A lot of you are probably still wondering what to make of the latest spasm of foreclosure apoplexy that temporarily seized the memeosphere last week when Obama vetoed that two-page bill everyone else in D.C. so unanimously loved. Here is who is not wondering, though: the Washington Post! There is nothing in any section of today’s paper about foreclosure moratoriums, so you have to direct yourself to a bottom-page B2 story in the New York Times to learn why: David Axelrod told Face The Nation yesterday that the Obama administration’s “hope is this moves rapidly and that this gets unwound very, very quickly” and that he’s “not sure that a national moratorium” is called for since “there are in fact valid foreclosures that probably should go forward.” No big deal, bro! Some reasons I beg to differ:
1. Hello, this whole story was touched off when the banks voluntarily stopped throwing people out of their homes. That’s right! The banks, not Elizabeth Warren or Hugo Chavez or Pol Pot or whomever. Chances are you didn’t hear about this meme until the mortgage servicer GMAC sent all employees a widely circulated September 17 memo ordering staff in 23 states to indefinitely suspend all evictions and foreclosure sales pending review of the lender’s foreclosure protocol. That was not for lack of publicly available information about the comprehensively criminal practices of the “foreclosure mill” businesses; it was in December 2009 that now-famous (and terribly urbane) GMAC manager Jeffrey Stephan gave his first of three depositions detailing the stunning amount of negligence and perjury required to evict people from their homes at the gold standard rate of 10,000 per month. But the media had long since grown weary of the same-old-same-old story of banks screwing people with impunity etc. etc. and was preoccupied declaring currency war on China and promulgating revisionist history when the shit hit the fan.
2. Banks do not just walk away from a cash cow like “mortgage servicing” without a good reason. Mortgage servicing is a $200 billion a year business, and that is not because of the flat 0.25% fee mortgage servicers receive to process the timely payments of responsible homeowners. In the boom years, mortgage servicers raked in fees every time they convinced a homeowner to refinance—the more “adjustable” the better!—and in the bust years, late fees and foreclosures are the cash cows. Like all things banks do, it is truly recession-proof! The catch is that because foreclosures sort of necessarily involve, you know, “laws” governing “property rights” and “trespassing” and whatever, they require someone acting on behalf of the theoretical new “owner” of the property (whoever that is) to sign an affadavit saying something along the lines of, “yes, I’ve thought about it and reviewed the documents and whoever the local sheriff is should know that definitely these people deserve to have their locks abruptly changed and all their shit ransacked by some contract team of meatheads, and whoever shows up on this property after that they should feel free to harass, arrest, and what the hell waterboard.”
But if actually it turns out that whoever signed the affadavit is either not a human, or possibly not the human who is named, or did not actually look at the documents probably because no one could find the documents, or can’t even really read, and whatever the case definitely was not actually in the presence of a witness like the affadavit says, that is what they call “perjury” and also possibly “forgery” and/or “falsification,” all of which are crimes that carry large fines. That was no big deal, until some bankruptcy attorneys actually got incensed enough to spend their own money deposing employees of the servicers, and now the potential fines (and legal fees) are threatening to offset the profits reaped in by all those glorious fees, and that is why many of them stopped doing it.
3. Hey, so who actually “owns” these foreclosed properties anyway? Funny you should ask… Sometimes the party named as the plaintiff in a foreclosure will purport to be some sort of trust, other times it will be something called the Mortgage Electronic Registry System or MERS. Either way, it is a total joke. Most of the time no one actually knows and it doesn’t matter because more than half of the $10.7 trillion in mortgages outstanding in this country are owned or guaranteed by Fannie Mae and Freddie Mac i.e. you, and hundreds of billions of others are guaranteed by other federal agencies or programs.
So put yourself in the shoes of these rightful owners, since they’re yours anyway: do you really want to evict millions of homeowners in the worst real estate market since the cholera epidemic, just so your houses can be ransacked by the lockup mercenaries, disemboweled and converted into meth labs by local entrepreneurs and blamed for the downward spiral in the values of surrounding properties many of which you also own? No of course not, only the mortgage servicers want that. You want to try and cut a deal with the homeowner, like Tim Geithner was supposed to facilitate with that “making home affordable” program that Rick Santelli used to launch a thousand tea parties, except that in his infinite ignorance Geithner outsourced that whole endeavor to the servicers who predictably sabotaged it entirely. Some private mortgage investors have tried to sue the servicers for this very reason, but it’s hard to even know who wants what because…
4. The entire industry stopped keeping track of who bought and sold. This brings us back to the aforementioned MERS. Headquartered in Reston, MERS was founded by this guy Paul Mullings who is now an executive at Freddie Mac and it is currently helmed by a fellow named R.K. Arnold who according to one account spends his leisure time collecting military toys. MERS was created to sidestep the process by which buyers and sellers of homes used to record transactions with local authorities by just entering deed and lien information electronically into a database. MERS did not even have to lobby anyone to change any laws do this, apparently: “The mortgage industry just changed how the land title system worked without getting anyone’s okay,” a law professor explained to the Washington Post. Various libertards are now arguing that since mortgages change hands a lot more often than actual houses do, MERS is the only “efficient” way of doing things, which might be true were there any evidence they were actual “doing” anything; two lawyers I spoke with and everyone quoted by anyone else who has actually done any reporting into the matter say that MERS has a pretty sloppy record of recording this stuff, since it has almost no employees of its own. That has not stopped MERS from volunteering its name to be used on the “plaintiff” side of millions of foreclosure actions, despite having no claim to anything at all except a poorly-kept database no one uses, but they have stopped doing that so much in recent months because a lot of judges have decided it might be against the law. But really, should someone have to have a claim on your house to file a foreclosure notice on it?
5. Homeowners Associations are still foreclosing on the houses of members who are delinquent on their dues by amounts of $150 or so. Seriously, how is this legal?How do I keep reading the same story over and over? Because we live in a banana republic that is carrying out some sort of unmanned drone attack on our so-called property rights for no apparent reason other than to juice the official indicators of housing market “activity” and that sort of thing such that Steve Pearlstein will continue telling us it’s all okay, business as usual, that the whole snafu will be resolved very, very quickly, safe in the knowledge that anyone who begs to differ is guaranteed to lose the audience within the first 160 characters anyway.