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Foreclosure Fraud: “Systemic, Industrywide, Pervasive”
Posted By Barry Ritholtz On October 16, 2010 @ 3:00 pm In Credit,Foreclosures,Legal,Real Estate | Comments Disabled
A strong article  in the Washington Post makes it so clear that even a CNN anchor can understand it: A huge portion of the Fraudclosure mess was by design.
These weren’t erroneous ‘i’s that were not dotted and ‘t’s that were not crossed; It was a mad rush to do yet another extremely important legal and financial process recklessly: As fast and cheaply as possible.
Gee, how could that ever go wrong?
“Millions of homes have been seized by banks during the economic crisis through a mass production system of foreclosures that was set up to prioritize one thing over everything else: speed.
With 2 million homes in foreclosure and another 2.3 million seriously delinquent on their mortgages – the biggest logjam of distressed properties the market has ever seen – companies involved in the foreclosure process were paid to move cases quickly through the pipeline.
Law firms competed with one another to file the largest number of foreclosures on behalf of lenders – and were rewarded for their work with bonuses. These and other companies that handled the preparation of documents were paid for volume, so they processed as many as they could en masse, leaving little time to read the paperwork and catch errors. [BR: aka the purpose of legal document review]
And the big mortgage companies overseeing it all – including government-owned Fannie Mae – were so eager to get bad loans off their books that they imposed a penalty on contractors if they moved too slowly.
The system was so automated and so inflexible that once a foreclosure process began, homeowners and consumer advocates say, there was often no way to stop it.”
The penalty for the people behind this should be that any future legal, medical or accounting services they personally require are done in the same manner: As fast and cheaply as possible.
The chain of criminality — and don’t let people tell you otherwise, this legal malfeasance demands prosecution — runs the full gamut of players:
“The financial incentives show that the problems plaguing the foreclosure process extend well beyond a few, low-ranking document processors who forged documents or failed to review foreclosure files even as they signed off on them. In fact, virtually everyone involved – loan servicers, law firms, document processing companies and others – made more money as they evicted more borrowers from their homes, creating a system that was vulnerable to error and difficult for homeowners to challenge.”
How bad was it? Consider the David Stern law firm — in the lead to be the first Florida Fraudclosure lawyer to move into a “charming, cozy room” at the graybar hotel:
The law firm of David J. Stern in Plantation, Fla., for instance, assigned a team of 12 to handle 12,000 foreclosure files at once for big financial companies such as Fannie Mae, Freddie Mac and Citigroup, according to court documents. Each time a case was processed without a challenge from the homeowner, the firm was paid $1,300. It was an unusual arrangement in a legal profession that normally charges by the hour.
The office was so overwhelmed with work that managers kept notary stamps lying around for anyone to use. Bosses would often scream at each other in daily meetings for “files not moving fast enough,” Tammie Lou Kapusta, the senior paralegal in charge of the operation, said in a deposition Sept. 22 for state law enforcement officials who are conducting a fraud investigation into the firm. In 2009 alone, Stern’s law firm handled over 70,000 foreclosures.”
I hope you are keeping track of the weasels who keep insisting that this is not pervasive or systemic, and there was nothing here but human error . . .
Read the entire WaPo article here .
For foreclosure processors hired by mortgage lenders, speed equaled money 
Ariana Eunjung Cha and Zachary A. Goldfarb
Washington Post, October 16, 2010
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URL to article: http://www.ritholtz.com/blog/2010/10/systemic-industrywide-pervasive/
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 article: http://www.washingtonpost.com/wp-dyn/content/article/2010/10/15/AR2010101506541.html
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