Posts filed under “Foreclosures”
Buying foreclosures to turn them into rental properties is tricky business. Mack Companies, a Chicago real-estate firm, invests in about one out of every 40 homes it inspects. MarketWatch’s Amy Hoak looks at why some make the cut and others don’t.
Feb. 3, 2012
A modern Pecora Commission could right Wall Street wrongs Barry Ritholtz January 28 2012 ~~~ What shall we make of this surprise pronouncement in President Obama’s State of the Union address? A belated investigation has been launched into the role of fraud in the financial crisis. This much is clear: Despite rampant illegalities, bank fraud…Read More
A.G. SCHNEIDERMAN ANNOUNCES MAJOR LAWSUIT AGAINST NATION’S LARGEST BANKS FOR DECEPTIVE & FRAUDULENT USE OF ELECTRONIC MORTGAGE REGISTRY Complaint Charges Use Of MERS By Bank Of America, J.P. Morgan Chase, And Wells Fargo Resulted In Fraudulent Foreclosure Filings Servicers And MERS Filed Improper Foreclosure Actions Where Authority To Sue Was Questionable Schneiderman: MERS And Servicers…Read More
The most interesting news from the SOTU address was the very belated appointment of a mortgage investigation task force, the Office 0f Mortgage Origination and Securitization Abuses. You may recall that back in April of 2011, I presented to the National Association of Attorneys General a short keynote speech. It was titled “How Systemic Bank…Read More
Mitt Romney’s State of the Union Challenge on the Mortgage Crisis by Eliot Spitzer and Dylan Ratigan ~~~ Finally, a presidential candidate came out and honestly addressed the biggest problem in our economy, the enormous debt overhang in our mortgage market. A few days ago, Mitt Romney was at a forum in Florida talking about…Read More
Earlier this week, we discussed whether Lender Processing Services deserved the “Corporate Death Penalty“. You can see all of our prior LPS discussions are here. I bring this up because there is a fascinating post over at Reality Check, which declares Florida’s new AG Pam Bondi “the BFF of foreclosure fraudsters” such as LPS. (I…Read More
Governor Sarah Bloom Raskin
At the Association of American Law Schools Annual Meeting, Washington, D.C.
January 7, 2012
Thank you and happy New Year. It is a pleasure to be with you today as you meet to discuss so many pressing and important issues. I know there has been much discussion at this conference about the public function of law schools and I commend you for tackling this essential challenge. In my speech today, I hope to add to the conversation a little bit by presenting a simple argument, that laws and regulations must be enforced, and enforcement must be part of what we teach lawyers and future lawmakers to study. What we think of as the rule of law encompasses not merely theories of the process by which public laws and regulations are created through particular legislative and administrative procedures, and not merely theories of how laws and regulations are interpreted by courts. The rule of law includes enforcement itself. The rule of law compels us to consider whether a rule has been crafted in such a way that it is capable of being complied with and capable of being enforced effectively by state actors. The rule of law also involves decisions about whether there has been compliance, and if not, what should be done about it.
The failure of timely enforcement leads to the entrenchment of bad practices and an increase in the costs of correction. For example, turning to what will be the focus of my comments today–the role of mortgage servicers in the foreclosure crisis–the longer it takes for mortgage servicers to make the operational adjustments necessary to fix their sloppy and deceptive practices, the costlier and more difficult it becomes for them to sort them out and correct them.
More fundamentally, a failure by regulators to enforce the laws and regulations as strong antidotes to financial misconduct and unsafe and unsound practices by the institutions they regulate establishes de facto acquiescence to the dominant norms of the financial marketplace. At that point, our laws become the resting place for unfair practices and broad disrespect for the law generally. This is a phenomenon that Shakespeare’s Angelo observed in “Measure for Measure” when he said:
We must not make a scarecrow of the law,
Setting it up to fear the birds of prey,
And let it keep one shape, till custom make it
Their perch and not their terror.
For sure, different regulatory regimes could have different answers regarding the best way to enforce laws and regulations. As law professors teaching both the substance of law and the practice of law, I imagine you find ways within your courses and scholarship to discuss theories of enforcement–for example, the use of private rights of action versus enforcement by regulatory agencies; different enforcement tools such as memoranda of understanding, consent orders, and cease and desist agreements; how these different enforcement tools are sequenced; and whether and when violations of law should be publicized.
In answering all of these questions, there is consensus that public enforcement should be used in addressing pervasive regulatory problems. Today I want to talk about how home mortgage foreclosures hurt the pace of an economic recovery, and how important it is that the severe misconduct that has been uncovered in the mortgage servicing sector be addressed through intensified public enforcement of the law as part of the overarching effort to rebuild our damaged communities and neighborhoods.
Mortgage Servicing and the Economy
The economic downturn that began in late 2007 and worsened considerably in the autumn of that year resulted in the worst recession in many decades. Although recovery from the recession officially began in the third quarter of 2009, the pace of recovery has been modest, resulting in an unemployment rate that has remained at or above 8.5 percent since mid-2009. This sustained high unemployment rate–with all the attendant social consequences, including lost income and family strains–has contributed to an unprecedented number of mortgage foreclosures throughout the nation.
This wave of foreclosures is one of the factors hindering a rapid recovery in the economy. Traditionally, the housing sector, buoyed by low interest rates and pent-up demand, has played an important role in propelling economic recoveries. The increase in housing sales and construction often is accompanied by purchases of complementary goods, like furniture and appliances, which magnify the effect of the housing recovery.
However, six years after house prices first began to fall, the pace of the economic recovery remains slow. Nationally, house prices have fallen by nearly one-third since their peak in the first quarter of 2006, and total homeowners’ equity in the United States has shrunk by more than one-half–a loss of more than $7 trillion. The drop in house prices has had far-reaching effects on families, neighborhoods, small businesses, and the economy, in part because so many American families–more than 65 percent–own their homes. The fall in house prices has caused families to cut back on their spending and has prevented them from using their home equity to fund education expenses or start small businesses. The decline in house prices has also impeded families from benefiting from the historically low level of interest rates, as perhaps only half of homeowners who could profitably refinance have the equity and creditworthiness needed to qualify for traditional refinancing.1
Before we begin our Sermon this Sunday, a bit of history:
Think back to the giant fraud that was Enron. It was enabled — indeed, it was only possible — by the criminal behavior of their “Big Five” accounting firm, Arthur Andersen. This massive fraud perpetrated on the investing public was only possible due to the cooperation and active participation of their accountant, who were found guilty of “obstructing justice when it destroyed Enron Corp. documents while on notice of a federal investigation” charges. For this sin relating to their handling of Enron’s audits, Arthur Anderson was forced to “decertify,” voluntarily surrendering their license to be Certified Public Accountants in the United States. By voluntary, we mean they had no other choice.
Hence, for their complicity in the Enron scandal, Arthur Anderson was taken out back like Old Yeller and put down. Their senior officers and accountants scattered to the other major firms with their clients in tow. Even their consulting firm, Accenture, luckily lost the name Arthur Andersen Consulting in 2000, removed all visible signs of affiliation.
Once Andersen was de-certified from Accountancy, AA was no more.
Today, we have what appears to be a parallel fraud: The processing of foreclosure documents by legal services giant Lender Processing Services. Thanks to the diligent worh of Attorneys General in states such as Nevada, New York, Delaware, California (but not Florida), we are starting to learn the extent of what took place under the auspices of LPS:
• former L.P.S. employee who worked in “attorney management,” overseeing firms that performed legal work for foreclosures, told Nevada investigators that L.P.S. required him to resolve issues raised by the firms at a rate of 30 foreclosure files every hour (2 minutes per)
• Former workers described their work as “surrogate signers.” Their job was to forge signatures on documents.
• Other employees were hired through temp agencies, paid $11 an hour and told that her job was “to sign somebody else’s signature on documents,” the lawsuit said. Investigators were informed she signed roughly 2,000 documents a day for months — well over 100,000 foreclosure docs.
• Notarization was similarly dishonest, with workers notarizing documents (as a Notary) that they had fraudulently signed as a surrogate.
• Borrowers were confronted with documents containing “false assertions about which entity was authorized to foreclose, and false assertions about whether the consumer was delinquent on a loan payment.”
I have a question for Bank of America and Citi: Why haven’t you thrown these LPS weasels under the bus? What dirt they have on you preventing a simple j’accuse! ? What the hurry to settle before an investigation?
The end game for this is fairly obvious: Find the fuckers who authorized this, prosecute and convict them, and throw their sorry asses in jail. If the orders came from high enough up the food chain, why not pursue a similar Arthur Anderson penalty. Wat this broad corporate policy, or the work of a rogue banker? There is the answer to the death penalty question. After all, if a legal services firm is committing fraud, what bank or law firm can ever work with them? Depending upon the outcome of these AG investigations, a corporate death penalty could very well be the appropriate remedy.
This is going to get very interesting this year . . .
From East and West, Foreclosure Horror Stories
NYT, January 7, 2012
“What’s happened is that, almost overnight, we’ve switched from democracy in real-property recording to oligarchy in real-property recording. There was no court case behind this, no statute from Congress or the state legislatures. It was accomplished in a private corporate decision. The banks just did it.” -Christopher Peterson, a law professor at the University of…Read More