Perhaps the biggest fallout of the entire economic crisis is that there has been a widespread series of foreclosures on homes, thus leaving millions of homeowners homeless and suddenly without a roof over their heads. A lot of these homes were simply reclaimed since the homeowners lacked the capacity to pay for the homes that they had taken out of hefty and hugely expensive loans for. But cases are beginning to come to light, particularly in Florida, that banks have been avoiding a system of checks and measures meant to protect the interests of homeowners, resulting in what has been dubbed quite imaginatively as “fraudclosures”. As banks set up their systems to ensure speed has precedence over all else, including the integrity of the procedure, the American public at large has begun to realize that fraud has been committed. The banks in question have apologized for their mistakes, but is an apology going to cut ice? Is fraud committed by big name banks not fraud at all? Why aren’t the authorities hauling out the handcuffs?
There is a huge logjam of homes to be processed by banks, what with 2 million homes in foreclosure and another 2.3 million cases pending review, but speed should have been the last thing on the mind of the arbitrators of the entire foreclosure process. It was almost as if it was a Grand Prix for the litigious; lawyers and law firms raced to outdo one another to see who could rack up the most number of foreclosures, a perverse game of gamesmanship that was bound to claim the homes of an innocent at one time or the other. These law firms were paid bonuses by volume and so they simply raced through the processes as rapidly as they could since they had dollars in their eyes and little else on their minds, errors and omissions be damned. And all the big time mortgage firms that were meant to oversee the process (and yes, that includes Fannie Mae) were just so keen to get the cash registers jingling that they actually penalized contractors for moving tardily, exacerbating what was already a mess.
The whole system was just so absurdly inflexible that there was no stopping a foreclosure process once started. The problems that plagued the process were more than a few document pushers that just forged documents or failed to review foreclosures as per norms either. The rot runs a lot deeper and is a lot more systemic than that; loan servicers, law firms, document processing companies and others, they were all in on it. It was a crazy game of real estate dominoes, and as these firms made more money from kicking out homeowners, they chased down others with even more zeal (rightfully or otherwise) and the system became increasingly prone to errors and any sort of appeals on the part of homeowners. Everyone was in on the fraud, and this can be best epitomized by the nation’s credit rating agencies that offer higher grades of credit to firms that were quick to handle the entire process of foreclosure and conversely they offered lower grades to those that hung on to delinquent loans. That shows how pervasive the decay was, and is.
How ironic that the entire bureaucratic procedure seems geared against homeowners, and it’s time that the powers that be shake off their inaction and start to make heads roll. There are examples to be set and muscles to be flexed, and only the nation’s supreme bodies can now protect the interests of the American homeowner.