Matt Taibbi: Courts Helping Banks Screw Over Homeowners
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the Rolling Stone article is in the Nov 11th issue available Friday on newsstands, as well online in Rolling Stone's digital archive
A few EXCERPTS
"Who's next?" Judge Soud says. He turns to Mark Kessler, the counsel for the big foreclosure mills. "Mark, you still got some?"
"I've got about three more, Judge," says Kessler.
Kessler then drops three greenish-brown files in front of Judge Soud, who spends no more than a minute or two glancing through each one. Then he closes the files and puts an end to the process by putting his official stamp on each foreclosure with an authoritative finality:
Kerchunk!
Kerchunk!
Kerchunk!
Each one of those kerchunks means another family on the street.
And...
The first reason is: It simply isn't true. Many people who are being foreclosed on have actually paid their bills and followed all the instructions laid down by their banks. In some cases, a homeowner contacts the bank to say that he's having trouble paying his bill, and the bank offers him loan modification. But the bank tells him that in order to qualify for modification, he must first be delinquent on his mortgage. "They actually tell people to stop paying their bills for three months," says Parker.And
The authorization gets recorded in what's known as the bank's "contact database," which records every phone call or other communication with a homeowner. But no mention of it is entered into the bank's "number history," which records only the payment record. When the number history notes that the homeowner has missed three payments in a row, it has no way of knowing that the homeowner was given permission to stop making payments. "One computer generates a default letter," says Kowalski. "Another computer contacts the credit bureaus." At no time is there a human being looking at the entire picture.Which means that homeowners can be foreclosed on for all sorts of faulty reasons: misplaced checks, address errors, you name it. This inability of one limb of the foreclosure beast to know what the other limb is doing is responsible for many of the horrific stories befalling homeowners across the country.
Read in its entirety
The second reason...
the money thing is bogus has to do with the changed incentives in the mortgage game. In many cases, banks like JP Morgan are merely the servicers of all these home loans, charged with collecting your money every month and paying every penny of it into the trust, which is the real owner of your mortgage. If you pay less than the whole amount, JP Morgan is now obligated to pay the trust the remainder out of its own pocket. When you fall behind, your bank falls behind, too. The only way it gets off the hook is if the house is foreclosed on and sold.
That's what this foreclosure crisis is all about: fleeing the scene of the crime.
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