Consumer Law

Robosigner Scandal Making for Strange Bedfellows

By Alan White

By Alan White

From the AP we learn today that banks hired foreclosure specialists with no knowledge of mortgages or foreclosures to file foreclosure papers.  Meanwhile, Treasury Secretary Geithner, HUD Secretary Donovan, and even Presidential spokesperson David Axelrod, piously intone the banking and real estate industries' line, attempting to trivialize the widespread fraud on the grounds that more delays in foreclosure will prevent economic recovery.  As if.

The Obama administration and its provisional allies on the Wall Street Journal editorial page want to scapegoat the robosigner scandal for delaying a housing recovery.  The real culprit is the foreclosure crisis itself, i.e. the fact that we have more than 5 million mortgages in default or foreclosure, that were being resolved at a snail's pace before the robosigner scandal and moratoria came along.  If every bank and servicer called off its moratorium today, and if all the state Attorneys General went away, we would simply go back to the agonizing process of dumping another 100,000 or so foreclosed properties on the market every month, while homeowners who want to make payments wait for months to get their workouts processed.  Before the foreclosure fraud scandal hit we were already facing  another five years  of depressed and uncertain home prices, even assuming more homeowners now making payments don't start falling behind.

Whether or not forcing banks to foreclose properly will delay economic recovery, the economic argument is hardly a reason to condone the systematic abuse of courts and the property recording system.  The banks we bailed out continue to cut corners, refusing to hire adequate staff to properly administer modification, short sale and other programs, or to do foreclosure paperwork correctly. 

Given the unpopularity of banks, it is a mystery why the Administration refuses to call out the banks, who are handing out record pay and bonuses, and demand that they do their jobs.  The way to stabilize home prices is to modify every loan that can be modified, bite the bullet on every reasonable short sale, and foreclose what is left, with adequate personnel to handle all these tasks quickly AND accurately.  Making excuses for banks who take shortcuts and lie to courts and deed recorders is not an economic recovery program.

Full post as published by CL&P Blog on October 13, 2010 (boomark / email).