“Judges and investigators need to be unflinching
in their inquiries into the paperwork debacle and must hold the banks fully
accountable. What we’ve already learned is chilling — and suggests that bankers
have learned little since the 2008 implosion and taxpayer bailout.”
NEW YORK TIMES
October 14, 2010
The
Foreclosure Crises
Attorneys
general in all 50 states have pledged a coordinated investigation into chaotic
foreclosure practices by some of the nation’s largest banks. The Department of
Justice is also looking into what happened, while some lawmakers are now
calling for a nationwide moratorium on all foreclosures until the legal
questions are settled. The Obama administration is insisting such a broad delay
would hurt the economy.
There is
plenty to worry about. But amid all this roiling, neither Congress nor the
administration has found a way to address an even more fundamental problem:
What government and banks need to do to finally stanch the flood of
foreclosures wreaking havoc on the lives of millions of Americans and
threatening the recovery.
According to
the latest figures, 4.2 million loans are now in or near foreclosure. An
estimated 3.5 million homes will be lost by the end of 2012, on top of 6.2
million already lost. Yet the administration’s main antiforeclosure effort has
modified fewer than 500,000 loans in about 18 months.
Judges and investigators need to be unflinching
in their inquiries into the paperwork debacle and must hold the banks fully
accountable. What we’ve already learned is chilling — and suggests that bankers
have learned little since the 2008 implosion and taxpayer bailout.
Major banks —
including Bank of America, JPMorgan Chase and Ally Bank, which is owned by GMAC
— have suspended foreclosures after admitting they had submitted tens of
thousands of affidavits to the courts, attesting to facts about the defaulted
loans that had not been verified by the bank employees signing the documents.
The Times’s
Eric Dash and Nelson D. Schwartz reported in Thursday’s
paper that in their rush to process foreclosures, banks hired
inexperienced workers (“Burger King kids” as one former banker derided them)
who barely knew what a mortgage was.
The problems
may go far deeper. The banks’ procedures for keeping track of mortgages may
also be seriously flawed. If there are problems in establishing a chain of
title, it could — again — call into question the value of mortgage-backed
securities. That would mean litigation, which would harm bank profits, and in a
worst case, risk another economywide disruption.
As important,
and dismaying, as all this is, it must not obscure the underlying problem:
potentially millions of foreclosures that could and should be avoided.
A mandated,
national moratorium may be unavoidable if banks resume a rush to foreclosure
before all the legal issues are resolved. So far, there is no sign of that. A
moratorium won’t address the fundamental problem that banks have not
competently and aggressively pursued ways to keep more financially viable
Americans in their homes.
The White
House may well be right that a moratorium would further rattle investors. But
the economy is not going to rebound until the housing mess is resolved. What is
needed, urgently, are laws and policies to give homeowners a better shot at
reworking their loans so they can keep making payments and avoid foreclosure.
Throughout
this crisis, the Obama administration has been far more worried about protecting
the banks than protecting homeowners. The big weaknesses in the
administration’s main antiforeclosure policy is that participation by lenders
is voluntary and homeowners have little leverage to get better terms —
especially reductions in loan principal when the mortgage balance is greater
than the value of the home.
One way to
change that would be for Congress to reform the bankruptcy law so troubled
borrowers could turn to the courts for a loan modification if banks were
uncooperative. Homeowners also need a simple process to challenge a bank if it
uses incorrect information to deny a modification and justify a foreclosure, or
if it refuses to divulge the facts and figures it used.
The
administration also needs to alter refinancing guidelines so that many
borrowers who are current in their payments are eligible to refinance to lower
rates, even if their houses have declined in value. It needs to provide more
legal aid to homeowners, using money authorized by Congress.
This latest
foreclosure crisis should settle one issue once and for all. The banks that got
us into this mess can’t be trusted to get us out of it. The administration and
Congress need to act.
*
WSWS.org
The
White House and the US mortgage racket
15
October 2010
The Obama administration has rejected
calls for a moratorium on home foreclosures despite revelations that banks
illegally processed mortgage documents to speed up the eviction of families and
seizure of their homes.
Nothing could more clearly demonstrate
the class interests served by the White House. Major banks have systematically
broken the law, victimizing an unknown number of families, and the Obama
administration responds by shielding the criminals.
The fraudulent practices that have come
to light include bank employees and those of contractors falsely attesting that
they had personal knowledge of cases, forging signatures, falsifying notary
stamps and altering documents, as well as banks falsely asserting ownership of
homes on which they had no legal claim.
Each day brings new revelations. The New
York Times reported Thursday that outsourced loan workers at
Citigroup and GMAC were sometimes so “frazzled” they simply threw paperwork
into the garbage, while contract workers for Goldman Sachs processed
foreclosure documents so quickly they “barely had time to see what they were
signing.”
Every major bank is implicated, and
hundreds of thousands, if not millions, of homeowners facing foreclosure have
been affected. There are numerous known cases of evictions of families who were
not behind on their mortgage payments at all.
The attorneys general in all 50 states
have launched a coordinated investigation and several have urged a moratorium
on foreclosures, calling the falsified paperwork a “fraud on the courts.”
Senate Majority leader Harry Reid of Nevada, facing a tight election race in
the state with the highest foreclosure rate in the country, has also called for
a moratorium.
Elementary due process dictates that a
moratorium be imposed. No one knows at this point how many homes have been
illegally foreclosed or repossessed. The bank records are in disarray. Logic
and the law demand that no more families be foreclosed on until a thorough
investigation is conducted.
But the Obama administration has once
again sided with the banks against the people. Federal regulators have merely
urged the banks to voluntarily review their own practices while they “continue
with foreclosures as quickly as possible,” according to the Washington Post.
In a press conference this week, White
House spokesman Robert Gibbs exhibited not the slightest concern for the fate
of those harmed by the banks’ fraud. Speaking unabashedly on behalf of the
banks, he said, “If there’s an empty house in the neighborhood that somebody
has a contract on and their closing date is next week and there is a
moratorium, that closing doesn’t happen, right? That sale doesn’t happen. That
recovery doesn’t take place.”
The Obama administration’s housing
policy, in other words, is to push millions of people out of their homes.
Even if one were to accept the dubious
claim made by the bankers and their mouthpieces in the government that a
moratorium would destroy the housing market and precipitate another financial
panic—a self-serving argument which they do not bother to substantiate—that
would only confirm the rapacious and socially destructive character of the
existing economic system. The fact that Wall Street all but admits that the
profit system is dependent on the spread of homelessness and social misery
underscores the necessity for the system’s overthrow.
The falsification of mortgage documents
is the latest phase in a vast crime against the population.
Before the financial crisis of 2008,
the banks lured millions of Americans into overpriced sub-prime mortgages, often
involving low “teaser” interest rates that jumped sharply after a set time. The
money-mad pyromaniacs on Wall Street knew full well that the loans could not be
repaid, but like all Ponzi schemers they were intent on milking the racket for
as long as possible, confident that, in the end, the government would step in
to cover their losses.
The resulting toxic loans were bundled,
securitized and sold, creating a massive structure of debt resting on
fraudulent and legally dubious foundations—from which bank executives and top
shareholders secured dizzying levels of personal wealth.
When the Ponzi scheme collapsed, the
federal government bailed out the banks to the tune of trillions of dollars. As
a result, the banks are now flush with cash and their executives are shattering
pay records in both 2009 and 2010.
But for millions of American families,
whose homes were their major source of wealth, the impact has been devastating.
The Obama administration’s so-called “housing rescue,” based on the voluntary
participation of the banks, has had virtually zero effect, resulting in the
permanent modification of fewer than 5,000 loans by the end of May.
The result is a vast and cascading
crisis. In the third quarter, nearly one million US homes, one in every 139,
received a foreclosure filing, and over 100,000 homes were repossessed by
banks. About 2.5 million homes have been taken by banks since December 2007.
How many of these were the result of fraudulent and illegal bank practices is
not known.
It is abundantly clear that there can
be no solution to the housing crisis outside of a struggle against the finance
industry and its servants in both political parties. The Wall Street criminals
responsible for the mortgage racket should be investigated and tried, their
ill-gotten fortunes seized and the money put toward the creation of affordable
housing for working people.
The working class has to break from the
Democratic Party. Obama’s opposition to a moratorium on foreclosures should
clear up any confusion. The Democratic Party is not and never has been a party
of the “people” or the “middle class.” It is a party, like its Republican
counterpart, of the ruling class, pursuing policies antithetical to the needs
of the population: good-paying jobs, a secure retirement, education, health
care, quality housing.
The Socialist Equality Party is the
only party that fights for a break with the Democrats and the building of a
mass movement of the working class to throw off the stranglehold of the
financial aristocracy and reorganize the economy to serve social needs, not
corporate profit.
In our recently adopted program, the SEP insists
that access to decent housing is a social right. The SEP program demands “an immediate
halt to all foreclosures and evictions” and the restructuring of all mortgages
“to affordable levels, indexed to income and employment status.”
“The right to decent housing for all
can be assured only by placing the home-building and financing industry under
public ownership,” the program continues, “and pouring hundreds of billions of
dollars in public funds into the construction of new homes and apartments and
the renovation of existing buildings.”
We urge all readers of the World
Socialist Web Site to study our program and make the decision to join and
build the SEP.
Tom Eley
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