Last Updated Oct 28, 2010 12:47 AM EDT
No blame to the lenders who dreamed up high-risk mortgages and doled them out to anyone with a pulse. No blame to mortgage brokers and bankers who misled customers into signing up. No blame to Wall Street for whisking risky loans into securities falsely labeled as "Triple-A safe."
No, you're the problem, for deliberately borrowing more from the innocent, trusting bankers than you could afford. And now, in foreclosure, you're whining about a few false robo-signatures on documents that the lenders use to evict. You're simply plotting get out of paying what you owe. "People aren't taking responsibility for their own actions," the self-righteous bankers tell each other at their watering holes. Kick 'em out of their homes and let's move on.
Talk about not taking responsibility. The bankers see the specks in their borrowers' eyes and deny the logs that are in their own. On the field of honor, the entire financial industry has melted away.
So what to do now -- especially with Tea Party politics turning against troubled homeowners, too?
1. Continue to force the lenders to produce honest documents before they foreclose. Property rights are central to American law. If it's okay to evict a property owner based on false paperwork, no one's house is safe. Indeed, cases exist of owners who almost lost their homes even though they had purchased them for cash.
The Wall Street Journal recently inveighed against "consumer lawyers" who halt foreclosures by showing that the lenders brought perjured documents to court. Apparently, that's bad form.
Law professor Alan White of Valparaiso University mounted a fierce counterattack. "Robosigners are an abuse of the court process," he said. "You can't have it one way, and say you believe in law and order and the sanctity of contracts, and then say it's just fine to abuse legal procedures if you are pretty sure you are right." (Funny, the Journal hasn't inveighed against corporate lawyers representing Wall Street investors who are demanding that the banks take back their faulty loans.)
Many borrowers with legitimate claims lose their homes because they can't afford lawyers to sift through the paperwork. If you want to try defending yourself, you can get advice here.
2. Stop foreclosures on loans that mortgage-service mills deliberately drove into default. The mills do it by manipulating the sum that belongs in your escrow account for paying taxes and homeowners insurance. For example, they might raise the amount owed for escrow, without your realizing it. When you send your regular monthly payment, it's suddenly too small. The servicers puts it into a separate "suspense" account and you're marked as being one month in default, with late fees owed. You probably won't be notified. A couple more months of those so-called "late" payments and foreclosure could start.
3. Stop foreclosures on loans in the HAMP modification process. There's clear evidence that mortgage servicers are abusing the Home Affordable Modification Program for their own profit. Homeowners given trial modifications might make regular, reduced payments for six months or more, and then be refused a permanent mod. Instead, they'll be hit with a bill for back payments, huge fees, and a foreclosure notice.
Often, the mod denials are entirely the servicers' fault. They lose documents, fail to communicate with borrowers, and give out false information. Special Inspector General Neil Barofsky just released a new report to Congress on how the government is handling bailout funds, including HAMP. He's withering on the service abuse, taking the time to recount six cases of pure malfeasance that had come to his attention. "To date, there have been no financial penalties imposed by Treasury on servicers who have violated HAMP guidelines," Barofsky wrote. For more gory details on the abuse, try this and this.
4. Start helping the people who are becoming new default risks. Most lenders won't talk to you unless you have missed at least three payments. "That's stupid," says Guy Cecala, publisher of Inside Mortgage Finance. "We tell borrowers to blow through their savings, and we'll talk to you only when you're at the point where you can't buy food -- then it's too late," he says. Cecala favors an immediate, six-month payment moratorium for people who just lost their jobs and can show that they're at the point of missing mortgage payments. That gives them time to get back to work. The missing payments could be packed onto the end of the loan.
5. End the institutional cruelty toward people who are faithfully paying high-interest loans and can't refinance because their homes are worth less than the mortgage against it. They're stuck with rates of 6 to 9 percent, at a time when new loans going at 4 percent or less. In theory, some of these hard-working homeowners should be able to refinance under HARP, the Home Affordable Refinance Program. But it's available only to people whose loans are owned by Fannie Mae or Freddie Mac and whose mortgage doesn't exceed 125 percent of the value of their homes.
But why exclude someone whose house is, say, underwater by 130 percent, if they're employed and making payments? Refusing to let them refinance makes it more likely, not less, that they'll eventually default and walk away, says mortgage expert Jack Guttentag.
What's more, most lenders won't refinance on HARP's terms, even for people who qualify (the names of some lenders that might help are listed here). They'll only accept people whose loans don't exceed 105 percent of the value of their homes, Guttentag says. And talk about piling on: You private mortgage insurer could block your application if you try to refinance through a different lender, even if your lender doesn't take HARP's terms.
At the moment, no fixes are in the wind. The bankers are still in the saddle, and may grow even stronger after the midterm elections. Only those dreaded consumer lawyers are trying to force the lenders to cheat.
More on MoneyWatch:
Foreclosure Fraud: How You Can Be Driven to Default Even if You Pay on Time
The Foreclosure Mills: How This Could Really Hurt the Housing Market
Thinking of Buying a Foreclosed Property? No Reason to Panic
Foreclosure Mess: What It Means for You