Consider this astonishing stat drawn from a WaPo story today: Courts in the area are estimated to be dismissing upwards of 50 percent of foreclosure cases against homeowners because of slipshod -- or outright fraudulent -- paperwork filed by lenders. Banks are appealing many of these decisions, a sign of just how afraid they are the rulings could embolden courts around the country to follow suit:
In millions of cases across the United States, local judges have wide latitude to impose sanctions on banks, free homeowners from their mortgage debts or allow the companies to proceed with flawed foreclosures. Ultimately, the industry is likely to face a messy scenario -- different resolutions by courts in all 50 states.Such developments highlight another reality -- if homeowners are to get due process in this affair, it will likely be at the local, not federal, level. All 50 state attorneys general are investigating the widespread reports of missing and falsified foreclosure documents. By contrast, the Obama administration has soft-pedaled the "robo-signing" scandal.
Congress, too, is proceeding cautiously (surprise!). Hearings are scheduled. Dudgeon is set on high. But the issue is already losing political luster in Washington, which has turned its attention to the joys of co-habitation. Somehow, I don't expect presumptive House Speaker John Boehner, R-Ohio, or Spencer Bachus, the Alabama Republican expected to head the House Financial Services Committee, to make a fuss (nor the remaining Blue Dog Dems, for that matter). On that, at least, the parties are in complete agreement.
Federal bank regulators are equally intent on keeping the foreclosure assembly line moving. That's no surprise, given that they're deeply implicated in the foreclosure mess. For instance, state financial supervisors turned to the OCC in 2007 after JPMorgan Chase (JPM) and Wells Fargo (WFC) stonewalled their investigations into improper foreclosures.
Not content to simply ignore the problem, the OCC actually made it worse. Protecting its authority to oversee national banks, a doctrine known as "preemption," the agency shooed the state enforcers away. Then it asked the banks to look into the matter. Pretty please:
[E]ven as it closed the door on state oversight, the OCC chose itself not to scrutinize the foreclosure operations of the largest national banks, forgoing any examination of their procedures and paperwork. Instead, the agency relied on the banks' in-house assessments. These provided no hint of the problems to come until they had tripped the nation's housing market, agency officials later acknowledged.The OCC is, of course, almost majestically lame. When did the agency actually start investigating banks' foreclosure operations? Two weeks ago, says the WaPo's Zachary Goldfarb. I just hope they don't go to any trouble. But even supposedly staunch regulators, such as FDIC chief Sheila Bair, have been studying their toes despite the mounting evidence of fraudulent foreclosures. Meanwhile, the lawsuits continue to rain down on banks, including new allegations today against JPMorgan.
"Based on what we were seeing and what we were concerned about, it felt like a chronic underreaction at the federal level," said John Ryan, a senior official with the Conference of State Bank Supervisors.
Of course, those New York judges do have one major advantage -- familiarity, and the contempt that often comes with it:
Judge Dana Winslow of Nassau County says he's thought a lot about why judges in his area are more apt to question [foreclosure] filings. He said it comes down to one thing: Lack of trust for Wall Street. In this region, judges have seen a lot of inaccurate filings from the financial sector.In other regions, too. After all, if banks were as duplicitous in handling foreclosures in legal jurisdictions that were known to be tough on financial firms, you can imagine the liberties they must've taken in parts of the country where law enforcement was looser.
Image from morgueFile
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