Scot Paltrow: “The watchdogs that didn’t bark“
Four years after the banking system nearly collapsed from reckless mortgage lending, federal prosecutors have stayed on the sidelines, even as judges around the country are pointing fingers at possible wrongdoing. …
Foreclosure-related case files in just one New York federal bankruptcy court, for example, hold at least a dozen mortgage documents known as promissory notes bearing evidence of recently forged signatures and illegal alterations, according to a judge’s rulings and records reviewed by Reuters. Similarly altered notes have appeared in courts around the country.
Banks in the past two years have foreclosed on the houses of thousands of active-duty U.S. soldiers who are legally eligible to have foreclosures halted. Refusing to grant foreclosure stays is a misdemeanor under federal law.
The U.S. Treasury confirmed in November that it is conducting a civil investigation of 4,500 such foreclosures. Attorneys representing service members estimate banks have foreclosed on up to 30,000 military personnel in potential violation of the law.
In Alabama, a federal bankruptcy judge ruled last month that Wells Fargo & Co. had filed at least 630 sworn affidavits containing false “facts,” including claims that homeowners were in arrears for amounts not yet due.
Wells Fargo “took the law into its own hands” and disregarded laws banning perjury, Judge Margaret A. Mahoney declared.
And in thousands of cases, documents required to transfer ownership of mortgages have been falsified. Lacking originals needed to foreclose, mortgage servicers drew up new ones, falsely signed by their own staff as employees of the original lenders – many of which no longer exist.
Based on the overwhelming evidence we’ve seen so far, a truly fair resolution will probably involve handcuffs, orange jumpsuits, and perp walks along with a financial deal. Financial restitution will need to include, at a minimum:
- substantial principal reductions for underwater homeowners, along with lower interest rates;
- a breakup or restructuring of the “MERS” shell game so that it no longer enables deceit, tax evasion, and the conversion of home mortgages from a two-party contract to a commodity bankers can trade and sell without regard to property rights;
- the right to rent a home that has become distressed; and,
- a loan modification facility that is not administered by the banks themselves.
“Fair Settlement” is a good enough umbrella under which to place these demands, as long as it’s clear that prosecutions and real restitution are vital elements of fairness. The question now is, How strong will this movement become? Will the public back these groups in demanding justice and rejecting any more cushy bank deals? If they don’t, the country will have serious problems in the years to come.