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We Need Pitchforks and Torches

Top Billing! The Daily CallerTheDC OP-ED: One nation, under fraud

Tomorrow, a bank-not your bank, but any bank-could evict you from your home. Even if you didn’t know the bank was foreclosing. Even if your mortgage is paid off. Even if you never had a mortgage to begin with. Even if the bank doesn’t hold a single piece of paper that you signed. And major banks not only know this fact, but have spent millions of dollars to defend it in court. Why? The answer starts with a Jacksonville homeowner named Patrick Jeffs.

In 2007, Deutsche Bank sued Jeffs for his home, which is a necessary step in the process of foreclosing on a homeowner in the state of Florida. Curiously, despite the fact that he immediately hired a law firm to defend his property when he found out about the foreclosure, neither Jeffs nor his attorneys were at the trial. That’s because it had already happened. Deutsche won by default because Jeffs wasn’t able to travel backwards in time to attend, even though the trial featured a signed affidavit indicating that he had been served his court summons.

The only problem with the summons Jeffs supposedly received was that it had been conjured out of thin air.

In June of this year, a Florida court ruled that the document was fraudulent, as the person who was supposed to make sure Jeffs was served had mysteriously received a copy of the summons before the lawsuit had even been filed, and Jeffs never even saw the copy. The text of that ruling was posted on various financial news websites in September. The lawyers that Jeffs hired to defend his case say that fraud such as this is not uncommon. It’s a widespread problem, and it has cost countless families their homes.

“I think it’s safe to say that 95% of the foreclosure cases in Florida involve some form of fraud on the part of the bank,” David Goldman of Apple Law Firm, PLLC told The Daily Caller in a phone interview. “It’s probably closer to 99%. And the court system is helping them get away with it.”

Banksters should not only be going to prison for intentionally destroying the lives of people who are not only NOT in default on their mortgages, but have never transacted a mortgage with the institutions attempting to illegally seize their property, these guys should be made to face an angry mob composed of the people they have defrauded.

This is the Oligarchy in action. They intend to hollow this country out and move their loot offshore just like in Russia during the 1990’s

Hat tip to Ron Beasley at Newshoggers.com who also found this gem:


Blogfriend Fabius Maximus, who often blogs on economics, would like to offer a counterpoint and i have agreed to let him put up his perspective here and some excerpts:

  A briefing about the foreclosure fraud crisis: its origin and impacts.

….The real estate title system in the US is complex, with safeguards protecting debtor and creditor (for details see this by Barry Ritholz).  It’s also local (rules and data are not national).  This system worked well for generations, but collapsed during the housing boom.

  • Loan volume accelerated, overloading key parts of the system.  Appraisals were often corrupted, as loan originators routed business to compliant appraisers.
  • Massive securitization of mortgages ignored these constraints, and erected a pseudosystem on top of it that cheaply processed the high volume of both mortgage origination and securitization (e.g., the Mortgage Electronic Registration System – a faux version of security clearing corporations; see this explanation).  Securitization also broke the link between the originator and end owner, with many ill consequences.  Among other things, this put great pressures on the servicing firms to lower costs.
  • During the RE boom years recoveries on foreclosed mortgages were zero or positive, which meant a low rate of foreclosures (homes could be sold by the owner rather than default on the mortgage).  So the institutional apparatus for foreclosures atrophied.

The the default bust hit.  Massive flow, overwhelming the system – which was never configured for such an event.  Remember, experts believed home prices never decline for more than a calendar year.  The worst scenario considered by the most experts was flat prices for 3 years.

The servicers (sometimes the bank originating the mortgage, often not) reacted by cutting corners (seethis Reuters story).  Finding the original loan documents was too expensive, so they used lost document procedures designed for extraordinary circumstances (e.g., fire, flood, or misfiling – see this at Calculated Risk and here at Reuters).  Some servicers hired law firms set up as foreclosure mills (e.g., FL), processing incredible numbers of foreclosures.  It’s not clear how, but clearly proper procedures were not followed.

As a result there have been many claims that foreclosure notices were never served (an easy way to make serving a high-margin profit center).  Employees have admitted under oath in depositions to fraudulently signing thousands of notarized affidavits.

This took place in the 23 states with judicial foreclosures only with the cooperation of Judges.  A few Judges protested when shown that their banks and their agents were committing perjury.  But the process ran smoothly for the past few years.  Now the wheels are coming off.  This might be difficult for the financial sector to conceal or mitigate, despite their de facto control over the government’s regulatory machinery.

A situation report about two headine issues – and a more serious problem

….Despite the oft-hysterical analysis, there is as yet insufficient public information about the scale of the problem.  Quite likely even key players (e.g., banks, their law firms, government regulators) lack the necessary information.  Deliberately, as all prefered to “see no evil.”  But now that the problem has erupted into the daylight, this leaves them ill-prepared to respond.  Especially as any adequate response will reveal their incompetence and malfeasance in creating the situation.  (Here are Wells Fargo’s procedures regarding creditors’ complaints; nothing available for their procedures to debtors’ complains).

Political factors, not legal or economic, probably will control the evolution of this crisis.  Hence the likelihood of modest impact to the national economy.  More than the small impact expected by Wall Street; less than expected by the increasingly rabid doomsters.   Over a longer horizon, a year or more, the economy will affect the political dynamics.  For a good analysis of the current political situation see “Congress Taking Cautious Approach with Foreclosure Mess“, American Banker, 14 October 2010.  The Republicans, as usual, eagerly support the banks – despite any violations of the law, despite the interests of the American people.

The economic impact looks to be minimal and probably less than the political effects.  New home sales are unaffected by this crisis.  The title problems are solvable.  New home finance is unaffected, and in any case are now 90% government financed or guaranteed.  Interruptions in sales of existing homes will have severe effects for those affected, but little for the overall economy (despite the massive attention to the volume of existing home sales, they have minimal economic effect).

What could change this forecast? A second dip would radically change the situation, as more links in US and global economy “unexpectedly” break.   As would a long foreclosure moratorium, although this is unlikely under the current political regime.  It could happen as part of system change, of such magnitude that the moratorium would be one of the lesser results.

20 Responses to “We Need Pitchforks and Torches”

  1. historyguy99 Says:

    At first, glance I thought your post was a bit of a parady like the video. But upon reading the link, it appears that art ( the video) is too close an immitation of life as it is, to really chuckle about.

    Pitch forks and torches, more of this; and it’s edging the population closer to 1789 France.

  2. Joseph Fouche Says:

    The United States is a casino with nuclear weapons.

  3. joey Says:

    As Frank Zappa said…It can’t happen hereIt can’t happen hereI’m telling you, my dearThat it can’t happen hereBecause I been checkin’ it out, babyI checked it out a couple a timesBut I’m telling youIt can’t happen hereOh darling, it’s important that you believe me(Bop bop bop bop)That it can’t happen hereWe need the security establishment to step in and restore order during this period of chaos.  Since the Army and the Police are the only powers that command society wide respect, it is only right that they should step in to protect the American people in this hour of need.    

  4. joey Says:

    gah, damn this text formating!

  5. Fabius Maximus Says:

    Is this a parody or actual hysteria?  In a nation of 300 million people one can easily find small numbers of awesome outrages.  That’s a Reader’s Digest staple.  Fantastic miscarrages of justice in the civil and criminal courts, horrific mistakes by our health care systems, terrifying actions by our civil and military machinery.  Get a grip, people. 

    The forclosure crisis is serious, although of unknown dimensions at this time.  This does not accurately represent the actual problem (people defaulting on their loans, illegal bank screw-ups on the docs).  And it is part of a larger financial crisis, still evolving in unknown ways.  Hysteria does not help.

    It is similar to the post about Goldman getting the swine flue vaccines, part of the CDC’s plan to distribute it though employers, leaving THE REST OF US TO DIE IN THE STREETS.  OMG!

  6. zen Says:

    "Fantastic miscarrages of justice in the civil and criminal courts, horrific mistakes by our health care systems, terrifying actions by our civil and military machinery.  Get a grip, people."

    I think the outrage stems from the fact that the foreclosure miscarriages stem not from anecdotal events of incompetence or venality but a systemic effort to intentionally defraud in order to stockpile assets and recoup industry losses
  7. Fabius Maximus Says:

    Perhaps, but the headline story you provide is totally unrepresentative of the actual problem, which constsist almost exclusively of people defaulting on their mortgages.  Many banks committed offenses when processing the foreclosure, but it’s not the same as implied by the opening story above.
    For some very sad stories, more deserving of outrage and action, go to The Innocence Project.  For example, see the many examples of people suffering from being arrested while Black.

  8. slapout9 Says:

    To this day I find it amzing that most people who damn Karl Marx (who was an economist before he was a revolutionary) have never even read Das Kapital (On Capital) which describes perfectly what is happening to our Economy. He called The Bourgeois, today we call them the Oligarchy…I call them exactly what they are CRIMINALS. Zen is right to call them that.

  9. Larry Dunbar Says:

    The forclosure crisis is serious, although of unknown dimensions at this time.  This does not accurately represent the actual problem (people defaulting on their loans, illegal bank screw-ups on the docs).  *I don’t know Fabius, first move manufacturing to a country with a lower standard of living, then, "…hollow this country out and move…offshore just like in Russia [the oligarchy left) during the 1990’s" and moved to a country of greater growth, kind of makes sense. It would be kind of like the brothers selling Joesph into Egypt, they (Jewish or not) could become very comfortable there, until perhaps an Exodus when they built-up enough resources that they could get their own country. I mean we are talking real money here and why would you guys want to stay anyway, ha!

  10. TDL Says:

    I think there is a certain amount of hyperbole of this issue.  The story that Zen referred to in the post is an extreme example of where the law firm that has contracted with Deutsche to manage the paperwork cut coroners where ever they could.  This is not a systematic effort to loot.  This is being caused because the banks began to increase the volume of transactions while at the same time demanding a decrease in the administrative costs associated with transferring titles to property (i.e. the creation of M.E.R.S. )  These are two competing business agendas; it is generally in-advisable to began a cost cutting initiative while attempting to expand your top line growth.
    This is fallout from the bankers greed from the earlier part of the decade, however, it is not an attempt to steal property from those who own it.  The looting meme on this specific issue does not even make sense.  It is far easier to lobby for billions more in bailouts & receive cash (a liquid & easily transferable asset) then to steal a piece of property, put it on the market for sale, market the property, & conclude the deal in a timely fashion in order to avoid a lawsuit preventing the bank from selling the property.


  11. Curtis Gale Weeks Says:

    Isn’t the real problem Capitalism + Usury?  Ha just kidding.  Sorta.
    All these calls for pitchforks, torches, mobs, etc., even to the degree that they are only metaphors (and especially to the degree that they aren’t) create a visceral reaction in me, a kind of powerful dread.  What happened to just voting yea or nay?  If voting is to be seen as once and for all passe, we are in real trouble.  (I grant the reality of The Campaign™ as a valid part of our democratic/republic system of government, and so I understand the 4GWish trend toward motivating sufficient numbers of voters by the blandishment of metaphorical torches, pitchforks, nooses, and all the other lovelies….but still.)

  12. zen Says:

    "What happened to just voting yea or nay? "

    What happened to having your day in court? 😉
    "This is not a systematic effort to loot.  This is being caused because the banks began to increase the volume of transactions while at the same time demanding a decrease in the administrative costs associated with transferring titles to property (i.e. the creation of M.E.R.S."
    Except that this is not a purely internal administrative cost for banks, within their purview to determine, it is a judicial process with third parties who have skin in the game. Circumventing the judicial process removes the checks that prevent fraud or incompetence from booting people out of their own homes. Due diligence is not a frill.
    I will have a counterpoint addendum from Fabius maximus later today in interest of open, honest debate.
  13. slapout9 Says:

    Criminologist Bill Black explains foreclosure gate (white Collar crime).

  14. TDL Says:

      You are absolutely right, "Due diligence is not a frill."  The problem is, the banks treated it as a frill over the past decade.  The action (or the inaction) of having a blase attitude towards due diligence (whether it was transferring title, underwriting, ratings, etc.) in deference to increasing transactions is still playing itself out.  It is necessary to differentiate the actual looting with negligence (both punishable.)  Punishing the bankers, regulators, politicians, & other enablers for the actual crimes commensurate to the degree they committed it is the best approach to take.
    Coming down hard on one group or individual to symbolically punish the crimes of a wider group is counter productive.  It will turn corrupt governors (think Blago) into heroes & rogue traders (Jerome Kerviel of Society Generale) into victims.


  15. Curtis Gale Weeks Says:

    Mark, it just occurred to me that, what with the call for pitchforks and torches and mobs and so forth…Are you trying to turn America into France?!@#$!!?

  16. J. Scott Says:

    At the Boyd Conference over the weekend, Ray Leopold contrasted the difference between the government’s view of contracts with the private sector. He distinguished the two as follows: the government’s contract is based on distrust, and private sector contracts are based on trust….that assessment was based on an old model…perhaps trust is devolving in our culture to the point of crisis…I don’t think so, but it is worth due diligence.

  17. Lexington Green Says:

    "Are you trying to turn America into France?!@#$!!?"
    Are the banks trying to turn America into Yeltsin-era Russia? 

  18. Curtis Gale Weeks Says:

    Lex, I doubt the banks could do such a thing.  There is the tendency to find one similarity, however accurate or tenuous, and extrapolate from that an exact similarity across all domains; but this isn’t Yeltsin-era Russia.  Maybe I should relate this to GCS: Gated Community Syndrome; or, it could be thought of as "thinking inside a box."  History may repeat itself; the Wheel of Time may turn; but I’m naturally hesitant to equate our contemporary America to Yeltsin-era Russia, because they are so different and the differences with have as much influence or more influence over the future of America than the similarities, I suppose.
    And unlike France, the students in America just don’t give a damn–yet.

  19. T. Greer Says:

    It may be time for pitch-forks, but this is not the issue to raise them over.

    This story is just beginning to break. We do not know if it is a few set of isolated incidents or if this type of fraud pervades the entire system. Better to see the monster in its full extant before we decide how to kill it.

  20. tdaxp, Ph.D. » Blog Archive » MyDD: Geithner et al part an organized criminal conspiracy Says:

    […] We need pitchforks and torches. […]

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