Wednesday, May 18, 2016

David Dayen — Foreclosure Fraud Is Supposed to Be a Thing of the Past, But It Happens Every Day

EVERY DAY IN AMERICA, people continue to be kicked out of their homes based on false documents. The settlements over allegations of robosigning, faulty paperwork, and illegal mortgage servicing didn’t end the misconduct. And law enforcement, along with most judges and politicians, have looked away in the mistaken belief that they wrapped up a scandal that just goes on and on.…
How clean is your title if you've purchased a property that was a foreclosure since the crisis?
The government, the regulators, and the judges seem content to refer back to their press releases about what they delivered for homeowners, while willfully blinding themselves to the continuing destruction of the integrity of the nation’s judicial system. They’ve collectively decided to pretend that the ruination of a 300-year-old property records system never happened. And homeowners are left to pick through the rubble on their own.
The Intercept
Foreclosure Fraud Is Supposed to Be a Thing of the Past, But It Happens Every Day
David Dayen

14 comments:

Ryan Harris said...

The ruination of the 300 year old property system... is a bit of an exaggeration. Anyone, anywhere can still today write a deed on a piece of paper with a pen and walk down to their local courthouse and record it, and there is no crime in that, mis-spellings, mis-descriptions, bungled dates, it's all in there and we get by just fine.
If making an error on a real estate record were criminal or invalidated chain of title, half of America would be in serious trouble. Our property record system is incredibly forgiving and we've documents, affidavits and other tools to clean up mistakes. Life, relationships and contracts are never simple and straight forward in property and we don't need a more rigid system of property ownership that these people imagine should or does exist. Ours is just fine, thank you.

Tom Hickey said...

Confirming this order on appeal, the SCA commented that “….. where registration of a transfer of immovable property is effected pursuant to fraud or a forged document ownership of the property does not pass to the person in whose name the property is registered after the purported transfer”. Where there is no “genuine intention to transfer ownership” on the part of the seller, ownership does not pass and registration in the Deeds Office has no effect.

PROPERTY FRAUD: BUYERS, BONDHOLDERS BEWAREPROPERTY FRAUD: BUYERS, BONDHOLDERS BEWARE

Ryan Harris said...

Proving a bank isn't entitled to collateral when loan default has occurred is difficult. A bit rich to say it is fraudulent in intent when they make a procedure error in filing docs. Fraud would be trying to steal a house they were not supposed to have, as in the article you posted above. There is no question the bank is entitled to the collateral, the question is only in whether they followed the procedure to foreclose properly. If they made a mistake, they can refile the paper, done properly.

Tom Hickey said...

But there is also the question of predatory lending, complicity in falsifying documentation, foreclosure on properties that banks don't actually have a legal interest in, etc. Dayen addresses a number of these issues.

Ryan Harris said...

And there was fraud, lots of fraud in the entire real estate process. Bankers, Brokers, Agents, Tax Assesors, Congressmen, Appraisers, Ninja Borrowers, pigs at the trough, all of them.

Andrew Anderson said...

"Loans create deposits" and supposedly real liabilities 1-for-1 for the lending banks but due to government subsidies/privileges for the banks those liabilities are largely virtual for the banking system as a whole.

So tell me, bank privilege defenders, how is the creation of virtual liabilities (bank credit) in exchange for real assets (promissory notes and claims to real collateral) anything but fraud? Hmmm?

Tom Hickey said...

So tell me, bank privilege defenders, how is the creation of virtual liabilities (bank credit) in exchange for real assets (promissory notes and claims to real collateral) anything but fraud? Hmmm?

It's just how finance works. The purpose of finance is to liquify collateral for use without having to sell assets. The fee for risk and transaction costs is interest. It is not fraudulent since both parties enter into the transaction voluntarily with full disclosure and understanding, which is in the contract and regulated by contract law and commercial law.

Financial fraud involves misrepresentation within that legal context.

Finance extends back into prehistory. The modern institutional aspects of finance began to be developed in the West in the 14th century, along with legal and accounting systems.

Basically, in a financial transaction, the lender risks capital and the borrower collateral. The purpose is to liquify collateral for current use while retaining ownership. In both cases ownership of property is placed at risk.

In modern money, government does not back the capital of lenders but rather agrees to provide liquidity in extremis that must be repaid, This liquidity is a loan, so there is a lender of last resort backing up the system to obviate runs on lending institutions.

An advantage of this system is that it is diversified and decentralized, so that risk is spread and no entity has excessive control over the system, although the government as regulator of the system ensures that it continues to operate seamlessly.

One of the problems with the system now is consolidation in the financial sector which reduces diversification and concentrates risk. It also tends to centralize power and control. This leads to systemic risk. This is the issue that global finance is wrestling with at present.

Andrew Anderson said...

It is not fraudulent since both parties enter into the transaction voluntarily ... Tom Hickey

It is NOT voluntary since physical fiat is not a genuine alternative to convenient, inherently risk-free accounts at the central bank which all citizens should be allowed to have and not be forced to lend* their fiat to banks or to other depository institutions.

You're defending a government privileged/enabled/enforced/subsidized usury cartel, Tom, which systematically steals from the poor. Don't wonder then why it is historically a cause of so much trouble including economic calamities and world wars.


*a bank, etc. deposit is legally a loan.

Tom Hickey said...

It is legal, not "fraudulent." It may be unfair, unjust, dastardly, or as Al Capone said, a "racket," but it is not "fraudulent."

People are not forced to borrow. They can consume within their means. Then producers would have to reduce prices to make sales.

Andrew Anderson said...

People are not forced to borrow. Tom Hickey

The alternative (assuming one has a choice which the poor often don't, being the least so-called creditworthy) is to be priced out of the market by those who do borrow, eg. try to save to buy a house.

And there's no need for the current system anyway since equal fiat distributions to individual citizen accounts at the cb can drive interest rates in fiat to near zero if desired or at least create sufficient price inflation so as to discourage money hoarding and encourage investment.

Andrew Anderson said...

Then producers would have to reduce prices to make sales. Tom Hickey

Deflation is very painful which is why it is resisted so much. Nor is it necessary since fiat costs nearly nothing to create. The problem then is distributing fiat ethically and that's hardly a problem since all that is needed is individual citizen fiat accounts at the cb, "trillion dollar coins" to finance the equal distributions to all citizens and the abolition of government-provided deposit insurance and other privileges for the banks so they won't blow more bubbles as the economy recovers.

Andrew Anderson said...

An advantage of this system is that it is diversified and decentralized, Tom Hickey

Individual and other (business, organization, State and local goverenment) citizen accounts at the central bank would be even more diversified and decentralized - as much as is possible.

So what's not to like?

Bob said...

The banks wanted to save money on property title registration fees... don't we all?

Tom Hickey said...

In addition, on some they didn't have the paperwork to file so they forged it. It was so common, it even has a name — robo signing.