Thursday, December 23, 2010, PM | Leave Comment
To understand the process of mortgage foreclosure and back-office dysfunction of banks, travel with me if you will back in time to the credit bubble of the early 2000s. Some media have compared it with a national casino where people usually think they will win any kind of bet.
The reason of the belief was simple. Home prices were moving up so fast even betting in casino seem to come secondary to some.
There were no lending standards throughout the nation. No job or down payment was necessary! If you could breath on the bank official’s neck, you were approved for mortgage. A time came when banks stopped holding on to mortgage loans and pooled them into securities that were sold to investors.
The banks charged fees for servicing the mortgages for nominal tasks such as collecting monthly payments. They started to slap on the biggest fees when a borrower was unable to make payments and the banks then foreclosed on mortgages.
The banks changed their servicing model to make extra buck. They replaced lending mortgages with foreclosures. Because for them, it was quick and cheap. By the way, when a foreclosed house is put back on the market and sold, the proceeds are used to pay creditors, like mortgage servicers, first.
The system of chaos was asking for intervention
A time came when greed began to take over and it finally prevailed when employees with virtually no experience masqueraded and presented themselves as senior executives of the bank. That became a standard practice. Consultants were hired to help the banks in foreclosure.
We all know how the robo-signers worked. Consultants sometimes signed documents on behalf of as many as 15 banks. The banks and their law firms created a quick-and-dirty money-making machine that was designed to rush through foreclosures as fast as possible. You might have seen online ads for making you millionaires overnight. The banks actually started practicing those “theories.”
Media report that former employees at banks and foreclosure law firms have testified that they also knowingly pushed through foreclosures on the wrong people.
The banks say they are reviewing their mortgage and foreclosure procedures and most of the people involved in foreclosure deals were behind on payments.
The problem in this quagmire is that once the bank places you on its foreclosure assembly line, it becomes nearly impossible to get off.
Banks have ethics complaint department…
Some banks have ethics complaint department and when consumers complained, they were met with deaf ears. Homeowners were told to hire lawyers and fight it out in courts. Instead of “being innocent til proven guilty”, homeowners were treated as if they were guilty and they had to prove their innocence.
In a Nutshell
Some banks went berserk and broke the financial windows of mortgage borrowers. Consumers’ best bet is to hire lawyer and fight it out in courts or else lose the house to foreclosure especially when it’s an unjust one.