It turns out that underneath that little iceberg tip of exposed evidence lies a fraud so gigantic that it literally cannot be contemplated by our leaders, for fear of admitting that our entire financial system is corrupted to its core — with our great banks and even our government coffers backed not by real wealth but by vast landfills of deceptively generated and essentially worthless mortgage-backed assets. You’ve heard of Too Big to Fail — the foreclosure crisis is Too Big for Fraud. Think of the Bernie Madoff scam, only replicated tens of thousands of times over, infecting every corner of the financial universe. The underlying crime is so pervasive, we simply can’t admit to it — and so we are working feverishly to rubber-stamp the problem away, in sordid little backrooms in cities like Jacksonville, behind doors that shouldn’t be, but often are, closed.
And that’s just the economic side of the story. The moral angle to the foreclosure crisis — and, of course, in capitalism we’re not supposed to be concerned with the moral stuff, but let’s mention it anyway — shows a culture that is slowly giving in to a futuristic nightmare ideology of computerized greed and unchecked financial violence. The monster in the foreclosure crisis has no face and no brain. The mortgages that are being foreclosed upon have no real owners. The lawyers bringing the cases to evict the humans have no real clients. It is complete and absolute legal and economic chaos. No single limb of this vast man- eating thing knows what the other is doing, which makes it nearly impossible to combat — and scary as hell to watch.
What’s sad is that most Americans who have an opinion about the foreclosure crisis don’t give a shit about all the fraud involved. They don’t care that these mortgages wouldn’t have been available in the first place if the banks hadn’t found a way to sell oregano as weed to pension funds and insurance companies. They don’t care that the Countrywides of the world pushed borrowers who qualified for safer fixed- income loans into far more dangerous adjustable-rate loans, because their brokers got bigger commissions for doing so. They don’t care that in the rush to produce loans, people were sold houses that turned out to have flood damage or worse, and they certainly don’t care that people were sold houses with inflated appraisals, which left them almost immediately underwater once housing prices started falling. The way the banks tell it, it doesn’t matter if they defrauded homeowners and investors and taxpayers alike to get these loans. All that matters is that a bunch of deadbeats aren’t paying their fucking bills.
Jamie Dimon, the CEO of JP Morgan, is even more succinct in dismissing the struggling homeowners that he and the other megabanks scammed before tossing out into the street. “We’re not evicting people who deserve to stay in their house,” Dimon says…It simply isn’t true. Many people who are being foreclosed on have actually paid their bills and followed all the instructions laid down by their banks. In some cases, a homeowner contacts the bank to say that he’s having trouble paying his bill, and the bank offers him loan modification. But the bank tells him that in order to qualify for modification, he must first be delinquent on his mortgage. “They actually tell people to stop paying their bills for three months,” says Parker.
The authorization gets recorded in what’s known as the bank’s “contact data base,” which records every phone call or other communication with a home owner. But no mention of it is entered into the bank’s “number history,” which records only the payment record. When the number history notes that the home owner has missed three payments in a row, it has no way of knowing that the homeowner was given permission to stop making payments. “One computer generates a default letter,” says Kowalski. “Another computer contacts the credit bureaus.” At no time is there a human being looking at the entire picture.
Which means that homeowners can be foreclosed on for all sorts of faulty reasons: misplaced checks, address errors, you name it. This inability of one limb of the foreclosure beast to know what the other limb is doing is responsible for many of the horrific stories befalling homeowners across the country. Patti Parker, a local attorney in Jacksonville, tells of a woman whose home was seized by Deutsche Bank two days before Christmas. Months later, Deutsche came back and admitted that they had made a mistake: They had repossessed the wrong property. In another case that made headlines in Orlando, an agent for JP Morgan mistakenly broke into a woman’s house that wasn’t even in foreclosure and tried to change the locks. Terrified, the woman locked herself in her bathroom and called 911. But in a profound expression of the state’s reflexive willingness to side with the bad guys, the police made no arrest in the case. Breaking and entering is not a crime, apparently, when it’s authorized by a bank.
More on foreclosures: Yves Smith, Mike Konczal, Ryan Chittum, Mike Konczal, and, of course, for maximum rage, IOZ. Oh, and also (and mainly) Mike Konczal, whose Foreclosure Fraud For Dummies series was nicely pitched at my level.
All images of awesome octopi shamelessly pilfered from Michelle Farran at Vulgar Army, an incredible website which seeks to “to identify and criticise themes in the use of the octopus as a metaphor in propaganda and political cartoons, as well as identify its relation to popular culture.” You just found something to do for the next twenty minutes. Get to it.