Matt Taibbi strikes again

November 12, 2010 2:18 AM

Matt Taibbi strikes again. Having gone after the investment banking industry, incidentally attaching a description to Goldman Sachs in ways their PR machine is still trying to peel off, his latest article in Rolling Stone illuminates the pervasive fraud at the heart of the foreclosure scandal.

Previously on metafilter.

posted by pharm (105 comments total)

I remember getting a boner everytime a new issue of rolling stone arrived while i was in high school. I still envy the hands on Ms. Jackson's breasts.

Now i see the words "matt taibbi"...and boom, its like high school again.

Thank you, muckraker.
posted by hal_c_on at 2:22 AM on November 12, 2010 [7 favorites]

The UK equivalent of Matt Taibbi's articles in Rolling Stone is probably John Lanchester writing in the London Review of Books. Here's a prime example from last year.

"The Debt to Pleasure" was fantastic.
posted by pharm at 2:28 AM on November 12, 2010 [5 favorites]

When the whole Florida 2000 thing was happening it was alarmist to to say the phrase voter disenfranchisement.
When the whole Iraq thing was beginning it was alarmist to say the word quagmire.
When the Katrina thing happened it was alarmist to say the word abandoned.
When Abu Ghraib broke it was alarmist to say the word torture.
When the bailouts began it was alarmist to say the phrase moral hazard.

It's not hard to find the fraud in the case. For starters, the assignment of mortgage is autographed by a notorious robo-signer — John Kennerty, who gave a deposition this summer admitting that he signed as many as 150 documents a day for Wells Fargo. In Cooper's case, the document with Kennerty's signature on it places the date on which Wells Fargo obtained the mortgage as May 5th, 2010. The trouble is, the bank bought the loan from Wachovia — a bank that went out of business in 2008. All of which is interesting, because in her file, it states that Wells Fargo sued Cooper for foreclosure on February 22nd, 2010. In other words, the bank foreclosed on Cooper three months before it obtained her mortgage from a nonexistent company.

Hundreds of thousands of cases like the one above are being put before a court of law and are winning

Hear that? That's a fucking ALARM.
posted by fullerine at 4:02 AM on November 12, 2010 [30 favorites]

So the banks are rushing to convert their reams of "bad paper" into physical assets, real estate seized from the people who made bad home loan deals. But once they flood the real estate market with newly foreclosed homes, won't that further depress the real estate market? So many homes on the market, but who are the buyers? The same people they just kicked out? Are they assuming total gullibility from thousands-to-millions of wannabe homeowners they already screwed once? And can they actually make any money if the supply is so inflated that the physical properties are nearly worthless? Or do they just intend to hold these new physical assets on their balance sheets at values having no resemblance to market prices until the housing market either comes back or they can sell them to real estate speculators who are the classic "greater fools"? Is there really any profit in this game, or just an economic Darwinist fight for survival?

Taibbi's final line: "Because in America, it's far more shameful to owe money than it is to steal it." If that is the way it truly is, then the American Economy will screech to a total halt because nobody will buy anything if it puts them in debt and the Banking System will no longer need to exist. What is the value of owning everything if you can't sell any of it?

I do have sympathy for the people screwed over by the banks and their go-betweens, but the longer they keep their "homes", the more they are going to have to pay with no guarantee that they will ever truly "own" their "homes". My advice to them is: get out. Get away. Run away. It will NEVER get better.
posted by oneswellfoop at 4:09 AM on November 12, 2010

Comparing John Lancaster to Matt Taibbi is unconscionably unfair to Lancaster who is actually a very serious man who puts real thought into his work rather than seeking to sensationalize anything and everything.

And then lets not even talk about their actual writing.

Felix Salmon had a review of Taibbi's most recent book and he made a point that I thought was excellent - Taibbi is really really good at drawing out the facts, and then making absolutely absurd statements not supported by them.
posted by JPD at 4:12 AM on November 12, 2010 [7 favorites]

Lanchester even. Fucking mornings.

Seriously you should be reading his stuff.
posted by JPD at 4:25 AM on November 12, 2010

How did Rolling Stone become a hold out for investigative journalism? is it funded differently than other places? do they just think it's kind of punk? I don't get it. It's like if Heat magazine was responsible for breaking eight of the last ten major exposes on big pharma. Were they always like this and everyone else gave up?
posted by shinybaum at 4:27 AM on November 12, 2010 [2 favorites]

Taibbi is really really good at drawing out the facts, and then making absolutely absurd statements not supported by them.

I'll second that. Hanlon's Razor does really, really bad things to Taibbi's whole oeuvre.

Don't get me wrong: there were plenty of bad actors here, and Goldman Sachs is, in fact, evil. But Taibbi is alleging a degree of coordination and sophistication that I find completely implausible. I'm completely willing to spin this as a story about the dangers of corporate pride, moral hazard, and government laxity, but taking it a step further and suggesting that everything about the 2008 crash, including the crash, was deliberate is just a bridge too far.
posted by valkyryn at 4:28 AM on November 12, 2010

How did Rolling Stone become a hold out for investigative journalism?

Just speculation, but it may be that no one has found a way to make investigative journalism profitable. This is bad for places like the NYT and news magazines, but not as big of a deal for Rolling Stone, which has the entertainment and advertising side to subsidize actual reporting.
posted by valkyryn at 4:30 AM on November 12, 2010

Just speculation, but it may be that no one has found a way to make investigative journalism profitable.

Or, put a more accurate way, very few people think that unprofitable things are worth doing.
posted by DU at 4:41 AM on November 12, 2010 [7 favorites]

How did Rolling Stone become a hold out for investigative journalism?

To be fair, Rolling Stone also was beating the drum pretty loudly on the vaccine scare. And "investigative journalism" isn't exactly the phrase I'd use to describe that, ya know?
posted by ubernostrum at 4:46 AM on November 12, 2010 [1 favorite]

incidentally attaching a description to Goldman Sachs in ways their PR machine is still trying to peel off

Link?
posted by orville sash at 4:49 AM on November 12, 2010

You can remove Taibbi from the equation, the fact stands that the banks, regulatory agencies, Bush administration, and other greedy motherfuckers conspired to fleece the American people of their homes, and continue to do so at an unprecedented pace, and the mainstream media has more or less completely failed to do the job of informing anyone that the shit has hit the fan. And make no mistake, we've not seen the worst of it yet.
posted by dbiedny at 5:15 AM on November 12, 2010 [10 favorites]

Mortgages. How … rock n' roll.
posted by scruss at 5:16 AM on November 12, 2010

Not to be nitipcky, but did Wachovia really "go out of business" in 2008? Wells Fargo completed the paperwork to merge with Wachovia in October 2008, but Wachovia was still open as a separate bank as recently as 2 months ago. Maybe someone who knows more than I will comment.
posted by blucevalo at 5:22 AM on November 12, 2010

Taibbi was on Tavis Smiley's show last night and the vibe was really weird between the two. Tavis was definitely giving-off this attitude that he really didn't want to be talking with Taibbi. It was a very strange interview.
posted by Thorzdad at 5:24 AM on November 12, 2010

orville sash: "incidentally attaching a description to Goldman Sachs in ways their PR machine is still trying to peel off

Link?"

Goldman Sachs 'vampire squid'
posted by Happy Dave at 5:24 AM on November 12, 2010

I wrote a letter to NPR about this very thing - they've been complicit in repeating bank claims directly from press releases while ignoring the basic foundation of fraud on which the "problematic paperwork" exists.

No response yet.
posted by odinsdream at 5:28 AM on November 12, 2010 [2 favorites]

Is there any possibility of a class action law suit to hold the banks accountable? Maybe one of the lawyers here on the blue can comment on this question.
posted by AElfwine Evenstar at 5:35 AM on November 12, 2010 [1 favorite]

You can remove Taibbi from the equation, the fact stands that the banks, regulatory agencies, Bush administration, and other greedy motherfuckers conspired to fleece the American people of their homes, and continue to do so at an unprecedented pace, and the mainstream media has more or less completely failed to do the job of informing anyone that the shit has hit the fan. And make no mistake, we've not seen the worst of it yet.

This scandal IS fraud, and those who engaged in these practices SHOULD be punished - but the only thing the fraud enabled was foreclosing on homes on the time frame as legally defined by the states by lying about the paperwork but not about the facts of the foreclosure. Again - fraud, not theft.

There was one very stupid bet made by every single participant, whether they knew it or not - that house prices can only go up. The greedy people selling mortgages they knew were inappropriate were betting on that, and the people buying houses they couldn't afford were betting on that. Yes, the banks were greedy, yes they were catastrophically stupid, and yes there should have been more regulation to protect the financially illiterate - but you are delusional if you think there was some conspiracy to foreclose on a shitload of homes to steal money from the american people.

I mean this is so dumb at face value I can't imagine a serious person making this argument. If your theory were correct the banks would be making money in this whole situation, when in reality I'm sure the same people who make your argument also like to argue that the banks are bankrupt and should be nationalized.
posted by JPD at 5:35 AM on November 12, 2010 [4 favorites]

Is there any possibility of a class action law suit to hold the banks accountable?

the attorneys general of most of the states involved are suing pretty much all of the banks.
posted by JPD at 5:36 AM on November 12, 2010 [1 favorite]

Two years late and $500,000 short.

Though, in Taibbi's defense, when you're like one of three investigative reporters left in the country, you've got a lot to get done.
posted by l33tpolicywonk at 5:43 AM on November 12, 2010 [11 favorites]

...the only thing the fraud enabled was foreclosing on homes on the time frame as legally defined by the states by lying about the paperwork but not about the facts of the foreclosure. Again - fraud, not theft.

Apparently you missed the accounts of banks foreclosing on homes that they had not yet acquired the mortgage on, or that they never did have the mortgage on, or that had no mortgage at all. What do you call that, if not theft?
posted by Kirth Gerson at 5:52 AM on November 12, 2010 [4 favorites]

I am a young person just out of school, with a career job that comes as about as close as you can get these days to being a stable paycheck with decent expectations of some upward mobility (minus massive student loan debts). Throughout most of the 20th century, I would be the perfect target housing consumer, thinking about buying a modest starter house with the intent to sell in a few years and trade up for a nice family home.

I cannot ever see myself purchasing a home in today's America unless I somehow manage to save the entire purchase price beforehand and have a deed to the place free and clear, with 3 or more witnesses and a videotaped signing ceremony with the bank president, real estate broker and the developer. There is simply no way to know that any bank will honor any sort of so called agreement put on paper, or will even work with me to further thier own interests should I ever have to refinance or renegoitate. And I can't see how I will ever believe anything a bank says in the future after seeing what went on the last 10 years and is happening to people right now.

I'll stick to renting, thanks.
posted by T.D. Strange at 5:59 AM on November 12, 2010 [14 favorites]

but you are delusional if you think there was some conspiracy to foreclose on a shitload of homes to steal money from the american people

Why?

I can see why maintaining that the CIA spent 6 months fitting bombs to the WTC or the American President is a Kenyan sleeper agent hell bent on winning the cold war is stretching it, but why is this particular idea delusional?

There's trillions of dollars worth of motive, the acts are well documented and the beneficiaries have a common ancestry if you will. Why is it so unbelievable that greedy people steal things? Is it because they're not that bad? Is it because they will be caught and punished?
posted by fullerine at 6:04 AM on November 12, 2010 [4 favorites]

Is there any possibility of a class action law suit to hold the banks accountable? Maybe one of the lawyers here on the blue can comment on this question.

From what I've read, the pension funds who purchased CDOs have grounds to sue the banks because of the fraudulent information in their prospectuses for these securities.
posted by banal evil at 6:05 AM on November 12, 2010 [1 favorite]

fullerine: "but you are delusional if you think there was some conspiracy to foreclose on a shitload of homes to steal money from the american people"

Conspiracy? Perhaps not an organised from the top-down traditional sorta conspiracy, no, you're right.

But a "holy shit you guys these fucking things are making serious megabucks can you believe these assholes are buying this crap it's cool for us to do this everybody else is doing it we just need to get out before it crashes and bet against the crash and we'll be golden" conspiracy? You betcha.

I cannot ever see myself purchasing a home in today's America unless I somehow manage to save the entire purchase price beforehand and have a deed to the place free and clear, with 3 or more witnesses and a videotaped signing ceremony with the bank president, real estate broker and the developer. There is simply no way to know that any bank will honor any sort of so called agreement put on paper, or will even work with me to further thier own interests should I ever have to refinance or renegoitate. And I can't see how I will ever believe anything a bank says in the future after seeing what went on the last 10 years and is happening to people right now.

I'll stick to renting, thanks.

Amen.

Except for the part (particularly prevalent in the UK) where all the buy-to-let arseholes suddenly can't afford their mortgages and evict you.
posted by Happy Dave at 6:10 AM on November 12, 2010 [1 favorite]

Yes, the banks were greedy, yes they were catastrophically stupid, and yes there should have been more regulation to protect the financially illiterate - but you are delusional if you think there was some conspiracy to foreclose on a shitload of homes to steal money from the american people.

Which conspiracy? The one to defraud borrowers, the one to defraud investors, the one to defraud local governments, or the one to commit fraud on the courts?

For borrowers it was fraud in the inducement. People making $40k/year were convinced they could afford a $400k/year mortgage through teaser rates and Option-ARMs.

For investors it was fraud when the banks bundled crap mortgages and sold them off, sometimes not even bothering with to transfer the notes to the REMICs within the 90 day window, meaning the MBSs sold to investors had no mortgages in them.

For local governments it was the creation of MERS, a secondary land title system where the banks didn't have to bother with the pesky paperwork filing and fees with the local governments. The banks were even brazen enough to destroy the original paperwork, including the note! They admitted that in a filing with the Florida Supreme Court.

For the courts it was hiring hair dressers for $10/hr to commit up to 500 counts of perjury per day, per person by robosigning foreclosure documents.

This isn't one or two bad actors; there's no Bernie Madoff or Alan Stanford acting with a handful of others. This is systemic. You are more likely to find the large financial institutions engaging in the above behaviors than not.

And don't even get me started with banks that were packaging and selling MBSs with one hand and betting against their failure with the other hand.
posted by ryoshu at 6:11 AM on November 12, 2010 [21 favorites]

Of course the easiest thing to do would be to have the fed buy up these non-performing bullshit mortgages and then sell them back to the homeowners at .10 on the dollar. Everyone stays in their houses and most of the mortgage debt would be wiped out. Oh Moral Hazard you say? I'm virtuous and they get a free ride you say? So what. It actually helps you. You can either be surrounded by a wasteland of foreclosed properties or keep your neighbors. Moral hazard didn't stop any of the many bubbles I've seen in my lifetime. It didn't stop the one before the depression either. Your insane desire to punish people you've never met for doing something that was actively encouraged by the lenders (lying about incomes, etc), is ridiculous. In fact its like the game theory thing where you and I could split twenty dollars on two conditions. One I get to decide how we divide it and you get to accept or reject the money. If you reject neither of us gets paid. If I offered you $1 and kept $19 most of you (Americans) would say bleep you. Even though objectively you've just gotten a free dollar. Your irrational belief in some absurd fairness (I should get half or at least 40% of the free money) is totally insane. It is this exact scenario that is keeping us from addressing the core problems here, mainly that lots of worthless empty homes are sitting vacant while a bunch of people are living in tent villages. Seriously WTF man people don't deserve a roof over their heads? OMG they got a free 5000 sq ft McMansion in the exurbs and you are living in your rented apartment? What does A have to do with B. You bought into the BS of defer gratification until you are too old and sick to enjoy life so that you can be rich and prosperous. Apparently that protestant work ethic nonsense fucked you, I hoped you enjoyed it.
posted by humanfont at 6:15 AM on November 12, 2010 [13 favorites]

For borrowers it was fraud in the inducement. People making $40k/year were convinced they could afford a $400k/year mortgage through teaser rates and Option-ARMs.

Whoa, that isn't fraud, that's bad math skills. If we're now excusing people getting grabby as being enticed by fraud, I'm going to go buy a yacht.
posted by yerfatma at 6:24 AM on November 12, 2010

Whoa, that isn't fraud, that's bad math skills. If we're now excusing people getting grabby as being enticed by fraud, I'm going to go buy a yacht.

It is most certianly is fraud when the loans issued vastly undermet the stated underwriting standards advertised to investors.
posted by T.D. Strange at 6:31 AM on November 12, 2010 [3 favorites]

Simply allowing distressed homeowners to refinance and repurchase their mortgages AT THE SAME RATE as they are traded as securities would get close to a neutral solution to this mess. But it's too much of a stretch. Better to create a systematic fraud that corrupts financial and judicial institutions than give the little guy a break.

I expect the Tea Party to fix this problem immediately. I also expect the Easter Bunny in about six months.
posted by warbaby at 6:37 AM on November 12, 2010 [2 favorites]

Wachovia was still open as a separate bank as recently as 2 months ago

I just cashed a couple of checks there this week. In North Carolina at least, there are still tons of branches open with the Wachovia name/branding. However, inside the building various groups (like loans) have Wells Fargo business cards.

Basically they are switching the branding over in chunks. There's also the online stuff to merge. Right now I still log in to wachovia.com but I have various Inbox messages and little signs telling me to read this or that about dates different things get switched over.

I've been banking there since 1988 or so *sniff*. My parents used to call the bank "walk all over ya" which I still think is funny.
posted by freecellwizard at 6:40 AM on November 12, 2010

... you are delusional if you think there was some conspiracy to foreclose on a shitload of homes to steal money from the american people.

Here's the thing, though, if the legal and technical systems are so convoluted that the banks don't know whether they own a home or not during a foreclosure, the end result is the same as stealing. I don't personally think that there was an actual conspiracy to steal homes, but I do think that the regulatory, legal and technical frameworks under which the foreclosure process operates makes it impossible to tell the difference between a conspiracy to steal homes and just accidentally stealing homes.
posted by odinsdream at 6:41 AM on November 12, 2010 [1 favorite]

Apparently you missed the accounts of banks foreclosing on homes that they had not yet acquired the mortgage on, or that they never did have the mortgage on, or that had no mortgage at all. What do you call that, if not theft?

The only one of these three that isn't fraud is those houses with no mortgage on them and I've yet to see any data showing the prevlance of that sort of catastrophic fuck-up has dramatically increased in the last 5 years. If you have data, please - share it.

Which conspiracy? The one to defraud borrowers, the one to defraud investors, the one to defraud local governments, or the one to commit fraud on the courts?

I believe I was responding to an accusation that there was a widespread conspiracy to defraud borrowers. Actually I have an issue with any accusation of conspiracy here. I agree that there was most definitely fraud wrt to local governments, and the courts. I reject fraud as an excuse for investors except in those situations where they were misled as to what the assets they were buying are, and as best I can tell what happened to the borrowers was not a fraud of inducement but rather a regulatory failure on the part of our government. Or as yerfatma says - bad math skills aren't fraud, and I'd add the government should have been there to protect those people. Free markets only work when the playing field is level. That's also why I have no sympathy for investors who got killed in the crisis. (meaning the professionals - not people who lost money in their 401k's obviously)
posted by JPD at 6:41 AM on November 12, 2010

But Taibbi is alleging a degree of coordination and sophistication that I find completely implausible. I'm completely willing to spin this as a story about the dangers of corporate pride, moral hazard, and government laxity, but taking it a step further and suggesting that everything about the 2008 crash, including the crash, was deliberate is just a bridge too far.

I read the article, and I didn't get the impression that Taibbi was alleging this at all. He does say this:

That's what this foreclosure crisis is all about: fleeing the scene of the crime. Add into the equation the fact that some of these big banks were simultaneously betting big money against these mortgages — Goldman Sachs being the prime example — and you can see that there were heavy incentives across the board to push anyone in trouble over the cliff.

but is it really controversial that a lot of these people saw the crash coming and bet on it heavily at the same time as they were continuing to make money by generating and on-selling exactly the kinds of mortgages that were the problem? (as, on preview, ryoshu mentions)

I'm sure Michael Lewis (who, as enjoyable as Taibbi can be, is much better and also funnier) has written about exactly that.

Anyway, the part of the Rolling Stone article where my jaw literally dropped open was the bit about borrowers being fraudulently charged for non-existent attempts at service of documents that are also fraudulent, and the court enforcing the charges. That's right, my brain used so many computational resources trying to comprehend just how fucked up the US legal system is that it could no longer keep the muscles in my face working.
posted by A Thousand Baited Hooks at 6:43 AM on November 12, 2010 [3 favorites]

humanfont: "Of course the easiest thing to do would be to have the fed buy up these non-performing bullshit mortgages and then sell them back to the homeowners at .10 on the dollar."

Strangely enough in Denmark you can actually do this very easily: the bond that contains your mortgage is traded on the open market & you can buy it out at any time (or simply pay off part of it) at the prevailing price simply by purchasing a chunk of the matching bond series.
posted by pharm at 6:46 AM on November 12, 2010 [5 favorites]

odinsdream - I don't disagree with you - if you can find evidence that a real meaningful percentage (2-3% would be meaningful I think - although I could be convinced or 1%) of those cases in which there was not clear standing to foreclose but a forclosure occured, were homes that should not have been forclosed upon.

If there is a conspiracy who is profiting from it? Answer that first before you assert a conspiracy.
posted by JPD at 6:47 AM on November 12, 2010

Whoa, that isn't fraud, that's bad math skills. If we're now excusing people getting grabby as being enticed by fraud, I'm going to go buy a yacht.

fraud in the inducement - n. the use of deceit or trick to cause someone to act to his/her disadvantage, such as signing an agreement or deeding away real property. The heart of this type of fraud is misleading the other party as to the facts upon which he/she will base his/her decision to act. Example: "there will be tax advantages to you if you let me take title to your property," or "you don't have to read the rest of the contract-it is just routine legal language" but actually includes a balloon payment.

Sadly, the people most likely to be victims of this type of fraud do not have the resources to fight it. When state AGs attempted to step in back in 2003 the OCC went to federal court and got an injunction to stop the AGs. Even the FBI warned about wide spread mortgage fraud back in 2004, but they were not given the resources to crack down on it.

It was fraud.
posted by ryoshu at 6:48 AM on November 12, 2010 [5 favorites]

Why?

I can see why maintaining that the CIA spent 6 months fitting bombs to the WTC or the American President is a Kenyan sleeper agent hell bent on winning the cold war is stretching it, but why is this particular idea delusional?


Because no one is profiting from this. The banks have lost magnitudes more from the fallout then they ever made in the bubble.
posted by JPD at 6:50 AM on November 12, 2010 [1 favorite]

Ryoshu - the fraud the FBI was warning people about was being committed by borrowers and brokers not lenders. And not remotely related to what you earlier called fraud.
posted by JPD at 6:52 AM on November 12, 2010

If there is a conspiracy who is profiting from it? Answer that first before you assert a conspiracy.

I just clearly said that I'm not asserting there was a conspiracy.

The percentage of acceptable error in land and title transfers should be zero. Absolutely zero. This blog post explains it better than I can. The entire problem is that the whole process has been driven to insane speeds, and shortcuts have been taken that undermine the system's reliability, and all of this was done intentionally.

I don't think that each individual fuckup was part of an overarching conspiracy, but the lack of a conspiracy doesn't mean the system isn't transparently corrupted.
posted by odinsdream at 6:56 AM on November 12, 2010 [1 favorite]

JPD: "The banks have lost magnitudes more from the fallout then they ever made in the bubble"

The bankers themselves have made a fortune however. The banks lost a fortune & were bailed out by the Fed, the BoE & the ECB. Bankers (as a class) have made out like bandits.
posted by pharm at 6:57 AM on November 12, 2010 [9 favorites]

My dad had to do a short sale in Florida on a condo, it was a nightmare. He got lucky and sold it right at the deadline, but seeing firsthand how shady, poorly run, and fraudulent the process was (and this is for a property that Fannie owned - meaning we owned it) I have a baaaad feeling about our housing market. He went in thinking everyone would be reasonable and 'This is America' but came out quite jaded. The system is set up for you to fail. Failure makes a lot of people money. He spent two years going back and forth with the bank (he had a fax number only, he didn't get a phone number or an email address or anything, you know, effective) before he finalized a sale.

He still gets calls about it even though it closed and has gotten notices from foreclosure lawyers even though he doesn't own the property anymore. This article just makes me seethe all over again.
posted by dig_duggler at 7:00 AM on November 12, 2010 [2 favorites]

In North Carolina at least, there are still tons of branches open with the Wachovia name/branding. However, inside the building various groups (like loans) have Wells Fargo business cards.

That will be gone within a month, probably. In Tennessee there is no Wachovia branding left.

I've been banking there since 1988 or so *sniff*. My parents used to call the bank "walk all over ya" which I still think is funny.

I don't really miss Wachovia, though if you've been with them since 1988 I can definitely understand. Wells Fargo is far larger and far more impersonal. They seem more efficient than Wachovia so far (to me), but that may be just my limited experience.

Wells Fargo was a very crappy bank when I had business with them in California, though not quite as craptacular as Bank of America. I would prefer to do business with a smaller institution or credit union and will probably eventually do that.
posted by blucevalo at 7:02 AM on November 12, 2010

Because no one is profiting from this. The banks have lost magnitudes more from the fallout then they ever made in the bubble.

if someone robs a convenience store for 100 bucks and wrecks a 10,000$ car getting away, they've lost money, but they're still robbers
posted by pyramid termite at 7:04 AM on November 12, 2010

JPD wrote: "Because no one is profiting from this. The banks have lost magnitudes more from the fallout then they ever made in the bubble."

Their balance sheets show otherwise.
posted by wierdo at 7:04 AM on November 12, 2010 [1 favorite]

Is it too late to make a little joke about 'The Ownership Society'?
posted by newdaddy at 7:04 AM on November 12, 2010 [5 favorites]

It was fraud.

Why wasn't it fraud when the borrower promised to make payments in the future and in fact did not? Fraud requires more than just forward-looking statements that turn out to be wrong.
posted by planet at 7:06 AM on November 12, 2010

The bankers themselves have made a fortune however. The banks lost a fortune & were bailed out by the Fed, the BoE & the ECB. Bankers (as a class) have made out like bandits.


I actually think in the medium term this is not going to be the case. Already 2010 is a bad year, and it is only going to be worse in 2011. Look at a graph of finance wages relative to median wages - we are clearly going back to the pre volcker days. It will take time though.

I just clearly said that I'm not asserting there was a conspiracy. I know - that wasn't directed at you

The percentage of acceptable error in land and title transfers should be zero. Absolutely zero. This blog post explains it better than I can. The entire problem is that the whole process has been driven to insane speeds, and shortcuts have been taken that undermine the system's reliability, and all of this was done intentionally.

I ABSOLUTELY agree, but there will be errors and if you want to make an argument that it is not an error you need things to veer far enough from zero to be able to prove its not just incompetence. I would also take your second point further, and say that the system did not evolve properly because there was no money in it, so no one ever got a a bigger bonus by saying "Hey let's spend 10 million bucks to make sure our title system is really world class just in case foreclosures spike"
posted by JPD at 7:08 AM on November 12, 2010

Their balance sheets show otherwise.


wrong.
posted by JPD at 7:08 AM on November 12, 2010

Yes, those are bad math skills yerfatma -- so why did the banks aggressively market poison mortgages to "grabby" people who obviously could not afford them? Presumably their math skills are somewhat better than those of a lying cheat or financial illiterate.

As I learned from R-ing TFA and many like it, in many of these cases, homeowners tried to negotiate reduced payments with the banks, were instructed to cease paying their note to trigger default and renegotiation, and then foreclosed upon without ever actually getting the opportunity to pay the reduced note.

Then there were homeowners dunned for missing payments they never actually missed. And people who were foreclosed upon who had NEVER HAD A LOAN with the foreclosing institution but were visited by sheriffs with bolt cutters anyhow. All these cases were rubberstamped by a robosigner and rocket docket -- just how many new phrases have been introduced into our idiom thanks to these rapacious motherfuckers anyway? -- meaning all the careful legal procedure to verify home ownership in the US was just waved away like it was nothing. Like it was nothing!

Seriously JPD et al, what in this article is wrong exactly? This is the same information I've read elsewhere, just with more pointed anger -- anger I am more than ready to see (although by pure dumb luck I sold my own house in 2005 and have rented ever since). I spent my young adulthood watching my countrymen get randomly screwed by the Drug War, the War on Terror, and whatever it is they're calling the Wars on Reproductive Freedom, Learning About Darwin, and Long-Haired Freaky People these days. But home ownership is the pinnacle of middle-class respectability, the thing most serious adults do, the thing I was so proud to do once but wouldn't do now on a bet -- because the War on Our Financial System is pretty much over. And it sure as hell wasn't won by some dude with a badly calculated 5-year ARM.
posted by melissa may at 7:16 AM on November 12, 2010 [5 favorites]

Is there really any aspect of American life today that isn't being blatantly raped -- and I use that word intentionally in its harshest meaning as a total violation of one's basic human right to self-determining behaviour -- by the government and/or financial sector (in all its faces of health, banking, etc)?

And if this is a new thing -- and I think it is in scope if not in intent (the seeds of conquest are always there) -- is it that this practice of the raping of the people is now simply so all-encompassing that there's really no longer any point in hiding it, and instead there is only the thinnest layer of distraction via soma-like media to keep us disengaged/distracted enough for our denial mechanisms to keep us under control that we do not rise up en masse?

And what happens when the people wake up?
posted by seanmpuckett at 7:18 AM on November 12, 2010 [3 favorites]

Seriously JPD et al, what in this article is wrong exactly?

Very simply - it is incompetance not malice
posted by JPD at 7:21 AM on November 12, 2010 [1 favorite]

...you are delusional if you think there was some conspiracy to foreclose on a shitload of homes ...

This is a straw man. In the outset, there was no conspiracy to foreclose on homes and Taibbi isn't saying that. I read the article as saying the following:

1. The banks had the ability to keep proper records.
2. Keeping proper records may have demonstrated that (a) fraud was rampant and that (b) the banks may be exposed to tax liability.
3. Banks often encouraged homeowners to default as a means of opening up loan modification as an alternative ("you need to be in default before we can modify your loan").
4. The State of Florida created a court system that preferences the interests of banks over homeowners.
5. The banks take advantage of their preferred position by further providing more fraudulent documents (that are often sloppily created) in order to support to idea that these are open/shut foreclosure cases.
6. Regardless as to whether or not the homeowner is able to pay or not, the bank is inclined to foreclose ASAP as a means to obscure the original fraud.

Now, does this mean that there is a conspiracy between government and the banks? Not necessarily. I'd suggest that the right-wing government in FL does have an ideologically-tempered tendency to side with the arguments of bankers, however. I can easily imagine the secretive (and cheap) structure of these foreclosure courts being one that the FL government was conned into agreeing to. So no conspiracy necessarily...just the banks taking advantage of the path of least-resistance in hiding something they need to go away.

Add to this that many people, including the homeowners themselves, have been socialized into the idea that being foreclosed on equals being a deadbeat. Confronting lawyers and a judge, with your tail between your legs, is far from pleasant. So many people just give up before even bothering to investigate what the bank has done.

Which is a long way of saying that there doesn't have to have been some conspiracy to foreclose from the outset. Instead, it may just be the latest, best option for a banks trying to survive... hide the evidence.
posted by Hypnotic Chick at 7:23 AM on November 12, 2010

Its not a straw man because I didn't say that - someone else did.
posted by JPD at 7:26 AM on November 12, 2010

... you need things to veer far enough from zero to be able to prove its not just incompetence...

I disagree. Once it's veered beyond zero percent it's unacceptable. Whether it's because they're incompetent or malicious is irrelevant. You would find it unacceptable if your bank account was missing three pennies tomorrow and nobody could find out why. This is the exact same thing. There is zero excuse for not being able to buy and sell property with 100% confidence in this country, where we have laws that require such confidence.

I would also take your second point further, and say that the system did not evolve properly because there was no money in it, so no one ever got a a bigger bonus by saying "Hey let's spend 10 million bucks to make sure our title system is really world class just in case foreclosures spike"

That's why the legal system exists - to ensure that when there is no profit motive the right thing still gets done. In this case, the legal system is colluding with banks, which is breaking the entire thing down.
posted by odinsdream at 7:44 AM on November 12, 2010 [1 favorite]

This article is surprisingly good. I'm generally on the side of the foreclosing banks here: despite the sloppy process, end of the day I still believe unpaid mortgages should be foreclosed. But Taibbi does a fantastic job of showing just how awful the process has been, and how the banks lawyers are forging paperwork to cover up the awfulness, and how the current system has completely screwed homeowners who need an adjustment. He's a good writer.

Right at the end he buries a really awkward part of the whole breakdown

Why don't the banks want us to see the paperwork on all these mortgages? Because the documents represent a death sentence for them. According to the rules of the mortgage trusts, a lender like Bank of America, which controls all the Countrywide loans, is required by law to buy back from investors every faulty loan the crooks at Countrywide ever issued.

Investors are starting to demand that repayment. Mega-bond-buyer PIMCO, for instance, is demanding Bank of America repurchase faulty mortgages. That sound you hear is one half of America's financial system suing the other half, no longer playing along.
posted by Nelson at 7:53 AM on November 12, 2010

no no no you misinterpret what I say about the incidence rate - yes of course anything above zero is unacceptable - I'm saying if you are using the incidence rate to prove some sort of systemic attempt to defraud people rather then just incompetance you have to show that it happened enough times that it couldn't possibly be incompetance.

I don't think the legal system is colluding so much as totally overwhelmed.
posted by JPD at 7:56 AM on November 12, 2010

JPD wrote: "wrong."

Hmm..then where are all these profits coming from? I love how profits and losses are just nebulous things that come and go at the whim of a commenter. Or a bank, depending on whether it wants a bailout or the government to get its finger out of the pie.

Go read some 10Ks for crying out loud.
posted by wierdo at 8:02 AM on November 12, 2010

"but you are delusional if you think there was some conspiracy to foreclose on a shitload of homes to steal money from the american people."

Dude, those are your words.
posted by rollbiz at 8:04 AM on November 12, 2010

JPD - Ryoshu - the fraud the FBI was warning people about was being committed by borrowers and brokers not lenders. And not remotely related to what you earlier called fraud.

One of the problems with discussing the mortgage market of the 00s is the fraud was so pervasive that it's hard to grasp how big it was. The FBI was investigating brokers and borrowers, but at the same time the banks were bundling the fraudulent loans together and ignoring their own underwriting standards. (I can provide links on request, but this has been covered in previous threads on this topic)

You've been asking who profits from all of these foreclosures. That one is pretty easy: the servicers.

And just for fun, BofA is defending against a racketeering suit in Indiana.

planet - Why wasn't it fraud when the borrower promised to make payments in the future and in fact did not? Fraud requires more than just forward-looking statements that turn out to be wrong.

As much as the Mortgage Bankers Association would like to convince people of that, no it's not fraud. The note lays out what the payment terms are for the mortgage and what happens when the terms are not met (foreclosure). The bind that many banks find themselves in today is that the notes were destroyed, so rather than having a secured debt, the mortgages are now unsecured loans. That's a pretty good incentive to rocket docket foreclosure cases, with fraudulent documents, before people start catching on.
posted by ryoshu at 8:05 AM on November 12, 2010 [1 favorite]

It is unclear if PIMCO has proper standing to force the buybacks - however the GSEs and the Monoline insurers most certainly do and have been doing so. It's been costing Bank of America between 500mil to 800 mil a quarter and it is probably going to increase.

But the sort of fraud that permits forced buybacks is not (really) the same sort of fraud that the mortgage companies are committing in the foreclosure points. Taibbi asserts that some of it is related, in that the banks want the foreclosure done and the evidence destroyed before the current owners can force the originator to make them whole. I had not heard that, but it sounds very plausible. There is certainly evidence (as noted by PIMCO) that when the originator (who is on the hook for the buyback) also owns the servicer (the guy who collects the money and sends it out to the owners, and when the money doesn't come in starts the foreclosure process), that the servicers have not being acting as a fiduciary for the owners (their legal requirement) when they are presented with information that should trigger a buyback by the originator - i.e they aren't presenting it to the originator and forcing them to buy it back. That is fraud as well, and certainly there I think it is a concerted effort by the banks.
posted by JPD at 8:06 AM on November 12, 2010

Go read some 10Ks for crying out loud.

barking up the wrong tree guy. Tell me a bank who has increased retained earnings 04-today. Not captial raising, not intangibles from doing deals. Actual retained earnings.

Dude, those are your words.

weird - maybe you didn't see the comment I quoted. here I'll reproduce it for you.

You can remove Taibbi from the equation, the fact stands that the banks, regulatory agencies, Bush administration, and other greedy motherfuckers conspired to fleece the American people of their homes
posted by JPD at 8:10 AM on November 12, 2010

I don't think the legal system is colluding so much as totally overwhelmed.

I feel like we're not even talking about the same world. Have you not read anything about the Florida court system? It exists for the sole purpose of rubber-stamping the bank's documents.

The only reason such a specialized court system exists is to support the insanity that our housing system has become, but I'd argue that's looking at the issue backwards. When there's a legal requirement that people be 100% confident about a transaction, if that process takes too damn long for you to make a profit: too fucking bad. That's not a bug to work around, but work-arounds are all we have now, from MERS to the kangaroo courts.

What's happened is that it's become acceptable for banks to completely drive the process, and the legal system is trying to accommodate them as best as possible. This is completely backwards. The legal system should not be accommodating the banks, it should be regulating and checking their functions.

It's irrelevant whether the banks are incompetent.
posted by odinsdream at 8:12 AM on November 12, 2010 [6 favorites]

JPD - got it. I missed that, sorry.
posted by Hypnotic Chick at 8:15 AM on November 12, 2010

JPD wrote: "barking up the wrong tree guy. Tell me a bank who has increased retained earnings 04-today. Not captial raising, not intangibles from doing deals. Actual retained earnings."

What the fuck world are you living in that a decrease in profitability is a loss? They're still earning. If they weren't they'd go bust, as many have.
posted by wierdo at 8:15 AM on November 12, 2010

I don't think the legal system is colluding so much as totally overwhelmed.

That is a heart-warmingly charitable interpretation of an article which gives specific examples of:
- bankers getting away with routinely doing things that if done by anyone else would be prosecuted as criminal fraud
- borrowers, on the other hand, being given one chance before being thrown on the financial scrapheap in a way that the American credit-surveillance state won't let them forget for years, if ever
- a judge threatening a lawyer with contempt for accompanying a journalist into the courtroom

Keep in mind that you don't need every court to be like this for things to go wrong. You just need one judge plus the possibility of forum-shopping and you have a "systemic" problem. It sounds like there's a lot more than just one judge, though.
posted by A Thousand Baited Hooks at 8:16 AM on November 12, 2010 [3 favorites]

AElfwine Evenstar: "Is there any possibility of a class action law suit to hold the banks accountable? Maybe one of the lawyers here on the blue can comment on this question."

Well, if AT&T gets their way before the Supreme Court, this may be a null point in the future. When you buy a house/sign a mortgage, they could just add a clause stating you can't class-action them. Lovely corporate shit. Why do I have a horrible feeling that the court will rule in favor or AT&T? *sigh*
posted by symbioid at 8:22 AM on November 12, 2010 [4 favorites]

What the fuck world are you living in that a decrease in profitability is a loss? They're still earning. If they weren't they'd go bust, as many have.

where did I say that? Take the money center banks and the investment banks that were in this business - look at the profits their mortgage businesses made during the good times, subtract the losses those businesses generated in the bad times as well as the now worthless investments those banks made buying other mortgage companies and the result is less than zero.
posted by JPD at 8:32 AM on November 12, 2010

but you are delusional if you think there was some conspiracy to foreclose on a shitload of homes to steal money from the american people.

I believe the point of the foreclosures, and where the conspiracy lies, is to convert assets and obliterate the paper trail back to derivatives that a lot of these mortgages were packaged in. That was mentioned (or at lest alluded to) in the article.

There was securities fraud occurring on a grand scale in the sale of these derivatives to pension funds, local governments, etc. and if you wipe out the paper trail no one can trace the fraud back to you (you in this case being the banks and investment firms).
posted by CosmicRayCharles at 8:38 AM on November 12, 2010 [2 favorites]

Of FFS JPD. Sure, the banks have made massive losses. But the bankers continue to pay themselves huge bonuses: that money flow is what's being protected here, not bank profits. So long as the bankers can pretend that their banks are solvent, they can continue to extract their pound of flesh from the economy unhindered, secure in the knowledge that if they do foul up, the Federal Reserve will bail them out (again).
posted by pharm at 8:43 AM on November 12, 2010 [5 favorites]

JPD wrote: "where did I say that? Take the money center banks and the investment banks that were in this business - look at the profits their mortgage businesses made during the good times, subtract the losses those businesses generated in the bad times as well as the now worthless investments those banks made buying other mortgage companies and the result is less than zero."

Mostly paper losses at this point, actually. It's the owners of MBS and MBS-based derivatives that have really gotten fucked.

Even accepting your premise, you're failing to account for future earnings. Lending money is very profitable when you can borrow at 0.25% and lend at 5% or higher. You act as if the entire mortgage business just disappeared. It didn't. Defaults aren't even terribly high in most places. They're high, yeah, but not enough (at the moment, largely thanks to federal support) to erase the profitability of the whole book in the end.

However, when your assets are valued by the market at far less than their held-to-maturity value, your mortgage book looks a lot shittier.
posted by wierdo at 8:49 AM on November 12, 2010

..than it really is. Shitter than it really is.
posted by wierdo at 8:50 AM on November 12, 2010

On Tuesday, by mistake, Chase sent my office a banker's box full of judgments rendered in Florida on unsecured debt (mostly credit cards).
posted by [citation needed] at 9:08 AM on November 12, 2010

Pharm - I don't think that's the right way to think about the argument "Conspiracy is silly because no one is making money off this" - if there was a conspiracy you wouldn't have wanted to take those huge payouts in cash when times were good, you would have wanted to squirrel them away in the bank and gotten paid in lots of restricted stock or options. I mean obviously those payouts were inexcusable and there needs to be some mechanism to prevent and/or claw them back - but in the context of "There was a massive cabal to steal people's homes" if anything they are evidence that the banks really are so short sighted they would incapable of something so complex and long-term as being mooted by some.

Indeed, mostly paper. we'll see what happens.

The future earnings discussion is tough - if you look at the book they wrote from 04-07 I'm not sure there is a positive NPV there, but yes of course mortgage lending is a profitable business.

Totally agree on the valuation point.
posted by JPD at 9:11 AM on November 12, 2010

I think if you look at 07 and 08 alone, you'd be hard pressed to find profitability in that set of mortgages. I haven't looked at default rates for specific vintages recently, though, so I don't know whether the trend of early and large losses on mortgages written in those years continued after the wave of crappiness.

If they're as loaded full of fraudulent mortgages as I've seen claimed, I can see where you're coming from. I think taking it back all the way to '04 is a bit much, though. The market was overheated then, but the credit risks being lent to were much better. Last I looked the default rates on those mortgages were much, much lower. Moreover, you're much more likely to recover a good deal of that in foreclosure than you are with a newer, larger loan.

Since the houses were worth significantly less in '04, the loan sizes are smaller. I'm not considering seconds and HELs and all that other shit, though. I'm just thinking in terms of firsts.
posted by wierdo at 9:25 AM on November 12, 2010

Also, I should point out that I'm assuming that the federal government will figure out a way to keep the entire mortgage market from coming apart at the seams for lack of documentation. As much as I hate it from a fairness standpoint, I just don't see the banks getting as fucked as they should from that end.
posted by wierdo at 9:27 AM on November 12, 2010

you have to consider the seconds and heloc's though - most of them are worthless.

I just chose 04 'cause I didn't want someone accuse me of using too small a data set. I don't disagree with you wrt those years.

They're going to get fucked for it, but not as hard as they should. The one thing they have on their side is that (yes there are exceptions) people have defaulted on the underlying. Hopefully this issue is something that gets addressed by the SEC in terms of much tighter requirements for the paper trail. But I'm probably too optimisitc.
posted by JPD at 9:35 AM on November 12, 2010

Any sufficiently complex and opaque system appears to be a conspiracy from the outside. When everyone acts in their own self interest, and all those interests align, and there's no check on their actions because they're working right around the edge of what's legal, very bad stuff happens. That's how the financial crisis happened. And now, with the cleanup, it's in no one's interest to do anything but obfuscate what happened.

The world of business/finance strongly rewards people who can take advantage of (or completely circumvent) the law. Making money fair and square is not something lenders or finance folks are known for, and it's been that way SINCE BIBLICAL TIMES. Lenders benefit from screwing you as much as possible without breaking you. The meltdown was what happens when we let them run wild with no oversight. The people who would benefit from oversight, though, could barely comprehend the complexity of what's going on even if they were getting the truth. Which they aren't.

I'm totally amazed that Americans haven't gone crazy yet. We used to have riots in this country! I hate to think we've gone so soft that this can't get people with pitchforks out into the streets. Not that I'm advocating that, but it'd be nice to see people paying attention.
posted by pjaust at 9:40 AM on November 12, 2010 [4 favorites]

I'm totally amazed that Americans haven't gone crazy yet. We used to have riots in this country! I hate to think we've gone so soft that this can't get people with pitchforks out into the streets. Not that I'm advocating that, but it'd be nice to see people paying attention

Yeah, Taibbi's last paragraph is his best:

When you meet people who are losing their homes in this foreclosure crisis, they almost all have the same look of deep shame and anguish. Nowhere else on the planet is it such a crime to be down on your luck, even if you were put there by some of the world's richest banks, which continue to rake in record profits purely because they got a big fat handout from the government. That's why one banker CEO after another keeps going on TV to explain that despite their own deceptive loans and fraudulent paperwork, the real problem is these deadbeat homeowners who won't pay their fucking bills. And that's why most people in this country are so ready to buy that explanation. Because in America, it's far more shameful to owe money than it is to steal it.

posted by crayz at 9:47 AM on November 12, 2010 [1 favorite]

So when this whole shit blew up in 2008, I was convinced that the banks attracted some of them "smart" (those types that masturbate furiously to case-studies and struggle to differentiate between metaphor and reality) folks and those smart folks started hyperventilating in their own world, not unlike another set of "smart" folks started hyperventilating over dot-coms. So I began reading up on economics massively, both micro and macroeconomics; Krugman, de Long's blogs, all those books that were flavours of the respective months, Black Swan, Freakonomics, "Too Big To Fail" yada yada. Heck, even did a part-time distance-education module in micro-economics from an American university.

And now I read this. Now it turns out there's nothing particularly smart or even "smart" about this, that this is plain ol' fraud, and plain ol' powerful people fucking over the not-so-powerful. What troubles me the most with this article is that there's nothing that more knowledge or breaking down a new discipline that will resolve anything here; plainly, the lower-rungs of the executive and the judiciary have simply been bought off.

Now, here's the stuff I still have a hard time squaring with: whether by accident, hubris, intent or design or all, the most charitable reading of the article is that there's a huge amount of legal fuck-ups going on; in other words, there's a lot of legal wrangling/ smoothening-things by folks who are trained to deal with this stuff. And yet, we have threads after threads here in the blue on how it's just such a bad time to graduate from a law school and how it's been a bad three years for legal hiring.

In other words, on the one hand, there's this massive dearth of legal skills in these rocket-dockets, while on the other, you have legions of lawyers not getting jobs and burdened with heavy debt. How does that happen? I mean, I get the details - the graduating lawyers have huge debts and are probably not up to doing cases pro-bono or at a reduced rate - but still, from an overall perspective, how did it come to this?
posted by the cydonian at 9:54 AM on November 12, 2010

ctrl-f malice Hanlon's Razor
posted by vectr at 9:54 AM on November 12, 2010

Whoa, what is with the hate on senior judges? The Federal court system would collapse without senior judges, including Sandra Day O'Connor, partially filling the holes caused by the Republican refusal to approve any judge to the left of Attila the Hun.

Florida has a rocket docket for all Federal court functions, not just mortgages. It is part of those districts' culture. Every circuit and district has a distinct and very different culture. This is widely considered to be a feature.

Taibbi is usually pretty good, but he really misses context here.
posted by QIbHom at 9:59 AM on November 12, 2010

And now I read this. Now it turns out there's nothing particularly smart or even "smart" about this, that this is plain ol' fraud, and plain ol' powerful people fucking over the not-so-powerful. What troubles me the most with this article is that there's nothing that more knowledge or breaking down a new discipline that will resolve anything here; plainly, the lower-rungs of the executive and the judiciary have simply been bought off.

It's a serious mistake and oversimplification to think most of these people are "bought off". The vast blindered masses of them are just doing their jobs in the context of contemporary American society. I doubt the judge sees anything odd about foreclosing a home in minutes if the homeowner fails to appear, but letting the banks come back and get infinite do-overs. After all, who are the bums here?
posted by crayz at 10:16 AM on November 12, 2010

Looks like the sloppy paperwork is catching up to the banks.

Hundreds — and possibly thousands — of Massachusetts homeowners are facing back-to-back foreclosures as lenders realize there were problems with property titles the first time around. Those lenders, often unable to obtain title insurance, are opting to start from scratch with what is being called a “re-foreclosure.’’

posted by ryoshu at 11:57 AM on November 12, 2010

I think it's the judges pulled in from retirement, QIbHom, that was mentioned in the article. Senior judges are okay, but judges who have been out of the system for a while called in to preside over dubious cases and rubberstamping final judgments do not exactly lend credibility to the proceedings.

But I agree that he misses the point a bit about rocket-dockets. Most courts have these, usually for uncontested cases, and not just federal courts.

And because I practice law in Florida, I just have to plug the 12th judicial district (Sarasota, Bradenton, Arcadia), where our chief judge (Hayworth) has set up, via numerous administrative orders, a series of safeguards for foreclosure proceedings, including mandatory mediation, conciliation dialogues between lenders and borrowers, checklists for documents that must be present in the file before summary judgment can be sought, which checklists must be certified by the attorney and re-certified at the hearing, etc.

At the last foreclosure proceeding I was involved in, I attended the uncontested rocket-docket. The judge took the foreclosures where the homeowner or tenant showed up first, often giving the homeowners or tenants extra time by either continuing the case or placing the sale date 90 days out. He then heard the foreclosure cases by lawyers who had less than three cases, saving the mills for last. The judge routinely dismissed the cases where the paperwork was not in order in accordance with the checklist or no checklist was filed. Legal aid was present and the judge urged homeowners to speak with them. Aides were there to advise tenants of their rights in the foreclosure. The judge had no less than three assistants double-checking the paperwork.

Of course, this doesn't mean that cases with fraudulent paperwork aren't winning, but it cuts down on the possibility because someone at the court is looking at every document.

Sadly, it seems our judicial circuit is the exception.
posted by Jezebella at 1:09 PM on November 12, 2010 [3 favorites]

Taibbi is usually pretty good, but he really misses context here.
posted by QIbHom

He did have a specific example of a judge that didn't seem to know the difference between 'cite' and 'site' and that didn't seem to think it was okay for the defendant to talk to a reporter. I'm not sure he really meant to rag on all senior judges at all.
posted by kingbenny at 1:21 PM on November 12, 2010

This is not the article I wanted to read four hours after closing on a house.

"Blah blah blah it only happens to deadbeats" isn't really reassuring when you read about the robosigned foreclosures on houses that aren't even under a mortgage. Someone upthread said something about renting, presumably on the grounds that you can't be ripped off if you don't have a mortgage. I used to feel the same way until I realized it was all a crapshoot and they could foreclose on a house or apartment complex I was renting in, or even something I owned outright.

We can pay for the house we just signed a mortgage on, and will, barring the mortgage owner selling it and not telling us where to pay or something ridiculous like that. But fundamentally it's all a crapshoot until the systemic sloppiness and/or fraud, depending on your POV, gets fixed, if it ever does.
posted by immlass at 4:58 PM on November 12, 2010

I agree with the Hanlon's law, to a point.

I don't think it is with malice that these banks have found the best way to game this system. And I don't think that the state of Florida necessarily had the wherewithal or the resources to systematically track this fraudulent activity, and change their process accordingly.

But we have to accept that interaction with our legal system has real costs. When a company cheats thousands of people out of 2-3 cents, they can generally assume that no single person is going to go through the trouble of suing them. Likewise, as the stakes rise, they can use their legal resources as a way to delay the legal process, winning by default, even when it isn't outright fraud. Isn't this common practice in every sector of big business? Health insurance companies do it, car insurance companies do it, etc etc etc. I was on my bike and hit by a car several years ago. The police officer on the scene cited the old lady who hit me, she pled guilty and paid a ticket, but instead of my auto insurance company going to bat against her auto insurance company, I had to retain a lawyer myself. I was not badly injured (wear your bike helmet), but my bike was totalled, and the emergency room bill, while small, was big for a grad student with a family. The lawyer essentially said that it wasn't worth my time, or theirs to pursue this, since the stakes were so low.

But the whole point is that we don't just have a system of laws, we have a system of laws with certain processes of enforcement. To those who are sophisticated enough (read: big banks, big companies) the process of enforcement matters just as much as the law itself.
Taibbi plays this up in his typical fashion, but exploiting the legal process has been acceptable corporate policy for quite a while now, by my reckoning.

Yet somehow we have a population that still thinks that fraud is fraud, and people who break the law go to jail. No, people who break the law, and don't have a team of lawyers go to jail. Companies (despite having first amendment rights) cannot go to jail, and so they diffuse responsibility, and break laws all the time. They pay the fees (or not) and go about their business.
posted by cogpsychprof at 5:00 PM on November 12, 2010 [2 favorites]

So let's say one owns a house that has been refi'ed a couple times and where the mortgage has been sold and resold. How would one determine if the bank that owns the note has all their ducks in a row, or if something like this is likely to happen to the homeowner?
posted by KathrynT at 5:45 PM on November 12, 2010

KathrynT, you can demand to see your mortgage note.
posted by genehack at 9:05 PM on November 12, 2010

Hanlon's razor doesn't really apply in this case. Taibbi's not saying that evil bankers were nefariously plotting the demise of their nation, he's saying their greed and incompetence (and of course the ability to fund campaigns) brought us here.

JPD would do well to RTFA (the whole FA); he seems to be responding to some idea of the author that doesn't really apply here.

Your appreciation of Taibbi correlates directly to your love of polemics and hyperbole, and inversely to your proximity in life to wealth and power.
posted by donkeybear at 9:07 PM on November 12, 2010 [2 favorites]

I don't think Taibbi goes far enough. Since when is it OK to screw up in this fashion and them use the excuse "to big to fail"? Once you dig down and examine that assumption, it looks like just another excuse for the banks to walk away free. Why is not every single senior executive for those banks in jail, for years? Even here in the blue there is a sense of resignation about this outrage. That just shows how apathetic and beaten down we have become as a society. Scary.
posted by Vibrissae at 1:03 AM on November 13, 2010 [3 favorites]

Vibrissae, I cannot favorite that comment enough times, for me, that's really the main underlying point - in America, people have been conditioned to be ignorant, petty, disconnected from understanding sourcing and effect, made to believe that the institutions are somehow more important than the people that are served by the institutions. Money at any cost, further consolidation of money and property, and everyone swimming in this pool wants to keep their head above water, even if it means drowning out those they're standing on, it's "me, me, me", 24/7/365. Empathy is paid lip service, it's part of the corporate messaging, as empty and meaningless as the ad copy generated by robots in cubicles. Corporations have the legal rights of individual citizens, but none of the moral accountability or humility of a human soul, and even when senior executives "take responsibility", they never seem to actually pay up for their actions, it's all the justice money can buy.

All the justice money can buy.

For me, that's the epitaph of the American experiment. We tried, it's failing, except this time, everything is so locked together, the potential domino effect is scaring the hell out of those modeling the outcome.
posted by dbiedny at 6:31 AM on November 13, 2010

The percentage of acceptable error in land and title transfers should be zero. Absolutely zero.

This isn't possible. It's just not. Aiming for some very small number of errors is fine, but they're going to occur from time to time, and the important part is how you handle them when they do occur.

Building a system that errors 0.1% of the time (1 in 1000) but has some path for realizing and correcting the error, and more importantly isn't perceived as perfect may actually be preferable to a system that errors only 0.0001% (1 in 1M) but totally blows up when it does, because everyone thinks it can't ever fail.

The failure mode, in other words, is just as (if not more) important than the failure rate.

Consider two systems:

In one system, a bank generates foreclosure notices. It is well-known and understood that they're generated by a machine which doesn't handle certain edge cases very well and that some not-totally-insignificant number of them may be wrong. As a result, they have some language on them telling recipients what to do if they think the notice is in error, which kicks the item into some sort of exception-handling mode, whereby it's corrected. End result is a number of people who are probably annoyed that they got bogus notices in the mail, but probably nothing that a very sincere apology won't correct.

In another system, the bank generates foreclosure notices using a much more complex machine, which has lots of logic in it for dealing with weird edge cases, such that it has never been wrong. Ever. Until one day it is, because a cosmic ray hits it just right or a fly craps in the teleprinter or some elderly keypunch operator types 'O' instead of '0' or whatever. These things happen, eventually. But because the system never fails, everyone has confidence in it, the gears of the bureaucracy grind on, and someone somewhere loses their house. Whoops. And maybe nobody ever even knows that the system has failed. (At least until somebody who got wrongly evicted figures out where the notice came from and walks in there with a semiautomatic rifle and teaches everyone a valuable lesson about unhandled exceptions in business processes.)

And just to head off a trivial objection, replacing the "machine" with people doesn't necessarily make it any better. People still make mistakes. The 'machine' is just shorthand for any complex process, which could involve people, machines, courts, judges, lawyers, the Postal Service, etc., viewed as a black box which decides whether people lose their houses or not.

So in reality, what we need is a system that realizes its own limitations, doesn't try to transcend them, and has a well-tested route for dealing with the errors that will eventually creep in, and head them off or reverse them, hopefully before they become tragedies. You do not do that by demanding "zero defects."
posted by Kadin2048 at 8:13 AM on November 13, 2010 [1 favorite]

Kadin2048; I appreciate your comment, but could you read through the blog post I linked to? It explains very clearly how land and title transfers can easily have zero percent error. This is not hard. It's become hard because banks have insisted that the process be able to happen at ludicrous speeds in order to be able to have things like mortgage-backed securities.

As long as we're talking about how the system should be rebuilt: I'd argue that MBS'es should not be able to exist, because it should be too time-consuming, due to the legal checks and balances required, to transfer mortgages between parties at rapid speeds. It should be impossible to do this effectively. And, as we've seen, that's actually the case. MERS is a failure, MBSes are failures. The idea does not work.
posted by odinsdream at 10:05 AM on November 13, 2010 [1 favorite]

I think maybe it's been lost in the shuffle that a lot of the small middlemen, the fly-by-night storefront lender companies, had a lot to do with this, as follows:

They did the original fraudulent behavior of lending to people they knew could pay a huge mortgage at the teaser rates but would be screwed when the rate reset - the proverbial $40K/year strawberry picker here in CA - which didn't matter to that little lender, because they immediately sold the mortgage upstream to some larger entity for actual cash. they also kept their up-front fees.

Many of the owners of these thousands of little lenders either spent that cash on living the big life...or, they turned around and invested back into real estate to try to repeat the cash bonanza as many times as possible, flipping etc.

As long as you were either selling houses or mortgages and were being handed cash, you were doing great, and this kept the bubble inflating.

Now, if you banked all that cash carefully, in safe investments (or maybe in gold, over the last several years), then you're probably doing fine right now, sitting on a decent pile of money.

However, my guess is that most of the middlemen - these would be considered "small fry" in the financial world, but they were making more cash than they'd ever seen - wound up either losing all their "gains" by staying in the house game too long, or spending it all on "big lifestyle" crap as if they would always make that much money, or just blew it the old fashioned American way like Bernie Madoff: Vegas, hookers and blow.

I feel like a lot of what became this pile of imaginary money now represented by the MBSes was paid out in real cash to a bunch of little players that then made it all disappear again.
posted by zoogleplex at 2:44 PM on November 13, 2010

valkyryn: Hanlon's Razor does really, really bad things to Taibbi's whole oeuvre.

I'm generally a fan of Hanlon's Razor, but not in this case.

If we were to guess that (for example) Goldman Sach's involvement in the mortgage mess was the result of incompetence, we'd expect them to be suffering badly financially, whereas in fact they're making out like bandits.

It's possible for something like the mortgage mess to result from circumstances that look (and for most intents and purposes, function like) a conspiracy, even in the absence of any centralized planning by a mustache-twirling mastermind. It seems to me that Taibbi's work mostly describes the way these institutions have in fact behaved rather than implying that every aspect of that behavior was part of a long term plan.
posted by Western Infidels at 9:25 AM on November 14, 2010

Or - greed of sufficiently single-minded focus is indistinguishable from malice.
posted by Kirth Gerson at 11:17 AM on November 14, 2010

The other sad thing about this is that, whatever the merits of Matt's reporting, that it's appearing in Rolling Stone means that ultimately not enough of the kind of people who actually could effect any kind of change in response to reading this will actually read it. No offense to the readership of Rolling Stone.
posted by newdaddy at 4:10 AM on November 15, 2010

Your appreciation of Taibbi correlates directly to your love of polemics and hyperbole, and inversely to your proximity in life to wealth and power.

This, a thousand times. Wait no, a MILLLION TIMES!!11!
posted by thsmchnekllsfascists at 7:53 AM on November 15, 2010

Congress and the White House may be working on a retroactive deal to legalize mortgages issued under MERS and much of the legal challenges to bank forecosures
posted by T.D. Strange at 8:27 AM on November 15, 2010

Oh fuck you congress... God damn it.
posted by odinsdream at 12:00 PM on November 15, 2010

Follow ups:

Foreclosure Judge Doesn’t Read Mortgage Cases -- or, He Says, Rolling Stone Taibbi's follow up from Nov 12 (two days after original article) in Rolling Stone.

After

the American Civil Liberties Union, the ACLU of Florida and a coalition of journalistic and First Amendment organizations earlier this week sent letters to Chief Justice Charles P. Canady of the Supreme Court of Florida and Chief Judge Donald R. Moran of Florida's Fourth Judicial Circuit highlighting a number of reports from around the state pointing to a troubling pattern of foreclosure courts operating behind closed doors rather than openly as mandated by Florida law,

Canaday "Says State Foreclosure Court Hearings Must Be Open To Public." reports the ACLU.

Interview[mp3] with Taibbi on WJCT's First Coast Connect 11/18. Program notes.

Interview[mp3] with Nomi Prins and Taibbi on KPFK as a prelude to the talk they gave in Los Angeles that night.

If someone wants to make a FPP, go for it, but I don't have time to make it good enough this morn. Have to earn some money to send to the ACLU.
posted by morganw at 9:39 AM on December 1, 2010