This is Obama’s Biggest Failure
An excerpt of a review of David Dayen’s new book Chain of Title:
Not many noticed while the bubble was going up, but after it collapsed and the recession took hold, millions of people fell into default on their mortgages. Dayen’s book follows three private citizens, Lisa Epstein, Michael Redman, and Lynn Syzmoniak, all of whom were sucked into the foreclosure machine after the economic crash of 2008. In desperation they began poking around their foreclosure documents, and found howling, inconceivable errors — being foreclosed on by a bank that did not own the mortgage, obviously impossible dates, missing signatures, and so on.
They investigated further, and found that their cases were by no means unique, they were just one of the tiny minority of people who bothered to contest their foreclosure. Practically every case they looked at had gargantuan holes in them. Others had it even worse — banks who had foreclosed on people whose mortgages were paid-up, or ones who had no mortgage at all. It turned out the banks had battalions of people committing systematic fraud. “Robo-signers” would attest to “personal knowledge” of homes, or forge others’ signatures, or falsely notarize documents, hundreds of times per day. The sheer speed meant that the documents were almost universally garbage, but on the rare instances a foreclosure was challenged, the banks would usually just come back later with a new set that was magically in order.
Epstein, Redman, and Syzmoniak became obsessed with the foreclosure disaster, and they joined with others to agitate for the government to step in and provide relief for homeowners. After awhile, they began to get some traction. All this obvious fraud gave the government enormous leverage. If a bank does not have proper chain of title, it is illegal to foreclose. Since it means the bank does not own the mortgage, it is theft. Under New York law, securities which did not properly follow the original contract (and they usually didn’t) would be void. And under federal tax law, income from securities without proper documentation could potentially be taxed at 100 percent. With those tools, the federal government could have easily used the threat of prosecution and taxes to force the banks to the negotiating table.
Be sure to read the review in its entirety here…