Foreclosure Fraud: “Systemic, Industrywide, Pervasive”

10-17-2010 • Ritholtz.com

These weren’t erroneous ‘i’s that were not dotted and ‘t’s that were not crossed; It was a mad rush to do yet another extremely important legal and financial process recklessly: As fast and cheaply as possible. Gee, how could that ever go wrong? “Millions of homes have been seized by banks during the economic crisis through a mass production system of foreclosures that was set up to prioritize one thing over everything else: speed. With 2 million homes in foreclosure and another 2.3 million seriously delinquent on their mortgages – the biggest logjam of distressed properties the market has ever seen – companies involved in the foreclosure process were paid to move cases quickly through the pipeline. Law firms competed with one another to file the largest number of foreclosures on behalf of lenders – and were rewarded for their work with bonuses. These and other companies that handled the preparation of documents were paid for volume, so they processed as many as they could en masse, leaving little time to read the paperwork and catch errors. [BR: aka the purpose of legal document review] And the big mortgage companies overseeing it all – including government-owned Fannie Mae – were so eager to get bad loans off their books that they imposed a penalty on contractors if they moved too slowly. The system was so automated and so inflexible that once a foreclosure process began, homeowners and consumer advocates say, there was often no way to stop it.”