Banks Push Cover-Up on Mortgage Foreclosure Scams

In General Interest by Jonathan Tasini0 Comments

    This past week, I made the point that the conviction of Raj Rajaratnam was a tale of a relatively little fish getting nabbed, while the big fish who caused the biggest disaster and heartache for most Americans get away. Or cover-up what they have done. Bank of America, Citigroup, G.M.A.C., JPMorgan Chase and Wells Fargo et al make the case that the scammers are still on the loose.

  I am not arguing that Rajaratman shouldn’t go to jail, nor that he didn’t play an illegal game of insider trading. But, he needs to have plenty of cellmates. And when it comes to the biggest crisis facing the country, this is what is far more destructive, per Gretchen Morgenson:

As the Rajaratnam verdict captivated many on Wall Street last week, the institutions that service about two-thirds of the mortgages in this country offered to pay $5 billion to settle allegations about robo-signing and other shady practices that quick-step troubled borrowers out of their homes.

That figure is a fraction of the $20 billion that state attorneys general had apparently floated. If regulators accept the lowball offer, perhaps that would be because they haven’t dug deep enough.

   From the outset of the financial crisis, and since then–through the twists and turns that led to the Dodd-Frank legislation (which I thought was pretty mild) and through every aspect of the weak attempt by the regulators to hold people accountable–the leaders of the biggest financial institutions, principally the largest banks, have done everything possible to avoid responsibility for the mortgage fiasco. As an example, Robert Rubin of Citibank, in my opinion,simply liedto the Financial Crisis Inquiry Commission.

    In this part of the tale, the banks are doing everything possible to undermine the United States Trustee Program, the department in the Justice Department that oversees the bankruptcy system:

Banks have repeatedly tried to thwart the program’s actions, filing lawsuits and court motions to prevent officials from compiling evidence. Never mind that part of a trustee’s job is to investigate possible improprieties in foreclosures to determine if they are poisoning the bankruptcy system.

“We have faced consistent opposition by all of the major servicers,” Mr. White said. “We are currently facing 200 motions to quash our discovery requests. We also are facing upwards of 20 appeals either in district courts or in circuit courts.”

Those pushing back include Bank of America, Citigroup, G.M.A.C., JPMorgan Chase and Wells Fargo, he said.

   And the upshot is that banks are trying to–I know this will shock you–cheat people:

One involves inaccurate amounts that the banks say borrowers owe. The accuracy of these documents, which are filed with the courts, is crucial. Borrowers and bankruptcy judges overseeing their cases use them to determine payment schedules to cure defaults, for example…

In one matter, a bank claimed to the court that a borrower owed $52,043. After the borrower objected and a trustee asked for documentation, the amount owed dropped to $3,156.


   That is not a simple error in math. That is deliberate.

   Then, there are the erroneous fees heaped on people:

Often, the fees charged to troubled borrowers are not even specified. Trustee program officials found a defaulted borrower who was charged $10,260.50 in “prior service fees” with zero documentation. In another case, a borrower fell behind after the lender doubled his escrow payments with no explanation or justification. Then the bank filed a motion to lift the bankruptcy stay so that it could foreclose.

“In fewer than 20 judicial districts,” Mr. White said, “we have identified hundreds of facial deficiencies, including cases in which we seek to investigate inflated or improper escrow charges and cases in which the mortgage servicer sought relief from stay so it could foreclose on a debtor’s home.”

   My view is that part of the problem is that the people in charge are not facing jail time, and there are not enough examples of bankers who went to jail. If Raj had a lot more of his ilk filling jail cells, that would be a much better deterrent to prevent, or at least slow down, the fleecing of American home owners.

   Whether it be running safe factories in America or living by the rules the rest of us live by, the only thing CEOs and Wall Street financiers fear is a jail cell that would provide them access to their G-5s and mansions in the South of France. Fines are not enough–partly because too often they end up being paid by the company (read: shareholders).

    Jail them. Raj needs company.

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