...Nobody wins when a home enters foreclosure — neither the borrower, who is evicted, nor the lender, who takes a loss when the home is resold. That’s the conventional wisdom, anyway.
The reality is very different. Behind the scenes in these dramas, a small army of law firms and default servicing companies, who represent mortgage lenders, have been raking in mounting profits. These little-known firms assess legal fees and a host of other charges, calculate what the borrowers owe and draw up the documents required to remove them from their homes.
As the subprime mortgage crisis has spread, the volume of the business has soared, and firms that handle loan defaults have been the primary beneficiaries. Law firms, paid by the number of motions filed in foreclosure cases, have sometimes issued a flurry of claims without regard for the requirements of bankruptcy law, several judges say.
Much as Wall Street’s mortgage securitization machinery helped to fuel questionable lending across the United States, default, or foreclosure, servicing operations have been compounding the woes of troubled borrowers. Court documents say that some of the largest firms in the industry have repeatedly submitted erroneous affidavits when moving to seize homes and levied improper fees that make it harder for homeowners to get back on track with payments. Consumer lawyers call these operations “foreclosure mills.”
“They get paid by the volume and speed with which they process these foreclosures,” said Mal Maynard, director of the Financial Protection Law Center, a nonprofit firm in Wilmington, N.C.
John and Robin Atchley of Waleska, Ga., have experienced dubious foreclosure practices at first hand. Twice during a four-month period in 2006, the Atchleys were almost forced from their home when Countrywide Home Loans, part of Countrywide Financial, and the law firm representing it said they were delinquent on their mortgage. Countrywide’s lawyers withdrew their motions to seize the Atchleys’ home only after the couple proved them wrong in court...
But pity the poor Congresscritters. Seems like they'll get no votes in November if they don't try to re-regulate the mortgage industry, and no money from their financial ba$e if they do. Now there's a case of being caught between the devil and the deep blue sea of constituents.
The new Federal Agency being drawn up to have oversight over the underground economy of hedge funds and mortgage speculators is conspicuous for it's stress on non-regulation and heavy on bully boy powers.
It's classical Bu$hie doctrine: you're either with 'im [and contributing nicely to the Cause, no doubt] or a rogue element against him.
...Treasury Secretary Henry Paulson Jr. is taking a stand against supporters of stricter regulations...
...Although the proposal would impose the first regulation of hedge funds and private equity funds, that oversight would have a light touch, enabling the government to do little beyond collecting information — except in times of crisis.
The regulatory umbrella created in the 1930s would grow wider, with power concentrated in fewer agencies. But that authority would be limited, doing virtually nothing to regulate the many new financial products whose unwise use has been a culprit in the current financial crisis.
The plan hands vast new authority to the Federal Reserve, essentially formalizing what has been an improvised process over the last three weeks. But some fear that the central bank’s role in creating the current mess will undercut its ability to clean it up...
And as far as the Preznitial Candidates are concerned? Its Chicago School Rulez, baby. You have just begun to smell the blood of economic predation in the name of policy.
If you can get out of the water, do it now, because the big fins are doing the feeding frenzy thing, and the small fish get eaten first.
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