Want to fix the mortgage mess? Companies must recognize individual problems.
Friday, October 15, 2010; 12:49 PM
Really, should any of us be surprised at the recent events surrounding home foreclosures?
Bank of America has said it will halt foreclosure sales nationwide after reports that mortgage loan servicers signed thousands of foreclosure documents without verifying the information.
A spokesman for J.P. Morgan Chase said the company has stopped seeking judgments in 41 states while it reviews all paperwork. GMAC Mortgage is conducting independent reviews of its foreclosure procedures in all of the states.
Tom Miller, the attorney general of Iowa, is leading a 50-state coordinated review of the practice within the mortgage servicing industry known as "robo-signing." The task force, which also includes state banking and mortgage regulators, will investigate whether mortgage servicers improperly submitted documents in support of foreclosures.
"This is not simply about a glitch in paperwork," Miller said.
No, this is not a glitch. The foreclosure crisis reminds us again that there is a fundamental problem in the mortgage industry. As a society, we claim we value homeownership. But that does not appear to be true anymore for many lenders since mortgages became akin to baseball trading cards, and since removing people from their homes became something like an assembly line.
The only way to unbundle this mess is case by case, treating each borrower as an individual, not as a case number.
In the mortgage trading game, millions of home loans have been sold and resold at warp speed. During the housing boom, lenders created mortgage mills and put people into overpriced homes with mortgages that were difficult to understand and even more difficult to maintain. They often didn't bother to verify incomes or an applicant's long-term ability to keep up with the mortgage payments.
Now we have foreclosure factories where many of the people who are supposed to ensure the process is fair and legal simply rubber-stamped the paperwork that led to kicking homeowners to the curb.
Some politicians are calling for a nationwide halt of foreclosures, while others are saying that slowing down the process will further cripple the U.S. economy.
Then there's the criticism of the Obama administration's response, which frankly does appear lame. The Federal Housing Finance Agency announced it has directed Fannie Mae and Freddie Mac to "implement a four-point policy framework detailing FHFA's plan, including guidance for consistent remediation of identified foreclosure process deficiencies."
In plain language (something that eludes many government officials), the agency that regulates Fannie and Freddie is asking the mortgage servicers to double-check the foreclosure paperwork and review their procedures to assure everything is in compliance with the law.