Banks' foreclosure hustle
The banks have resumed foreclosing again.
Phew! Glad to see American business bouncing back.
On Monday, two of the nation's largest financial corporations, Bank of America and GMAC, announced that they were reopening their foreclosure mills, which they had shuttered earlier this month in the wake of reports that they were processing foreclosures with essentially no oversight. Federal officials are now investigating the foreclosures for possible financial fraud.
The resumption of the high-speed foreclosure industry comes as a shot in the arm to those who feared that America had lost its knack for mass production or, in this case, mass destruction. We may not be turning out cars and tools like we used to, but the accounts of robo-processors signing hundreds of repossessions daily look increasingly like the chronicles of Henry Ford's assembly lines. The system, as Ariana Eunjung Cha and Zachary A. Goldfarb documented in The Post on Friday, "was set up to prioritize one thing over everything else: speed."
Mortgage companies, wrote Cha and Goldfarb, penalized processors if they foreclosed too slowly. The firms that worked the quickest received bonuses from the banks that employed them and higher marks from credit-rating agencies. According to court papers filed in the many cases brought against the banks and the processors, some processing firms hired people essentially off the street to come in and sign documents.
There is, after all, big money in foreclosures. The banks need these properties off their books, and with 2 million homes in foreclosure and an additional 2.3 million with mortgages that are seriously delinquent, they need to resell these houses so that somebody, somewhere, is paying them some money.
On Monday, that money began flowing again. The resumption of foreclosures, said Bank of America spokesman James Mahoney, "is an important first step in debunking speculation that the mortgage market is severely flawed."
Of course, if the mortgage market hadn't been severely flawed in the first place, perhaps a good chunk of the 15 million Americans currently without work might have a job today. The banks that are repossessing millions of homes with a speed that suggests they're double-parked are the same banks that made billions by swapping paper on millions of homes purchased with mortgages that made no financial sense.
Garbage in, garbage out. Hey, it's only people's lives.
Meanwhile, BofA is coming under pressure from institutional investors, including the Federal Reserve Bank of New York, over bonds issued by Countrywide Financial, which BofA purchased in 2008. The investors are seeking compensation for bonds based on home loans that failed to meet underwriting requirements but were issued nonetheless.
As bad (or just plain nonexistent) as the government's regulation of the mortgage-based securities market was in the run-up to the financial crisis, its handling of the housing mess since the market blew up is even worse. The major government program to help homeowners modify the terms of their mortgages essentially leaves the modifications up to the banks, which haven't exactly jumped at the chance. As my colleague Ezra Klein has suggested, a better process would be to allow housing counselors to propose modifications and give banks the right to challenge them. Or simply to require banks to sit down with the homeowner, the counselor and a judge, and try to work things out.
As events would have it, pay at Wall Street's biggest banks is headed for another record high this year, the Wall Street Journal reports. Pay and benefits at the 35 largest firms will rise an estimated 4 percent over last year's level, to $144 billion.
Inquisitive minds might want to know how the big banks -- and bankers -- are getting richer while the underlying economy of the nation they serve isn't. Clearly, they're not lending to businesses that are rehiring lots of Americans, since no such businesses seem to exist.
Happily, they have other ways to make money. They can invest abroad. They can trade the equities and securities of enterprises, many of them American, whose fortunes are increasingly and blissfully decoupled from the underlying health of the U.S. economy. They can peddle equities that they are secretly betting against. And if the going gets rough, they can process foreclosures, as they once processed mortgages, at warp speed.
You make money building Vegas, Arizona and Florida, and you make money depopulating them. Who says American enterprise is dead?