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Monday, October 25, 2010

More on the forclosure mess...


Big Problem for Banks: Due Process


A loan for $360,000 went to a Chicago woman who supposedly earned $6,833 a month at an auto body shop. In truth she was a part-time housekeeper who was posing as the buyer to help her sister. The Countrywide loan officer not only knew these facts, she came up with the idea of having the borrower pretend to work at the auto body shop.

The lawsuit uncovered a raft of similar examples — case after case where the loan officers not only knew that fraud was being committed, but were actively engaged in committing it. “By about 2006,” says the lawsuit, “Countrywide’s internal risk assessors knew that in a substantial number of its stated-income loans — fully a third — borrowers overstated income by more than 50 percent.” And that is just one small subset of what went on at Countrywide. The truth is, any rock you turn over in the Countrywide subprime portfolio, something slimy is going to emerge.

That’s why most people, myself included, have no sympathy for Bank of America’s legal predicament — and no patience for its “we’re not the bad guys here” arguments. It is absolutely true that the homeowners that Bank of America wants to foreclose on are in default on loans they should never have gotten in the first place. (Gee, whose fault was that?) But it simply does not follow that the bank therefore has an absolute right to take back the home. Under the law, it has to prove it has that right — by filing documents that show that the owner of the mortgage has conveyed that right to it. That’s why this affidavit scandal isn’t some legal nicety. It’s about the single most important value of American jurisprudence: due process.

“Just because the homeowner hasn’t paid his mortgage doesn’t mean anybody in the world can kick him out,” said Katherine Porter, a visiting law professor at Harvard. “The bank has to have the standing to do that.” She added that the bank’s argument was a little like saying that someone who committed a crime shouldn’t receive a trial because he’s so obviously guilty. America just isn’t supposed to work that way.

That’s also why the bank’s contention that the foreclosure scandal will soon be behind it is unlikely to hold true. Peter Ticktin, a Florida lawyer who represents some 3,000 homeowners, told me that he did not believe it was possible for Bank of America to have properly vetted those 102,000 affidavits in a matter of weeks.


Read whole article:
http://www.nytimes.com/2010/10/23/business/23nocera.html?_r=4&partner=yahoofinance

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