Which means that homeowners can be foreclosed on for all sorts of faulty reasons: misplaced checks, address errors, you name it. This inability of one limb of the foreclosure beast to know what the other limb is doing is responsible for many of the horrific stories befalling homeowners across the country.
The second reason the whole "they-still-owe-the-f*cking-money" argument is bogus has to do with the changed incentives in the mortgage game. In many cases, banks like JP Morgan are merely the servicers of all these home loans, charged with collecting your money every month and paying every penny of it into the trust, which is the real owner of your mortgage. So, if you pay less than the whole amount, JP Morgan is now obligated to pay the trust the remainder out of its own pocket. When you fall behind, your bank falls behind, too. So the only way it gets off the hook is if the house is foreclosed on and sold. Hence the constant incentive to foreclose.
That's what this foreclosure crisis is all about: fleeing the scene of the crime
Now add into the equation the fact that some of these big banks were simultaneously betting big money against these mortgage backed securities -- Goldman Sachs being the prime example -- and you can see that there were heavy incentives across the board to push anyone in trouble over the cliff.
Things used to be different. Asked what percentage of struggling homeowners she used to be able to save from foreclosure in the days before securitization, one homeowner attorney is quick to answer. "Most of them," she says. "I seldom came across a mortgage I couldn't work out."
Yes, many of the people facing foreclosure bear some responsibility for the crisis. Some borrowed beyond their means. Some even borrowed knowing they would never be able to pay off their debt, either hoping to flip their houses right away or taking on mortgages with low initial teaser rates without bothering to think of the future. The culture of take-for-yourself-now, let-someone-else-pay-later wasn't completely restricted to Wall Street. It penetrated all the way down to the individual consumer, who in some cases was a knowing accomplice in the creation of the bubble mess.
But many of these homeowners are just ordinary Joes who had no idea what they were getting into. Some were pushed into dangerous (but more profitable) loans even though they qualified for safe ones. Others were told not to worry about future jumps in interest rates because they could just refinance down the road, or discovered that the value of their homes had been overinflated by brokers looking to pad their commissions. And that's not even accounting for the fact that most of this credit wouldn't have been available in the first place without the Ponzi-like bubble scheme cooked up by Wall Street, about which the average home -owner knew nothing -- hell, even the average U.S. senator didn't know about it.
At worst, these ordinary homeowners were stupid or uninformed -- while the banks that lent them the money are guilty of committing bald-faced crime on a grand scale. These banks robbed investors and conned homeowners, blew themselves up chasing profits fraudulently, then begged the taxpayers to bail them out. And bail them out we did: We ponied up billions to help Wells Fargo buy Wachovia, paid Bank of America to buy Merrill Lynch, and watched as the Fed opened up special facilities to buy up the assets in defective mortgage trusts, from these banks -- at inflated prices. And after all that effort by the state to buy back these phony assets so the thieves could all stay in business and keep their obscenely lavish bonuses, what did the banks do? They put their foot on the foreclosure gas pedal and stepped up the effort to kick people out of their homes as fast as possible, before the world caught on to how these loans were made in the first place!
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