GMAC Mortgage, JPMorgan Chase and Bank of America recently announced that they were suspending foreclosures after lawsuits exposed fraudulent practices. Other banks charged with illegalities include Wells Fargo, CitiMortgage, HSBC and National City.
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In a mad rush to get rid of remaining “toxic” assets on their books, the banks, which had already received huge federal bailout funds and loan guarantees, moved to “streamline” the legal process required for foreclosures and evictions. As a result, banks repossessed a record number of homes in August. (CNBC, Sept. 14)
“The flawed practices … are so prevalent, lawyers and legal experts say, that additional lenders and loan servicers are likely to halt foreclosure proceedings and may have to reconsider past evictions.” (New York Times, Oct. 3)
The Washington Post reported Oct. 9 that senior Obama administration officials were saying that “a nationwide moratorium on foreclosure sales may be inevitable, despite their grave reservations about the impact a broad freeze would have on the nation’s housing market and economic recovery.”
Problems turning up in courts across the country are varied, the New York Times reports, but all involve documents that must be submitted before foreclosures can proceed legally. Here are some of the more common shortcuts that have been exposed:
- Thousands of documents have been signed by employees, dubbed “robo-signers,” who admit they have not verified crucial information like amounts owed by borrowers.
- Questionable legal notarization of documents has been common, in which, for example, the notarizations predate the actual preparation of documents—indicating that signatures were never actually reviewed by a notary.
- Other notarizations took place so far from where the documents were signed that it was highly unlikely that the notaries witnessed the signings, as the law requires.
- On other important documents, an official’s name is signed in radically different ways suggesting that some are forgeries.
Additional problems have emerged, the Times reports, when multiple banks have all argued that they have the right to foreclose on the same property, “a result of a murky trail of documentation and ownership.”
The latter problem stems from an “innovative” practice of big lenders in the period leading up to the real estate bust. They, in collaboration with ratings agencies, packaged sub-prime and other mortgage loans of questionable quality into securities and then peddled them to investors around the world as high-grade bonds. Besides the deception involved in rating these junk securities as high grade, the identities of the ultimate owners of the underlying mortgages sometimes got lost in the complex process, and multiple banks have ended up claiming title to the properties.
Foreclosures stalled
While the rush by lenders to foreclose on and evict homeowners has created a bonanza for law firms specializing in foreclosure law, it has now stalled as a result of legal wrangling and judicial challenges. Some elected officials have also called for a freeze on foreclosures until the questionable foreclosure practices and questions of who owns what property title can be resolved.
Such a moratorium, previously called for by the Party for Socialism and Liberation and other voices on the left, is long overdue. Already the number of vacant housing units in the United States has surpassed the 20 million mark, according to Moody’s Analytics, while the number of homeless and ill-housed has soared. The potential exists for these numbers to grow.
One in seven mortgages were delinquent or in foreclosure during the first quarter of 2010, a record high since 1979, according to the Washington-based Mortgage Bankers Association. The number of homes repossessed or in default that eventually will be offered for sale stood at 7.3 million in the first quarter, according to Laurie Goodman, an analyst in New York at mortgage-bond broker Amherst Securities Group LP. (Bloomberg, Aug. 23)
Oppressed communities have been especially hard hit. Predatory lending aimed at residentially segregated neighborhoods of people of color led to mass foreclosures that fueled the U.S. housing crisis, according to a new study published in the American Sociological Review.
The study, which used data from the 100 largest U.S. metropolitan areas, found that living in a predominantly African-American area, and to a lesser extent a predominantly Latino area, were “powerful predictors of foreclosures” in the nation.
Stumbling recovery
Nuwire Investor reported Oct. 4: “Concerns are growing that the housing market recovery could stumble amid stubbornly high unemployment, a sluggish economy and faltering consumer confidence. U.S. home sales have collapsed since federal homebuyer tax credits expired in April.”
The U.S. Labor Department reported Oct. 8 that another 95,000 jobs were lost in September. Local and state government payrolls were slashed, especially in education, and layoffs continued in manufacturing and construction. Private-sector job gains were mostly lower-paying, part-time or short-term, in businesses such as temporary-help firms and eating and drinking establishments, according to the report.
The Federal Reserve Board at its last meeting declared that it stood ready to take additional measures to spur the stagnating economy. Since the interest rates the Fed controls are already close to zero, the new central bank measures can only involve so-called “quantitative easing,” or buying up financial assets (such as mortgage-backed securities and government bonds) with newly printed money. The stock market has responded by rallying, and the dollar has sunk, with gold hitting a new all-time record of well over $1,300 per ounce.
The inflation (initially concentrated in food and energy prices) resulting from such a devaluation of the dollar is already causing real wages in the United States to fall (since wages always lag behind inflation) and corporate profits to rise. Without countervailing actions, dollar devaluation means the rise in value of the currencies of other countries against the dollar and, consequently, a relative rise in the real wages of their workers and fall in profitability for their capitalists. This adversely affects their competitive position in the U.S. and world markets. To counteract this outcome, other countries have responded with “competitive devaluations” of their own, with Japan the latest, announcing its own quantitative easing program Oct. 5. For China, which ties its currency to the dollar, such devaluation is virtually automatic when the dollar sinks, though as a result of strong pressure from the U.S., China’s government has reluctantly promised to allow some appreciation of the yuan.
Rising prices along with continued mass unemployment and criminal measures carried out by capitalist governments and banks alike are forcing workers to respond with independent mass actions in self-defense. General strikes in Europe against austerity and the Oct. 2 rally for jobs, peace and justice in Washington, D.C., are harbingers of the kind of militant workers’ movements that are urgently required
