Oct 11, 2010
In early October, the largest bank in the U.S., Bank of America, stopped all foreclosures across the country. Other major banks had already halted mortgage foreclosures in 23 states.
Are the banks trying to help the millions who are about to lose their homes? Of course not. These banks are trying to figure out how to avoid being charged with fraud.
During the height of the housing boom, many millions of mortgages were bundled together and turned into different kinds of investment securities, which were bought and sold by speculators. Record keeping was sloppy or even non-existent about which “investment” bond contained which mortgages. What was in these bonds? No one really knew – or even cared. The various speculators kept on buying and selling them in their rush to turn a profit, while the banks turned huge profits in commissions and fees.
The problem for homeowners was that they often didn’t know which company or bank actually held the mortgage on their home. Homeowners only knew who to send the payment to. So, when homeowners tried to renegotiate their mortgage, they often couldn’t find anyone to negotiate with.
When the wave of foreclosures began, many homeowners and community groups started to sue – demanding that the banks provide the proper legal documents. And often, the banks didn’t have them – or they have signatures that appear forged!
In reality, there seems to be fraud on a massive scale. So, to limit their liability, banking companies halted all foreclosures in the 23 states where they had to go through the courts. This moratorium on foreclosures has now spread nationwide.
But financial interests will be protected and foreclosures will begin again – even without the proper documentation – as soon as Congress returns from the elections. The politicians already have started writing laws to get mortgage interests out of legal difficulties. Any mortgage whose financing crosses state borders – which these days is most of them – will be deemed to be “legal,” with or without papers to prove it. And let homeowners be damned.