Friday, 15 October 2010

Lawlessness and collapse [UPDATED]

Foreclosure-gate is eerily familiar. Watching it unfold reminds me of the very early rumblings in 2007 when some obscure thingies known as mortgage-backed securities (MBS) appeared on the financial pages as the cause of some temporarily knotty problems involving distinguished Wall Street landmarks as steady as ocean liners by the name of Lehman Brothers and Bear Stearns. Problems that will soon be resolved, tut tut.

Back then, an avid lay reader of business and financial news could begin to piece together a strange set of signals—something like what the old Kremlin-watchers would have spotted as they pored over the dense pages of Pravda and Izvestia just before the coup against Khrushchev, noting a new phrase here, an odd listing of party officials there for a hint of what was up.

In both cases the average citizen had no clue that an earthquake was about to occur given that poker-faced officialdom would emit a steady stream of reassuring banalities, along the lines of this quote from an anonymous Goldman Sachs source in today’s New York Observer:

‘Maybe there is sloppiness, but at the end of the day, people took out mortgages they can’t pay back. Now I worry that if anything, the government is making something that is just a clerical error into something that would be nefarious or whatever’.

The translation of this sleep-inducing paragraph is: ‘PAY NO ATTENTION TO THE MAN BEHIND THE CURTAIN!’ Do not get funny notions that because we bankers (1) cooked up unpayable mortgages to extract juicy fees from suckers; (2) did not do the proper, legally mandated paperwork to secure the loans with the properties; (3) are now engaged in wholesale affidavit falsification, shredding of records, document doctoring, breaking and entering, and all-around levels of fraud on the court that would put a mere mortal behind bars for all of this life and a sizable portion of the next—do not take any of that to suggest that we should suffer any serious consequences or that our business model is in the slightest danger of collapse.

The Goldman Sachs line, endlessly echoed in the cable business-news universe, is that irresponsible borrowers got themselves into houses too big for their incomes and now should get out. All the upheaval about phony notary signatures and rushed procedures, say the usual suspects, is mere detail while the real point is that people aren’t paying their mortgages. ‘Substantive errors’, in the Wall Street Journal’s phrase, are non-existent or so rare as to be meaningless.

So what does the wholesale trashing of legal procedures look like? Peruse if you will one rainy afternoon this deposition from Tammie Lou Kapusta, a former paralegal in a Florida ‘foreclosure mill’ law firm, a company that had 250 employees when she began and grew to 1100 in a single year with subsidiary operations in Guam and the Philippines. Kapusta’s tale is hair-raising but hardly unusual. She describes stacks of legal documents being cranked out under a daily quota system, signed by anyone with a working set of fingers, legalized with bulk notary seals and shipped to pliant judges for quick turn-around. Imagine getting caught in the maw of this legal bulldozer:

Q [deposing attorney] What if a homeowner made payment?
[Kapusta] That was never there [in the computerized foreclosure documents].
Q If that happened, it was never reflected?
A No. There was instances where the UPB
[unpaid balance] should have been different than what it was, but again that was a business decision made by Cheryl based on where we were at on the file. If we were ready to get judgment on it, she would just—
Q So there’s instances you’re aware of where the affidavit of indebtedness used to get the foreclosure was incorrect?
A Correct.

According to Ms Kapusta, if a paper was missing at a court hearing that might threaten to delay a foreclosure, the law firm had a back-up plan.

What would happen would be like if I had file A, and that one didn’t go to hearing because there was something wrong with it, but file B was going to hearing and it was the same bank, I would take the signature page from A and give it to B.

Easy! And ironically, how reminiscent of the descriptions of detainees trapped in the Kafakesque netherworld created by Bush and sustained by Obama as their lawyers slog their way through the rigged system trying to defend accused prisoners. In fact, the bankers’ response to complaints from homeowners being rolled by this system is exactly the same argument made by people who complained so throatily about giving accused terrorists legal due process or criminal trials—hey, ‘these people’ (a recurrent phrase used to describe delinquent home-owners, by the way) are obviously guilty, so the point is to get them off the streets and into jail. Enough of all this business of Miranda warnings and clever lawyers protecting the bad guys.

The apogee of this smug endorsement of dictatorship is, of course, Guantánamo and the torture debate. Terrorists don’t deserve due process. Keep us safe. Do whatever is necessary. We want revenge, not justice. How easy when you are on the dishing-out end and not the receiving end.

In short, fellow Americans, be careful what you wish for. When laws can be ignored at will by the powerful, little people like you and me get crushed under the wheels. Barack Obama and his team of banker shills won’t stand up for you either, and in this case, frankly, it’s hard not to snigger as the same populace that bayed for the dismantling of due process gets to experience a system that doesn’t care about it.

By the way, here is an aerial view of the home and boat of the owner of the law firm referred to above, David J. Stern. I gather he is paying his mortgage without any problems. The boat was allegedly to be called ‘Su Casa Es Mi Casa’, a indescribably perverse joke on the original Spanish phrase meaning, ‘Make yourself at home’.

[UPDATE] As an antidote to the coming onslaught of banker-fed spin ("This is merely a few technical errors that should not allow deadbeats to stay in homes they cannot afford"), here is an actual case from the state of Florida related by The Daily Caller:

In 2007, Deutsche Bank sued Patrick Jeffs for his home, which is a necessary step in the process of foreclosing on a homeowner in the state of Florida. Curiously, despite the fact that he immediately hired a law firm to defend his property when he found out about the foreclosure, neither Jeffs nor his attorneys were at the trial. That’s because it had already happened. Deutsche won by default because Jeffs wasn’t able to travel backwards in time to attend, even though the trial featured a signed affidavit indicating that he had been served his court summons.

The only problem with the summons Jeffs supposedly received was that it had been conjured out of thin air.

In June of this year, a Florida court ruled that the document was fraudulent, as the person who was supposed to make sure Jeffs was served had mysteriously received a copy of the summons before the lawsuit had even been filed, and Jeffs never even saw the copy. The text of that ruling was posted on various financial news websites in September. The lawyers that Jeffs hired to defend his case say that fraud such as this is not uncommon. It’s a widespread problem, and it has cost countless families their homes.

“I think it’s safe to say that 95% of the foreclosure cases in Florida involve some form of fraud on the part of the bank,” David Goldman of Apple Law Firm, PLLC told The Daily Caller in a phone interview. “It’s probably closer to 99%. And the court system is helping them get away with it.”

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