Mortgage Mess: Shredding the Dream; Major Fight over Enormous Losses Yet to Come
by ilene - October 22nd, 2010 1:45 am
Mortgage Mess: Shredding the Dream; Major Fight over Enormous Losses Yet to Come
Courtesy of Mish
The foreclosure crisis isn’t just about lost documents. It’s about trust—and a clash over who gets stuck with $1.1 trillion in losses say BusinessWeek writers Peter Coy, Paul M. Barrett and Chad Terhune in a comprehensive 7 page article called Mortgage Mess: Shredding the Dream.
The article kicks off with a high-profile case of Joseph Lents who has been in default for 8 years and is still living in his home because no one can come up with the note. Such cases are extremely rare, yet highly publicized as if they widely occur.
The article continues with a discussion about MERS including this interesting comment:
"The Florida Bankers Assn. told the state Supreme Court last year that in many cases the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file."
Then there is the issue of LPS, America’s biggest mortgage-and-foreclosure outsourcing firm.
"LPS supplies much of the digital plumbing for the convoluted home-finance system. At the start of 2010 it said its computer programs were handling 28 million loans with a total principal balance of more than $4.7 trillion—or more than half the nation’s outstanding mortgage balances."
Because of robo-signings and other questionable practices the U.S. Attorney’s Office in Tampa and the state of Florida are investigating whether LPS and affiliated companies have fabricated documents and faked signatures.
LPS employees "seem to be creating and manufacturing ‘bogus assignments’ of mortgage in order that foreclosures may go through more quickly and efficiently," the Florida Attorney General’s Office says in an online description of its civil investigation.
To keep the paperwork moving, LPS uses a variety of incentives. Top-performing workers receive monthLY "Drive for Pride" awards that sometimes include $500 in company stock and a spot in an underground parking garage. LPS also devised a coding system to grade outside foreclosure attorneys based on their speed in completing tasks. Fast-acting attorneys receive green ratings; slower lawyers are labeled yellow or red and may receive fewer assignments. "Bill will move quickly and expect you to be there to pull your weight," says Jerry Mallot, executive vice-president of the Jacksonville Regional Chamber of Commerce. "I wouldn’t call the environment at his company kind and genteel."
In yet another case involving HSBC …
Judge Sigmund, who has since