Tell me it aint so S&L. You keep telling Govt is the source of ALL problems. LOL.
Bankers Ignored Signs of Foreclosure Trouble
Published: Thursday, 14 Oct 2010 | 6:04 AM ET Text Size
By: Eric Dash and Nelson D. Schwartz
The New York Times
At JPMorgan Chase, they were derided as “Burger King kids” — walk-in hires who were so inexperienced they barely knew what a mortgage was.
At Citigroup [C 4.101 -0.149 (-3.51%) ] and GMAC, dotting the i’s and crossing the t’s on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage.
And at Litton Loan Servicing, an arm of Goldman Sachs [GS 153.32 -1.41 (-0.91%) ], employees processed foreclosure documents so quickly that they barely had time to see what they were signing.
“I don’t know the ins and outs of the loan,” a Litton employee said in a deposition last year. “I’m not a loan officer.”
As the furor grows over lenders’ efforts to sidestep legal rules in their zeal to reclaim homes from delinquent borrowers, these and other banks insist that they have been overwhelmed by the housing collapse.
But interviews with bank employees, executives and federal regulators suggest that this mess was years in the making and came as little surprise to industry insiders and government officials. The issue gained new urgency on Wednesday, when all 50 state attorneys general announced that they would investigate foreclosure practices. That news came on the same day that JPMorgan Chase [JPM 38.8229 -1.0171 (-2.55%) ] acknowledged that it had not used the nation’s largest electronic mortgage tracking system, MERS, since 2008.
That system has been faulted for losing documents and other sloppy practices.
The root of today’s problems goes back to the boom years, when home prices were soaring and banks pursued profit while paying less attention to the business of mortgage servicing, or collecting and processing monthly payments from homeowners.
Banks spent billions of dollars in the good times to build vast mortgage machines that made new loans, bundled them into securities and sold those investments worldwide. Lowly servicing became an afterthought. Even after the housing bubble began to burst, many of these operations languished with inadequate staffing and outmoded technology, despite warnings from regulators.
When borrowers began to default in droves, banks found themselves in a never-ending game of catch-up, unable to devote enough manpower to modify, or ease the terms of, loans to millions of customers on the verge of losing their homes. Now banks are ill-equipped to deal the foreclosure process.
“We waited and waited and waited for wide-scale loan modifications,” said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, one of the first government officials to call on the industry to take action. “They never owned up to all the problems leading to the mortgage crisis. They have always downplayed it.”
In recent weeks, revelations that mortgage servicers failed to accurately document the seizure and sale of tens of thousands of homes have caused a public uproar and prompted lenders like Bank of America, JPMorgan Chase and Ally Bank, which is owned by GMAC, to halt foreclosures in many states.