Banks and Foreclosures: Where’s the Accountability?

Over the past several weeks Bank of America, Ally, and GMAC have announced that they have will be halting foreclosures in the 23 states that require a judge to sign off on foreclosures before eviction. Did this decision come from enlightened bank management who understand what is needed to stabilize the housing market and pull our economy out of the cellar? Of course not. Instead, it was done in response to the damning evidence that recently came to light that banks weren’t reading documents, were forging notarizations, foreclosing on homes that they didn’t own, and outright fabrication of loan documents. As usual the media is missing the real story during this ongoing foreclosure mess.

As appalling as this revelation is, it’s hardly unprecedented or unforeseen. Housing advocates warned, as far back as 1999, that low income and communities of color were being steered into high cost sub-prime loans even when they qualified for a better prime loan. This was done intentionally as a way to extract as much wealth as possible with devastating effects on these communities. These loans initially were originated by mortgage brokers such as Countrywide and others, who were later convicted of fraud and other serious ethics violations. These mortgage brokers are almost exclusively owned by the big financial institutions who each were foreclosing an excess of 10,000 homes a month, and engaging in shady or outright illegal processes. Many of the borrowers who were caught in loans that lenders gave with the full intention that the borrower would default tried to be proactive and get the terms of their loans modified, with a success rate below 10%. Banks would encourage people to not pay their loans (saying the only way they could modify their terms was if they were in default), refuse payment from delinquent homeowners, routinely lose requested documents, and generally be unresponsive.

Where’s the Accountability?

In this post-bailout world, with a history of deceptive practices and outright fraud by the entirety of the home (and commercial) mortgage industry, it isn’t surprising the banks can’t be trusted to police themselves and halt foreclosures in all 50 states. It doesn’t follow logic that people in Oregon, who will be foreclosed on by the same procedures as every other state, deserve to be foreclosed on while those in Florida don’t simply because a judge isn’t required to review prior to eviction. It’s all about accountability. The banks aren’t accountable to anyone. They received $17 trillion with no strings attached to save their corporations after they wrecked the economy. Meanwhile, the unemployment rate is still nearly 10% nationwide, foreclosures are continuing unabated, one out of eight homeowners owes more than their home is worth, and the banks are making record profits. To further underscore this atmosphere of unaccountability Bank of America has resumed foreclosures in several states, reassuring us they will simply resubmit documents with the proper signatures.

And yet President Obama won’t even force the banks to halt foreclosures, even despite their blatant disregard for following contract law or being good corporate citizens. He said recently that foreclosures should keep going as soon as possible. This is the rhetoric of the corporate politicians we thought we were ushering out in 2008: being more concerned with corporations’ bottom lines than the fates of the more than 3000 homeowners being kicked out of their homes every day. We have a financial system run amok and nobody in D.C has the courage to stand up to their corporate donors.

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