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Who’s to blame in foreclosure fiasco?

October 18, 2010

The building furor over whether the largest U.S. mortgage lenders used so-called robo-signers and incomplete paperwork to force delinquent borrowers from their homes has mushroomed into a probe by the attorneys general in all 50 states.

An empty mail box is seen at the front door of a foreclosed house in Miami Gardens, Florida in this September 15, 2009 file photo. REUTERS/Carlos Barria/FilesThose on Wall Street, however, are largely unsympathetic, insisting that possible errors in the foreclosure process are beside the point and that the process begins only when a borrower starts missing mortgage payments.

The potential fallout has raised questions about the depressed U.S. housing market, which was being helped by foreclosure sales. It has also put pressure on stocks as investors worry about the impact on banks’ financial health.

Who is at fault for the foreclosure mess?

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Comments

The bankers rigged the system and changed the dynamics of an industry that worked well at the local level but was just part of the Wall Street casino markets after Reagan let the dogs out.

Remember when you are voting for the friends of Wall Street, Lloyd Blankfein, CEO of Goldman Sachs calls creating a bubble that inflates your home price while bundling together the financial destruction for it’s billionaire customers God’s Work.

Posted by jstaf | Report as abusive
 

There should be a third choice in this poll. The judicial system is accepting these papers without checking. Shouldn’t the robo signers ha(or somebody) have to appear with each forclosure to swear the truth of the data?

Posted by Brian267 | Report as abusive
 

I don’t think it was the banks because they were forced by the government to give loans to people who could not afford the payments. The banks have to comply with the rules the government set so they could continue receiving money to subsidize their loans. So anyone with much sense (the borrower) would know just from gut feeling that they eventually couldn’t afford the adjustable rates. The banks knew this would collapse eventually which is why the banks would sell off loans to other banks so they wouldn’t get stuck with the loans in the end.
But in the end the government stabbed the banks in the back, I mean pointed the finger at the banks saying they were at fault.
This new type of government to share the wealth isn’t new at all. The way the housing loans were set up in the past was a way to share the wealth. And as we see, it doesn’t work because as long as you give handouts to most people they will usually think they are eventually owed more. But some people were smart enough to stay within their means.

Posted by madebymatt | Report as abusive
 

Come on — no one forced ANYONE to take out a mortgage, and no one “rigged” anything. If someone borrowed money (a mortgage) for something (a house)which they aren’t paying back (for whatever reason), then they lose the house, and that’s regardless of who “owns” the paperwork. End of story. The true market value of housing will only be determined by LEGITIMATE, qualified buyers. Slowing or stopping foreclosures is a fools game played by politicians to buy votes, ultimately with YOUR tax money.

Posted by cynicalme | Report as abusive
 

There are really two issues here. One is the homeowner/lender and the other is the Big Banks and the investors. In the first case, when you don’t know who your servicer of the loan is, the problem lies with the companies who sold your mortgage to a second and third party and there is no chain of ownership as recorded in various counties. In the other, read about Clayton and the lack of due diligence on the part of the big investment banks and other Big Banks.
Sure the homeowner bears responsibility but when two in the family are working and then fired because of the banking industry’s actions with regard to CDOs, blaming the little guy is obvious and false. I have no pity for those who had “liar loans,” (both the liar and the mortgage company) and I have no pity for those who got in over their head with McMansions they couldn’t afford, but the average “Joe” in the street whose just trying to get along and lost his/her job due to the Depression, don’t fault them. They like their grandparents in the 1930′s were victims of the banks.

Posted by neahkahnie | Report as abusive
 

Come on cynicalme…

“No one forced ANYONE to take out a mortgage, and no one “rigged” anything.”

And no one really took the time to explain a convoluted mortgage to some (perhaps) dumb sucker who didn’t understand the terms, having been fed the ‘American Dream’. Let’s just ASSUME the banker or lender understood the terms a little better, shall we…?

P.S.
I no longer have a mortgage, not due to age or wealth, but because the only term I understood was that I should pay up ASAP, thanks to frugal parents who were born during the Great Depression.

Posted by Warburton | Report as abusive
 

The standard of your house payment was that it not be more than 25% of your gross wages/month. It was the correct way to figure how much you could afford. The BANKS changed this to whatever and encouraged people to buy houses they could not afford. The BANKS did not check customers applications in many cases. The BANKS are the ones who give you the money for your mortgage and they let every one down due to their GREED. Then Wall Street came up with Credit Swaps that should have guaranteed sub-prime mortgages. Unfortunately they were not required to have funds to do this thus building a ‘house of cards’. We know what happened to the housing market but the banks are still paying giant bonuses and making money.

Posted by dennisaa | Report as abusive
 

@cynicalme: So if you figure out a fancy way to swindle and dupe someone out of their money without them realizing it, then it’s their fault? Gordon Gecko would be proud of you.

There’s enough blame to go around, but I think the current poll has it about right (64% blame to the banks, 36% to the borrowers). But since those borrowers are American citizens, with voting rights and the right to have a say in our government, then yeah they get some help from our government. That’s what a democracy is for.

Posted by bobSmith | Report as abusive
 

@bobSmith
what do you mean ‘get some help’ from the our government exactly?

1) Print more money and have free money sent from the government to you so you can make the payment?
2) Prevent bank from repossess your house even if you haven’t paid in a year and a half?
3) Go around the country with police and guns to confiscate money and property from people who are deemed rich and give it to you so you can make the payment (if they refuse, call the IRS, put a gun on their head and take them to prison)?

Well, actually you’re right, the government is doing just that. Obama has been doing the first 2 already and is closing on the third one pretty fast. Do you know what it is? It’s call class warfare.

And truly, I regret that I didn’t buy a house back in Houston a few years ago with next to no down payment and get almost 2 years free ‘rent’. Nothing for me to lose and a lot to gain potentially.

Always bad, always missing out for people living responsibly!!! Always bad!!!

Posted by trevorh | Report as abusive
 

BARNEY FRANK IS AT FAULT. Why isn’t he an option on the poll, or at least Congress as a whole?

Posted by stacylaw | Report as abusive
 

@bobSmith. A fancy way to swindle and dupe someone???? Ha, ha, ha. Now how in your imagination did that happen? The banks are NOT in the business of owning property and getting property back is the worst possible scenario for them. If you dont pay for something (anything), then you DONT own it. End of story. As for your comment of government and democracy, you obviously dont understand that the government has NO money – zero, nothing, nada! All the government does is take one persons money and gives it to someone else. Frankly, my mortgage payments are up to date, and taxes paid, and it is offensive in the extreme that some politician wants to give my tax money to someone else so I can in effect buy their house too. Now THAT is truly “duping and swindling”.

Posted by cynicalme | Report as abusive
 

If you rob a bank of $10,000 you go to jail, if you borrow $200,000 and don’t pay it back nothing happens. I’d say lenient bill paying and bankruptcy laws are really to blame.

Posted by minipaws | Report as abusive
 

For the financial system to place blame on homeowners is like a fox blaming the chicken for being an easy meal. Maybe the chicken is stupid, but the fox knows it and is the one still running around at the end of the day.

Posted by ebsanford | Report as abusive
 

Home ownership and the mortgage industry worked very well for homeowners and the economy for many years without direct involvement of Wall Street. This is a vital sector for the economy and individual household balance sheets. We now know that Wall Street’s direct involvement destroyed value which is not likely to be recovered for many years. It is amazing to read that Wall Street is unsympathetic to the plight of homeowners. We would not be discussing who is to blame today if the Government did not save Wall Street from its own excessive risk taking. They would have been out of business and these fine CEOs would be unemployed and banned from ever holding jobs in the financial industry! It is very simple, the Banks ought to be very sympathetic to homeowners because they had the power to influence the industry and it is their collective irresponsible actions and not those of homeowners that resulted in the financial meltdown which in return caused many homeowners: 1)to lose their jobs and ability to find new jobs, 2) inability to sell their homes because the market crashed, 3) inability to refinance because of dramatic home value decline, 4) inability to refinance because of loss of one or two homeowners sources of income. How much influence did individual homeowners have on all the above? Not much. So, the point is not to play the blame game. What is needed are real solutions. In the past industry Titans have demonstrated leadership by coming up with responsible solutions. They have been saved by the Government and it is time they truly pay back by getting together to agree on a single workable solution that will help the homeowners and the industry recover in orderly manner. Foreclosures while an option for the banks it is neither the best nor the most cost effective solution. The simplest and most effective solutions is for All the banks to refinance ALL homeowners at current 30 Year Mortgage interest rate and reduce the principal balance to current home market value. A ONE page loan modification document should be used to accomplish the refinancing process. The question is who pays for the potential loss? Well, foreclosures cost the banks no less than 40-50% of home values including the legal and litigations. Just check the foreclosure sales to confirm the extent of the losses. Refinancing ALL homeowners at once will stabilize the market immediately. The losses are tax deductible so the Banks shareholders are not bearing all the cost of the refinancing and they stand to gain value once the risks are completely boxed. If the industry leaders muster the courage to agree on a common solution they can deal with the problem and if there are legal issues the Government can be called to pass appropriate legislation immediately to provide cover. Is this a simple and naive solution? Perhaps, but where are the smart solutions that truly address the problem? The Banks need to do the right thing to save themselves and the economy. If this problem gets out of control they stand to lose the most and this time the Government has the legal authority to let them fail.

Posted by amj | Report as abusive
 

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