When banks burglarize

By Felix Salmon
December 22, 2010
meltwater reeking of rotten halibut?

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When Bank of America bought Countrywide, did it know that as a consequence it would start being associated in the public mind with meltwater reeking of rotten halibut?

In Texas, Bank of America had the locks changed and the electricity shut off last year at Alan Schroit’s second home in Galveston, according to court papers. Mr. Schroit, who had paid off the house, had stored 75 pounds of salmon and halibut in his refrigerator and freezer, caught during a recent Alaskan fishing vacation.

“Lacking power, the freezer’s contents melted, spoiled and reeking melt water spread through the property and leaked through the flooring into joists and lower areas,” the lawsuit says.

The NYT‘s Andrew Martin does a good job of presenting four cases where houses were improperly raided by bungling banks. But of course this is the NYT, where there always has to be a broader national significance:

In an era when millions of homes have received foreclosure notices nationwide, lawsuits detailing bank break-ins like the one at Ms. Ash’s house keep surfacing. And in the wake of the scandal involving shoddy, sometimes illegal paperwork that has buffeted the nation’s biggest banks in recent months, critics say these situations reinforce their claims that the foreclosure process is fundamentally flawed.

It’s pretty much impossible to feel sorry for the banks here, especially when they throw out a woman’s family photos, ski medals, and husband’s ashes. (Yeah, that was BofA too.) But that said, the story does carry a faint whiff of bogus trend, when Martin concedes that “Identifying the number of homeowners who were locked out illegally is difficult.”

The curious thing is that the banks seem to be able to overcome that difficulty:

Banks and their representatives insist that situations like Ms. Ash’s represent just a tiny percentage of foreclosures…

Banks and their contractors insist that the number of mistakes is minuscule given the hundreds of thousands of new foreclosure cases filed each month.

In order to know that cases like these are “a tiny percentage of foreclosures,” you need to know what that percentage is, n’est-ce pas? So this defense is not particularly convincing, unless and until we can see some numbers. Surely, mistakes like these would happen occasionally even during the boom years. But if the percentages are rising, that’s clear empirical evidence that overwhelmed servicers are doing an increasingly shoddy job.

Next time a newspaper wants to write about this particular trend, then, let’s get the names of those bank representatives on the record, let’s ask them how they know that the proportion of dreadful mistakes they make is “tiny” or “minuscule,” and let’s be a bit more determined that we should be the ones making the determination as to how small the percentage is, rather than the bank’s own flacks.

It’s sad that the settlements in these cases are invariably kept confidential. Obviously, any given case is bad for the bank, which would have been better off not illegally breaking into someone’s private property. But it’s easy to guess that the cost of preventing such break-ins is larger than the cost of settling with enraged homeowners, and that the banks consider that settling such suits is a natural cost of doing business, rather than something which they should try to bring down to zero. Getting numbers on percentages and settlements would surely help in determining whether the banks are cynically allowing this to happen because doing so means that their overall costs are lower.

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