Foreclosure-Gate Scandal Widens

The 'Helicopter Economics Investing Guide' is meant to help educate people on how to make profitable investing choices in the current economic environment. We have coined this term to describe the current monetary and fiscal policies of the U.S. government, which involve unprecedented money printing. This is the official blog of the New York Investing meetup.


After the Obama administration has failed to take action in the foreclosure crisis, up to forty state's attorney generals are now planning to launch a joint investigation into a massive number of robo-perjuries committed by big U.S. banks. So far, partially government owned GMAC, J.P. Morgan Chase, Bank of America, and Litton Loan Servicing, a division of Goldman Sachs, have been implicated in 150 pre-trial depositions in a Florida court case. In these depositions, bank employees admitted to having provided sworn court testimony about documents they didn't read and wouldn't have understood even if they had read them.

The Florida case involves 3,000 homeowners facing foreclosure. The "foreclosure experts" who signed notarized court documents that were key elements of perhaps hundreds of thousands of foreclosures had formerly been hair stylists, factory workers, and Walmart floor workers. They were provided with no formal training. It seems that many of these "foreclosure experts" knew little about mortgages. Some of them couldn't even define the most basic terms related to their job. One exasperated robo-signer stated, "I don't know the ins and outs of the loan, I just sign documents". The signing being discussed involved notarized documents subject to the perjury statutes and something that most courts in the United States would blindly accept because it was provided by a major financial company. Apparently, some institutions don't feel they need to follow the law and the courts let them get away with it.

There is more than enough reasons to think that the same corrupt practices are taking place in consumer credit card cases throughout the United States.

Up to now, the Obama administration has opposed a national halt to foreclosures even though the epicenter of the scandal seems to be partially government owned GMAC. Federal officials claim that a moratorium would hurt the housing market and using incredibly twisted logic have stated that it would distract lenders from 'helping' borrowers that face foreclosure. The program they are alluding to, HAMP (Home Affordable Mortgage Program), is generally acknowledged to have been a significant failure. It is beyond amazing that something which could turn out to be the biggest organized fraud in the history of the United States doesn't seem to bother Obama and his people. Apparently, the federal government is one of those institutions that doesn't think that it needs to pay attention to the law either.

Other than the obvious political implications, the recent revelations could mean a lot of lawsuits are launched at every level of the home loan process. The holders of bonds consisting of securitized home loans could potentially be at risk with the value of these loans plummeting once again as happened during the Credit Crisis. It will probably be much harder to do another bailout this time around however.

Disclosure: No positions.

Daryl Montgomery
Organizer, New York Investing meetup
http://investing.meetup.com/21

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.