Posted on Monday, June 20, 2011
I just finished reading about the Nyergers. That’s the retired cop and his wife who moved to Florida, bought their dream home for cash and then – thanks to a paperwork error – found out the bank was foreclosing on them.
My guess is this happened because someone forgot to tell the bank’s lawyer that the loan had been paid – at least in pat- by these new buyers and the foreclosure case should be dropped. And whoever handled the closing for these new owners didn’t do their job of making sure the foreclosure case was dropped. And then whoever was supposed to take calls from folks like the Nyergers who continually tried to get the bank to drop the foreclosure, also did not to his or her job. The point is, something like this usually requires a series of errors. Sometimes understandable mistakes we might refer to as ‘human error.’ More likely in this case, inexcusably error more along the lines of negligence. But certainly not, as some would have us believe, anything the bank deliberately did to wrongly foreclose on the Nyergers.
The biggest problem we face in trying to resolve the foreclosure problem is lack of an effective way to classify which banks and which borrower and which cases belong in which bucket. In short, how to separate the good guys from the bad guys. No question some banks are screwing up. But others are stepping up. There are likewise some borrowers taking advantage of a national crisis while others are true victims and many more fall somewhere in between. The real bottom line is that public enemy number one is not the banks or borrowers. Its’ simply the economy and circumstances.
Rewind a few years and we can trace this mess to three general culprits.
1. A huge volume of defaults and foreclosures all at once which translated to the need to ramp up quickly.
2. Industry changes before that, such as MERS, which made the business a bit more complicated but for which no like provision to keep up with the times in terms of foreclosure processes were ever made.
3. The ridiculously small amount of money paid and short time allowed for residential foreclosure work to be done (granted, for good reason since oftentimes borrowers end up being responsible for this bill) and, again, no measure taken to accommodate the increasingly more complicated work thanks to industry changes.
All of the above of course translated to under staffed and under qualified people handling residential foreclosure cases and pressure and willingness to cut corners a la rob-signer style.
Instead of being able to focus on fixing the original challenges, banks, congress, judges, and media time and energy have been distracted by HAMP and the insistence that impossible modifications systems and goals be implemented, FDIC bank take overs, the AG robo-signer investigation along with having to move and then audit and in many cases dismiss and re-file hundreds of thousands of files, the vast differences in foreclosure processes between states and even judicial circuits and court rooms and now, at least in Florida,. budget cuts that threaten to make it even more difficult to properly handle all of the foreclosures.
Fortunately the Nyergers had the money and wherewithal to fight back. We all know this is nto always the case. Our foreclosure system inside both the banks and the courts is far from perfect. But this notion that it can be fixed in the middle to all of this is absurd and attempts to do so are only exacerbating the problem. We also know that there’s a 5% margin of error in jury trials and that it is not unheard of for the IRS to conduct a costly audit only to find that no violations exist. Both, not unlike our foreclosure situation, Kafkaesque for those who truly belong in the ‘innocent victim’ bucket. Unfortunately, we have no way of knowing how many of the 10% or so of Americans personally involved in foreclosures qualify for that category. As for the 90% not personally involved, they, by definitely, are bystanders and their property values are ‘victims’ of the foreclosure crisis.