Wednesday, October 13, 2010

A Long Time Coming

Read this extensive exegesis on the foreclosure crisis from Rortybomb and then a slightly shorter post on the problems with the mortgage bond servicers in order to make your head hurt a little bit. It turns out the financial system was incredibly sloppy about nearly every relevant detail, when not being sloppy would've meant the difference between a problem and a crisis. And now that we're in the latter, it's time to learn the painful dreary details for ourselves--how investment banks don't really have a track of enough of the paperwork that would, if properly in order, show them that there were no deals that should be made; and now that the deals are made, salvaging the situation by keeping people in their homes seems unattainable. Not only is it headache-inducing stuff, but it’s also more than a little scary: like a good film noir there’s more than a little bit of willful waste here—of a bad thing coming that’s in everyone’s interests to avert, that some of those everyones have the tools to avert, but somehow ends up happening anyway. And that’s where we’re at with the foreclosure process: it’s a lose for practically everyone involved in the situation, but it appears that we’re born to lose.

There are two recommendations that Rortybomb advocates at the end of his piece: one, government intervention; two, failing that, people who are being foreclosed upon demanding to see the note and the terms of their loan (which is frequently lost). The first seems to me to be by far preferable, as a properly-designed system would make the process far simpler and easier to understand. The latter option relies on lawyerly combat, which like armed combat is sometimes necessary but to be avoided if at all possible.

The fault here is widespread, with many villains. But it’s hard not to fault the worst would-be hero here—the Obama administration—for their design of the HAMP program, which is a Rube Goldberg monstrosity of a program in which the same servicers whose interest it was in to pretend that the loans are worth more than common sense indicates they are were given the responsibility to avoid foreclosures. Of the $50 billion appropriated for the program, only $247 million has been spent. Heckuva job!

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