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Mortgage Fraud Collection Fraud

The

New York Times

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did its inevitable

on the collapse of the foreclosure mills today, and basically missed the story. You didn't hear about this? It's big news in the mortgage industry. On Sept. 20

(Maryland, alas, is not among them), apparently because a lawyer working for its servicing arm admitted in a lawsuit that he had not actually read the tens of thousands of documents he "signed" (with a rubber stamp) telling judges in foreclosure cases that all the paperwork was righteous and that the foreclosing company (GMAC; others) had all the proof anyone could ever need that it did, indeed, have the legal title, the right to foreclose, ownership of the loan, etc. Dude was submitting affidavits at the rate of 10,000 per month. Now, there is a substantial subculture of people—lawyers, mostly, but real people too—who have long been shouting "fraud" on these mortgage servicers and their hired "foreclosure mills" on the basis of just this kind of technicality. (

is just about ground zero for this movement). As the

Times

notes, these lawyers slow up the foreclosure business. It's actually their job. What the

Times

misses, however, is the base fact: In all but

,  the foreclosures are happening because the people who borrowed the money aren't paying. They are in default, living for free. And the company trying to take the house back actually is entitled to do so. So why the fraudulent docs? Because, during the bubble, almost every lender dispensed with the checks and balances that lenders used to employ to keep everything on the square. Things were moving too fast, you might hear them say. Then, too, if people with professional integrity had been present at the creation of these loans, mischief (i.e., loan denials, lawsuits, federal investigations, prison terms) would have ensued. The bubble would have popped in its infancy. That would not have been any fun at all, now would it? So we now have this very ironic situation whereby:

The snake is eating its own tail. The

Times

' take?

I don't think so. I think this will just delay the floor, and lower it, as lawsuits cloud titles on hundreds of thousands of empty houses. They'll ultimately end up in the hands of investors, laying the groundwork for the next bubble. Commenter number 49 from Eastern PA got the thing right. Here is his or her anonymous take:

Pressure? What pressure? The system was saved. Word now is that the TARP

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AIG is even

Next year. Good news is busting out all over.

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