By Zach Carter, ourfuture.org
Just when you thought Wall Street couldn't defraud the economy any further, it went ahead and did it. After pushing millions of borrowers into foreclosure with fraudulent loans, big banks are now being implicated in a massive new fraud scandal involving the foreclosure process itself. All over the country, banks and their lawyers are resorting to outright fraud in order to kick people out of their homes and slap them with huge, illegal fees. It may be the biggest scandal of the entire financial crisis, one that could result in epic losses for the nation's largest banks.
We've been hearing for years about the horrific mortgages bankers pushed borrowers into, the outrageous scams they deployed in dumping these mortgages on investors, and the lies they told to their own shareholders about those mortgages in order to boost bonuses. Fraud was a major part of this machine at every stage of production, but the foreclosure fraud being uncovered by lawyers today appears to be the broadest scandal to emerge from the mortgage mess thus far.
Yves Smith has done an outstanding job covering this scandal, so be sure to check out her posts for all the details, but here's the basic story: Banks intentionally skimped on their mortgage paperwork during the housing bubble—it cut their costs and made the sale of mortgage-backed securities more profitable. A basic, standardized part of the mortgage process at many banks included forging or destroying key documents, or never bothering to write them up in the first place. Those reckless procedures have been applied to millions of mortgages issued over the past decade, and allowed inflated bonus checks to be written for years. But things are about to get very ugly for the banks. (Read more)