It starts with the basics: How a mortgage is supposed to work. The bank is supposed to be responsible and only lend to people who can afford to pay a mortgage. It's good faith on both sides—on the bank's that the customer will pay them back, and on the customer's that the bank will hold that loan, apply payments to the loan, and notify the customer if that loan is sold to another bank. That contract has a couple of basic requirements. As Dayen explains it:
A mortgage has two parts. There's the promissory note, the IOU from borrower to lender, and the mortgage, which creates the lien on the home in the case of default. Foreclosure laws vary from state to state and evolve with every court decision, but in the simplest terms, to be able to foreclose, a financial institution must hold the mortgage, the note, or both. This gives you standing, as it would in most judicial contexts: if you accuse someone of stealing your car, you'd need to establish that you actually owned it in the first place.
That's pretty damned basic law. It's what the "chain of title" in the book's title means—which institution legally holds the mortgage. And it was totally upended when Wall Street realized just how much money there was to be made by breaking that system. So you had loan originators who would issue new mortgages at an insane clip, then turn around and sell them to banks. Then the banks would package them into mortgage-backed securities, because traditionally mortgages have been such a solid financial product. The securities, backed by the mortgages, would be broken up into new securities, sometimes multiple times, to the point where no one could figure out who actually held millions of these loans. The whole scheme was spinning so fast that keeping track of the paperwork was impossible. So they just started making it up, knowingly committing fraud with operations set up just to generate reams of fake paper, fake paper that they eventually started using—and manufacturing more of—in order to illegally foreclose on millions of these loans. The three people Dayen profiles were all victims of this massive corruption and made it their lives' work to expose it.
And they did. They had remarkable success, eventually, in blowing the cover off of the whole mess, even spurring a 60 Minutes segment. They even—almost—got the Obama administration to want to do something about it. Ultimately, the Treasury, the IRS, the FBI, and all law enforcement failed. Not one financial executive was sent to jail for creating this massive fraud that stole millions of people's homes and brought the global economy to the brink of collapse—even though it was obvious, proven beyond all reasonable doubt, that the whole thing was built on illegality.
Knowing before you go into this book how it's all going to end, you’re prepared to get infuriated all over again. You know, even as you're getting sucked into their stories and rooting for these three people to be the Davids that bring down Goliath and effect justice: That isn't going to happen. But you keep reading anyway, because you have to, because what these people are doing, what they're bringing to light, is so riveting.
Dayen knows you're going to be filled with impotent fury at the very unsatisfying ending, so he gives you a silver lining. "Without the foreclosure fraud movement," he writes, "there is no Occupy Wall Street; there is no Elizabeth Warren wing of the Democratic Party; there is no student debt movement, or low-wage worker movement, or movement to transfer money to credit unions and community banks."
That's all true, but because this is the story of these three individuals who gave up so much of their lives in this fight, the real happy ending is that they overcame the shame and the isolation and the feeling of personal failure their foreclosures brought them. They overcame it not just personally, but for all the people who were cheated by their banks and lost everything. They created a community and gave regular people the power to fight back.
If you’re in the area you can catch David talking about his book today, May 22 at 3:00 PM at Diesel, a bookstore located at 225 26th St., Santa Monica, California (in the Brentwood Country Mart) .
Comments are closed on this story.