So I’m on my way to Florida, to work on a story about the foreclosure crisis. On my way I wanted to post this bit of news, that Bank Of America has conceded to a significant percentage of errors in its review of pending foreclosures.
This clashes directly with what it said on October 18, when it said that an initial review indicated that “the basis for our foreclosure decisions is accurate.” It now says that between 10 to 25 of the first few hundred foreclosures it reviewed were faulty. And that’s only what the bank is admitting to.
There has been a tremendous effort in the media to blame this foreclosure crisis on homeowners who over-borrowed and the lawyers who represent them. (A Wall Street Journal article last week blaming a Jacksonville lawyer named James Kowalski for destroying the universe was a new low in crisis reporting and some of the worst journalism I’ve ever seen). The truth, and I’ll get into this in detail when the magazine piece comes out, is that this foreclosure fiasco is a story about wide-scale bureaucratic fraud, with a kind of mortgage counterfeiting and a gangbang mentality with regard to the securitization process has infected the entire system. Since mortgages and mortgage-backed securities are in everything — in your pensions, in insurance portfolios, on the balance sheet of the Fed and its bailout facilities (making all Americans stakeholders in subprime notes) — a wave of phantom and/or mismarked mortgages has the potential to wreck the entire economy, which is why everyone from Ben Bernanke on down is shitting bricks as this story (and disclosures like this BOFA thing) unfolds. This business is, believe me, a LOT worse than even Bank of America is admitting, and it’s not confined to just a few reckless banks. Anyway, more to come later.