Martha Randolph Carr Martha Randolph Carr, 11/15/2010 [Archive]

Banks Aren't Out of the Financial Hole

Banks Aren't Out of the Financial Hole

By Martha Randolph Carr

America is starting to see some recurring signs of a recovery, including a recent increase at last in the number of new jobs in 23 states. That's still marginal and less than half of the country but it's a start and in the right direction.

A basic principle of economics is that momentum of any kind will continue in the same direction without some kind of intervention. In other words, the rock is no longer rolling over us.

However, the tangled mess of mortgages that crashed the country into the Great Recession still has a few good punches to the gut left before we can put it all behind us. The hairy part is that the problems that are left are still big enough to trip up the recovery and drag out the recovery further or perhaps even send us into a double-dip recession.

Officially, in case you missed it, the Great Recession was over in June of last year. Now, we're in the midst of the Great Recovery, which means we've hit bottom and are looking toward the rebuilding instead of trying to prevent further deterioration.

But while the US economy is no longer leading to late night meetings at the White House to get us off the critical list, we're still in a financial ICU and it's still because of mortgages.

Investors who purchased mortgage-backed securities from banks have become fed up with getting nothing for their money and are suing the banks. Bank of America has several lawsuits filed against it for at least 54 billion dollars. Originally, they had pegged the amount at 375 billion but after a court ruling had to scale back the numbers.

While the different lawsuits in several states are varied about the exact offenses by BOFA, there is one underlying problem that everyone agrees has aggravated the problem. Sloppy record keeping has led to confusion about who exactly has owned or still owns the mortgages. BOFA is not the only major US bank being accused of the problem. CitiGroup, Wells Fargo, PNC Financial and JP Morgan Chase are some of the others who have recently had lawsuits filed against them citing the same types of problems.

Now, in the good old days, prior to the '80's and banking deregulation, when someone bought a house and acquired a mortgage the loan stayed with the bank that gave it to them. There was accountability, better oversight and at the least, basic accounting practices.

Once the wild round of selling first bundled mortgages and then mortgage-backed securities began those in charge appeared to have cared less and less about making sure the paperwork was in order and more about how to keep generating large fees.

Not enough banks were even making sure that they were buying or selling something that actually belonged to them. That's one of the reasons BOFA can't say for sure how many billions of dollars are involved and why their math may be off by 300 billion. Surely, that's a failing grade.

Into this mess comes the question of foreclosures and modification loans. In order for a bank to foreclose on a mortgage they have to be sure they own the debt. However, many banks have been using software to automatically sign the foreclosure paperwork.Not only have the banks not checked to see if they clearly had ownership of the debt, a New Jersey lawsuit points out instances where banks repeatedly ignored approved loan modifications or mediated settlements and proceeded to kick families out of their homes.

It's easy to see where the banks' interests lie and it's got nothing to do with the communities around them.

Banks have argued that taking the time to unravel the mess will cost them money in terms of legal fees, processing fees and not being able sell properties and recoup some money. The easy answer is to just say too bad that's the consequence for caring more about year end bonuses than the millions of lives wrapped up in all of those homes.

But, the executives who are still receiving big paychecks at those banks are well aware of the country's precarious economic recovery and know that even a perception of banks getting ready to fail could send everything back into a downward spiral.

They still have the rest of us by the short hairs and are willing to leverage that into continued rapid foreclosure proceedings and no penetrating investigations into their practices. If we give into that wholesale the end result will be that history will not only repeat itself but it will do so quickly, more severely and economic hardships that may be felt into the next generation.

Martha's latest book is the memoir, A Place to Call Home. www.MarthaRandolphCarr.com. Email Martha at: Martha@caglecartoons.com.

© 2010 Martha Randolph Carr. Martha's column is distributed exclusively by Cagle Cartoons Inc. newspaper syndicate. For info call Sales at (805) 969-2829 or email Sales@cagle.com.

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