David Dayen came of age as a writer during a golden age for bloggers.
Dayen, a 1990 graduate of Council Rock High School, was making a living in Los Angeles editing films and TV programs. “Name a channel on your digital cable package, and I’ve probably done something for it,” he says.
Interested in expressing his opinion in prose since his days as a columnist for his high school paper, Dayen, who is 43, discovered blogging around 2004. “I would be editing, and there’d be something . . . that would take a few minutes, and I’d go over and blog something,” he recalled. “It became more and more a part of my life, on my personal websites at the time, and these big political blog sites.
“It was a really new medium, and people who got involved at the time had the ability to advance themselves pretty quickly,” he said. “I was able to get caught up in that, and I did advance. I got hired to write for a site called firedoglake, it was one of the largest political blogs at the time.”
An acquaintance told him of a personal disaster involving a loan modification, including sudden demands by his lender for a large sum of money. Dayen began looking into the larger issues.
“There just weren’t a lot of people focused on it. That was how I set myself apart, and made myself sort of a self-taught expert,” he said.
This work led the author to a huge financial story — family homes had become fodder for billion-dollar investment vehicles, and foreclosure proceedings exploded across the country. The crisis had become a sad trek from Main Street to Wall Street, a financial stampede that trampled the lives of millions.
In 2010, Dayen met Lisa Epstein, Michael Redman and Lynn Szymoniak, Florida residents battling for their rights against deceptive practices during foreclosure proceedings. The result is the recently released, favorably reviewed “Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud,” published by The New Press. The New York Times called it “A gripping story of foreclosure fraud . . . Prepare to be surprised, and angry.”
“Chain of Title” also is a frightening book.
“This could have been a much bigger media event than it was if people (at news organizations) had figured out the right way to tell these stories,” said Dayen. “Was Watergate complicated? This is important stuff . . . the story should already have been written (before his book). This was the largest fraud in American history. That’s effectively the theft of millions of homes.
“You don’t have to have intricate knowledge of finance to understand this book.”
The author writes of the nation’s long history of tracking property transfers, which are usually recorded at the county level. “. . . so mortgage lenders could confirm ownership before they issued loans, tracking the chain of title back to the original owner and ensuring the lack of defects in that chain.
“When banks started securitizing mortgages on a wide scale in the 1980s, they viewed recording offices as a problem to be overcome. … To create the bankruptcy-remote trusts used in mortgage-backed securities, banks needed to transfer mortgages multiple times. Under the old system, that would trigger a recording fee and document creation at every step. With millions of mortgages expected to enter securitization, suddenly recording fees represented a drain on profits.”
So the industry computerized the process, creating an entity called the Mortgage Electronic Registration Systems (MERS).
“Instead of filing with county recording offices each time a mortgage transferred — and paying that fee — banks instead listed MERS as the ‘mortgagee of record’ in the initial mortgage assignment,” Dayen writes. “Then for subsequent transfers, the parties would go to the MERS database and list trades on an electronic spreadsheet. Banks could make unlimited transactions inside MERS; the county recorder only knew about the original assignment.”
A law professor who studied MERS found that the company “sold their corporate seal on their own website for $25,” the author reports. “Thousands of low-level workers across the country who worked at mortgage servicers or their law firms became ‘vice presidents’ and ‘assistant secretaries’ of MERS, despite never working for or receiving pay from them, so they could sign documents purporting to assign mortgages. Under the membership agreement, MERS empowered these ‘corporate officers’ to execute whatever documents were necessary for loans in the MERS system.”
At foreclosure, “You would need original promissory notes and assignments from every link in the securitization chain, along with certified testimony from each document custodian. But nobody preserved the records. Nobody tracked or verified evidence,” Dayen writes. “From a legal point of view, the chain of custody of hundreds of thousands if not millions of loans was fatally corrupted.”
Dayen reports the activists found some banks and lenders were foreclosing loans in which the institutions could not prove they had legal standing. A entire industry sprang up dedicated to document falsification — one such outfit offered a catalog, with prices, for fake notes, mortgages, securitization agreements and other papers available to lenders.
The author writes of runaway sub-prime mortgage lending to unqualified buyers, homeowners who never missed a payment foreclosed upon, the wrong properties foreclosed upon, people who did not have mortgages foreclosed upon, “rocket docket” judicial proceedings where summary judgments kicking people out of their homes were made in seconds (in one case mentioned, before the hearing).
There was the mysterious death of a witness in a criminal case against a company that routinely falsified documents on behalf of major lenders such as Bank of America; and other outrages against the land title process and ordinary citizens who should have been able to depend on it.
Instead, they were shamed out of fighting back with slurs like “deadbeat.” “Ninety-five percent of all foreclosure victims do not contest their cases,” Dayen said.
The author has noticed the most common word in readers’ reactions to the story is “appalling.”
Some big companies were made to pay a big settlement, but Dayen says that is not the end of the story.
“Every day in America, somebody continues to be tossed out of their homes based on false documents,” he said. “You would assume this activity stops, but it didn’t.
“This was an epochal moment in American life. There are so many people who have been touched by this. You’re talking about the collapse of trillions of dollars of wealth.” He quotes an informed source who called the waves of foreclosures “An extinction event for the black and Latino middle class.”
The author cites a Wall Street Journal report that 9.3 million families “either went through foreclosure or surrendered their home between the peak of the housing bubble in 2006 and 2014,” he said. Dayen estimates this affected 13 to 14 million people, not a few of whom came home from work to find their belongings scattered outside their houses and the locks changed.
“Thousands of executives” went to jail following massive failures of savings and loan associations in the 1980s and 1990s, but in the foreclosure crisis, “Nobody was held accountable for it,” said Dayen.
Instead, America got a bad case of “foreclosure fatigue,” he said. “People in law enforcement, judges, they’re just tired of it. They don’t want to hear the mortgage companies are engaging in illegal activity. . . there are real people behind those decisions. (People) most powerfully affected by it, homeowners . . . they were invisible in the policy discussion.”
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