David Dayen,”Housing crisis has led to breakdown of the Social Order”



By Andrea Riquier

Imagine the immense stack of papers that accompanies a home purchase closing.

Excited home buyers sign, sign, and sign some more. They sign even more now since the 2015 introduction of new regulations required by Dodd-Frank known as “know before you owe,” or TRID.

But does anyone actually read the documents being signed?

One woman did. In 2007, Lisa Epstein was closing on a mortgage with her husband for a new house. One problem was that she was pregnant. She could only read about five pages of the closing documents before having to excuse herself to run to the bathroom, wrote David Dayen in his book “Chain of Title.”

But another, bigger problem, Dayen noted, was that Epstein, a nurse, had no clue what she was reading. She wanted to appear responsible and she wanted to understand the process, but it was beyond her.

Besides, Lisa had a fallback in mind if there was ever a problem with the house: she already owned a condo. It was early 2007 in Florida. If she needed to, she should have no problem selling the condo for lots of money, right?

In many ways, the closing documents symbolize the structure and authority that the housing finance market creates, Dayen told MarketWatch in an interview. “I think the closing process is like the psychological way in which you’re taught that this is a very deliberate process that you can trust,” Dayen said.

But in the housing bubble of the mid-aughts, he said, “The fact that you couldn’t is the heart of the problem.”

The book describes how Epstein, who had a 803 credit score, was funneled into a subprime mortgage without realizing it. The loan was interest-only for 10 years, at which point principal payments would begin and the interest rate would increase.

And as Epstein would soon find out, no one wanted a condo in Florida in mid-2007.

Also read: Has there ever been a better time to be a home buyer?

Epstein wasn’t the only victim of dubious lending practices in the bubble, of course. But “Chain of Title” makes a broader point. The entire housing finance system was built on faulty, if not fraudulent, documentation, Dayen argues. Lenders cut corners, ignored regulations, and faked signatures to get as much fodder for the securitization machine as they could when the bubble was inflating. When it burst and the foreclosure crisis began, they repeated the process on the way back down…………………………

For More please continue to Marketwatch.com

10 Responses

  1. Reblogged this on Deadly Clear.

  2. Reblogged this on California Freelance Paralegal.

  3. It is important to remember, no matter what happened to anyone, in loan closings,refinancing, court battles, etc. You did nothing wrong, its the banks and the system! Homeowners are honest hard working people. The banks are the crooks.

  4. My husband and i took a class, talked with family and thought we were educated when we purchased our fumirst home in august 2006. Ou agent tried to get us into.interest only, even writing on a blackboard how it makes more sense than the 30 year fixed we insisted on. My husband actually walked out he was so mad that she wouldnt listen. Thats what we knew, get a 30 year fixed. We held strong to that , why we trusted her iinto taljkng us into getting two loans and refinancing in 3 months is beyond me. We had put 54900 down cash, had great credit, and she said refinancing wouldnt cost adfitional. Well come find out it cost another 15000, the loans she put us in were high intetest, and somehow we signed a second with a balloon payment due (not aware til 2013, this occurred) and interest rate of 12.9. We fired her got a new company, a 6% interest loan on refinance with new century and paid the costs out of pocket. We just chalked it up to and moved on. The paperwork, so much paperwork. The agent went over what each thing meant. Sign, sign, sign. So i did, afterall they know what their doing, they represent me, im just an educator, with a masters degree, it makes sense! In hindsight, i realize like many homeowners, regardless of how well you read, when youre trying get through the paperwork, get keys and celebrate, you might as well have lived on the moon your whole life, cause the people, all of them involved in selling you a house, have the ability to manipulate details and info that average person on earth couldnt fathom even if they tried.

  5. @Melissa: I am still in my home and still fighting since 2008 Ocwen has sent me a Notice of Default even though I am in the middle of a lawsuit (appellate court) and have Lis Pendens pending on file. I just sent notice to the Appeals Court of this matter and to opposing counsel, whom I believe, do not know what Ocwen just did. In fact, would bet my bottom dollar on it. We shall see…

  6. My 7 year battle is about to come to a close. June 22nd is The “Purchaser’s Verified Motion For Writ Of Possession”.
    In other words, They made up new papers so now they can throw me out. Eviction is next.
    The main problem we have here is attorneys’ greed.
    Let’s face it, attorney’s run the entire “JustUs” system.
    If The Bar Association wanted things changed then things would get changed.
    … for the right amount of money.

  7. Right on Melissa!

  8. Whatever happened to Lisa Epstein ???

  9. This is not about fake signatures, cutting corners or ignoring regulations.
    The Trust’s doesn’t own ANYTHING. The lender on the note and mortgage DID NOT borrow any money! The Courts are not believing ANYTHING the homeowner has to say. The Media is to blame for the stupid saying, Ro-Bo signing, I believe was done intentionally. Even if you have a good lawyer, have all the documents and have your day in court its still a battle and expensive. In the end you will hear, one of 2 things, 1st sheriff sale, or 2nd You get a Loan Mod that the Servicer is named on the loan mod. when you ask, Where is the trust that foreclosed on me, you will hear, That doesn’t matter you get to stay in your house. All of BS. Since when doesn’t a citizen of the US have the right to know WHO their creditor is. I know when, When Wall Street began the Biggest Ponzi Scheme ever on the citizens. When our government is Wall Street. Now while I appreciate the books, articles and all the people that work hard everyday to uncover this mess, most hear are not gaining any ground. That’s wrong.
    By the way, I have been reading and following Neil since 2008, and have been thru everything I wrote. I am still in my home and still fighting and its still a battle. I have gained the knowledge, but not how to stop the banks.

  10. If the book is as poorly written as the Editor piece, it is ins’t worth the paper it is printed upon.

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