Letting the banks make the rules
A year and a half ago, I sat in the office of Jim Kowalski, a prosecutor turned defense attorney in Jacksonville, Florida, listening to him describe a crime that was, by then, known to anyone who'd dealt with the foreclosure process. Kowalski worked with a small cadre of local attorneys trying to slow the area's onslaught of foreclosures. In the aggregate, they were monstrously outmatched by banks with subcontractors of subcontractors dedicated to removing families from homes quickly. But on a case-by-case basis, they stole the advantage because they knew the mortgage industry's secret: it had buckled under the weight of its own corruption. All you had to do was force the banks' empty hand, and you could keep a client in her home. The biggest tell came over list-serves that connected legal aid outfits and small private practices overwhelmed by the sudden demand for foreclosure defenses. As lawyers like Kowalski compared notes on the three big banks whose servicing arms controlled nearly half the mortgage market, they noticed case after case of irregularities. Once they forced the servicers into court, the pattern became clear: everybody involved in the securities process had cut so many corners in pursuit of record profits, had operated with such disregard for the many steps that ensure a safe and sound mortgage market, that they couldn't even show who owned the debt.