She’s at it again. The New York Times
’ Gretchen Morgenson has set her sights on the mortgage and housing crisis, after about a year placing her gaze elsewhere — and it’s clear that she is as intent as ever at pushing out half-truths and outright lies. With the inimitable Tanta
from the blog Calculated Risk no longer around to call her on it
, I suppose someone needs to step in. I'll try.
Right ahead of Labor Day, she and accomplice Geraldine Fabrikant pushed out a missive that used Florida’s foreclosure courts as a backdrop for their latest mischief (“Florida’s High-Speed Answer to a Foreclosure Mess
,” Sept 4, 2010). Morgenson and Fabrikant launch into a missive spanning nearly 3,500 words that makes plenty of noise. But I’m still not really sure what the point is.
The column begins with an andectode about the Waters family, from Middleburg, Fla.:
TEN days from now, a four-bedroom house on a cul-de-sac in Middleburg, Fla., is scheduled to be auctioned off at the Clay County courthouse, 25 miles south of Jacksonville.
A judge who recently took over their foreclosure case has ordered Rodney Waters; his fiancée, Terri Reese; and their four children to leave the home they bought in 2006.
Mr. Waters, a supervisor at a local packaging company and the family’s sole breadwinner, fell behind on his mortgage two years ago after his property taxes jumped unexpectedly. He now owes $264,000 on the house; a similar home down the street sold for $138,500 in February.
Okay, so Mr. Waters has lived rent-free in his home for over two years. We don’t know what he’s done during the past two years, but we do know that he fell behind because his city hiked property taxes on him, assumedly to make up for a budget shortfall — which is actually an interesting story in its own right. Not that Morgenson cares so much for such petty details. Regardless, it's probably true to say that having a roof over your head free of charge for two full years
beats a poke in the eye with a sharp stick.
So why bring the Waters’ predicament up, then? Apparently, in Florida, two-year backlogged foreclosures such as this one are now moving too fast
for consumer advocates’ liking:
“Now you show up and you get whatever judge is on the schedule and they have not looked at the file — they don’t even look at the motions,” says April Charney, a lawyer who represents imperiled borrowers at Jacksonville Area Legal Aid. “You get a five-minute hearing. It’s a factory.”
This little exercise in suspended logic, however, is just a setup for the main course in twisted disbelief. In Gretchen’s world, it’s not the fact that Florida has seen a massive amount of foreclosures in a state that requires judicial foreclosure — not to mention a huge influx of borrower’s counsel throwing every tactic it can on the wall, in an effort to see what sticks — that is to blame for the foreclosure backlog. Nope. It’s those darn foreclosure attorneys, of course:
Florida’s foreclosure mess is made murkier by what analysts and lawyers involved in the process say are questionable practices by some law firms that are representing banks. Such tactics, these people say, have drawn out the process significantly, making it extremely lucrative for the lawyers and more draining for troubled homeowners.
The idea that Florida's foreclosure gridlock is the fault of foreclosing lenders’ counsel appears more than once, too. Morgenson cites Margery Golant, former Ocwen
exec turned lawyer in South Florida: “There is a certain amount of truth to the gridlock, but the reason for the gridlock is the foreclosure firms are practically running the courtrooms.”
Damn those fat-cat foreclosure attorneys and their junior associates running the courtroom! And to hell with their delaying-foreclosures-so-they-can-get-filthy-rich
schemes! Let’s get out our pitchforks and hang ‘em, so we can … uh, speed up foreclosures?
(In real life, it’s said that the space-time continuum would cease to be if laws of physics ever were to double back on themselves. Apparently, in journalism, it only adds to the intrigue.)
The further you read into this act of journalism, the more it becomes clear that facts apparently only hold steady in Gretchen’s world so long as they’re needed to crucify an intended target. Because after she spends the first two pages vilifying foreclosure attorneys for willfully delaying foreclosures for profit, she then suddenly damns the same group for not delaying them enough:
“These law firms appear to be mills,” says Mr. McCollum. “They submit false documents, fabricate the documents, or the documents actually don’t exist. They wanted to speed the process up because the faster they get the foreclosures done the better.”
The lawyer most closely identified with Florida’s foreclosure morass is David J. Stern. …Critics say the Stern firm has been able to handle this high volume because its lawyers frequently refuse to work with borrowers and are very aggressive about pushing cases through the courts even when there are questions about the documentation.
By this point logic has been so thoroughly beaten and abused, about the only thing left for Gretchen to do is to distract the reader by pointing to shiny things: look, everyone, at all the boats, homes, cars that David Stern has! Who cares about the lack of logic here? Isn’t there something wrong with America if a foreclosure attorney can buy all this stuff?
Let me ask all readers of this column a serious question: should foreclosure attorneys be allowed to make money for providing legal services in a private marketplace? Or should foreclosures be considered a government service, regulated at the Federal level? It doesn’t matter, of course — my point is that someone has to do the work, and someone will have to pay for it.
The issue of compensation for attorneys in the foreclosure field is a contentious issue, even for those actually working in the field, as I wrote about last week
. And if Gretchen wants to crucify anyone for allowing David Stern to make millions by building a ‘foreclosure mill,’ she may want to look no further than the policies set forth by the GSEs — and paid for as of late by all of us, the taxpayers.
After all, it’s Fannie Mae
and Freddie Mac
’s own policies regarding foreclosure case referrals that have essentially given Stern’s office what amounts to a legal oligopoly within the Florida market, and made his office into what it is.
Now, before anyone goes charging off at the GSEs, keep in mind that loan servicing is a fixed-cost business, mostly. Fannie and Freddie name their preferred counsel in high-volume states because, quite simply, it keeps costs low, and ensures at least some nominal level of service in return. It’s a reflection of how servicing costs are paid in this industry.
There is a tough challenge now coming to bear in the nation’s foreclosure crisis, even if few truly want to admit it and even fewer truly understand it. What’s the value of a foreclosure? More generally, what’s the value of loan servicing? Should consumers and borrowers expect lender’s counsel to be top notch, big-name law firms that will send their named partners to court instead of junior associates, limiting the filing and clerical mistakes now passing as a contested issue in foreclosure actions? Should consumers expect white-glove, personalized service on their mortgage loans whenever they have questions or are having trouble paying?
Because all of that costs money. It’s at odds with everything that is the U.S.-based loan servicing model today, where fixed-costs rule and servicing is designed to cost as little as possible in order to keep rates and fees low for borrowers.
I’m pretty sure banks could get better and less error-prone legal representation if they paid more for it; or even better yet, if the servicing strip wasn’t fixed, but could be priced based upon the risk(s) of the borrower(s). But that simply isn't how the world of foreclosure and bankruptcy representation works, and the attorneys that truly understand this are the ones that have seen the most success.
Something tells me, however, that this sort of thinking has no place in Gretchen’s world. It's too complex and nuanced. After all, it’s much easier to fire off a few bullets at an easy target, and then move on to the next column, the next deadline.
Paul Jackson is the publisher of HousingWire.com and HousingWire Magazine. Follow him on Twitter: @pjackson