Of all the atrocities to sense and ethics that occurred during the Great Financial Crisis, this one dumbfounded me the most because at the time I thought, there’s no one way anyone can get away with this. But they did. Easily and with very little pushback or even reporting on it.
What precipitated this was that the mortgage industry thought they could ignore a 300-year old system of property law. They considered it too costly and time-consuming to generate and store (and pay to publicly record) paper assignments for every single transfer. Never mind that it was the law. Never mind that having a well-established property records system, so you can buy and sell property with the confidence that nobody else has a claim on it, is what separates developed and under-developed nations. The industry didn’t want to pay for it, so they didn’t. And they dared everyone – homeowners, politicians, law enforcement – to stop them. And given what transpired, and how little accountability we ended up seeing for this, you have to acknowledge that the industry made the right bet.
In short, there are millions of houses out there now where it’s not clear in any real way who owns them — oh, some bank says they own them, or some family believes they own their house, but if you actually examine the chain of title it’s pretty clear there is fraud along the way — and guess what? Fraud invalidates current title.
(And I actually do know a fair bit about this. I worked at an offshoot of Transunion for a while before I broke into IT, first as a proofreader but later after I got my own team and did a good bit of title examining. This means determining if a title has a clear chain of ownership, no liens, and that the property description is something that makes sense. So yeah, I actually do know how to examine a title to industry standards; I once upon a time got paid to do it and I was really good at it.)
I don’t foresee millions of title invalidations. But nevertheless it is possible. Most likely, the title invalidations would benefit big banks anyway so here’s to hoping it doesn’t happen. My point though is that there are millions of properties out there now where the title documents by dint of massive fraud back in the title chain are completely compromised, and it is very possible that this fact could cause harm in the future.
But if you don’t see the problem with what happened think of it this way: what if you showed up at the DMV and your name, say, is Jennifer Martinez. You’re getting a license, let’s posit. You have a birth certificate written in crayon that claims your name is “Twiggy Nietzshe.” Your document that establishes your current address is some scrawl limned in Sharpie on the side of your cat. And you have a current passport from the country of Neverland and another valid one from Atlantis.
But the DMV takes a look at this, pronounces it all good, and hands you a license.
By way of absurdity, the above is just as ridiculous as what the banks got away with above. Really. And they should’ve been smacked down just as hard as you would be if you showed up at the DMV with that collection of “documents.”
I think foreclosure and chain of title being difficult to understand is what caused this to be woefully under-reported, but it was for me the most shocking event of any that occurred during the GFC, this repudiation of 300 years of very well-established and previously-incontrovertible property law.
Having worked in the industry, I have no idea how any of it is still operating with so much clear fraud right out in the open.
One of the biggest scams in history that very few even know was and is a scam, and one with still-extant very real financial and ownership risks.