There are a number of factors for this, one that many will point to is the robo-signing debacle that caused the likes of Bank of America to suspend its foreclosure processes. Certainly, there was a ripple effect as many other lenders had to look at the issues that they are facing with accuracy of reporting and reliability of identifying participating versus nonparticipating loans, but I don't believe that to be the complete story. Bad practices have been rampant in the entire process from the first orignation of these loans to the foreclosure. The real issue that I think the lenders are facing is that technology wasn't capable of doing what the lenders thought it could do.
I remember my first banker. My dad took me down to the local bank and got me a savings account when I got my first lawn mowing job. The president of the bank is the one that opened my account for me. That bank and president got a lot of business from my family over the years. There was a personal touch. However, with the advent of MERS and its ability to track mortgages electronically starting in 1995, the lending industry pushed for faster, less expensive (read that as less human capital intensive) means of delivering its products to the consuming public. Essentially, a dehumanizing of the banking world. There was a shift, an ebb if you will from human to computer.
Today, though it may not seem any different as we see commercials for check cashing via I-phone and online banking being required or there will be a fee, there is a new flow to human contact. You may not notice it at the teller line or in the text message notices of your account balance, but I promise there is a human factor that is coming. These flows in the foreclosure, though they ebbed the last two months in Washington, will be flowing again soon. My post from last week in regard to Moody's downgrade of MBS is what I believe to be a harbinger of future calamity in our housing markets.
Part of that calamity is going to be in the form of new and innovative lawsuits and the human element of the banking world will be manifest because banking officials will be making very personal appearances in a court room near you. Failing to take the time to get to know your clients when you had the chance at originating the loan will soon mean getting to know the client and his attorney in a deposition. The reliance on technology to dehumanize the transactions when that human element may have been the most important aspect of underwriting the risk of loans is coming back to wash over the banks with tidal fury.
In a case from the bankruptcy courts, Kemp v. Countrywide Home Loans, there was a very Davidian blow sent to the banking industry as the issue with MBS trusts that were not properly populated with assets and the backlash from investors started to mount. Important people, at least in their own spheres were being called to answer uncomfortable questions. Additionally, it is noted that the AG from IOWA is talking about sending some of these bankers to jail for their roles in the violation of due process in the foreclosure scandals.
Waves, they ebb and flow, constantly changing but staying the same. Banking was personal, it got impersonal, robotic, and pretty soon, if this attorney has anything to say about it, will be personal again.
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