Book Review: 'Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud' by David Dayen
Editor's note: This review was originally published at the Daily Kos, which notes that its "content may be used for any purpose without explicit permission unless otherwise specified." The original page can be found here.
Don't buy a house or refinance your mortgage until you read this book. It's that important. It's also written by one of our own, David Dayen (though he's been away for a while, doing really important stuff like writing this book). Here's how he describes it:
The book is about three individuals in South Florida who were instrumental in exposing the largest consumer crime in American history. They called it foreclosure fraud. Millions of families were kicked out of their homes based on false evidence submitted by mortgage companies that had no legal right to foreclose. The documents were fabricated, forged, backdated. This was systematic fraud that implicated every major bank in this country, and ruptured a 300 year-old system of well-established property records law.
And yet, Lisa Epstein, Michael Redman, and Lynn Szymoniak didn’t work in government or law enforcement. They were not experts in real estate law. They had no history of anti-corporate activism or community organizing. They had no resources or institutional knowledge. They were a cancer nurse, a car salesman, and an insurance fraud specialist, and they were all foreclosure victims. And while struggling with their shame and isolation they committed a revolutionary act: closely reading their own mortgage documents and discovering the deceit behind them. Instead of merely using that knowledge to fight their own cases, they dug into the public records, found patterns of fraud lurking in plain view in courtrooms and county recording offices, found each other in the comment sections of websites, and founded a movement to tell the nation about this unbelievable misconduct that affected millions of lives.
The story of these three people (and the myriad others who play a supporting role in their ongoing fight) is edge-of-your-seat engrossing, and keeps the book moving at a clip you'd expect from a whodunit—you want to know what happens to them next. But the story of these three people is a powerful vehicle for the larger story, that of the worst economic disaster the nation faced since the Great Depression, the lawlessness that created it, and the failure of our political system to deal with it.
It starts with the basics: How a mortgage is supposed to work. The bank is supposed to be responsible and only lend to people who can afford to pay a mortgage. It's good faith on both sides—on the bank's that the customer will pay them back, and on the customer's that the bank will hold that loan, apply payments to the loan, and notify the customer if that loan is sold to another bank. That contract has a couple of basic requirements. As Dayen explains it:
A mortgage has two parts. There's the promissory note, the IOU from borrower to lender, and the mortgage, which creates the lien on the home in the case of default. Foreclosure laws vary from state to state and evolve with every court decision, but in the simplest terms, to be able to foreclose, a financial institution must hold the mortgage, the note, or both. This gives you standing, as it would in most judicial contexts: if you accuse someone of stealing your car, you'd need to establish that you actually owned it in the first place.
That's pretty damned basic law. It's what the "chain of title" in the book's title means—which institution legally holds the mortgage. And it was totally upended when Wall Street realized just how much money there was to be made by breaking that system. So you had loan originators who would issue new mortgages at an insane clip, then turn around and sell them to banks. Then the banks would package them into mortgage-backed securities, because traditionally mortgages have been such a solid financial product. The securities, backed by the mortgages, would be broken up into new securities, sometimes multiple times, to the point where no one could figure out who actually held millions of these loans. The whole scheme was spinning so fast that keeping track of the paperwork was impossible. So they just started making it up, knowingly committing fraud with operations set up just to generate reams of fake paper, fake paper that they eventually started using—and manufacturing more of—in order to illegally foreclose on millions of these loans. The three people Dayen profiles were all victims of this massive corruption and made it their lives' work to expose it.
And they did. They had remarkable success, eventually, in blowing the cover off of the whole mess, even spurring a 60 Minutes segment. They even—almost—got the Obama administration to want to do something about it. Ultimately, the Treasury, the IRS, the FBI, and all law enforcement failed. Not one financial executive was sent to jail for creating this massive fraud that stole millions of people's homes and brought the global economy to the brink of collapse—even though it was obvious, proven beyond all reasonable doubt, that the whole thing was built on illegality.
Knowing before you go into this book how it's all going to end, you’re prepared to get infuriated all over again. You know, even as you're getting sucked into their stories and rooting for these three people to be the Davids that bring down Goliath and effect justice: That isn't going to happen. But you keep reading anyway, because you have to, because what these people are doing, what they're bringing to light, is so riveting.
Dayen knows you're going to be filled with impotent fury at the very unsatisfying ending, so he gives you a silver lining. "Without the foreclosure fraud movement," he writes, "there is no Occupy Wall Street; there is no Elizabeth Warren wing of the Democratic Party; there is no student debt movement, or low-wage worker movement, or movement to transfer money to credit unions and community banks."
That's all true, but because this is the story of these three individuals who gave up so much of their lives in this fight, the real happy ending is that they overcame the shame and the isolation and the feeling of personal failure their foreclosures brought them. They overcame it not just personally, but for all the people who were cheated by their banks and lost everything. They created a community and gave regular people the power to fight back.