Recently unsealed litigation documents filed against megabanks such as J.P. Morgan, Bank of America, Wells Fargo, Citi, and GMAC, among others, reveal far more about the American banking industry than the public had thought possible. The common assumption during 2012 when news of the home mortgage banking scandal broke was that major US banks involved in phony foreclosures settled for $95 million; however, recently unsealed court documents reveal a much more egregious corporate ploy that could involve more than one third of all residential mortgages in the US.
Court documents cite that US mega-banks who received federal bailout money resorted to massive operations to forge millions of fake documents in order to press homeowners on foreclosures so banks could recoup lost money over defaulted home loans. However, since banks “securitized” the home loans by repackaging the contracts as mortgage-backed securities, which banks then sold back to investors, and even internationally to both private and public investors around the world, as bonded securities, banks suddenly could no longer legitimately establish the true ownership of the very loans that they had underwritten.
So banks were faced with a dilemma. How could banks foreclose on property that they had already securitized, profited from, and previously resold as packaged mortgaged-backed securities? Well, they forged mortgage contracts and then egregiously pursued phony forecloses en masse on innocent Americans who were legally entitled to stay in their homes.
The banks did not contest the assertion, but instead attempted to settle out of court for a pittance. Unfortunately, the disturbing reality underlying such acquiescence is that these fraudulent foreclosure claims were so widespread that tens of millions of American mortgages still lack any legitimate claim of official ownership.