Long article in the NYT today on the troubles leading up to this foreclosure mess. It pretty much comes down to this: the real money was selling loans and packaging them for resale. Servicing those loans was an afterthought, with total profit per loan over its lifetime, maybe $500. So naturally, they hired “Burger King Kids” (a slur on Burger King, so far as I can tell), invested no money on talent or computers, and were swamped when the foreclosures began. Each foreclosure, by the way, costs $2,500 and up, and so wipes out at least four other productive loans. Bummer.
They banks admit they have no idea who owns what, and I’ve experienced this myself in the past year. I have literally millions of dollars in offers out there on behalf of clients who want to buy troubled homes, but, as one bank’s lawyer admitted to me, “we don’t know enough about the loan to sell it with any confidence that we have the right parties”. Picture my little office, multiply it by tens of thousands, and you’ll begin to grasp the problem.
I’ll admit to being on the lower half of the bell curve, but so far, I haven’t read a single suggestion by any genius that offers a solution to all this. One will surface, eventually, because this can’t go on, but in the meantime, we’re in trouble and going nowhere.