Foreclosure mess exposes the rot from within

From Paul Jackson from Housing Wire.

Believe it or not, mortgage servicing is a noble industry. Or, at least, it’s supposed to be. Even in managing borrower defaults and repossessing property, there is something noble to the work, underneath it all — and it comes from following the law, enforcing contracts, ensuring that our nation’s system of property rights maintains its integrity for all Americans.

In many ways, for me, being involved in the machinery of servicing loans when I first started my career was sort of like being a financial cop; and it seemed to serve the same useful societal functions, too. There was purpose to the work that gave what we did meaning. …

For years, mortgage servicing as an industry has been rotting from within, slowly but surely. Much of the industry has long confused rampant cost-cutting with process improvement, and has always been about moving as fast as possible — believing that moving faster was always the best approach to limiting investor losses. In an earlier column, I discussed the persona of “Chainsaw Al” and his cut-costs-at-all-costs mentality. That’s the mentality that has ruled this industry for decades now.

It’s this same mentality that has spawned massive, interconnected computer systems that manage attorneys and others based almost entirely on how quickly they can respond and perform certain “steps” — not that the computer systems themselves are the problem, of course. They merely reflect the reality of an industry that long ago threw due process out the rear window in the name of ‘process efficiency.’

It seems like to squeeze every last penny of profit, the credit industry thought it would be worthwhile to disregard the rule of law. I know former insiders who cringe at the thought of what has happened to the whole securitization and servicing process.