The 2008 financial crisis was the most disruptive political event yet experienced in the 21st Century, but even for professional bank dorks, the material can get pretty dry. So it’s refreshing when authors can offer up strong character-driven narratives to make key elements of the crash accessible. With his first book, Chain of Title, journalist David Dayen joins Michael Lewis (The Big Short) and Andrew Ross Sorkin (Too Big To Fail) as a master of this technique. Dayen follows three homeowners — cancer nurse Lisa Epstein, car salesman Michael Redman and insurance fraud expert Lynn Szymoniak — as they struggle to fend off foreclosure. In the process, all three discover that their banks may be in bigger trouble than they are.
But where other writers have described the meltdown as a colossal mistake, a failure of ideology or a collective delusion, Dayen emphasizes another aspect of the crash: it was illegal. In doing so, he has produced what may be the most important book about the financial crisis to date.
By studying the documents in their own mortgage cases, Epstein, Szymoniak and Redman noticed some glaring irregularities. Signatures on key documents appeared forged. Official dates on those signatures were off by months or even years. Entire documents are clearly fabricated.
His protagonists had uncovered a nationwide scandal. Wall Street had fractured the legal foundations of the nation’s housing property system so deeply that banks were simply making up documentation in order to pursue foreclosures. They frequently couldn’t prove they had a legal right to foreclose, or even determine if they had a financial interest in doing so. Banks were misplacing mortgage payments, and in other cases, refusing to accept them. Sometimes they evicted homeowners even after they successfully completed bank-designed repayment plans.
Dayen’s characters meet different fates, but each navigates a maddening, Kafkaesque legal system. Some judges simply cannot believe that major, prestigious financial institutions are engaging in the behaviors that Szymoniak, Epstein and Redman document and detail. As banks and their agents threaten, cajole and harass them for years, Dayen successfully channels their emotional journeys into a narrative rhythm that at times resembles a spy thriller (no small feat for a tale of faulty mortgage papers).
Dayen has been covering this material for six years. The public briefly fixated on an aspect of his drama in the fall of 2010, when major banks declared foreclosure moratoriums to give them time to clear up what they described at the time as “paperwork errors.” The issue resurfaced again in the spring of 2011 when the CBS program 60 Minutes produced a Gerald Loeb-award winning segment on what was now known as the “robo-signing” problem. But then the issue faded from the headlines of most major publications. Dayen, one of only a handful of reporters who followed the foreclosure chaos after the initial flurry of media attention faded, prefers the term “foreclosure fraud.” He portrays it not as an isolated moment of consumer abuse, but an inevitable result of the mortgage securitization boom on Wall Street that wrecked financial markets in the fall of 2008. In the frenzy to pack home loans into bonds for sale to investors, banks cut a lot of corners. As loans were chopped up and sold from one financial house to the next, the necessary documents simply weren’t maintained or transferred. When families began defaulting, the banks couldn’t keep it together. So they cheated.
Chain of Title is a book about both finance and politics. While a few homeowners were able to leverage their legal position to save their homes, the federal government made a series of conscious decisions to defend the banks, not the borrowers. As a result, an enormous number of families were evicted who simply did not need to be forced out of their homes. The Obama administration first turned a blind eye to the problem in response and then insisted it was working to resolve it with loan work-out programs that turned out to be as bogus as the banks’ paperwork. The administration ultimately wiped away the banks’ fraud liability with a settlement that, Dayen details, offered paltry levels of restitution for the families they had wronged.
And the foreclosure mess never really went away. There were nearly 1.1 million homes in foreclosure in 2015, according to RealtyTrac data. That’s down from the peak of about 2.9 million in 2010, but up about two-thirds from the 717,522 recorded in 2006, the year the subprime mortgage market began its implosion.
The great foreclosure fraud epidemic that spread across America during the Obama years demonstrates that the bank bailouts were much more than a congressional vote taken in the fall of 2008. They were not a one-off rescue maneuver in which unpleasant but necessary measures were taken for the greater good. The bailouts were a decade of sustained policy spanning two administrations in which the rights and interests of working consumers were subjugated to the profits of a handful of Wall Street firms.
Because Chain of Title shows both the Bush and Obama administration policies siding with elites against consumers, it’s tempting to see the book as a narrative of the American political left. But the lessons Dayen draws from his tale could come straight from a conservative think-tank. Property rights are important, he argues, and the rule of law matters. But neither mean very much when the government refuses to enforce them for everyone.