Untangling The Complex Foreclosure Mess.

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Untangling The Complex Foreclosure Mess

TERRY GROSS, host:

This is FRESH AIR. I'm Terry Gross.

The mortgage foreclosure crisis isn't just a crisis for people who can't
pay their mortgages. It's causing big problems for would-be homebuyers
and for investors in mortgage-backed securities, and that may include
you if you have money in a 401(k). Banks are now dealing with the
fallout of the crisis they helped create.

Attorneys general in all 50 states are investigating improper
foreclosure procedures, including sloppy documentation, questionable
notarizations and robo-signings.

My guest, Gretchen Morgenson, is going to talk with us about how we got
into this mess and why it has such far-reaching consequences. Morgenson
is a financial reporter and columnist for The New York Times. She won a
Pulitzer Prize in 2002 for her coverage of Wall Street.

Gretchen Morgenson, welcome back to FRESH AIR. So the foreclosure crisis
is part of the continuing adventures of the toxic assets that we've been
talking about, you and I, for a few years now.

(Soundbite of laughter)

Ms. GRETCHEN MORGENSON (Financial Reporter; Columnist, The New York
Times): I know.

GROSS: The toxic assets that helped create the housing bust and the
financial meltdown. But this is part of the drama, just a little further
down the line.

So let's just start by a little recap of what these toxic, securitized
mortgages are, and then we'll take it from there.

Ms. MORGENSON: As you know, in the old days, Terry...

(Soundbite of laughter)

Ms. MORGENSON: ...the bank would make a loan to – usually to someone
that they knew in town or at least for a property that they were
familiar with in their town. This is the old George Bailey Building and
Loan from the wonderful story "It's a Wonderful Life" that we look at
every Christmas.

Okay, so that was the old business model of the banking-mortgage-lending
business: Know your customer, know your property.

Well, that sort of went haywire in the mortgage boom that we just lived
through, which really involved a dramatic increase in the securitization
of mortgages, meaning that banks or originators would make loans to
people across the country that they may never even meet at a closing,
may not even be familiar with the property. It was part of this kind of
urge to increase the rate of homeownership in the United States. There
was a general belief that homeownership was a greater good for all
people, regardless of economic ability to pay.

And so this was a sort of a part of a – almost a – well, it was a
policy, really, in Washington, that we should increase homeownership
across the country, so more money was available to lend to people. Also,
the very rock-bottom interest rates that the Federal Reserve had dropped
its prevailing rates down to, one percent, kept it there for a very long
time, starting in 2003.

All of these things sort of conspired to create a huge gold rush in
mortgage lending: way more money available than normal to way more
people than would normally have been allowed to borrow to buy a home.

A lot of those loans...

GROSS: And then these mortgages were basically made into securities that
investors could buy.

Ms. MORGENSON: That's right.

GROSS: So explain that part.

Ms. MORGENSON: Okay, the mortgages were pooled. Thousands of them would
go into one security, like say 10,000 mortgages, from a variety of
places. They were trying to achieve diversification in these pools so as
to diminish the risks associated with them.

And so you would have varying economic ability to repay in the loans.
You would have very high-grade loans, you would have subprime loans, you
would have a variety of loans from different geographic areas. And so
this would, you know, it was hoped, be put into a security that would
perform well over time and, you know, where people would repay the
mortgages. And at the end of the line, the owner of the securities, and
there were many of them because they were sliced up into varying risk
degrees, okay. But in case, the idea was that everyone pretty much would
get repaid at the end of the line.

Well, what was happening that many people did not recognize was that the
types of loans were poisonous, toxic as you describe them, made to
people who could not repay them, carried interest rates that would
ratchet up dramatically after a few years, thereby making certain that
they couldn't be repaid. And these created the toxic assets that you're
talking about.

GROSS: So attorneys general across the country have been investigating
improper foreclosure practices. You went to one of the states that's
being investigated, Florida. Florida is setting new records for
foreclosures. And they set up a foreclosure-only court system staffed by
retired judges. What are some of the things you saw about the court
system that's been set up to deal with foreclosures in Florida?

Ms. MORGENSON: Well, I guess the biggest problem, Terry, that I saw
there was that these judges view their job as a caseload effort to get
rid of mortgage foreclosures. It's sort of like let's just get rid of
the backlog here, whether or not we are paying close attention to the
bank's paperwork and whether they do indeed have the right to foreclose.

So it's almost like a view that, geez, there's a mountain of
foreclosures here. Let's just chip away at that mountain as fast as we
can, you know, 30 seconds, one minute, five-minute hearings at which
when people do try to point out that the bank may not have the right to
foreclose, they're sort of overruled and, you know, take a hike, not my
problem, moving on, we're moving on.

I mean, these judges have been given a benchmark of reducing the backlog
by I think it was 62 percent within a year. So I mean, that's a hard
number that they want to try to reach, and so how are you going to do
that if there are real questions about mortgages. It leads you to think
that what they're really basically doing is just rubber-stamping the
bank's ability to foreclose, whether they really have the right to or
not.

GROSS: Yeah, the chief judge for Florida's 9th Judicial Circuit said
that during July of this year, 1,319 cases had been closed by three
senior judges in two counties. So that's a lot of foreclosures for three
judges in a month.

Ms. MORGENSON: Yeah, and it makes you wonder if they're really paying
attention to the details. I just don't think that they could possibly
understand every one of those cases in that amount of time.

So the question is, you know, are people's, you know, rights to really
understanding who owns their mortgage or their note, are they being sort
of railroaded?

GROSS: So what are some of the paperwork problems a judge would run into
if a judge was truly investigating whether somebody was properly
foreclosed on?

Ms. MORGENSON: I guess the way I would generalize most of these issues,
Terry, is to say that there are legal documents signed by
representatives of the servicers that say that the paperwork is not
there, but we attest to the fact that the paperwork is accurate and that
what we are saying is true, i.e., that we have the right to foreclose,
that we represent the bank that does, in fact, you know, have the right
to foreclose, that the transfers of mortgages were done properly, but we
just can't find that material right now.

So these are things like lost note affidavits, where a representative of
a servicer would say, you know, the note was transferred, then it got
lost, and, you know, so here I am attesting to the fact that yes, Bank A
has the right to foreclose, even though the note is nowhere to be found.

Then there are cases where you have very different signatures on certain
legal documents, even those that are as important as specifying how much
a troubled borrower owes to the lender. These are some of the fees
involved, of course the late fees, the junk fees, the arrearages when
you have stopped paying.

There are people who are signing these documents, which are obviously
crucial because sometimes what you owe on your mortgage follows you
around for many, many years if you don't pay it, and yet they're signed
by people whose signatures, the same person, their signature looks
completely different, cannot possibly be the same person, which suggests
that, you know, who knows who is signing these things.

These are supposed to then be notarized. The notaries are often in a
completely different part of the state from where the paperwork was
signed.

They're supposed to be physically present to be able to ask questions of
the person signing the document, such as: Are you, you know, competent?
Are you aware? Do you know what you're signing? Are you attesting
properly? Have you done the necessary work to understand that this is
right, what you're signing?

So things like that, it was all about expedience. It was all about
speed. Hurry, let's get these things done. Let's foreclose. And it's
just a really sort of sad commentary on the way the business was
approached.

But as you pointed out at the outset, this is exactly what the banks
were doing when they were making the mortgages. So why are we surprised
that on the other end of it they're doing it again?

GROSS: So these courts in Florida that you visited that were set up just
to foreclose, I've read that they're just being, these courtrooms are
basically in hallways?

Ms. MORGENSON: Yeah, they're not even courtrooms. I mean, they are in
the halls of the courthouse because...

GROSS: Why is that?

Ms. MORGENSON: Well, because the other courtrooms are being used for,
you know, other legal cases. You know, when the Supreme Court of Florida
decided to call back retired judges to help reduce this backlog, it
wasn't as though they were going to build a new courthouse for
foreclosures in every, you know, district.

So these people have to sort of shoehorn themselves into the courthouses
where they used to operate before they were retired. So you see them in
hallways. I mean, it's really unbelievable.

GROSS: My guest is Gretchen Morgenson, a financial reporter and
columnist for The New York Times. We'll talk more about the mortgage
foreclosure crisis after a break. This is FRESH AIR.

(Soundbite of music)

GROSS: My guest is Gretchen Morgenson. She's a financial reporter and
columnist for The New York Times. And we're talking about the
foreclosure crisis, what led to it and what its repercussions are.

So another questionable part of this foreclosure process is the lawyers
who represent the banks. Some of them have been accused of questionable
practices. And one of them is a lawyer in Florida, where you've reported
from, named David Stern. His firm filed 70,382 foreclosures last year.
What has his operation been accused of?

Ms. MORGENSON: Well, lawyers who are representing troubled borrowers who
have been foreclosed upon by the David J. Stern firm have taken
depositions of some of his employees, and they are hair-raising, the
practices that this firm conducted.

For instance, a person who was sort of the go-to person for signing a
lot of these documents that we were talking about where, you know,
you're attesting to the fact that a note was lost, a promissory note was
lost or that you're attesting to the fact that the borrower owes
$439,000.28, those documents have to be signed by apparently this one
woman. And she would sign 1,000 documents a day - 500 in the morning,
500 in the afternoon - according to this deposition. And when she would
get tired, which she would, other people would sign her name.

GROSS: That means she can't possibly be reading the documents, let alone
investigating their validity if she's signing so many in a day.

Ms. MORGENSON: Correct, and also when she allows other people to sign
her name, that's improper, obviously. So that was just one thing that
some of these depositions have come out with. It's really all about this
expedience effort, and that's sort of what I think the true – goes to
the heart of it now.

The David J. Stern firm is only one of many of these firms, which we
call foreclosure mills because they really do not take the care that's
necessary. And the reason for that, Terry, is that they are rewarded for
speed by the banks.

If they get a foreclosure within a certain, you know, period of time,
then they get paid more, and if they don't have the foreclosure finished
in a certain amount of time, then they get either a lower payout, or
even in some cases they get admonished because they're not making the
grade.

GROSS: And in terms of making money, David Stern apparently did a really
good job of that. He and his wife in recent years bought nearly $60
million in real estate, mostly in Florida.

Ms. MORGENSON: Yes, and several boats, beautiful cars, et cetera. You
know, it's a very lucrative business if you are on the other side of the
troubled borrower.

GROSS: So Fannie Mae is now very critical of some of the David J. Stern
firm practices. What did Fannie Mae do in response?

Ms. MORGENSON: Fannie Mae stopped giving cases to the Stern firm. I
think that they are questioning the practices of the firm, obviously.
And having seen these depositions - which of course are employees
talking under oath, it's not like they're just, you know, chatting at
the bar, so it's not something that we can question - they're really
being very forthright and truthful, I'm sure, since they're under oath.

So Fannie Mae said no more cases for David J. Stern. But as I pointed
out, he's only one of many foreclosure mills across the country.

GROSS: So, you know, you've talked about the law firms that conducted
the robo-signings because they get money. Like, the more foreclosures
they handle, the more money they get from the banks. The banks have an
interest in getting rid of mortgages as soon as they foreclose on them.
They want to sell those mortgages to somebody else. Why?

Ms. MORGENSON: When they're originated, the banks want to get rid of the
mortgages so that they can make another loan. How the machinery worked
during the mania, Terry, was this: I'm an originator. Let's say I'm
Countrywide or any other bank, IndyMac, many, many, many of them. I have
X amount of dollars to loan to people. I get fees when I make those
loans, and if I can sell those loans to a buyer down the line, then I
get the money back again to make another loan.

It's, you know, it's like any business. You get a warehouse line of
credit, it's called, from your bank if you're in the steel business, if
you're in the widget business, you know, it's what you have to make your
product. All right, in this case, it was investors willing to buy the
mortgages, which meant that I, as Countrywide or any other lender, could
then go back to the well and make another loan and make more fees.

So it was that kind of a process that was involved, and then the
investor would be the one who wanted the stream of income from the loan
that represented the monthly payments, monthly mortgage payments that
you make.

GROSS: Is the kind of robo-signings that you saw in Florida typical in
other states, too?

Ms. MORGENSON: Absolutely. These practices were nationwide. They were
conducted by companies that have, you know, operations in many, many
different courts.

GROSS: So people who have been foreclosed on, many of them have a right
to question whether they were legitimately foreclosed on, since there
are so many paperwork questions. Do they have any recourse if they think
that the procedure was not handled in a legitimate way?

Ms. MORGENSON: Well, first of all, Terry, let me just say at the outset
that, you know, there are critics out there who say that these people
just want to have a free house, that they're just gumming up the system
to get a free house. And that really is not what most of these people
want. I think that what most of these troubled borrowers would like is
some sort of a modification of their loan that really makes sense for
them.

You know, in the time between the mania and now, we have many, many
people who are upside-down in their mortgages, meaning that they owe
more on their property than the property is worth, and so they're
carrying mortgages that are, you know, vastly higher than the property,
which is an uneconomic prospect for many people. And, you know, so we
have to take that into account, as well.

But what their recourse is, is - and why it's important, is this: If the
wrong people are foreclosing, if a bank that does not have the right to
foreclose forecloses on you and then takes the property and then sells
it to someone else, who's to say that in two years, five years,
whatever, another bank comes along to the buyer of your home and says
wait a minute, I'm the rightful owner of that house, you should never
have been able to buy it from Bank A. It's my property.

And there you are in a fix because you thought the title was clear. You
thought you actually could buy the property. The bank who sold it to you
was wrong.

So, you see, it's not just about gumming up the system, slowing down the
process, giving troubled borrowers free homes. It's about making sure
that the rightful party is doing the foreclosing so that they are then
the rightful party who can do with the property what they please, which
is possibly sell it to someone else.

GROSS: So are you saying that people who are buying homes now have a
right to be a little scared that sometime down the future a bank might
challenge their legitimate ownership of the home?

Ms. MORGENSON: Well, you've seen title companies, title insurance
companies, saying that they won't, you know, guarantee titles in certain
of these states. So I think yes. The question is there, and it's a good
question.

So just once again, it is not about giving people free homes. It is
about the rule of law and who has the right to foreclose, and if they
do, please produce the evidence, and then we can move on. And then we
can sell the property rightfully.

And, you know, if you are not the right party foreclosing, then it just
creates a problem that lives on and on.

GROSS: My guest, Gretchen Morgenson, will be back in the second half of
the show. She's a financial reporter and columnist for The New York
Times. I'm Terry Gross, and this is FRESH AIR.

(Soundbite of music)

GROSS: This is FRESH AIR. I'm Terry Gross, back with New York Times
financial reporter and columnist Gretchen Morgenson. She won a Pulitzer
Prize in 2002 for her reporting on Wall Street. We're talking about the
mortgage foreclosure crisis and its far-reaching consequences. Earlier,
she described foreclosure mills - law firms that foreclose quickly
without producing adequate documentation; and robo-signing - legal
representatives who sign off on hundreds of foreclosures a day without
verifying or even reading what they're signing.

Well, looking a view years down the line, considering the foreclosure
mills, considering all the robo-signings that have put foreclosures into
play without really examining what was behind the foreclosure, do you
think we're going to see a lot of problems in the next couple of years
resulting from these robo-signings?

Ms. MORGENSON: You know, the people who were foreclosed upon wrongfully
probably don't have the wherewithal, don't have the money to bring
lawsuits against these people. I mean, you know, they were - probably
99.9 percent of them were in default on their mortgages. They were
unable to pay. They then would've had to leave the house. So it's not
clear that they will necessarily go back and try to sue to get their
house back. The fact is they were in a toxic loan, they were in a loan
that they could not afford, for whatever reason, whether it was because
the interest rate was punitive after a few years, or whether it was
because they lost their job, had a hospital emergency or because they
just bought too much house and couldn't actually afford it.

For those people, I don't think that they're going to go back and try to
sue these institutions. But I think that the investors who bought these
loans in these pools are in a position to certainly try to get some
recoveries for the losses that they've absorbed because of these
practices.

GROSS: Now, what problems have the investors ended up with - the
investors in these mortgage-backed securities?

Ms. MORGENSON: Well, for instance, it is a sort of tried and true fact
that if you foreclose on a person - a borrower - that if you take the
property back and then have to resell it, it's a long process, it's an
expensive process. The fact is that foreclosures usually involve a
severe loss to the investor who owns the underlying property. Okay,
here's a question: if the lender - in this case the servicer - had been
willing to revise the mortgage for that troubled borrower so that they
would have maybe a lower payment, have maybe a lower principal amount to
pay, they could've stayed in the home and the recovery would have been
far greater; or, put another way, the loss would have been far smaller
to the investor. So there are just many questions like these about what
could have been done and what should have been done while these people
were rubber-stamping this paperwork and forcing people out of their
homes.

The question remains: could there have been a better process where they
could have been given a better, less poisonous, less toxic loan, keep
them in the house, the house continues to have someone in it, continues
to pay the taxes, continues to pay the homeowners association dues,
etc., you know, instead of a hulking empty house, you know, the taxes
aren't being paid. It is a blight on a neighborhood when you have
foreclosures like these. So I think that the investors who end up taking
the losses on these properties really have some severe and serious
questions to ask the servicers who were, you know, in such a hurry to
foreclose.

GROSS: So are major investors threatening to sue, and if so, who would
they sue?

Ms. MORGENSON: Major investors are threatening to sue. Well, the biggest
servicers are the biggest institutions - Bank of America, which bought
Countrywide's loan servicing when they bought that company. You know,
these are big institutions - Citigroup, JPMorgan Chase, you know,
obviously very wealthy companies. So those would be the people that they
would want to be talking to about, you know, making them whole or at
least giving them something to cover some of their losses. Many, many,
many losses have been made - as you know, Terry, have been absorbed by
investors in these securities.

GROSS: So who are the, like who are the typical major investors that
would have the juice to actually sue the big banks?

Ms. MORGENSON: Mutual fund companies, pension funds. If you own a 401(k)
that owns bonds, fixed income 401(k), then you might own some of these
mortgages. I mean these are mortgages - they are vast spread out
throughout the system. Many, many people own them. We're not just
talking about well-heeled investors, we're talking about everyday
investors with 401(k)s. They certainly are investors in mortgages. So
we're talking about a wide array of investors.

GROSS: So the investors are contending that the banks didn't vet the
documents in the loan pools - that they really didn't know what was in
there.

Ms. MORGENSON: Didn't vet the documents in the loan pools, didn't pay
close attention to, you know, the required paperwork, maybe didn't
actually make the kinds of loans that were promised in the prospectus
for the security that they purchased. Many of those securities had basic
assurances that we are putting into this pool loans that are of high
quality, that are geographically diversified, where the people with FICA
scores of, you know, 700 or higher, this kind of thing, and if it is
found that the loans in these pools were vastly different from the
characteristics that were described in the prospectuses, then investors
may have a right to recovery.

GROSS: Would that be unprecedented, if mutual funds and pension funds
started suing banks?

Ms. MORGENSON: It should not be unprecedented, Terry, because they have
a fiduciary duty to you and me and the people whose money they run to
make sure it is overseen properly.

GROSS: Okay. So is this the position that we're in, that our taxpayer
money went to bail out banks and now the institutions that have our
401(k)s are going to sue those banks?

(Soundbite of laughter)

GROSS: Is that where we are?

Ms. MORGENSON: That's where we are. But it's not as dopey as it sounds.
I mean, which would you prefer, that we let the banks get away with
this practice both at the outset when they made the loans and then at
the back end when they're foreclosing on the loans? I mean, throughout
this process what I hear most from people who email me and telephone me
and write me letters is, where is the accountability? Where is the
accountability for this mess? Nobody has gone to jail. Nobody has, you
know, stepped forward and said, you know, with the exception of a couple
of really kind of like whispered mea culpas - you know, there's no
accountability here. We have thrown money at these banks and we are now
seeing what their practices are and our hair is standing up on end
because the practices are so dubious. There has to be accountability.
Trillions of dollars have been lost. Is no one going to pay for that?

GROSS: Okay. So say investors sue the banks and investors win and banks
owe the investors a lot of money. What position does that leave the
banks, those too-big-to-fail banks in?

Ms. MORGENSON: You see, part of the problem, Terry, it obviously leaves
them in a less sound financial position, depending upon, you know,
whether the investors win, how much they win, etc. The problem I think
stems from the fact that people were not forced to face the music early
on. I mean when we were throwing money at these banks back in 2008, it
was, you know, our - everybody's hair was on fire. You know, it was, we
had to do this, the system was teetering, it was absolutely in peril, we
were - the world was going to come to an end if we didn't bail out these
banks. And so, you know, $700 billion and, you know, a variety of
different systems that the Federal Reserve put in to help the banks, the
banking system, the financial system, and it did right itself, it did
not go off the cliff.

But the point is that now these banks understand that they are going to
be helped, that if they can cry systemic risk, help us, that they will
be rescued. And so it's almost as though there is no limit to the bad
behavior that they can perform because they are so systemically
important, quote-unquote, that they will always be bailed out. So we
have sent this very, very, I think, disasters message that these large
institutions will be bailed out no matter what because they are
systemically important.

We should have cut them down to size. Dodd/Frank should've had a far
more of a focus on reducing the size of these institutions, and in fact
they did nothing about too-big-to-fail.

GROSS: My guest is Gretchen Morgenson, a financial reporter and
columnist for the New York Times.

We'll talk more about the mortgage foreclosure crisis after a break.

This is FRESH AIR.

(Soundbite of music)

My guest is Gretchen Morgenson. She's a financial reporter and columnist
for the New York Times. And we're talking about the foreclosure crisis,
what caused it and what the repercussions are.

So meanwhile, Angelo Mozilo, the former CEO of Countrywide, which was
one of the biggest subprime lenders, just made a settlement in a civil
case against him. What were the charges against him? What was the
settlement?

Ms. MORGENSON: This is a case that grew out of his selling of major
portions of his stock in Countrywide. The government, the FCC,
Securities and Exchange Commission, was bringing the case against him
and two of his managerial colleagues, and they maintained that Mr.
Mozilo internally was expressing doubt, severe anger about the kinds of
loans Countrywide was making, fear that it was going to be harmful, end
up hurting the company financially, and yet on the outside to the world
at large, whether it was in interviews on CNBC or to reporters or to
investors at conferences, he was telling them everything was fine, the
company was making only the best possible loans and that there were no
problems.

So at the time that he was making these upbeat statements, he was also
selling stock in Countrywide, and then when the whole thing collapsed,
the government went back and looked at these statements, looked at his
stock sales and said, hmm, we think that you might have actually known
that there were more problems than you were expressing publicly. You
were, in fact, selling stock, perhaps to reflect those worries, and we
call that insider trading and we're going to sue you, and that's what
they did.

GROSS: And the settlement was he pays - what is it - over 65 million?

Ms. MORGENSON: Well, unfortunately, he does not pay over 65 million. It
was 67.5 million, actually. This is the world we live in. Bank of
America is paying $20 million of his penalties...

GROSS: Bank of America bought Countrywide.

Ms. MORGENSON: Bank of America bought Countrywide. They are paying $20
million of...

GROSS: Because he has an indemnification clause in his contract.

Ms. MORGENSON: Correct.

GROSS: Yeah.

Ms. MORGENSON: Correct. It's unclear. Maybe there is an insurance
policy, directors and officers liability policy that pays more. So he
personally is not paying $67.5 million.

GROSS: Right. So I don't know if you'd have the answer to this, but for
anybody who is in the process of buying a home, what should they be
looking out for to make sure that the paperwork will be what they need
for now and the future so that no other bank ever shows up and says, you
know what, the bank who you bought the mortgage from doesn't really -
didn't really own the property, we own the property - like what should
you do to make sure you've got your paperwork in place?

Ms. MORGENSON: Well, what a borrower should do is just make sure that
they buy rock solid title insurance. If a title insurer is concerned
enough that they say they're not willing to insure the property that
you're buying or the obligation that you're buying, then I would say -
then I would walk away from that transaction, because you're basically
on the hook for the possibility that somebody comes along and says you
never had the right to buy this property because it belonged to me. As
long as the title insurer is standing in between you and that problem,
and the title insurer is sound financially, then I think you're on solid
ground.

GROSS: How do you know if it's rock solid title insurance that you're
getting?

Ms. MORGENSON: Well, you know, these are these problems, Terry, you -
obviously companies can go, you know, into - get into trouble. I would
look at the financials, but I know that's way too much for the...

GROSS: Oh gosh...

Ms. MORGENSON: ...average homeowners to do.

GROSS: ...I have to study the financial background of the title
insurance companies.

Ms. MORGENSON: But you know, I guess, you know, look at - it's hard to
just say that you can rely on a rating of the insurance company, because
we know how abysmal the rating agencies performed in this mess. So, you
know, if there's anything we learned from this disaster, it's that, you
know, everybody really has to do their own work and make sure - make it
certain as they can that they're, you know, on good footing and that the
companies they're relying on are on good footing. But I know that's a
really, really hard thing for the average person to do. But, certainly,
if a title insurer is not willing to ensure the transaction, then that's
a real, solid giveaway that maybe that's not the right thing to do.

GROSS: Gretchen, you have been coming on FRESH AIR ever since the very
start of the financial crisis and the mortgage crisis. And as I recall,
right from the start, you know, you were wondering on our show: So what
happens if you own a mortgage that's been securitized? What are the
implications of that for selling or for modifying your mortgage? And
there was no answer in sight. And now we're seeing the evidence...

(Soundbite of laughter)

GROSS: ...that there were real problems involved with that. And I'm
wondering, like, if I knew to ask about it and you knew that there were
problems coming down the line, how did this go on for so many years?

Ms. MORGENSON: Well, you know, people in positions and institutions of
power have a real interest in keeping these things under wraps. I mean,
I have been writing about the problem of who owns the mortgage since
2007, okay? Almost three years. And yet it took this long for it to gain
critical mass so that now we have attorneys general interested in
knowing who owns the mortgage, and do they have the right to foreclose.

Throughout this process, throughout these three years that I've been
writing about it, consumer lawyers have been banging their shoes on the
table, screaming about this problem. Some judges - a handful of judges -
have been very forthright and open about these problems. But for the
most part, it was a pay-no-attention-to-the-man-behind-the-curtain. This
is not a problem. This is the way it's always been done. Don't worry
about it. These are just, you know, a one-off or anomaly, anomalous
people. They don't know what they're talking about, or pay no attention
to them - because the people in these institutions that are so powerful
didn't want people to take a look at it for obvious reasons.

Now we know why. We have depositions of people explaining that someone
signs 1,000 documents a day, and when they get tired, they let somebody
else sign their name.

We have documents showing completely different signatures for the same
person. It's clear now. None of that was clear at the time. We just had
this face-off between sort of a small group of people, not so powerful,
against a vast, very group of people who didn't want this sort of
process to be scrutinized. Well, you know, my hats off to the people
who've been yelling about this for years, because it turns out to be a
problem and it turns out to have been something that really should never
have gone on.

GROSS: Gretchen Morgenson, thank you so much for coming back to FRESH
AIR. Appreciate it.

Ms. MORGENSON: Anytime, Terry.

GROSS: Gretchen Morgenson is a financial reporter and columnist for The
New York Times. You can find links to NPR's continuing coverage of the
housing crisis, as well as links to Gretchen Morgenson's articles on the
foreclosure crisis on our website: freshair.npr.org.

Coming up, Ed Ward reviews a new collection of singles that were
released by Apple Records, the company founded by The Beatles.

This is FRESH AIR.
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Finding The Best Of The Bands On The Beatles' Label

TERRY GROSS, host:

In 1968, The Beatles decided to do something no other band had ever done
before: take control of their business affairs. Among the things their
new company, Apple Corps Limited, would do, would be to run a record
label to release The Beatles' own records. But they also hoped it would
be a place for worthy young acts to flourish, and to that end, appointed
their friend Peter Asher to find some. Thirty-one albums and 52 singles
resulted, and Apple has just released "Come and Get It: The Best of
Apple Records," collecting some of the singles.

Rock historian Ed Ward has a review.

(Soundbite of song, "Come and Get It")

BADFINGER (Rock Band): (Singing) If you want it, here it is. Come and
get it. Make your mind up fast. If you want it anytime, I can give it.
But you better hurry, 'cause it may not last. Did I hear you say that
there must be a catch? Will you walk away from a fool and his money? If
you want it, here it is. Come and get it.

ED WARD: Here's a bit of Beatles trivia for you: The first single on
Apple Records was by Frank Sinatra. According to the discography I have,
Apple one was "The Lady Is a Champ" and "But Beautiful," pressed on one
side. Only one copy supposedly exists, and it's very likely in the hands
of the former Maureen Starkey, Ringo's wife at the time. He thought it
would make a great birthday present for his wife, and Sinatra agreed.
Apple two, though, was, unfortunately, a worldwide smash.

(Soundbite of song, "Those Were the Days")

Ms. MARY HOPKIN (Folksinger): (Singing) Once upon a time there was a
tavern, where we used to raise a glass or two. Remember how we laughed
away the hours and dreamed of all the great things we would do.

Those were the days, my friend. We thought they'd never end. We'd sing
and dance forever and a day. We'd live the life we choose. We'd fight
and never lose, for we were young and sure to have our way. La, la, la,
la...

WARD: Ingenue folksinger Mary Hopkin was a Paul McCartney discovery, and
if Beatles fans were shocked at his producing such a sentimental piece
of schlock, they hadn't been paying attention. But sentimentality was in
the air, as was obvious from another early single with which McCartney
had nothing to do, by a Welsh band called The Iveys.

(Soundbite of song, "Maybe Tomorrow")

THE IVEYS (Rock Band): (Singing) Listen to a lonely sound. See the grey
and sadness all around. See the people go their way. Care not of me and
love I've lost today.

Maybe tomorrow, I will love again. I'll never know until I've looked
into her eyes. Maybe tomorrow...

WARD: The Iveys' "Maybe Tomorrow" was a flop everywhere except Holland,
but Apple believed in the band, changed their name to Badfinger and had
a huge hit with them a year later with "Come and Get It," written and
produced for them by McCartney.

Some of the singles they put out defy logic. Why would The Beatles put
out a sound-a-like cover version of "Golden Slumbers" and "Carry that
Weight" from the "Abbey Road" album by a Scottish band called White
Trash - hastily changed to Trash after protests from radio and
retailers? At least John Lennon was displaying a sense of humor when he
had the company release a cover of "Give Peace a Chance."

(Soundbite of song, "Give Peace a Chance")

TRASH (Rock Band): (Singing) Everybody's talking about this war and that
war, whose war and not war, the last war, the next war and nuclear
enough war, and one more, get love war. Childish. Rubbish.

All we our saying is give peace a chance.

WARD: This engagingly weird rewrite was also from a very odd source: The
Hot Chocolate Band later became Hot Chocolate and had smash after smash,
including the memorable "You Sexy Thing." Another odd release was by
veteran Cajun accordionist Lionel Cormier's band The Sundown Playboys,
who'd been going at it since 1945.

(Soundbite of song, "Saturday Nite Special")

THE SUNDOWN PLAYBOYS (Cajun Band): (Singing in foreign language)

WARD: The story was that Cormier's teenage son heard that Apple was
looking for acts and mailed them a copy of the single, and either George
or Ringo decided to release it. It was their label, and they were having
fun, so why not?

Well, one reason was that nobody was really looking after the money, and
that the recording studio they were building was eating up a lot of it.
They were also hiring expensive help: Phil Spector was hired to scout
American talent out of Apple's New York office, as well as to ruin what
became the "Let It Be" album. There was an upside to this, though,
probably the best Apple single that never saw a full album.

(Soundbite of song, "Try Some Buy Some")

THE RONETTES (Pop Group): (Singing) Not a thing did I have. Not a thing
did I see, till I called on your love and your love came to me.

WARD: At once grandiose and gorgeous, this George Harrison song gets a
great production from Spector, not least because the vocalist is his
wife Veronica, of The Ronettes.

Apple Records outlived The Beatles as a group, but its best-known
releases were albums. They set the pattern for independent and artist-
owned labels, and as a few of the singles show, it was more than just an
indulgence.

(Soundbite of music)

GROSS: Ed Ward reviewed the new singles compilation "Come and Get It:
The Best of Apple Records." It's been released as a stand-alone album,
and it's also included in a new Apple Records box set that Ed will be
reviewing in an upcoming segment.
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