GUY RAZ, host:

From NPR News, this is ALL THINGS CONSIDERED. I'm Guy Raz.

Two million, that's the number of homes in this country currently in foreclosure. And the mortgage payments on another 2.3 million homes are delinquent. And for the foreclosure industry, the past two years have been a boom time. It starts with the banks who subcontract law firms, who then hire document processing companies who bring in temporary workers, many of them with no qualifications, to rubber stamp the paperwork.

Now the faster these subcontractors process foreclosures, the bigger bonuses they receive from the banks. And over the years, a lot of mistakes were made, which is why Bank of America, JP Morgan and Allied Financial have temporarily halted foreclosures. In a moment, we'll find out how we got here and why the White House is resisting calls to force all banks to do the same.

But first, we meet Atila Helvaci. In June 2007, Atila, his wife and two kids went to shop for their first house in Sarita, Arizona, just outside Tucson.

Mr. ATILA HELVACI: It was a brand new community with a lot of amenities. You know, they have a brand new school, a lot of activities for children, and very safe community also. Well, safety was one of the issues.

RAZ: There was a house that caught his eye. It was pricey, almost $360,000. And at the time, Atila was earning about $70,000 from two jobs. But he had enough money to put down 5 percent on that house.

Mr. HELVACI: The person who was processing my loan said, you know what, you can go up to $500,000, she said. I said, are you kidding me? I can't afford $500,000.

RAZ: The loan was originally with Countrywide and later taken over by Bank of America. And for the first year, Atila made his payments on time. But in the middle of 2008, he lost his second job as a bookkeeper for a local convenience store. And so, to keep paying that mortgage, about $2,600 a month...

Mr. HELVACI: Well, I start digging into my savings and credit cards, and I do have over $20,000 credit card debt right now.

RAZ: Toward the end of the year, he realized he couldn't keep up. So he started calling the bank to see if there was somebody who'd be willing to modify his loan.

Mr. HELVACI: So I called back again, and then the next person said, you know, they couldn't do anything for me unless I start missing payments.

RAZ: So for the first time in his life, Atila Helvaci stopped paying his bills.

Mr. HELVACI: So, that was a hard decision, you know? I always pay my bills. I never missed the payment for my credit card or other bills, you know? So it wasn't really easy.

RAZ: And so, he tried again. He called up the bank to see if he could work out a manageable payment plan.

Mr. HELVACI: And every time I call, either they were missing my taxes, even though I send it to them, or they were missing my W-2s, which I already sent to them. So there was always an issue I have to keep repeating the same paperwork. And what they're stating was that you never get the same person. Every time you call, there is someone else, and you have to explain to that person all over again, and then you get a different answer from that individual.

RAZ: The bank eventually agreed to cut down the monthly payment by $200, which Atila still couldn't afford. He managed to make a few payments with borrowed money from family.

But this past summer, it became impossible to continue, so he stopped paying again. And in July, he received a foreclosure notice. The letter said that on November 30th, Bank of America will seize that property.

Mr. HELVACI: Since I start having problem, I really haven't ever sleep. I sleep sort of like four, five hours a day if I like, you know?

RAZ: And so this news that the Bank of America is going to freeze the foreclosures doesn't necessarily ease your anxiety.

Mr. HELVACI: Well, I didn't really get any relief out of that news, to tell you the truth, no.

RAZ: So, I asked him, what did he think will happen on November 30th?

Mr. HELVACI: My true feeling, I think I'm pretty much going to lose the house.

RAZ: Do you think somebody's going to come and basically take over the house?

Mr. HELVACI: Yes. I mean, the reason I say that - one of our neighbor just last month find out that, you know, her house was sold to an investor and she didn't know. So they just came and knocked at her door, you have to leave the house in three days.

RAZ: That's Atila Helvaci from Sarita, Arizona.

In recent months, six homes on his block had gone into foreclosure. And as you heard, he's uncertain about what will happen now. Bank of America can't tell them how long its foreclosure moratorium will last. So, how did we get here?

John Carney is senior editor with CNBC.com explains.

Mr. JOHN CARNEY (Senior Editor, CNBC.com): A couple of people work in testing their foreclosures and their lawyers got to depose a couple of the guys who had signed off on the foreclosure notices.

Now, when guys sign off on these notices, they basically sign an affidavit that they then bring to court and say I've reviewed the loan documents. This person is delinquent and, you know, please issue a foreclosure order.

What turns out that's been happening is guys were signing hundreds of these a day, tens of thousands a month for years on end. They clearly were not actually reviewing the underlying documents, which basically are affidavits falsified.

RAZ: Basically, they were hiring a bunch of people to help them with foreclosures, people who aren't qualified.

Mr. CARNEY: Right, people who had very, very little training. And so, the fear then became that one of the reasons that they weren't actually reviewing the underlying loan documents is that the banks might not have them.

RAZ: Mm-hmm.

Mr. CARNEY: These documents may not have been properly transferred as mortgages went from one company to another.

RAZ: Aha. I mean, let me see if I have this straight: The banks that own these so-called mortgage trusts, right?

Mr. CARNEY: Right.

RAZ: Where you've got mortgages bundled up into investments, they may not have all of the proper documentation showing that they actually own these mortgages. But then there are investors behind those mortgages right who could presumably sue these banks. I mean, big banks like JP Morgan, Bank of America...

Mr. CARNEY: Right. This is the big fear. This is what brought financial stocks down, Bank of America, Citigroup, JPMorgan Chase were all down big this week. And the fear is that the people who bought mortgage-backed securities may have legal rights to say you violated the promises you made to me that you had all the documents in place. So you have to now buy back my mortgage-backed security.

Now there was something like over a trillion dollars of mortgage-backed securities issued in the height of the housing bubble. So the potential liabilities are gigantic.

RAZ: Mm-hmm. Some economists argue that if there was a moratorium on foreclosures, you would actually damage the economy further and reduce real estate values across the country even more. Can you explain how that works?

Mr. CARNEY: Sure. One thing is it creates a big level of uncertainty when it comes to buying a home that has been foreclosed on. You'll be unable to get title insurance for - which is one step you need for a mortgage. People will be unwilling to buy a lot of homes because they're not sure who actually owns it. Did the bank actually get to take possession of it?

The other thing is if you stop the foreclosures altogether, what you'll end up doing is pushing that back. And so when they are able to restart foreclosures, you'll have this enormous backlog of homes that are - need to go back onto the market. And so what that ends up doing is flooding the market with too many homes all at once. And that could seriously drag down home values.

RAZ: You know what really bothers me about this is the uncertainty because it's like this is the next thing that happens, right? And then what's the next thing that's going to happen? You know what I mean?

Mr. CARNEY: I think it's terrifying. We thought we were through this period where we had - everybody was worried about the financial health of our largest banks. But, dang, we're right back into it. And I think it's absolutely terrifying.

RAZ: That's John Carney. He's a senior editor at NetNet.CNBC.com.

John Carney, thank you so much.

Mr. CARNEY: Thank you.

RAZ: Dean Baker is the co-director of the Center for Economic and Policy Research here in Washington, and he says the White House has to force banks to temporarily freeze foreclosures immediately.

Mr. DEAN BAKER (Co-Director, Center for Economic and Policy Research): We know the foreclosure process is a total mess and we've had three of the biggest servicers. We had JP Morgan, we have Bank of America, we have Allied - formerly GMAC - Financial, all impose a moratorium.

They didn't do this just, you know, out of the blue. They did it because they knew their processes weren't in order. I don't doubt part of it was public relations. But the point is, things aren't being done right. And it's not just those three.

So it would make perfect sense for the Obama administration to say, as they did with the Gulf after the BP spill, that we're going to put a moratorium and make sure that things are being done right.

RAZ: Now, what will the consequences be, though?

Mr. BAKER: We've had people talking about - including Secretary Geithner - that this would create chaos, that it would collapse the economy. It's really kind of silly.

There's been this huge backlog, the shadow inventory of foreclosed homes that the banks are sitting on that they haven't put on the market. In the event that you have the pipeline of foreclosures temporarily curtailed two months, three months, four months - who knows how long this would be - they would simply sell that shadow inventory.

So the idea that somehow this is going to wreck the housing market, bring chaos to the economy, it's very, very hard to see that.

RAZ: But wouldn't foreclosure freeze exacerbate the existing uncertainty in the market already?

Mr. BAKER: It's very hard to see that because the whole point would be that in effect, you'd be having the government come in and say they've certified - the regulators would certify that the process is being followed, because right now, we're supposed to trust the banks. And, you know, that seems kind of a silly proposition at this point. There's not a lot of reason anyone would have good faith in the banks.

RAZ: How could it affect consumers? Say, you are in a home and you can't afford to make your payments, like the fellow we heard from early on the program, do you think it would force banks to reconsider mortgage modifications, for example?

Mr. BAKER: I think it would, and that would be one of the positive points here, because basically, the banks are trying to do everything on the cheap, which, you know, is understandable from their perspective. But what that means is that they're not thinking as much as they should be about modifications, doing things to keep people in their home.

And if you say, look. Now, you got to do things right. You have to file the paperwork. You're going to have to trace down the title and make sure everything's done right. And if that adds two, three, 4,000, that's the way it goes. And if that's the case, then the bank might look much more seriously at the prospect of modifying a loan in the way it allows a person to stay there.

RAZ: So why do you think the Obama administration is holding back on doing this?

Mr. BAKER: It's - you know, I can't - to be honest, I can't really give you a good reason. The only reason I could tell you is that obviously, they have a lot of supporters in the financial industry. They depend on their campaign contributions. And my guess is they don't want to get them angry just before the election.

RAZ: That's Dean Baker. He's the co-director of the Center for Economic and Policy Research.

Dean Baker, thank you so much.

Mr. BAKER: Thanks for having me on.

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