As the foreclosure crisis continues, the stories of clueless employees just get worse. Swamped with delinquent customers, banks hired inexperienced walk-ins one former executive called “Burger King kids,” who, for years, processed mortgages at an astonishing rate. Overwhelmed employees not only signed papers without reading them—they sometimes tossed paperwork into the trash. Some banks even outsourced foreclosure operations. That’s why, employees, executives, and regulators tell the New York Times, this crisis—shocking as it may be to the general public—was no surprise to insiders.
The problem dates back to the housing boom, when banks were so busy figuring out ways to make more money, they ignored the lowlier aspects of actually servicing the mortgages they were churning out. Regulators began warning banks they needed to improve such operations as the bubble began to burst, but banks downplayed the problems—partly because servicing loans, especially delinquent ones, delivers such meager profit that there was “no incentive to staff up,” says one former employee. By the time banks finally began beefing up servicing units, the situation was out of control.