— and yes, we were — try this on for size:
In light of a 50 state joint investigation into the alleged improper filing of foreclosure claims by financial institutions, several Capitol Hill lawmakers are now calling for a national moratorium on the entire foreclosure process. Those include embattled Representatives Alan Grayson and Gabrielle Giffords, among others, who literally want to shut down all foreclosures for an indefinite period of time.
There would be several consequences to this. If Congress shuts down the foreclosure process, it also would have to shut down the foreclosure sale process, which in the second quarter accounted for over $43 billion of home sales, according to RealtyTrac. Distressed institutions attempting to dig their way out of the financial crisis would be forced to keep that much of these non-performing assets on the books every quarter while a moratorium was in place. That could total more than $150 billion annually for every year a moratorium is in place — all to allow delinquent borrowers to stay in homes they cannot afford.
While a moratorium was in effect, prospective homebuyers would also have to put their plans on hold. In short, the housing market would seize up.
Moreover, a foreclosure moratorium would create an incentive not to pay one’s mortgage, plain and simple. There would be disincentives against delinquent borrowers from even doing basic home upkeep. This would further depress the quality of neighborhoods, causing prices to depreciate even more than they already have. This in turn would place more pressure on underwater borrowers, causing more strategic defaults.
Therefore, an indefinite foreclosure moratorium would actually increase the number of overall foreclosures that ultimately occur. That’s very bad policy.
While everyone would rightly be sympathetic if foreclosures were filed in error, resulting in families being thrown out of homes they were current in the payments on, that’s not what appears to have happened here. “As was the case for our judicial state review, our initial assessment findings show the basis for our foreclosure decisions is accurate,” Bank of America spokesman Dan Frahm said on October 17th. The bank is once again resubmitting foreclosure affidavits after it had temporarily suspended foreclosure operations across the country.
So, it appears properties have been legitimately foreclosed upon, but in some cases the paperwork may not have been properly processed. That must not now become a “Get Out of Jail Free” card for delinquent borrowers to stay any longer in homes they simply are not making payments on. But that appears to be exactly what Grayson, Giffords, and Co. want — all in a continued, coordinated attempt to create a political constituency out of borrowers behind on their payments.
[…]
Taken together, government and other institutional efforts at forestalling foreclosures have slowed up the overall process of the housing market correcting by almost a year. Bear in mind that depending on the locality, a foreclosure can take months or more than a year to initiate. This has already had the effect of artificially increasing the supply of foreclosed properties, further depreciating prices — all contrary to the stated goals of elected officials.
In fact, the current spate of foreclosures, with over 347,000 in September according to RealtyTrac, can in large part be owed to government continuing to stand in the way of the process moving forward. And all government wants to do is slow it down even more. “Robo signers” is just the latest excuse to do so.
Perhaps what is really needed is an indefinite moratorium on all government intervention into the housing market.
So long as banks are held responsible — by way of large civil judgments against them — for foreclosing on a home wherein the homeowner is up to date on payments, I can’t say I see a problem here in principle.
I feel for people who were promised the American dream by a government that decided it could force the market to bend to its will. But just because you call something “progressive” doesn’t mean that implementing it leads to progress. As, eg., Fannie and Freddie and Barney Frank should have already learned by now…
Agreed.
Spot on.
Remember when Bonnie and Clyde would rob banks and let the people inside keep their wallets because they were “after the banks money, not yours”? That was bullshit then and it’s bullshit now.
I do, however, think the ending was pretty much right on.
“Fannie and Freddie and Barney Frank should have already learned by now…”
Learned? Learned?! So much easier to simply lie about what happened (Frank) or just go for another assist from Big Daddy Sugarbucks (Freddie and Fannie).
BOA has its head up its ass (if a bank has an ass). Try calling a BOA call centers if you have a question on your mortgage.
Still, we only get through this housing crisis if foreclosures are processed and homes remarketed for sale. When that pig passes through the snake then the markets can stabilize.
Some related views on the foreclosure “mess”.
Josh Rosner: “Could Violations of PSA’s Dwarf Lehman Weekend?”
Foreclosure Fraud: It’s Worse Than You Think
Robo-Signing Mess Is Just the Tip of the Iceberg
Alan Grayson is in favor of it, which is your first clue that it’s a really stupid idea.
geoffb
those are very hair-raising articles — a little deep-in-the-weeds, but what really stands out that there is a very specific set of standards concerning the original documents (note, deed of trust, title insurance, etc) and how they are transferred from place to place and the banking industry, including the Governments Freddie & Fannie, taking a “what? that doesn’t apply to me” attitude.
WTF that originators endorsed the borrowers note in “blank name” and the intermediaries in the chain to the final Trustee (mortage owner) never did “wet ink” endorsements??
what a mess
Per geoffb, yeah, there’s a LOT more to this forclosure mess than just saying, on balance, that as long as the correct people are being foreclosed on, things are fine. Between invalided contracts, circumvention of state laws concerning real estate transactions, misrepresentation of repackaged loans into securities, etc, this is a LOT larger than just forclosures.
Karl Denninger, in particular, has been beating this drum for 3 years. This is scary stuff, indeed.
We’ve blogged on the problems with the robo-signings here as well, Exanter.
Which is why my argument is that the banks should be open to civil (monetary) liability for violations; but that the problems you itemize can’t forestall what is a legitimate foreclosure impulse, one that is important to stabilizing the market.
If a person is delinquent on their mortgage, then certainly there is no question foreclosure is a legitimate pursuit of the Trustee.
But excuse me if I’m a cynic about taxpayer bailed out Banks refusing to do modifications with homeowners who could easily service the modified loan when they can make more money letting it go to foreclosure and collect the balance of the owed mortgage through insurance.
Dumping thousands of empty (and shortly unmaintained) homes on the market, is also market killer. Especially since these same REO banks balk at negotiating with a potential individual buyer, too.
– The entire system is basically trashed, and was the day CRA and Franks decided to buy votes with this massive housing scam. This is all just putting off the inevitable, Democrats in certain districts scrambling for any ‘giva away’ they can find to hang on.
– Franks, and a lot of the Fanni/Freddi people should see some jail time eventually, but they’re not getting any help from Bumbblefuck so far, his position being, “no need for a foreclosur holdup’ as of last word.
– Interesting mess, Dems crying for help, and the Golden Urkel throwing them under the bus.
– There goes another ‘voter block’ down the porcelain hole.
I had an interesting conversation with a guy I worked for back in the nineties. We were in the low-income housing business and if you want to you could probably name me as one of the causes of the credit crisis. Not the cause, but before I got my shit together I certainly was a strong proponent of the CRA. It paid the bills, you see. Anyway, my friend is still a gung-ho nutcase on the subject, crazy liberal, but an absolute expert on the housing market. He is also unflaggingly optimistic. He had a pretty scary take on housing, saying that we will probably not see enough of a decline in housing prices to “reset” the market and the increased credit requirements on mortgage borrowers will keep most of the first-time and low-income buyers out of the market for a seriously long time. Mainly due to housing starts for mid-level starter homes flatlining. So, he figures on the rental market going up in the big cities…BUT… not enough to overcome the barrier to entry that exists right now in regards to small investors buying income property. Which means, the gov’t and big pension funds (Carpenters, Electricians, etc) will end up buying up the rental housing where the market is tight. Good for him, good for property management companies, bad for neighborhoods and really bad for the middle class. Freaked me out.
oh … just an FYI, California is not a judicial foreclosure state so the time from a filing of Notice of Default to foreclosure sale on the steps just outside the courthouse is about 4 months.
not enough to overcome the barrier to entry that exists right now in regards to small investors buying income property.
LMC
I’ve read and seen several reports for quite some time that a lot of individuals who go to bid on foreclosures have already been shut out. They just can’t compete with the investor pools who are willing to bid up above market value and snap up all these properties.
“I feel for people who were promised the American dream by a government that decided it could force the market to bend to its will”
They are pretty good at bending the market, to their will often enough. Where they run into problems is due to complete ignorance of the concept of unintended consequences.
That, and they think they can control even the weather.
My favorite article on this topic is here. Some highlights:
Two dumbs do not make a smart, just as three right-wingers do not a lefty make.
I would like to see what bh proposed done to get a handle on what this mess involves. One fear I have is if it turns out that the money being paid on mortgages has been flowing to an entity that doesn’t have the legal right to the payments and that it has no financial ability to pay the funds back to the homer buyer or to the entity that does have the legal title to the property. That would be a can of worms that would need some legislative fix.
Sorry, I should have put some kind of break between the Wells-Fargo business and the Alan Grayson quote from cirby.
Grayson is toast, I think. He can try and give himself some free publicity by doing this, but It’s what? Three weeks to election? Not enough time to undo a couple of years of assholery.
I am so glad that I am renting.
#16 – The oceans will recede and the planet will heal!
Heh, but they’re making progress on those LTC.
I just read the article Slart linked. That is frelling scary stuff.
As far as I’m concerned, when they banks destroyed the notes, they essentially gave up any right to the mortgage. The contract is null and void. All those homes are now the property of the current title holders (i.e the people who bought the houses). I know it won’t play out that way, but that’s the way it is to this armchair attorney.
I think the real message there is there are some very good reasons to stop some of the foreclosure process. Whether that means that all foreclosures must halt is questionable, but certainly if a given bank has shown that it’s using practices of dubious legality, that bank’s foreclosure activities must be brought up short.
IMO, of course.
It seems like all of them were engaged in practices of dubious legality. I guess that may not be true, but who knows?
Here’s where I think most people are getting miffed. When you close on your mortgage, you are expected to have all of the i’s dotted and t’s crossed which is usually why you have a lawyer present to make sure that is done. Now go 5-10 years into the future. You’ve lost your job and your spouse isn’t making enough to cover the mortgage because of pay cuts. Suddenly the bank is coming at you for a foreclosure and doesn’t want to modify the loan. You remember back to the fact that the bank demanded everything be done to the letter of the law and decide to hold them to that standard. Is it the homeowner’s fault that the bank can’t provide proper documentation that it can foreclose? Hey, if you can’t prove you hold the note, why should I pay you? That is what is happening here in a significant number of cases. I don’t feel any sympathy for the banks.
You live by the sword, you die by the sword.
Deadbeat borrower that wants a free house versus a deadbeat lender that can’t get its paperwork straight. It’s a lot like watching the Yankees versus the Red Sox — you really just want a meteor to wipe out everybody involved.
Squid… a goodly portion of those “deadbeat” borrowers arent and its looking like the whole mortgage business has made being a deadbeat lender a very lucrative business where no one is ever punished for their shenannigans.
Slart,
They can’t survive without the fraud. So they’ve decided to rob America blind. They just don’t want you to know. Thus, only one question remains. When do we foreclose?
The saddest thing is the only people that will suffer will be the hardworking responsible people who, like suckers, have kept up their end of a contract that was shredded soon after the ink was dried.
Well, hell. Bought a house that cost about 1/2 what I could have borrowed back then, and have been on time for every payment. What the hell was I thinking?
So, it appears properties have been legitimately foreclosed upon, but in some cases the paperwork may not have been properly processed.
That is a flat contradiction. If the ‘paperwork’ in a legal proceeding is not properly processed it is not a valid legal proceeding. It may simply require a do over (assuming everyone acted in good faith) but it still requires a do over. If anyone failed to act in good faith it may constitute a fraud.
Every day we inch closer to a banana republic.
The last thing we need to do is further abrogate long standing law, particularly property and contract law. There is no ‘big fix’ that will not end in disaster. This mess needs to be cleaned up the old fashioned way, piece by piece and contract by contract. Yes it will be costly and painful but the alternative is giving government greater authority to pick the ultimate winners and the losers.
buzz, I’m another chump just like you. Didn’t borrow every nickel I could; didn’t suck the equity out of my home for cool toys or a vacation in the Caymans; paid on time and with extra principal. Why the hell didn’t I enjoy it while it lasted?
And that’s the most dangerous part of all this. The idea that we were all chumps for working hard and following the law. When no one is willing to do that without a cop standing over them with a gun, you can’t hire enough cops to keep society going.