October 11, 2010

Revenge of the more housing stuff

There's momentum underway to push through a nationwide mortgage foreclosure due to the irregularities revealed in Bank of America's handling of foreclosures. Now, the WaPo is reporting that the Obama Administration knew, at the least, that the mortgage lending industry was not in position to deal with this problem.

This article is interesting in what it does and does not say and in the general tone of the article itself.  There's more than a whiff of "those bad bad lenders who only wanted to make money and who didn't care about the poor homeowners" to it.  I'll admit to being torn about this.  Of course the companies servicing the loans wanted to make money.  That's the whole point of being in that business.  (We'll leave to another day the undercurrent that mortgage lending, if not mortgages themselves, seem to be viewed as a combination of an entitlement and a charity.)  I am, however, a bit loathe to defend the mortgage serving industry as a whole since there were quite a number of really bad actors out there.

As always, what I'm more interested in some of the almost throwaway lines in the article, such as this. 

There is no evidence so far that the specific abuses made public in the past few weeks were known to government officials. Nor is it clear whether they were aware that the process of the selling and reselling of mortgages among financial firms - which became extremely common and highly profitable during the housing boom - was raising legal questions about who actually owned the loans and had the right to foreclose if they want bad.

This is something I've mentioned before but it bears repeating.  The churning in the mortgage marketplace created a situation where it can be very difficult to determine what entity is the true holder of the mortgage.  My prior firm did pro bono work, including some foreclosure defense, and I've had the joy of trying to work through the paperwork to verify if the entity claiming to be the final lien holder was, in fact, the final lien holder.  There was one instance where a company filed a foreclosure and stated that it was in the process of finalizing the assignment of the loan.  We pointed out to the court, and the court agreed, that in the process of finalizing meant that the entity filing suit didn't actually own the loan.  If you don't own the loan, then you do not have standing to file suit.  All that did was delay things for a month or so until the paperwork cleared but it is a problem.  Filing an action without standing to do so can open the door to counterclaims for abuse of process.  There's also the problem that if the house is foreclosed and sold and then another party shows up and proves that it was the real lienholder, then the home owner may be on the hook to yet another party.  It is a real problem, not just a lawyer trick to get people out of foreclosure. 

What I find difficult to believe is that the Obama Administration is shocked and surprised by this.  Or, well, maybe not since it is an obvious problem.  The Obumbles don't really seem to have a grasp of the obvious.  If anyone from the administration spent more than two minutes talking to anyone who deals with this area it would have been mentioned.  Hell, just do a bing search for how to defend foreclosure and there are tons of articles bringing up this point.

Should all foreclosures be halted?  No.  The housing market cannot possibly stabilize until there is some type of certainty regarding how and when the backlog of foreclosed properties will hit the market.  Should BoA be liable for screwing up how it handled the paperwork?  Yuppers.  The rules exist for a reason.

Posted by: alexthechick at 10:13 AM | Comments (4) | Add Comment
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