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So the mortgage market is in disarray. Bank of America and three other servicers have halted some foreclosures in response to allegations that they submitted fraudulent documents in thousands of foreclosure proceedings nationwide. A coalition of as many as 40 state attorneys general is expected Wednesday to announce an investigation into the mortgage-servicing industry.
How long will the chaos last? How will this shake out in the housing market? Should we brace for an even-longer housing bust?
Josh Levin, a Citi home-builder analyst, seems to be wondering the same thing. On Monday, he held a conference call featuring Adam Levitin, associate professor of law at Georgetown University. Tuesday, Mr. Levin distributed a research note that takes a stab at these questions.
But before we get to the answers, let us add–as Mr. Levin does in his note–another problem: Real-estate law. It is arcane and requires that paperwork be physically transferred when mortgage ownership is transferred from one party to another, Mr. Levin explains.
During the go-go housing boom years, paperwork wasn’t necessarily transferred properly and some appears to be missing. That’s emboldening some troubled homeowners (and their lawyers): They’re challenging their lender’s authority to even foreclose. A growing concern is that more home owners will find a sympathetic judge willing to cut their mortgage balance to $0.
“At the end of the day, the U.S. can’t afford for this to go too far,” Gregor Watson, with McKinley Partners, a development company that buys foreclosed homes, tells Developments.
During the call, Mr. Levitin gives three potential outcomes for what is being dubbed “Foreclosures gone wild.”
Readers, how do you think this will play out?
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Whenever you purchase a home or do a re-finance you have to pay for title insurance. I’ve always thought they overcharged, I just paid another $1,000 for TI for my second re-finance in 6 months. But think — all of these loans had title insurance, if ownership and liens are listed and the trust deed holder can’t find their trust deed, now whose fault is that? The lender, not the borrower that paid for the TI when the loan was done.
I’m trying to understand this. Exactly what might be wrong with the paperwork that a borrower can contest the mortgage? What are the actual legal issues. What issues are the borrowers actually raising??? If anyone wants to take the time, I’d look forward to learning. Feel free to email me at websww@yahoo.com Thanks, Ron
As I have stated before, “we have another 30-50% correction in the price of homes in America”. With out the already discounted investment property in the mix, this market would fall apart. Investment physics dictate a further drop in housing prices. Joe Manzanares Loaning4Less.com
This hyperbole about “free homes” is nonsense. nothing could be further from the truth. Glad I switched to just taxes and insurance, and maintenance. The $155k down and $135k I have paid in four years is enough. BOA felons can prove to me and my lawyer that they own the note and title. I will wait. I bought my foster daughter a car, and am hoping to recoup what the BOA felons tried to steal from us. Their noncompliance in HARP constitutes fraud. You should stop paying, also. Credit scores rebound quickly. Deal out of the fraud and wait.
Box in the Sock Take the obligor’s note,security instrument and governing laws and put into a box. Take the box and put into a sock that represents collateral for the securities that fall under IRS tax laws. Sell the sock to the trust. Trust needs to foreclose and gets the box out of the sock. Trust opens the box and the box contains a thumb drive. Robo signers now create the missing paperwork. Not just assignment fraud but tax fraud at the REMIC level. Banks tried to apply sock laws to the contents of the box, no can do.
The Developments blog features exclusive news, analysis and commentary on residential and commercial real estate from The Wall Street Journal’s real estate bureau. Send tips, comments and questions to developmentsblog@wsj.com.
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