NVDAILY.COM | Opinion
Posted October 6, 2010 | Leave a comment
The housing bubble, whose bursting helped precipitate the Great Recession, was fueled by imprudent lending, including lax standards, sloppy documentation and a get-'er-done mentality. Those same shortcomings have materialized in the wave of real estate foreclosures.
In the last two weeks three major lenders -- Bank of America, GMAC and JP Morgan Chase -- have halted foreclosures in 23 states where courts control the process. In addition, several states, including Texas, California and Connecticut, have frozen foreclosures and others have opened formal probes or sought information from the mortgage lenders.
At issue is whether bank officers properly approved paperwork requiring them to attest to the accuracy of each foreclosure proceeding. Some officials have admitted to signing thousands of affidavits each month, a process called "robo-signing."
The improprieties mean that some families lost their homes through a tainted process and that new owners may not have a clear title to the property.
Although Bank of America said it was reviewing all its foreclosure cases, GMAC and Morgan Chase have said they will amend paperwork only in cases they think were handled improperly -- a handful so far.
But the revelations make it more likely that distressed homeowners will seek legal aid to contest the proceedings. Judges may also be inclined to take a harder line with banks, holding them to strict standards in each disputed case.
The moratorium, however, could have a positive outcome, slowing the foreclosure process and helping establish a floor under the damaged housing market. But it also injects fresh uncertainty, which should prompt the Obama administration to prod the banks to modify their policies to better accommodate distressed homeowners, rather than ousting them.
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