Quote:
Originally Posted by Cletus Miller
1. The problem with coming in with a new assignment is that they would have to restart the clock on the foreclosure--if the Lender wasn't the real party in interest on day one of the foreclosure notice, it was completely ineffective. So there wasn't anything to present in *that* case, but they could restart at the beginning.
2. Because of #1 and related and unrelated but similar problems, and also because of the robo-signer "scandal" and figuring out who's going to pay the out of pockets (the servicer *really* doesn't want to, because they got about tree-fitty to perform the role and are losing money just making copies), there are thousands of mortgages in default which are not being actively pursued for foreclosure. Also, the Lenders not knowing what the hell to do with the props after they become REO encourages delay, too.
3. Given the environment created by 1 & 2, and marginally ethical lawyers + whacky As-Seen-On-TV schemes (akin to credit repair), a lot of people believe that they have more defenses to foreclosure than they really have.
Thus, you have a lot of people who have stopped paying their mortgages, think they have a good legal position to challenge foreclosure when it comes, and a lot of Lenders who are extremely slow seeking their remedies* reinforcing the mistaken belief that there is a documentation problem that creates or strengthens defenses. This results in thousands of people staying in their houses for months or years w/o paying the mortgage, but not in any situation that would prohibit foreclosure, nor in any way reduce the principal owed (penalties and fees, there might be a decent argument, depending on how the assessing of them is handled).
*note: no laches argument, as the remedy is contractual, not equitable.
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The chain of title scandals are side shows, and side shows the servicers would love to have us believe are the real problem with curing the housing market's ills (or at least a much bigger part of it than they actually are).
The real problem is even if fcs could slide through with no paper problems, nobody wants to buy the fucking shit. It's an inventory problem. The 800 lb gorilla no one discusses is the investors in the shit securities tied to a lot of these properties are going to take 40-70% losses on most of this shit. Nobody wants the mass realization of loss everyone knows is out there to hit in a wave. The thinking at the outset was, "Lets fc as we need to, and hopefully the housing market will rebound, the economy will rebound, and this problem will work itself out. Refis and buyers looking to grab discounts will swoop in. Why not? Rates are crazy low!"
Too bad the banks (who own the servicers) won't lend on this shit. Too bad nobody who could afford the monthly payment has 20% to put down.
Now the servicers are stuck with a scenario where the more they fc, the more they debase their own inventories. There is no rebound, there is no wave of buyers. There's everybody who might be a buyer/speculator waiting, because we all know, there's a monster loss out there the servicers are trying to ease through the system slowly over time, and that prices are not going to stabilize for still many more years.*
Shiller's wrong. The problem isn't too many people believing there'll be a better deal tomorrow. The problem is too many people rightly believing there will be a better deal tomorrow, and too much quick information proving anyone taking a contrary view is a clueless cheerleader.
We need a mass workout. Fuck moral hazard. Call it "Mortgage Court." Put the borrowers in a room with representatives of the servicers with actual authority and force the parties to work it out.
*Geographically, they will in certain areas, and at certain price points. But we're talking macro, so I'm going wide.
