Tuesday, August 02, 2011

The Mortgage Crisis Continues

Federal and state prosecutors are in negotiations with Bank of America in pursuit of a settlement that would provide 'some kind of assistance' to those who are 'in distress, which can be defined by the number of days late a borrower is on his mortgage payments.' That's a clear incentive to stop paying your mortgage. It will be interesting what they do to Fannie and Freddie, who guarantee half the mortgage debt out there, and appear to be just as guilty of this 'crime' as anyone (just add it to our off-balance sheet debt, it doesn't really matter at this point).

Add to this the number of people telling mortgage payers that there's a good chance their mortgage could be legally invalid due to some arcane rule related to the "clear chain of title" that requires the note be endorsed over to the buyer of the mortgage at each sale, and public recording of the transfer (see here and here). So even if notes can be produced in foreclosure cases, the banks may not have the necessary assignments showing each sale and thus proof of the chain of title, and it's at least worth a court filing that allows the squatter to live their rent free another 6-12 months.

This is hurting housing, neighborhoods and the economy.

6 comments:

montanna said...

Guaranteed payday loans are there as assistance to people who need cash immediately. The greatest thing about these loans is the absence of paperwork that have to be filled out. Faxing documents can be tiresome and can take up so much of your precious time.

Mercury said...

A co-worker just got back from Florida to report that several of his well-to-do friends have simply stopped (months ago) making mortgage payments. Apparently the only real incentive for them to keep paying is their credit score and that's no longer incentive enough.

Now, Florida tends to foster high-risk, semi-disposable lifestyles but it makes you wonder how much of this mortgage non-payment is responsible for Ipad sales and whatever other few business bright spots are left in this country.

At this point I don't see why converting (banks' bad mortgage) debt to equity isn't the best way to resolve this mess. That's the way it works in other bankruptcy situations.

traderscrucible said...

The problem isn't the difficulty in getting people out. It's getting banks to foreclose in the first place. The time between payments stopping and eviction has gone to 400 days.

http://www.foreclosurepulse.com/blogs/mainblog/archive/2011/06/22/average-default-amount-in-california-nearly-80-000.aspx

A foreclosure means a write down. Banks don't want the write downs so they aren't foreclosing.

Brad F. said...

This is most definitely hurting housing and neighborhoods... but which households and which neighborhoods? Probably the ones where living there was kind of silly in the first place. I'm hoping that this will encourage people to rent more, move closer to cities, and be more sensible about where and how they live. People who lived in and financed homes in suburbs an hour out of the city, or homes in hurricane zones will probably get rid of them, as they should.

Mercury said...

...and yet some areas of human endevor continue to advance even as the surrounding civilization seems locked onto a path of steady decline...Behold! - The flying squirrel suplex!

http://www.youtube.com/watch?v=2FrB_iJ7X3k

Eric Falkenstein said...

That match should have just ended on style points right there. Fabulous.