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Several weeks ago, I had a conversation with a bankruptcy judge in Georgia. She told me that the foreclosure paperwork she's seeing is, in her words, "atrocious."
Lenders are having a difficult time proving they have the right to foreclose, and the judge said she's not surprised that her colleagues are, in some cases, throwing the foreclosures out of court.
Like many, she is appalled that lenders feel they can file affidavits that aren't truthful, signed by "robo-signers" who never reviewed documents they swore were reviewed. She wonders whether lenders feel they have to follow the rule of law at all. She is concerned by troubled and upset homeowners who are being snowed into submission by extraordinary amounts of paperwork showered on them by lenders and their attorneys.
I wonder how long it will take those homeowners, who are in trouble but for whom filing for bankruptcy just isn't an option, to find their way out.
I've been watching the foreclosure crisis unfold since 2007, when the markets started to go bad and homeowners started to lose their jobs by the millions. The government's Making Home Affordable (HAMP), and other loan modification programs have been an unmitigated disaster. Barely a tenth of those who applied for relief have received it. In the meantime, millions of homeowners have lost their homes, had their credit destroyed, and watched their financial lives vaporize.
Michael Barr, the U.S. assistant treasury secretary for financial institutions, recently spoke in front of the
What do you think they found?
Here's how Barr put it: "The bulk of the examination work to date focused on the foreclosure process has found widespread and, in our judgment, inexcusable breakdowns in the foreclosure process."
What's really inexcusable is that the regulators from the
The loan modifications programs are all voluntary. There are obscure net present value (NPV) calculations that are done that eliminate wide swaths of homeowners from assistance. Transparency is, by and large, a joke. And now we know that the foreclosure process is truly as "inexcusable" as homeowners have been claiming.
The government, through its conservatorship of
But homeowners and those on Main Street who can afford their mortgages but have watched their home values decimated by the housing crisis and deep recession don't seem to be at the top of anyone's list.
Why is anyone surprised that lenders are taking advantage of homeowners? What's really surprising is that it has taken more than two years for the government to see what's going on, and to catch it in action.
It's easy to see how Wall Street is set to pay out big bonuses this year. It's a lot harder to see how this works out well for homeowners.
Ilyce R. Glink's book is "Buy, Close, Move In!: How to Navigate the New World of Real Estate--Safely and Profitably--and End Up with the Home of Your Dreams"