Over the past several weeks there has been a lot of news about major banks freezing hundreds of thousands of foreclosures due to possible paperwork deficiencies. In a sure sign that we’re in a political season, there have been proposals for a government-imposed moratorium, and now the Federal Reserve wants to get involved.
Even with this slow-down, there will be something more than 1,000,000 foreclosures completed in 2010. That’s down from the 1,200,000 we were headed for previously, but it’s still a big number. They are heavily concentrated in the five states where the worst of this recession has played out, but the effects are being felt nationwide.
In considering the faulty foreclosure paperwork, the next owner deserves the process to be squeaky clean — possibly more important than the current property owner’s position. If a property is foreclosed, the defaulting borrower is evicted, then the property will eventually be sold “in good faith” to a new owner who in most states, including Texas, will have a title insurance policy to protect his or her rights in ownership. If the original eviction wasn’t handled correctly, then this can obviously get complicated — and expensive, mostly for the lender and the title company, but with the current owner caught in the middle.
What is largely missing from the discussion is that the properties and property owners involved are on lenders’ foreclosure lists for a reason — mortgage default. Every real estate closing that involves mortgage financing includes paperwork that basically says “no pay, no stay.” Should the lenders be required to make sure they have their i’s dotted and t’s crossed? Sure. But there is no doubt that these foreclosures will happen, as they should under the terms of the mortgage contracts. Empathize with the circumstances that led the borrowers into their difficult situations? Absolutely! Is empathy a good enough reason for them to keep possession indefinitely without paying? Absolutely not.
My point is, “Let’s get on wiith this.” Wringing our hands for months over foreclosures that ARE going to happen, will only result in more market confusion and disruption, and a longer, deeper, housing crisis than we already have.