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Donna Schifano's Blog

By Donna | Property Manager in Cambridge, MA
  • The Politics of Foreclosure

    Posted Under: Foreclosure in Haverhill  |  October 13, 2010 7:24 AM  |  1,139 views  |  No comments

    Talk about a financial scandal. A consumer borrows money to buy a house, doesn't make the mortgage payments, and then loses the house in foreclosure—only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine? The affidavit was supposed to be signed by the nameless, faceless employee in the back office who reviewed the file, not the other nameless, faceless employee who sits in the front.

    The result is the same, but politicians understand the pain that results when the anonymous paper pusher who kicks you out of your home is not the anonymous paper pusher who issupposed to kick you out of your home. Welcome to Washington's financial crisis of the week.

    In the 23 states that require judicial foreclosures, lenders seeking to seize property from a delinquent borrower must file a summary judgment motion in court. Typically, this document must be signed in the presence of a notary by a "witness" who has reviewed the relevant documents and confirmed that the borrower is in default and the lender owns the mortgage.

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    Recently GMAC Mortgage, whose parent Ally Financial is majority-owned by the U.S. government, suspended foreclosures in those 23 states after acknowledging that in some cases notaries may not have been present and the signers may have relied upon others to review the documents instead of doing it themselves. Bank of America and J.P. Morgan Chase then halted their own foreclosures in those 23 states to ensure they are following the letter of the law, and yesterday BofA announced its moratorium is now nationwide.

    We're not aware of a single case so far of a substantive error. Out of tens of thousands of potentially affected borrowers, we're still waiting for the first victim claiming that he was current on his mortgage when the bank seized the home. Even if such victims exist, the proper policy is to make them whole, not to let 100,000 other people keep homes for which they haven't paid.

    In their zeal to find and prosecute the great bank defendant, state Attorneys General aren't waiting to see if anyone within their borders was actually harmed. In a civil suit, Ohio's Attorney General Richard Cordray has even charged an Ally employee with fraud for signing the documents without reading them. In a Journal interview, Mr. Cordray compared the employee to Nazis at Nuremberg who claimed they were just following orders.

    As far as we know, House Speaker Nancy Pelosi hasn't compared any bank employees to Nazis, but this week she demanded an investigation by the Department of Justice. The next day Attorney General Eric Holder announced that his Financial Fraud Enforcement Task Force is examining the issue. But even if one believes this is more than a technicality, the issue is whether the banks violated state laws, not federal ones.

    On Thursday, Senate Majority Leader Harry Reid jumped into the fray by demanding a halt to all foreclosures in Nevada, though Nevada is not one of the 23 states affected and therefore presents not even a theoretical violation of the law. The same day, Representative Edolphus Towns (D., N.Y.) demanded a national foreclosure moratorium, which Mr. Reid then endorsed on Friday. Even normally sober Republican Senator Richard Shelby has called for a federal probe of bank regulators.

    Yes, the same crew (Mr. Shelby excepted) that ran roughshod over its own transparency rules—not to mention the established customs of the House and Senate—to restructure American medicine is now appalled that some paperwork at private businesses may have been incorrectly processed. To be clear, bank employees appear guilty of sloppy work, and problems in the back office should be corrected, but freezing activity in a $2.8 trillion financial market is the last thing this economy needs and is in no way proportional to the problems reported so far.

    Now President Obama is refusing to sign a previously noncontroversial measure to have states recognize notarized documents from other states. Among other things, the bill would have streamlined the process of moving people out of homes they can't afford and therefore would have helped to allow housing markets to clear and begin to heal. Allowing supply to meet demand in housing must not be one of the "progressive agendas" that Mr. Obama recently told Rolling Stone he is committed to advancing.

    If evidence emerges of policies or actions that wrongly threw people out of their homes, by all means investigate and prosecute violations of law. But allowing people to live in homes without paying for them is not cost-free. That cost will be borne directly by investors in mortgage-backed securities and mortgage servicing companies, and ultimately by American taxpayers, who now stand behind 90% of new mortgages, thanks to guarantees by Fannie Mae, Freddie Mac and the Federal Housing Administration.

    The bigger damage here is to the housing market, which desperately needs to find a bottom by clearing excess inventory and working through foreclosures as rapidly as possible. The moratoriums further politicize the housing market and further delay a housing recovery. In an economy and a financial system engulfed in Washington-created uncertainty, the political class has decided to create still more.

  • The Politics of Foreclosure

    Posted Under: Foreclosure in Haverhill  |  October 13, 2010 7:24 AM  |  1,095 views  |  No comments

    Talk about a financial scandal. A consumer borrows money to buy a house, doesn't make the mortgage payments, and then loses the house in foreclosure—only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine? The affidavit was supposed to be signed by the nameless, faceless employee in the back office who reviewed the file, not the other nameless, faceless employee who sits in the front.

    The result is the same, but politicians understand the pain that results when the anonymous paper pusher who kicks you out of your home is not the anonymous paper pusher who issupposed to kick you out of your home. Welcome to Washington's financial crisis of the week.

    In the 23 states that require judicial foreclosures, lenders seeking to seize property from a delinquent borrower must file a summary judgment motion in court. Typically, this document must be signed in the presence of a notary by a "witness" who has reviewed the relevant documents and confirmed that the borrower is in default and the lender owns the mortgage.

    View Full Image

    100810hubPMAssociated Press
    100810hubPM100810hubPM

    Recently GMAC Mortgage, whose parent Ally Financial is majority-owned by the U.S. government, suspended foreclosures in those 23 states after acknowledging that in some cases notaries may not have been present and the signers may have relied upon others to review the documents instead of doing it themselves. Bank of America and J.P. Morgan Chase then halted their own foreclosures in those 23 states to ensure they are following the letter of the law, and yesterday BofA announced its moratorium is now nationwide.

    We're not aware of a single case so far of a substantive error. Out of tens of thousands of potentially affected borrowers, we're still waiting for the first victim claiming that he was current on his mortgage when the bank seized the home. Even if such victims exist, the proper policy is to make them whole, not to let 100,000 other people keep homes for which they haven't paid.

    In their zeal to find and prosecute the great bank defendant, state Attorneys General aren't waiting to see if anyone within their borders was actually harmed. In a civil suit, Ohio's Attorney General Richard Cordray has even charged an Ally employee with fraud for signing the documents without reading them. In a Journal interview, Mr. Cordray compared the employee to Nazis at Nuremberg who claimed they were just following orders.

    As far as we know, House Speaker Nancy Pelosi hasn't compared any bank employees to Nazis, but this week she demanded an investigation by the Department of Justice. The next day Attorney General Eric Holder announced that his Financial Fraud Enforcement Task Force is examining the issue. But even if one believes this is more than a technicality, the issue is whether the banks violated state laws, not federal ones.

    On Thursday, Senate Majority Leader Harry Reid jumped into the fray by demanding a halt to all foreclosures in Nevada, though Nevada is not one of the 23 states affected and therefore presents not even a theoretical violation of the law. The same day, Representative Edolphus Towns (D., N.Y.) demanded a national foreclosure moratorium, which Mr. Reid then endorsed on Friday. Even normally sober Republican Senator Richard Shelby has called for a federal probe of bank regulators.

    Yes, the same crew (Mr. Shelby excepted) that ran roughshod over its own transparency rules—not to mention the established customs of the House and Senate—to restructure American medicine is now appalled that some paperwork at private businesses may have been incorrectly processed. To be clear, bank employees appear guilty of sloppy work, and problems in the back office should be corrected, but freezing activity in a $2.8 trillion financial market is the last thing this economy needs and is in no way proportional to the problems reported so far.

    Now President Obama is refusing to sign a previously noncontroversial measure to have states recognize notarized documents from other states. Among other things, the bill would have streamlined the process of moving people out of homes they can't afford and therefore would have helped to allow housing markets to clear and begin to heal. Allowing supply to meet demand in housing must not be one of the "progressive agendas" that Mr. Obama recently told Rolling Stone he is committed to advancing.

    If evidence emerges of policies or actions that wrongly threw people out of their homes, by all means investigate and prosecute violations of law. But allowing people to live in homes without paying for them is not cost-free. That cost will be borne directly by investors in mortgage-backed securities and mortgage servicing companies, and ultimately by American taxpayers, who now stand behind 90% of new mortgages, thanks to guarantees by Fannie Mae, Freddie Mac and the Federal Housing Administration.

    The bigger damage here is to the housing market, which desperately needs to find a bottom by clearing excess inventory and working through foreclosures as rapidly as possible. The moratoriums further politicize the housing market and further delay a housing recovery. In an economy and a financial system engulfed in Washington-created uncertainty, the political class has decided to create still more.

 
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