Yesterday Diana Olick reported on a call by some for a 90 national moratorium on foreclosures. Texas isn’t waiting:
Texas Attorney General Greg Abbott called for a halt on foreclosures Monday amid nationwide scrutiny over the way they are processed.
Notices to suspend foreclosures were sent to 27 loan servicers doing business in Texas, including Bank of America and JPMorgan Chase, the Attorney General’s Office said. It did not have the full list of companies available late Monday.
The state office also called for a halt on the sales of properties previously foreclosed upon — possibly affecting auctions scheduled Tuesday — and on evictions of people living in such properties.
The office said it began investigating foreclosures last month after reports that an employee of Ally Financial, a large mortgage lender, acknowledged signing thousands of foreclosure documents without reviewing them as required.
For now the call is voluntary, which leaves open what happens if lenders don’t comply. This will be a mess:
The Attorney General’s Office has not sought a court order, and wouldn’t say what kind of action, if any, it might take if companies don’t comply.
“This is a demand from the Attorney General’s Office that they thoroughly review their business practices to ensure they comply with Texas law and are not unlawfully harming Texas homeowners,” Strickland said.
The move could have a widespread impact on Texas borrowers and lenders.
“If the AG can really do this, it’s huge,” said Zugheri.
George Roddy, president of the Addison-based Foreclosure Listing Service, which tracks foreclosures in 19 North and Central Texas counties, questioned the attorney general’s authority to seek the suspensions. “I’m not sure how the AG could do that unless there’s some type of fraud,” he said .
And stopping the sale of properties already lost to foreclosure could prove particularly complicated.
“This could be opening up a real can of worms if they’re actually talking about properties already sold,” Roddy said. “Title has been passed back to the lender or a third party has purchased it at the foreclosure auction. Someone else could be living in the house.”
This has to lead to more defaults. How many Texans are wondering if their money might be better spent hiring an attorney than paying their mortgage?
Something has to be done about the “robo-signing” mess. Lenders need to be prosecuted and fined, but discouraging people from paying their mortgage isn’t the answer. More and more buying a house looks like a risky idea- and a second leg down is assured.
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twist -
Did you see that Barry Rithholtz was channeling John Ryskamp today? This is not funny …
http://www.ritholtz.com/blog/2010/10/foreclosure-fraud-reveals-structural-legal-crisis/
Did you read the debate below with “Dead Hobo” and Ritholtz? I’m not altogether sure they disagree with each other as fail to understand each other. They both make good points.
This is getting closer to the world that Ryskamp envisioned every day. I keep waiting for him to come by and say “I told you so”.
Thanks, I hadn’t read the comment thread. Lots of good stuff there. Barry seems to be saying that REIC sloppiness has now revealed itself to be an existential risk to its own business model, while Hobo is saying yeah, but the REIC itself is too-big-to-fail so a **judicial** bailout is forced. Alas, “both correct” is probably the right answer.
Comment by new Doomer Steve Bradley under yesterday’s CDoom applies to this
http://housingdoom.com/2010/10/04/crack-of-doom-was-that-a-dog-whistle-we-didnt-hear-last-friday/comment-page-1/#comment-407
Steve-
I’m with you. Every time we find out about more fraud, it seems that there is more calls for “regulation”. There are laws that do cover things like title transfer and mortgage fraud. When laws aren’t enforced however, they tend to be ignored. Then there’s another big problem, another call for “regulation”, more laws are added- but without enforcement, the problem persists.