Recovery in Housing Sector Cannot Take Place Unless Scrutiny of Foreclosed Documents has Been Completed
Recovery in housing sector cannot take place unless scrutiny of foreclosed documents has been completed and then sold. En route there are troubles galore related to legal challenges and missing papers.
The scenario is all the more worrying considering how big the foreclosure market has grown. Prior to the eruption of the scandal relating to robo-signing John Burns Real Estate Consulting had forecasted that 41% of all sales in residential property would be from the distressed category. Generally under normal circumstances these account for 7% of the deals.
During the previous seven recessions it is the housing sector that has pulled out the economy from the morass. As such the news of further damage could not have come at a more catastrophic juncture. The collapse weakens the recovery further. Diane Pendley of Fitch Ratings said, “This is definitely one of the last things anyone needed to have to deal with”.
The announcement of suspension of foreclosures in 23 USA states by GMAC, JPMorgan Chase and BofA is only the beginning of the chaos – the tip of the iceberg. The legislators in Washington are crying for investigations dismissing the excuses put forward by the lenders. The Attorney General of Ohio has already filed a lawsuit against GMAC. So far other Attorney Generals in six states have called for similar bans and are starting off their own enquiries.
Class action lawsuits by lawyers have been filed in Kentucky and Maine. Entire neighbourhoods are signing up as clients. Private detectives have been hired to locate the former employees of the mortgage industry and marathon conferences are being held to chalk out strategic steps to find out as much dirt as they can on the banks.
Referring to the employees of banks at the lower levels Barry Righoltz of Fusion IQ said, “They were just so haphazard and so gloriously incompetent to save a few pennies here and there. But a few pennies times millions of documents is a billion dollars”
The banks are insisting that all those foreclosed upon were defaulters. Despite this if the documents are not in order then the deal could be nullified. The entire system would have to start off again. The lenders are also reiterating that mistakes have occurred only in few instances. There would be delays but the result would be the same. The mortgage firms are saying they are making stronger their methods of processing. But this talk is only spreading uncertainty and doing little to assuage fears of doubts.
