Foreclosure Problem? What Foreclosure Problem?

BLOG VIEW: With two weeks to go before Election Day, there is a considerable political and economic problem facing the nation: the foreclosure controversy and the growing demands to put a national moratorium on foreclosures until the situation is fully addressed.

Many people are opposed to this solution, including President Obama and Sen. Chris Dodd, D-Conn., the chairman of the Senate Banking Committee. But their opposition to the foreclosure moratorium is balanced with calls for a thorough investigation into the roots of the problem: the so-called robo-signing of tens of thousands of foreclosure-related documents without any human review of their content.

However, there are some who would prefer the business-as-usual approach – and this camp gets agitated whenever someone points out the root causes of the ongoing controversy. In fact, they would like to pretend that there is no problem at all. Consider a letter sent to Capitol Hill by a coalition of financial services industry trade groups that included the Mortgage Bankers Association (MBA).

‘In several states, some mortgage servicers have put final foreclosure sales on hold while they review their document procedures,’ the letter said. ‘It is important to note, however, that these are document process reviews; in almost all cases, there are no factual disputes about whether the mortgage is delinquent, the amount of the arrears or whether foreclosure is proper. Indeed, a substantial percentage of foreclosures are uncontested by borrowers. In the overwhelming majority of cases, we believe the facts presented to the courts in foreclosure proceedings about the debt amounts and delinquencies have been accurate.’

Several states? Isn't that figure closer to 23 states – nearly half of the country? Those 23 states are linked by the common ground of requiring court approvals on foreclosures – the other 27 states plus the District of Columbia are also in an uproar regarding foreclosure activities within their borders.

And the statement that ‘the substantial percentage of foreclosures are uncontested by borrowers’ will come as news to Ohio Attorney General Richard Cordray, who filed a fraud suit against Ally Financial's GMAC Mortgage unit by warning it was ‘the tip of an iceberg of industry-wide abuse.’ In a very rare show of nonpartisan support, the other 49 state attorneys general are joining Cordray to investigate this matter.

Also participating in this obfuscation is the first (and, to date, only) congressional Republican leader who is ready to speak out nationally on the foreclosure controversy: Rep. Eric Cantor, R-Va., the House Minority Whip. In an Oct. 11 appearance on ‘Fox News Sunday,’ Cantor tried to change the subject by blaming the financially troubled homeowners for causing all of the problems – while blithely ignoring the toxic dimensions of fraud and incompetence surrounding the controversy.

‘If you impose a moratorium on foreclosures,’ Cantor said, ‘what you are telling people and institutions that lend money is they do not have the protection to take the risk they need to, to extend credit for people [who] will get a mortgage. You'll shut down the housing industry if that is the case.’

Cantor added insult to injury with an astonishing post-script sound bite. ‘Now, come on, people have to take responsibility for themselves,’ he said. ‘We need to get the housing industry going again. We don't need government intervening in every step of every aspect of this economy.’

Ah, but what type of people have to take responsibility for themselves – only the homeowners? Shouldn't the robo-signing servicers also take responsibility for their actions? After all, tens of thousands of foreclosure documents were signed without any review.

And as for the ‘government intervening’ in housing-relating matters, perhaps Cantor forgot that there wouldn't be a mortgage banking industry without the federal government propping up the secondary market? Besides, the federal government has yet to commit to offering any intervention in this matter.

The mortgage banking industry is facing a major problem with the foreclosure crisis, and vain attempts by the industry and its political supporters to ignore or change the subject will not work. To employ a cowboy cliche, a circle-the-wagons approach may fend off an initial attack from slings and arrows – but it also stops the wagon train dead in its tracks. And in the case of the mortgage banking industry, its wagon train needs to move forward and not come to another self-inflicted stop.

– Phil Hall, editor, Secondary Marketing Executive

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