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Home Publications Blogs Beat the Press Foreclosure Moratorium: The NYT Does Not Know What The Obama Administration Fears, Only What It Says It Fears

Foreclosure Moratorium: The NYT Does Not Know What The Obama Administration Fears, Only What It Says It Fears

Tuesday, 12 October 2010 04:36

The NYT is a great newspaper with many outstanding reporters, but does it have access to the innermost thoughts of top administration officials? That seems unlikely, which is why readers should be wondering how it knows that "the administration fears it [a foreclosure moratorium] will only delay the inevitable and necessary process of forcing many Americans out of homes they cannot afford."

This particular explanation seems highly unlikely since its HAMP program seems designed to accomplish exactly this. The vast majority of homeowners who enter the HAMP program keep making payments on homes that they will eventually lose. While this does help the banks, it delays the inevitable and necessary process of forcing many Americans out of homes they cannot afford. It doesn't make sense that the administration would be spending tens of billions of dollars on a program whose main impact is to delay having homeowners forced out of their homes if it actually thinks it is important that people be forced out of their homes quickly.

There are other possible explanations for the Obama administrations opposition to a foreclosure moratorium. For example, it could be discovered that the fraud and procedural abuses are widespread. It would likely be very costly for many servicers to construct the proper paperwork to carry through foreclosures. The administration may not want to force banks to incur these costs. That is at least one alternative explanation for the administration's position. 

Comments (9)Add Comment
HAMP a Measure of Intent
written by Ron Alley, October 12, 2010 6:00

Get real. If the ineffective HAMP program is a measure of the intent and resolve of the Obama administration's effort to reduce foreclosures, then its intent is clear. It's aim is to allow foreclosures to proceed virtually unchecked.
written by bokun59, October 12, 2010 11:38
Mr. Baker:

I think what the administration is afraid of is that if foreclosures are stopped and people look into the issue they will see the following:

1- throughout the history of the invention of who owns things, real property has been treated specially; it has had a sacrosanct spot in the annals of ownership; for example the Statue of Frauds mandates that all contracts involving real property be in writing; Registry of Deeds were created in all counties in the land in order to process this necessity of writing and as a means of making sure that real property was handled properly- in writing; there are countless other examples;

2- adherence to contract law and the rule of contract is vital to the free flow of property (real and personal) in our society; the creation of the Uniform Commercial Code is an example of the recognition that contracts need be adhered to and executed properly;

3- a mortgage is a real contract about real property (yes, I know obvious, but needs stating) and the reason mortgage contracts are so long and contain so many clauses is to specify the rights of all parties under all existing law; it binds BOTH parties- the lender and the lendee;

4- in order to ensure that only the true holder of the note can kick a person off their real property, a paper trail is specified and required; everyone needs to know who owns the debt so that some other entity cannot claim ownership of the debt;

5- when the ownership trail of the true holder of the note is broken, chaos ensues because ONLY the holder of the note can exercise his/her foreclosure rights; so if no one know who owns the note, NO ONE has the legal right to foreclose to re-claim the real property

6- THAT is the true problem here; if these notes are not done properly or lost or not transferred properly vis-a-vis NY law (I use NY laws because most of the trusts wherein the notes were to be allegedly transferred stated NY law governs), then poof- the right to re-claim is- well, you can figure out what that means....

7- it may seem 'unfair' that the banks lose the right to foreclose when the mortgagor cannot/does not pay but that is the risk inherent in creating a contract; you have to play by the rules or really, the meaning of contract is gone-poof... ; who would make a contract if only one party had to play by the rules? If I screw up and don't pay my mortgage or something happens, the banks will foreclose. But if the banks do not follow the law/rules and cannot foreclose- whose fault is that?

A final note is that it is my guess that unless ones mortgage stayed with the group that made the loan, the transfer of the note was never done properly and any foreclosure done was illegal. It amazes me that any title company would certify title on a recently foreclosed property.

That means even if you are current on your mortgage there can be problems with the title due to the mistakes made in transferring the note.

There is no way to fix this without abrogating millions of contracts.
written by BOXER, October 12, 2010 6:41
I always belive capitalists will protect business no matter how gross the violations and I've never been wrong, unless there are political advantages to be gained.
written by TG, October 13, 2010 12:33
bokun59 makes some interesting points. A recent NYT article mentioned that at least one national title insurance underwriter has stopped insuring recent foreclosures by some of the major banks. How long before the feds launch the Troubled Title Relief Program?
written by JohnT, October 13, 2010 8:44
I found the NYT article confusing. If you read the article through, the reporter acknowledges wrongful foreclosures, eg, the guy in Florida who didn't even have a mortgage.

The main thesis seems to be that there are many valid cases for foreclosures. But of course! Nobody said otherwise so far as I know. The nub of the problem is not that there are valid cases, but that one must show validity or be able to show validity.

On one hand the article seems to accept the Obama Administration's contention that the banks must be allowed to proceed with foreclosures regardless of the validity of their claims, while at the same time citing cases that were not valid giving the lie to the contention.

In another section, the article reports the Admin's view that validity is merely a "technical" problem.

It's a confusing story. If this were China I would guess that the reporter was constrained to publicize the views of the rulers, but sneaked in enough details in contradiction of that view to clue the reader in. Good thing this isn't China.
written by TG, October 13, 2010 9:25
Title insurance, it has always seemed to me, is not like most types of insurance. Auto insurance, for example, is insuring you against the risk of liabilities arising out of some unknowable future occurance like an accident or theft. Title insurance, on the other hand, insures you against liabilities arising out of past occurances. Title companies review (or are supposed to review) those past occurances, such as deed transfers, claims of lien, foreclosures, etc. They basically insure that the publically recorded chain of title is in tact as of the date of the issuance of the insurance. If they are not convinced of this, they will not insure. They are really not in the business of taking risks.

Title insurance companies have assumed the validity of foreclosure proceedings for establishing title. If this is called into widespread doubt, then I think it is likely that many companies will not be willing to assume the risks of insuring these properties.

In today's world, having title insurance is essential to most real estate transactions and certainly to transactions involving financing.

Given the potentially widespread impact of the recent revelations, I would expect some sort of government title insurance guarantee program can't be too far off.
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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.