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Tuesday, October 5, 2010

Halting the foreclosure factory in TX

Greg Abbot has stepped up again to go after the big bad banks.

The Texas Attorney General's office called for a halt on all foreclosures today amid widespread scrutiny over the way foreclosures are processed nationwide

While my knee jerk reaction might likely be with the majority of the comments on this story claiming that the government needs to get out of the way and let business proceed, it gets a little more interesting when you get into the details which are not listed in the story.

A friend of mine works in real estate here and today he pretty much deals only with pending foreclosures (preventing them, that is). He has some pretty terrible stories about how people are being mislead during foreclosure proceedings (like the bank claiming to work with them to put a short sale in place while the bank is still foreclosing out from under them just depending on which paperwork gets done first). But the real kicker is just the sheer number of loans that are invalid on their face. From what I hear its almost a guarantee that a troubled loan has something wrong with the original agreement. Now if that is the case and the near totality of these loans are wrong from the get go, then the authorities do need to step in and stop the proceedings-as-usual in order to make sure that everyone is treated correctly under the law.

This is not about socialistic government stepping in and taking care of everyone who has a problem. This is about holding the banks accountable for improperly setting up loans and then taking the property which they may not have a legitimate claim on.

Indeed, as I understand it, its systemic. Some of the bank’s standard loan forms may have actually done things the wrong way. If that is actually the case, this is catastrophic for them as well as the home owners. There is purposeful and inadvertent fraud likely on both sides and clouded titles on the properties for the foreseeable future.

Further, if the banks reaaaaally screwed this up, there may be a whole class of folks still able to make their payments that might start to challenge their loans.

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