Lately, the news has been full of analysts and pundits offering their opinions on the big picture surrounding the current problems in the mortgage industry (the “foreclosure crisis,” as they like to call it). One of the more commonly cited side effects is that an inability to foreclose will cause chaos in the real estate industry and artifically deflate home prices.
In other words, these experts and opinion makers are taking the approach that the ends justify the means. Simply translated, who cares about the legality of foreclosing because foreclosures are good for the market.
In my opinion, there could not be a more two-faced attitude. On the one hand, these folks want to enforce the loan contracts that were entered into. They just want the protections the law affords them. Sounds reasonable enough, right? Well, these same folks also want to pick and choose which contracts they can enforce, and which laws they want applied.
In most instances, your mortgage has been sold off several times over (without you ever knowing), and the bank that is trying to foreclose probably doesn’t even own the debt it’s trying to collect. That bank entered into contracts to sell your mortgage to investors through complex financial instruments. Not surprisingly, the bank doesn’t want you to know about those contracts, and it certainly doesn’t want to be bound by them when it tries to foreclose on your home. Banks also don’t seem to want laws relating to the technical requirements for the transfer of property to apply to them either.
While the banks and analysts warn about the result of suspending foreclosures (or even just making lenders establish that they have the legal right to foreclose), I worry more about a marketplace where contracts no longer mean anything. I worry about an environment where a company can collect a debt that they are not even owed–even if that means taking your home. Banks preach about the “disasterous” effects of slowing down foreclosures, but they don’t stop and consider the even bigger impact of wrongful foreclosures.