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The Rant: The Perfect Storm for Foreclosures

Jonathan Foxx
Oct 08, 2010

I don’t think a day goes by when we are not told of or experience for ourselves yet another action by banks that, at the least, may be charitably characterized as malfeasance, with respect to the default process. Banks do not operate in a vacuum and function, by extension, through their servicers with respect to foreclosure processes. Lest it be forgotten: the biggest banks are constructively their own servicers, mutatis mutandis, of their own portfolios. You probably know about the on-going MERS litigation that is gaining some ground (i.e., In Re MERS, USDC, Arizona; the RICO class-action in Kentucky, et cetera). Yet another debacle to unwind in an unwieldy way soon. Borrowers’ attorneys will (and should) jump in where and when possible. There are weak links already inherent in the system, without having to also endure incidents of improper process in foreclosure due diligence. Let’s face it: The Perfect Storm in the foreclosure arena is building up, and any reasonable observer can admit that these winds of change are anything but stabilizing to the economy. I am waiting—fretting might be a more suitable word—to see if and when government intervention will step into the fray on the side of the consumer. That means going through yet another round of “moral hazard” rhetoric from the politicos, pundits, and bloviators. Indeed, I am getting weary of the White Knight riding into the throng of unwashed masses to save the day! Anything for a vote, or, better said, for a pecuniary contribution. Thus far, the consumer has received little in the way of actual consumer protection. Then again, the consumer does not have lobbyists with hundreds of millions to spend. On the other hand, in an ideal world there would be considerable shaking out across asset classes and an irrefutable value established based on fair market exchange. Note I stated “fair market,” not “free market,” as the latter has really never existed at any time in all of recorded history. Lenders are the first to admit that an “arms length” transaction exists between the consumer and the lender and no special relationship exists. As such, the relationship is contractual in which the breach of the contract is a known remedy and the motivation to avoid a breach are based on several risk factors. However, the MERS issue and the banks’ dubious handling of the foreclosure process itself—as demonstrated now in something as blatantly derelict as executing an affidavit—are hardly in that category, inasmuch as the banks themselves—and their servicers—have been unresponsive to voluntarily working with consumers, and their lawyers, to offer effective loss mitigation. Commissions to mask intended changes, investigations that are retrospective rather than proactive, laws written by lobbyists, and proposed legislation that has virtually no chance of Congressional approval, testimony and evidence and findings that are willfully suppressed, blatant gaming of the election finance system—all these political posturings, obfuscations, and ministerial chicanery degrade America’s unique place in the history of nations. My fervent wish is that this generation and future generations of Americans will safeguard America’s deeply democratic values and find the ways to preserve its highest and best aspirations.