Judges Lowering Boom on Foreclosure Sloppiness, But at a Cost…
Ashby Jones from the Wall Street Journal brings us an interesting article which has an obvious take but also an interesting twist. Judges are elected officials. As a result, judges will do what it takes to get re-elected. Where this surfaces in the housing industry is when the judge challenges a lenders ability to foreclose.
Judges are forcing the attorneys for lenders to jump through major hoops in order to foreclose. Some are threatening penalties of purgery if the attorney attests to the accuracy of documents without personally knowing if they are accurate or not. These actions will continue to prolong the housing crisis, which is the obvious take on the story. The twist is that the actions may cost the tax payers more money in the long run.
A passage from the article explains it best, “Over the long run, borrowers are likely to pay hundreds of dollars in additional fees or slightly higher interest rates, as toughened quality control ripples through the market for new and refinanced mortgages, many experts predict.
“The cost of servicing has gone through the roof, and the legal risks are almost unknowable,” said Dan Cutaia, president of capital markets at Fairway Independent Mortgage Corp. in Sun Prairie, Wis. As a consequence of rising servicing costs for lenders, “there will be higher pricing for the consumer.”
Judges Lowering Boom on Foreclosure Sloppiness, But at a Cost…
By Ashby Jones
The foreclosure mess that erupted about six weeks ago with evidence of widespread sloppiness in foreclosure paperwork is, by some accounts, nearing the beginning of the end.
Still, the push by mortgage companies to accelerate the process is running into resistance from judges who are cracking down on the sloppy methods. Click here for the page-one story in Wednesday’s WSJ.
For instance, inFlorida, a state-court judge has begun forcing lawyers to defend fees charged to borrowers by law firms. Maryland’s state appeals court told judges that they can hire experts to scrutinize paperwork filed in foreclosure proceedings—and make lawyers swear that the documents are accurate.
Since last month, New York has threatened to use “penalties of perjury” against lawyers caught filing bad documents, even if they didn’t know about the problems when the foreclosure process began.
The crackdowns might be justified, even necessary. Still, the moves by dozens of state courts across the U.S. could add to the delays brought about by foreclosure-document crisis. Sales of foreclosed homes have slowed, and mortgage servicers face new expenses as they scramble to shore up their operations.
Over the long run, borrowers are likely to pay hundreds of dollars in additional fees or slightly higher interest rates, as toughened quality control ripples through the market for new and refinanced mortgages, many experts predict.
“The cost of servicing has gone through the roof, and the legal risks are almost unknowable,” said Dan Cutaia, president of capital markets at Fairway Independent Mortgage Corp. in Sun Prairie, Wis. As a consequence of rising servicing costs for lenders, “there will be higher pricing for the consumer.”