No foreclosure moratorium: White House, judges have a better response.
10/20/2010 © Palm Beach Post editorial
From now on, Palm Beach County Chief Judge Peter Blanc says, even when foreclosure
cases are uncontested, banks will have to produce sworn or certified documents to prove that
they have the right to repossess a home. That approach in courts around the country beats a
national foreclosure moratorium.
Since Florida Rules of Civil Procedure require such paperwork, that should have been the case
all along. In light of allegations that attorneys representing lenders and mortgage servicers have been using forged documents, it's more important than ever that judges make them follow the letter of the law. Civil rights organizations and some Democratic lawmakers have called for a nationwide moratorium on foreclosures in response to the alleged fraud. Holding lenders accountable makes more sense.
Judge Blanc admitted to The Post's Kim Miller, however, that in thousands of cases that hasn't happened. "In the past, when affidavits came in on defaults, the judges haven't been requiring the documents because no one was there objecting," Judge Blanc said, noting that 80 percent of the cases are uncontested. "Dealing with the volume we are dealing with, we want to make sure that all our i's are dotted and t's crossed."
Even when the homeowner fails to show up in court, lenders should have to prove their case, because they can collect from defaulting homeowners the balance between what they owe and what the bank gets from selling the home. The records that support lenders' foreclosure claims include details of the loan, borrower fees and payment history that verify how much is owed. In one case, a judge failed to inspect the documents and granted summary judgment to a lender even when the homeowner's attorney objected to the validity.
A summary judgment is a swift ruling made instead of a trial when the facts of the foreclosure are considered irrefutable. The problem has been that, too often, the facts are disputable.
The 50 state attorneys general have opened a joint investigation into whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures. The Obama administration's Financial Fraud Enforcement Task Force is investigating whether those that did submit flawed paperwork misled federal housing agencies, which own or insure a majority of home loans.
These investigations, coupled with judges taking a more active role, is a practical response as opposed to the political response of calling for a moratorium. A nationwide foreclosure moratorium only would delay the inevitable for most homeowners, and further delay the housing market recovery.
Jack McCabe, a real estate consultant based in Deerfield Beach, favors a moratorium, but admits that it would have a negative effect on the economy. "Forty to 50 percent of sales in the state have been foreclosure sales," he said. With a moratorium, there would be "a large reduction in the number of foreclosure sales, and in sales in the overall market with these foreclosures not being available." Buyers of non-distressed properties might wait, fearing that they are paying too much.
The housing market will not improve until those distressed homes get back onto the market and get sold. The foreclosures must be scrutinized, but they must continue.
- Rhonda Swan, for The Palm Beach Post Editorial Board
