Untangling The Complex Foreclosure Mess


Gretchen Morgenson has a fantastic interview and article over at NPR.    Some excerpts:

Attorneys general in all 50 states are investigating improper foreclosure procedures that may cause sweeping consequences for the banks and institutions that bought mortgage-backed securities during the housing boom — and affect the cases of thousands of homeowners facing eviction.

Morgenson explains that for every mortgage, there are two pieces of paperwork necessary to complete the transaction: the note, which is the homeowner’s promise to repay, and the mortgage, which is the lien on the property.

“Then the note and the mortgage are supposed to be in the loan file, so that if there is a foreclosure we understand that everybody knows that these are the right parties that are interacting here: the institution that has the right to foreclose and the borrower who has to deal with the foreclosure,” she explains. “What has ended up happening is in the loan file, there’s no note. The note’s gone missing.”

“I think that this is a whistling-past-the-graveyard exercise because there is just no way that they can know that all of these practices are sound given the really horrible, horrifying examples that we’ve seen and these scary depositions that we’ve read from employees at some of these firms about how lackadaisical some of the practices were,” Morgenson says. “I don’t see how the banks could really have ‘solved’ this problem because it’s really so loan-by-loan. It’s so labor intensive. I just don’t think it’s over.”

Listen to the Inverview