More Foreclosure Problems

It's been over two months since this blog has appeared, probably largely unnoticed, but some serious surgery and hospital time has been a distraction. Meantime the wheels of commerce continue to be spinning ineffectually. The most recent event just took place and is likely to have a major impact on the housing market, and just when we were thinking it couldn't possibly be any worse. A major title insurance company has just announced it will no longer offer title insurance on sales of foreclosed homes. If other companies follow suit, a likely prospect, then that should put a stop to what has become a significant selling sector of the almost non-existent real estate market. All this has come about because major lenders have put a stop to their foreclosure activities because they suspect, with very good reason, that they are not in a legally supportable position to foreclose. The documentation has not been sufficiently verified, and in cases where it has been verified, it has been found wanting. One company holding a huge dollar value of mortgages originated by Countrywide, which was acquired in a scam sale supported by the government by Bank of America, has filed suit because they have discovered on an audit that 97% of the mortgages they purchased did not meet the underwriting claimed by Countrywide. 97%. The industry is in shambles, and not as a result of unintended consequences. With absolute knowledge that loans were being originated at the insistence of the government through Fannie and Freddie that could not have any expectation of repayment, the financial markets jumped all over these instruments, leveraging at unconscionable levels and selling instruments they knew to be worthless to not entirely blameless investors. The government initiated this problem, they continue to exacerbate it with uninformed glee because of a delusional belief that government can solve what private business decision cannot. We may not be doomed, but we're in a hell of a lot of trouble. November 2 may start the process of cleaning things up, but it's going to take at least a couple of rinse cycles to get rid of all the dirt.

As usual,
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