Despite Massive Fraud, The Wall Street Journal Pushes To Make It Easier For Banks To Foreclose On Homeowners
Blog ››› ››› REMINGTON SHEPARD
The Wall Street Journal pushed for policies that would make it easier for banks to foreclose on homeowners, even as banks are paying out millions to settle lawsuits over their fraudulent foreclosure practices.
During the housing crisis, mortgage lenders engaged in massive fraud in order to speed the process of foreclosing on loans, which led to multiple lawsuits, admissions of guilt, and settlements with state and federal regulators totaling $33 billion so far. The latest such settlement was announced Tuesday.
Despite this fraud, a Journal editorial advocated that all states adopt a mortgage foreclosure system in which lenders can seize people's houses without going to court:
We're referring to the difference between "nonjudicial" states that have streamlined foreclosure procedures and the 23 "judicial" states that force lenders to go to court to enforce mortgage contracts. Prices are stabilizing in the former but still faltering in much of the latter, which isn't surprising, except to politicians. Housing markets can't clear until lenders can foreclose on delinquent borrowers and prices fall far enough to attract buyers who can afford the mortgage payments.
Politicians and housing lobbyists decry nonjudicial foreclosure as unfair to borrowers, but every homeowner in any state has the right to challenge a foreclosure in court. The main difference is that in a judicial state the lender has to file a lawsuit to initiate a foreclosure, which can take months or years to settle depending on the state.
The editorial also claimed that state foreclosure protections "have taught borrowers it's okay to stay delinquent for months or years while fending off foreclosure."
In fact, the protections for homeowners that the Journal decries helped uncover foreclosure fraud that led to massive settlements and admissions of guilt. In New York, one of the states that requires lenders to go to court before seizing people's homes, a judge tossed out 46 of 102 foreclosure motions brought before him over a two year period because he found many of the motions to be problematic. According to The New York Times, Judge Arthur Schack threw out one motion that featured:
A Deutsche Bank representative signed an affidavit claiming to be the vice president of two different banks. His office was in Kansas City, Mo., but the signature was notarized in Texas. And the bank did not even own the mortgage when it began to foreclose on the homeowner.
Nevertheless, the Journal wants to decrease judicial oversight over the foreclosure process.