Mortgage Default Information

Foreclosure Crisis: The Dilemma of Respecting Contracts

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In Brief...

David Dayen has an interview with Congressman Brad Miller, " Brad Miller is at the front of the foreclosure fraud crisis, recently signing a letter urging the newly created FSOC council of regulators to meet to investigate the servicer issues.. Here's Calabria, May of 2009, writing after cramdown ('lien stripping' or mortgage modification in bankruptcy) failed, With 'Cramdown' Rejection, Is Senate Ready to Respect Marketplace Contracts Again? Even though our system of property rights and secured credit are deeply embedded in our laws, if two people made a contract over a mortgage under a regime of the law to then change that law, bankruptcy or otherwise, would insult our system of marketplace contract and introduce all kinds of moral hazard into the equation. The moral hazard of changing the rules for the banks or turning a blind eye to this activity would be deafening, and Lord have mercy on anyone who would violate the sanctity of the courts by bringing in fake documents to provide standing to foreclose. If you tell me that you aren't paying your mortgage, and I don't own the mortgage and the note, I can't kick you out of your house. And to now hand-wave it all away would generate a massive amount of moral hazard for the banking industry, a bailout on par with TARP. Calabria suggests that we toss out the process of judicial foreclosures in the states that have it, replacing it with a 'current or no?' style question and get foreclosures to "proceed, and proceed quickly. " Calabria doesn't suggest how he'd compensate homeowners for this taking. Having a court vet your foreclosure is like buying an embedded option in your mortgage, and like any option you pay for it.

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