Oh boy. Seems like just about every rock you pick up these days has some giant cockroaches underneath -- especially if it has anything to do with the banks and the mortgage industry:
The foreclosure machinery that has forced millions of Americans out of their homes is beginning to seize up as some lenders and their lawyers are accused of cutting corners in their pursuit of rapid home repossessions. Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country’s biggest home lenders in the past two weeks. Even lenders with no known problems are expected to approach defaulting homeowners more cautiously and look more aggressively for resolutions short of outright eviction.
Despite the turmoil, some economists said the breakdown could ultimately lay the groundwork for a real estate recovery. Stricken neighborhoods across the country, for example, could benefit. One big factor undermining home sales is fear of a large number of foreclosed homes coming to the market. If the foreclosures are delayed or never happen, housing prices might find a floor. “Maybe this is like shock therapy,” said the economist Karl E. Case. “Maybe this will actually get the lenders to the table and encourage them to work out deals that are to the benefit of everybody.”
While such a happy ending is possible, the near term is more likely to produce paralysis and confusion. If foreclosures were not properly done, families who bought the troubled homes could be vulnerable to claims by the former owners. And as more defaulting homeowners become aware of the lenders’ problems, they are expected to hire lawyers and challenge the proceedings against them.
Apparently alarmed about such a possibility, one of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that “until further notice” it would not insure title to properties foreclosed upon by GMAC Mortgage, the country’s fourth-largest home lender and one of the two big lenders at the center of the current controversy. GMAC declined to comment, and Old Republic representatives did not return calls. Both GMAC and JPMorgan Chase have acknowledged legal missteps in processing mortgages — 56,000 in the case of Chase alone — and have suspended all foreclosures in the 23 states where they need a court’s approval.
