Judges Are Now More and More Reluctant to Approve of Foreclosure

The foreclosure documentation crisis is brewing trouble for all. In the latest round the mess is posing a dilemma – by being just to some of the players the entire society could have to endure pain. Then how should the game be played out?Theoretically one line of approach should be the best but the ground realities prevent this. Some mega financial bodies are sandwiched a crunch. There is a lot at stake.One the one side there are a staggering number of foreclosures on residences of individuals. In the period stretching from 1997 to 2007 the lenders churned out an astronomical number of mortgages. But they did not make corresponding changes in their infrastructure to deal with the increased volume of work when defaults started rushing in with a flood. The paperwork involved could not be properly checked. Even the mega lenders could not deal with the onrush.Many were hesitant about restructuring even though it would have been financially beneficial to them. Their existing capacity could deal with a fraction only of the cases. Similarly they were not administratively prepared to handle the foreclosures abiding by the rules laid down by the law of the land. This resulted in the robo-signing of thousands of affidavits. It was impossible for the signatories to check on the contents or observing other related rules. In some instances the lenders resorted to taking the help of specialists to backdate or even forge the documents.Faced with such indisputable facts the bankruptcy judges are now more and more reluctant to approve of foreclosure in those states where the process has to go through the courts. A team of all the state attorneys are investigating the possibility of illegalities in the procedure that could have led to wrong foreclosures and evictions. The net result is the foreclosure of properties worth billions are hanging in the balance.On the other side are the firms that made packages of mortgages into various types of “mortgage-backed securities” – some simple and others bizarre in its complexities having links with overseas tax havens. Large volumes of new securities were turned out by cutting corners and overlooking fact details. This led to the companies relying on new documents and institutions that had not undergone the legal test – the prime one being MERS that kept digital track of the change of hands of mortgages without noting the same in land records office.