Misplaced Zeal In The Housing Crisis
Four years after the beginning of the housing bust
, it seems that some in the political arena are fighting so that it may continue. The Attorney General out of Massachusetts, Martha Coakley, is infusing more uncertainty for the mortgage industry with a lawsuit that is pushing business out of her state.
The attorney general put fort her case against the top mortgage servicers in the country, claiming that they engaged in foreclosure practices that were "unfair and deceptive." She also impugned the banks' documentation practices; which, according to her, deceived borrowers about the availability of loan modifications.
The suit is a parallel to the robo-signing complaints made in continuing national mortgage settlement negotiations among state attorneys general and large financial institutions. While the government is requesting $25 billion in restitution for purported documentation violations, the firms want assurances that they won't face an onslaught of lawsuits if they settle.
Instead of awaiting the result of these negotiations, Attorney General Coakley is proceeding with a lawsuit that takes advantage of anti-bank sentiment and undoubtedly would aid her political ambitions.
Since no evidence exists that homeowners that were current on their mortgages were evicted from their homes, the state is focusing on bank procedures specific to Massachusetts. Certainly, anyone wrongly tossed-out of their homes should be compensated; however, errors in processing aren't necessarily deception and fraud. Throughout the U.S. banks have found only a few cases in which homeowners were wrongfully foreclosed upon, and Attorney General Coakley offers not one of these cases.
Federal regulators are already penalizing banks for sloppy procedures and documentation. Foreclosures between the years of 2009 and 2010 are being examined and more than 2Vi million letters have been sent to borrowers informing them that their cases can be reviewed.
The housing market cannot recover until servicers are able to foreclose on delinquent homeowners and resell home to those who can afford them. The lawsuit will delay this from happening, which will increase credit costs, reduce options, and postpone a housing recovery.
by: LindaKinyo
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