Foreclosure Crisis Could Last For Years

Margaret Cronin Fisk and Kathleen M. Howley of Bloomberg Businessweek via MSNBC.com published a great article on why the foreclosure crisis could take years to resolve. Between congressional hearings, states investigations, a presidential pocket veto of related legislation and mounting class action lawsuits, this isn't going anywhere anytime soon.

The dimensions of the foreclosure crisis keep expanding. Lenders and loan servicers including JPMorgan Chase and Ally Financial are facing an explosion in homeowner lawsuits and state attorney general investigations of claims of falsified mortgage documents. Lawmakers in both houses of Congress have called for investigations. And procedural mistakes in the handling of mortgage documents have clouded titles establishing ownership of the homes, a problem that could plague both buyers and sellers for years. "This is going to become a hydra," says Peter J. Henning, a professor at Wayne State University Law School in Detroit. "You've got so many potential avenues of liability. You don't even know the parameters of this yet."

Yesterday, Caren Bohan and Scot J. Paltrow of Reuters reported via MSNBC.com that President Barack Obama will not sign legislation that could have made it more difficult for homeowners to challenge unjustified foreclosure actions.

White House communications director Dan Pfeiffer said Obama was sending the bill back to the House of Representatives for further discussion of how it would affect the foreclosure crisis, which has become a political lightning rod amid media reports that banks acted improperly to evict struggling borrowers.

The bill would have required courts to accept all out-of-state notarizations, including those stamped en masse by computers in a practice that critics say has been improperly used to expedite foreclosure orders.

The U.S. Justice Department is getting involved too (via MSNBC.com):

The government is looking into allegations that mortgage lenders in the foreclosure crisis have been evicting homeowners using flawed court papers, Attorney General Eric Holder said Wednesday.

President Barack Obama's financial fraud enforcement task force has a mortgage component to it, Holder noted during a news conference.

In a letter Tuesday, House Speaker Nancy Pelosi and dozens of Democratic lawmakers urged bank regulators and the Justice Department to probe whether mortgage companies violated any laws in handling foreclosures and borrowers' requests for loan assistance.

This is not what housing/mortgage markets need... not to mention the broader economy.