[Ed. note: You can check out more coverage of the foreclosure fraud and mortgage crisis at this link.]
In a recent article published by Yves Smith has up at Naked Capitalism, the recent foreclosure tsunami is leaving behind a mine field for future home buyers.
It’s based on an analysis done by AFX Title, posted at 4closure Fraud blog. Basically the analysis tells us the same lack of documentation (about which I have ranted for months) that should prevent some banks from having "standing" to foreclose causes something called a "break in the chain of title."
In an uncontested foreclosure, which most are, this standing issue remains dormant and can be brought up at a later date to invalidate the foreclosure, as happened in U.S. Bank v. Ibanez.
So, the home buyer may find that they have bought a previously foreclosed house from a bank which did not have standing to foreclose upon it and therefore, no right to sell it. Title insurance policies are being written with all kinds of nasty exceptions for this contingency.
A wise prospective homebuyer would be leery of buying a previously foreclosed house, wouldn’t they? Which means — wait for it — these greedy banks, who refused to do meaningful mortgage modifications that would have kept people in their homes and still provided a profit to the investors, may be stuck with unmarketable housing inventory.
Ah, delicious irony! Karmic justice! . . .
The bad news for neighborhoods, will be the blight of these empty houses which will continue to depress the housing market.
Somebody, anybody, should listen to Al Franken and put in a monitor to oversee mortgage modifications.