Originally, I hadn't paid much attention to the foreclosure "fraud" scandal, which reared its ugly head last week. However, since then, virtually every big bank has come forward to admit irregularities in the process of foreclosing homes.
As Diana Olick reported at CNBC, the problems include mortgage securities and who actually owns the mortgage, not just foreclosure paperwork.
This could not come at a worse time for our economy and the Obama administration.
For the Obama administration, $90 billion was spent on the first mortgage foreclosure freeze failure, $20 to $50 billion spent on a second entitlement earlier this year (which so far has bombed), and nearly $200 billion on Fannie and Freddie who are being used to underwrite and securitize about 90% of all new mortgages in the U.S (not to mention, they own about 180,000 homes).
As David Faber (in video) points out, you will not get buyers into this market until it hits a bottom in pricing. Why should I buy a 2nd or 3rd house when the government is focused on giving Americans free temporary housing through foreclosure freezings? Why should I buy a foreclosed property if the government just let someone squat in it for 18 months (would you fix a broken window or fixture if the house you were in was foreclosed and you were eventually going to be evicted)?
Politicians are seizing this opportunity in wanting to provide homeowners with more assistance and slow the foreclosure process further. My #1 complaint about the housing market is that foreclosures aren't being processed fast enough!!! Delaying this process further will continue to undermine the housing market and the economy as a whole.
