Making Sen$e -- October 14, 2010 at 6:48 PM ET
Why We're Looking at Foreclosures
On Thursday's NewsHour, we have the first in a series of stories on foreclosures. A glance at the "Most Popular" list at the Wall St. Journal's online real estate page gives some sense of the shapes these stories are taking:
Our Thursday story features, among its several characters, Brooklyn Judge Arthur Schack, who began blocking foreclosures three years ago, due to what he already identified as faulty, if not downright fraudulent, paperwork.
Another key protagonist is North Carolina lawyer Max Gardner, known as "the dean of the bankruptcy bar." Gardner has agreed to answer your mortgage questions here on Making Sen$e.
Finally, we have an upcoming explainer that will walk you through the process of what happens to a mortgage loan from origination to foreclosure. We promise not to be too wonky.
Final question: How big a deal IS this? Big. Potentially, huge. Across the country, title insurance companies are refusing to guarantee the deed on foreclosed properties. Would you buy a home without the guarantee that once you bought it, you'd own it? Conversely, if you OWNED a home which the bank or Fannie Mae, say, was trying to foreclose on for non-payment of the mortgage, would you continue to pay? Move out?
Hey, suppose you're an investor holding a mortgage-backed security. Your payments ultimately come from the mortgage payments that back the security you've purchased. Uh...
And the "TBTF" banks? The ones I've talked to are holding upwards of 30 percent of all the mortgages they "service" on their own books. If payments on many of those securities suddenly stop, aren't the banks in trouble once again?
I just spoke to a member of my family, a longtime, respected and successful real estate broker in Ohio. The real estate business has been iffy enough since the crisis. In communities like his, 50 percent or so of all residential transactions involve foreclosed properties. (See our recent piece on Cape Coral, Florida for a vivid illustration) What's going to happen to America's half a million or so real estate brokers and sales agents if the foreclosure market dries up?
Postscript (if you'll pardon the term in the online context): The foreclosure story is moving so quickly, I forgot to mention a nascent national movement instigated by the Service Employees International Union: wheresthenote.com. Here's a note we received from the union this morning:
Just wanted to share the exciting news that our "Where's the Note?" campaign was featured on CBS's the Early Show this morning. In a little over 24 hours, more than 50,000 homeowners requested their mortgage note from their bank through www.wheresthenote.com. You can view the clip here.
With our online tool, homeowners can easily request a copy of their mortgage note, a document banks need to prove that they own the loan and can collect payments from homeowners... The campaign is sponsored by SEIU, National People's Action, PICO National Network, Industrial Areas Foundation, Alliance of Californians for Community Empowerment, and the Northwest Federation of Community Organizations.