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US banks face ‘nightmare’ of missing mortgage docs
Business Digest: Judges halt foreclosures because where lenders cannot prove they own the mortgage
Judges across America have raised the prospect of a "nightmare scenario" for banks and other mortgage lenders by ruling that lenders must prove they have the right to foreclose on mortgage defaulters.
This has arisen, according to a report in the Washington Post, because millions of US mortgages have been shuttled around the global financial system - getting sold and resold - without the legal documents that prove who owns the loans.
As a result, many judges have taken the decision that a foreclosure is invalid.
As the Post reports, "For struggling homeowners trying to avoid foreclosure, it could mean an opportunity to challenge the banks they argue have been unhelpful at best and deceptive at worst.
"But it also threatens to leave them in prolonged limbo, stuck in homes they still can't afford and waiting for the foreclosure process to begin anew."
As for the banks, they face the prospect of lawsuits both from homeowners and from investors. "There's a possible nightmare scenario here that no foreclosure is valid," said Nancy Bush, a banking analyst from NAB Research.
Read a full report at the Washington Post. ·
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> "[struggling homeowners] ... stuck in homes they still can't afford..."???
How could they not afford the home, if nobody owns the mortgage? I am not a lawyer, but it seems to me that if the bank is trying to foreclose already but seems to have lost the paperwork, the homeowners ought to not only challenge the foreclosure but any further mortgage payments as well.
Presumably, if they're struggling, they have severely cut back their spending. Surely then, it would give an enormous boost to the economy if the government made it clear that if the banks cannot produce the paperwork on a mortgage, the homeowners own their home free and clear.