As you have undoubtedly by now heard, the states’ attorneys general are on the trail of evil mortgage companies for kicking people out of their homes on the basis of sham paperwork. They are certain that there have been frauds perpetuated on the courts as the mortgage companies and courts plowed through mountains of paperwork trying to kick the oppressed homeowners to the curb. Ohio’s attorney general even when so far as to bare his fangs about what the remedy should be, from Bloomberg:
“The financial institutions would be well served by working with us to get it cleaned up,” Ohio Attorney General Richard Cordray told Bloomberg Television’s “InBusiness with Margaret Brennan.” “And they’d also be well served to think about reaching negotiated resolutions with borrowers in cases where they’ve created exposure for themselves by committing fraud upon the courts.”
“Negotiated solutions” plus “exposure” means they better consider doing the same as some borrowers have been, and just walk away. In this instance, it’s the mortgage companies walking away from their interests in a mortgage against the residence. Meaning there will be a bigger, uglier hole on their balance sheets that might have been at least partially filled by the sale of the property at a foreclosure auction.
So, why bother with the messy process of actually investigating to see whether borrowers that owed money they weren’t paying back that was secured by a residence they nominally owned suffered the terrible calamity of having a robo-signer prepare their foreclosure paperwork and just give the god damn house back to them? That’s effectively what Ohio’s attorney general is saying.
We’ve never had a jubilee in this majority Judeo-Christian country (every fifty years, the ancient Hebrews declared jubilee and returned to the original families that owned it any property that had been sold or otherwise alienated during the intervening half-century). We may as well do it now. It’d take less time than all this messy demagoguery.
Never mind that all this would do is operate as a windfall to borrowers that have defaulted on their repayment obligations that will be paid for by everyone else. Never mind that this would make defaulting on a mortgage an even more attractive option than walking away. Never mind that renters and savers would pay some more for the opportunity to subsidize their spendthrift cohorts. Never mind that “negotiated solutions” based on “exposure” rings of extortion. Never mind that centuries of contract interpretation and enforcement will be overturned, blowing an ill wind through the normal execution of all contracts, both domestic and foreign. Just forget all that. Fifty state attorneys general fanning the flames of demagoguery beats reasoned inquiry and policy certitude every time.
When will the idiots in this country come to realize that there is no such thing as a free lunch? When will they realize that decisions have consequences, and decisions based on populist demagoguery usually have especially unattractive consequences?
When will the Obama Administration step in and put an end to this madness? Obama’s detached coolness is again a fault. It’s not clear he understands what’s at stake here. Either we have a republic where the fifty states subordinate their own narrow interests for the good of all, or we’ve got nothing. Either a duly-elected federal government runs the country, or each state is left to its own devices.
Could this be the beginning of the end to the republic as we know it?
*We’d first have to figure out who is the real owner of the property–the mortgagor or mortgagee, and not just by dint of affidavits and robo-signers. If a mortgagor put little to none of his own money towards purchase, is he really anything more than a glorified renter? At what equity level should a homeower be considered a homeowner? 5%? 20%? Should someone that bought a house with an FHA mortgage using a down-payment-assistance “charity” to pay his 1.5% down nonetheless get title to the house if the mortgage company failed to properly notarize an affidavit during the process of foreclosure? He’s never owned anything except the obligation to pay back a loan, yet he wins the foreclosure lottery and gets a house, paid for by his fellow taxpayers? Jubilee! I can see how it got its name.