[FoolYap]

$this->bbcode_second_pass_quote('Denny', 'W')ell, if everybody just practices some patience, over the years it will blow over. Both the owners and banks need to relax and not be so quick to hit the panic button.
So, maybe it wil take 5 years or maybe 25, but no need to lose heart. If the bank overextended the loan, that mistake is in the past, no need to make a fuss now.

[Denny]

Sure, the price drop would impair the "flippers" as they will have to wait so long now to see any profit, especially when one considers the interest charges. But, there will always be lots of renovation potential on existing housing stock to keep some work for carpenters and Home Depot. Not as much as before, but some. Also, the outcome of many natural disasters - fire storms, floods and tornadoes creates house building work.

Also, I am sure many people, who have been more careful with their money, will want to move upward from the cute bungalow to a four bedroom as the family grows and as their careers progress. So, that will retain work for real estate people, not as much work as before and likely smaller commissions as the sale prices wil be lower, but still a lot.
The U.S. is a huge country, and even if the sales rate is down, that massive size makes for a lot of work to be done.

[seahorse]

$this->bbcode_second_pass_quote('', 'b')anks need to relax and not be so quick to hit the panic button.

[Denny]

$this->bbcode_second_pass_quote('seahorse', '')$this->bbcode_second_pass_quote('', 'b')anks need to relax and not be so quick to hit the panic button.

[Pretorian]

$this->bbcode_second_pass_quote('seahorse', '')$this->bbcode_second_pass_quote('', 'b')anks need to relax and not be so quick to hit the panic button.

[FoolYap]

$this->bbcode_second_pass_quote('Denny', 'S')ure, the price drop would impair the "flippers" as they will have to wait so long now to see any profit, especially when one considers the interest charges.

[Waterthrush]

The news is coming too fast and furious to keep up with. Here, from the NY Times, the demise of Exurbia: http://www.nytimes.com/2008/06/25/busin ... xurbs.html

I wonder if the couple discussed would do better to have one of them stay at home and work on reducing their dependence on cash? What would happen with a lot of cooking, a big garden, getting rid of one of the cars? Of course, the heat would have to be on more in winter ...

[Couve]

$this->bbcode_second_pass_quote('Denny', 'W')ell, if everybody just practices some patience, over the years it will blow over. Both the owners and banks need to relax and not be so quick to hit the panic button.
So, maybe it wil take 5 years or maybe 25, but no need to lose heart. If the bank overextended the loan, that mistake is in the past, no need to make a fuss now.

[Micki]

I think it has been mentioned here before that mortgagees can get away with defaulting on payments and keeping the property.
Here is however a new article.
Apologies for the long post, but it is from a pay-site (LeMetropoleCafe), so can't link. I did truncate the article though, to keep size down a bit.

Will be very interesting to see if defaulting home owners start spending their last money on solicitors rather than mortgage payments.

$this->bbcode_second_pass_quote('', '.')..The Legal Trump Card: Make Them Produce the Note
A basic principle of contract law is that a plaintiff suing on a written contract must produce the signed contract proving he is entitled to relief. If there is no signed mortgage note or recorded assignment, foreclosure is barred. The defendant must normally raise this defense, and most defaulting homeowners, unaware of legal procedure and concerned about the expense of hiring an attorney, just let their homes go uncontested. But when the plaintiffs bringing subprime foreclosure actions have been challenged, in most cases they haven’t been able to produce the notes.
Why not? It appears to be more than just sloppy paperwork. The banks that originally entered into these risky subprime arrangements generally did so because they had no intention of holding the loans on their books. The mortgages were immediately sliced and diced, bundled up as mortgage-backed securities (MBS), and sold off to investors. Loan originators sold the mortgages to financial institutions or other banks, which then sold the rights to the monthly mortgage payment income to investors, while transferring the responsibility to collect these payments to specialized mortgage servicing companies. The result has been to slice up the mortgage contract, with no party really having ownership of the original paperwork. When foreclosure has been initiated, the servicer or trustee acting as plaintiff now has trouble proving that it originated the mortgage or owned the loan. In order for a second bank or financial institution to have standing to bring a foreclosure lawsuit in court, it must have been assigned the mortgage; and with the collapse of the housing market, many of the subprime lenders have gone out of business, making it impossible to contact the originating mortgage company. Other paperwork has just been lost in the shuffle.2
Why weren’t the mortgage notes assigned to the MBS holders when they were first sold? Apparently because the investors aren’t even matched up with specific properties until after default. Here is how the MBS scheme works: when the mortgages are first bundled by the banks, all of the subprime mortgages go into the same pool. The bundled mortgages are chopped into “securities” that are sold to many investors -- banks, hedge funds, money market funds, pension funds -- with different “tranches” or levels of risk. The first mortgages to default are then assigned to the high-risk “BBB-” tranche of investors. As defaults increase, later defaulting mortgages are assigned down the chain of risk to the supposedly more secure tranches.3 That means the investors get the mortgages only after the defendants breached the agreement to pay.
It also means the investors weren’t a party to the agreement when it was breached, making it hard to prove they were injured by the breach.
The investors have another problem: the delay in assigning particular mortgages to particular investors means there was no “true sale” of the security (the home) at the time of securitization. A true sale of the collateral is a legal requirement for forming a valid security (a secured interest in the property as opposed to simply a debt obligation backed by collateral). As a result, the investors may have trouble proving they have any interest in the property, secured or unsecured.4
The Dog-Ate-My-Note Defense
When the securitizing banks acting as trustees for the investors are unable to present written proof of ownership at a time that would entitle them to foreclose, they typically file what’s called a lost-note affidavit. April Charney is a Florida legal aid attorney well versed in these issues, having gotten foreclosure proceedings dismissed or postponed for 300 clients in the past year. In a February 2008 Bloomberg article, she was quoted as saying that about 80 percent of these cases involved lost-note affidavits. “Lost-note affidavits are pattern and practice in the industry,” she said. “They are not exceptions. They are the rule.”3
In the past, judges have let these foreclosures proceed; but in October 2007, an intrepid federal judge in Cleveland put a halt to the practice. U.S. District Court Judge Christopher Boyko ruled that Deutsche Bank had not filed the proper paperwork to establish its right to foreclose on fourteen homes it was suing to repossess.4 That started the ball rolling, and by February 2008, judges in at least five states had followed suit. In Los Angeles in January, U.S. Bankruptcy Judge Samuel L. Bufford issued a notice warning plaintiffs in foreclosure cases to bring the mortgage notes to court and not submit copies. In Ohio, where foreclosures were up by a reported 88 percent in 2007, Attorney General Marc Dann was reported to be challenging ownership of mortgage notes in forty foreclosure cases.5
Few defendants, however, are lucky enough to have advocates like Charney and Dann in their corner, and most defaulting debtors just let their homes go. A simple challenge can be filed to the complaint even without an attorney, and some subprime borrowers have successfully defended their own foreclosure actions; but retaining an attorney is strongly recommended. People representing themselves are often not taken seriously, and they are likely to miss local rule requirements. With that warning, here is some general information on challenging standing to foreclose:
Some states are judicial foreclosure states and some are non-judicial foreclosure states. In a judicial foreclosure state (meaning the matter is heard before a judge), if a promissory note or recorded assignment naming the plaintiff is not attached to the complaint, the defendant can file a response stating the plaintiff has failed to state a claim. This can be followed with a motion called a demurrer to the complaint. Different forms of demurrers can be found in legal form books in most law libraries. In essence the demurrer states that even if everything in the complaint were true, the complaint would lack substance because it fails to set out a copy of the note, and it should therefore be dismissed. Ordinarily there is no need to cite much in the way of statutes or case law other than the authority reciting the necessity of showing the note proving the plaintiff is entitled to relief.
In a non-judicial foreclosure state such as California, foreclosure is done by a trustee without a court hearing, so the procedure is a bit trickier; but standing to foreclose can still be challenged. If the homeowner has filed for bankruptcy, the proceedings are automatically stayed, requiring the lender to bring a motion for relief from stay before going forward. The debtor can then challenge the lender’s right to the security (the house) by demanding proof of a legal or equitable interest in it.6 A homeowner facing foreclosure can also get the matter before a court without filing for bankruptcy by filing a complaint and preliminary injunction staying the proceedings pending proof of standing to foreclose. A judge would then have to rule on the merits. A complaint for declaratory relief might also be brought against the trustee, seeking to have its rights declared invalid.7
An Equitable Settlement for Everyone
These defenses can help people who are about to lose their homes, but there is another class of victims in the sub-prime mortgage crisis: investors in MBS, including the pension funds and 401Ks on which many people depend for their retirement. If the trustees representing the investors cannot foreclose, the lucky debtors may be able to stay in their homes without paying. However, the hapless investors will be left holding the bag. If the investors manage to shift liability back to the banks, on the other hand, the banks could go down and take the economy with them. How can these tricky issues be resolved in a way that is equitable for all? That question will be addressed in a followup article. Stay tuned.