How deep does the foreclosure crisis run? Deep enough to cause academics and financial investigators to beg the federal govern to establish national standards to regulate the American mortgage industry.
The crisis occurred due to heavy lending to people with sub-prime credit and then packaging those loans at prime rated mortgage bonds. Once this system collapsed a potentially even greater problem emerged. The banks had no documentation to show who owned the bank notes. The notes had been traded numerous time and no one really new which bad owned the documentation. Once homeowners began to fall behind in payments and the foreclosure process began the banks did not have the correct legal documentation to remove home owners from their residents.
The process created a legal mess that has caused many officials to call for massive reform and a process to establish national standards for he mortgage industry. The standard would create new rules that would guide home mortgage services collect payments and distribute the revenue to investors. The mortgage service industry has been plagued by problems and lawsuits since the foreclosure crisis began.
Homeowners have accused mortgage services of failing to provide adequate assistance for loan assistance. The homeowners also accuse the banks of cutting corners during the foreclosure process. The group wants regulators to establish a detailed set of standards that would require providing reasonable loan modifications. The provision that might cause the banks the most reason to fret is that banks would be held accountable for not have the correct paperwork on hand. This causes banks to engage in less frequent and relentless trading. Top economists including New York University professor Nouriel Roubini signed off on the plans.
It was not the only time that a group asked for reforms in the mortgage industry. Members of the Federal Reserve’s Board of Governors have already be calling for reform in the mortgage industry.
