The foreclosure crisis is not only an economic disaster. It is a legal mess that is threatening the roll of the court system in administering property rights.
In cases where it is clear that the homeowner is behind in payments there are still legal steps that must be taken. The bank cannot just take back the home without going through a process through the courts. At the hearing the bank or lender must prove that a debt is owed, and this becomes a problem due to the nature of the home mortgage industry. Home loans are often traded numerous times as part of massive blocks of securities. The mortgages bond can be traded dozens of times before ending up in the final hands. Tracking this process and finding where the loan is. While the banks are able to make money on trading the loans the system breaks down if the home owners cannot afford to pay their mortgage.
University of Iowa law professor and bankruptcy expert Katherine Porter found that only in 40 percent of bankruptcy mortgage claims could banks provide proper paperwork. The specific paperwork necessary to enforce the mortgage claim and collect on the loan was the note, which could be held by a Chinese company. Porter wrote that the statistic called into question the integrity of the bankruptcy system.
Foreclosure attorneys report that banks rarely have the proper paperwork to file a legal claim on mortgage foreclosures. While members of a Florida bankers associate have called arguing that the proper paper cannot be produced is a “egal technicality”, but those same so-called technicality seems to be at the heart of the court system. If a person cannot prove that a house belongs to him or her, then the police evict them. If the bank cannot prove it owns house, should the bank be able to do the same thing?
