Redeeming Foreclosures

OCTOBER 28 2010 UPDATE: See article about former robo-signer who says industry expected such behavior.

You have to wonder about why individuals choose a certain career, particularly what are they getting from it and do they feel happy about it. It is nice to hear about someone who feels the need to "redeem" themselves from their career...and actually does so.

Thomas Cox, a retired Maine lawyer who was once responsible for foreclosing homes, is now fighting to keep foreclosures from barreling through the system. And he is setting off a chain reaction through an industry who has relied on "robo-signers".

The article also goes on to say how the bank, which has been fighting to foreclosure and evict the homeowner for two years, has now spent more in the process than the home is worth. Here again, one must question the motives of such an action.

Perhaps they still think by foreclosing, they can resell the home at a higher value, which may have been true a few years ago. But this home is located in a depressed area of Maine - who would be willing and able to buy anyway? In today's market that is flooded with foreclosed, empty homes, what use are these empty boxes if a bank owns them? Just ask Detroit, where vacancy leads to decay, which leads to crime, which leads to a host of other community problems (i.e. mass exodus).

Recently, all 50 state attorney generals have halted foreclosures as they examine whether the practices were fair and legal. (This is another example of "redeeming" one's career choice!) Yet, the financial industry is crying foul. Although they certainly made failed investments in home lending (whatever practices aside), what do they truly expect to recoup in a foreclosure market so deeply depressed without enough buyers? Sitting on vacant homes or pursuing expensive legal repossession tactics still equals a losing bet.

It's time to propose a new solution because clearly old tactics are not working (what a novel idea!). Temporary solutions could be:

1. Certainly examine all the paperwork and identify illegal and unfair practices.

2. If found, the homeowners get to stay but must pay a fair percentage of their income regardless of what the "mortgage" or "value" of the home is (remember the bank is losing money anyway but at least they would be recouping something out of it; that has to be accepted).

3. If found, for homeowners that are under/unemployed, they also get to stay but must maintain the appearance of their home and perform community services. This would help lessen the burden of administering these services that have decreasing budgets, keeps citizens engaged in their community in a productive manner, and offsets the chances of becoming a decaying community.

4. If no illegal or unfair practices are found, foreclosures can proceed. But former homeowners stay (paying a percentage of their income, maintaining the home, and community service) until the home is fairly purchased by new owners; at that point they would be fairly evicted with adequate notice.

5. Outlaw these practices that caused the industry mess in the first place. If lending institutions fail to follow legal procedure, they have to refinance at a discounted home value with no fees.

Bottom line is: Be greedy and you do it for free ;)