I love me a good fail, hence the whole Weaky Award system. I used to award Weakies for surprising acts, but after 25 awards these events no longer surprise me.
By now you should be aware of the newly dubbed “foreclosure crisis” that has emerged from a banker’s testimony. What basically happened was a guy from GMAC (now Ally Bank) testified that he approved thousands of foreclosures without ever looking at the paperwork. Other banks announced similar problems and now it seems half of the foreclosure industry has shut itself down. Here are just a few things that have happened:
- Thousands of foreclosures processed without proper review
- Guy who paid cash for his home somehow got “foreclosed”
- Someone else thought their home was being robbed as people tampered with the locks and called the police
- Some banks are having trouble proving they have the right to the home they’re foreclosing
This is simply hilarious, but again not surprising. Foreclosure organizations within banks have been swamped. Amidst TARP bailouts, layoffs, and nearly going under themselves, the banks have hardly had the resources to grow these groups to handle everything. The banks want to foreclose quickly because they want to get the bad loan off their books. These foreclosure departments were probably a 100th of the size they are today 5 years ago.
And if you think you don’t care about this think again. We’re all in this together. Over the short term the housing market will be in a panic. Sellers may want to get into the market as foreclosures are pulled out (inflating prices to a degree) and buyers will be scared to get into a home if the banks don’t have their stuff together. Long term we’re looking at the delaying of the foreclosure flood that continues to plague the housing market. For example, if it takes 6 months to clear this up then the market will be held back that much longer.
The housing market remains a big detriment to the overall economy. These foreclosures will happen and the sooner they do the better. This bandaid is already taking too long to rip off, now it’s just going to have more hair stuck in it and the wound a bit more infected. This is a side-effect of the economic recovery, one of many in fact. The others being high unemployment, poor access to loans, and a rich got richer mentality.
John Carney of CNBC has a thorough summary of “foreclosure-gate” or whatever else you want to call it.
Photo: respres
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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