That’s a vexing question asked by realtors, homeowners, attorneys and increasingly judges.

There is no one, certain answer, but there are a wide range of factors that play into the unwillingness of banks to make reasonable business decisions.

Top on that list are government incentives and bailouts that subsidize otherwise irrational business decision-making, oh and then there are the complex financial products that have twisted up title and real estate so tightly that no decisions can be made.

The attached article delves into the question and helps answer the question…..

Since the foreclosure crisis began, myself and a chorus of responsible, ethical attorneys have been screaming at the top of our lungs to judges and anyone else that might listen…

HOW IN THE WORLD CAN YOU CONTINUE TO LET ALL THIS FRAUD CONTINUE TO BE COMMITTED?

DON’T YOU UNDERSTAND THAT FRAUD IN THE FORECLOSURE PROCESS IS GOING TO WREAK HAVOC ON THE REAL ESTATE MARKETS AND COURTS FOR DECADES TO COME?

EVEN IF YOU PUSH FORECLOSURES THROUGH NOW, THE TITLE TO PROPERTIES FROM FORECLOSURES GRANTED IN THIS PERIOD WILL HAVE LITTLE OR NO VALUE!

and finally

THE TITLE INSURORS WHO ARE UNDERWRITING TITLE POLICIES WILL GO BANKRUPT AND TITLE INSURANCE WILL BE WORTHLESS!

Our realtor friends are starting to catch on…read the following article which is quite chilling…

-by George Mantor

Agents involved in foreclosures and short sales may need to begin to disclose the possibility of serious defects in title associated with these types of lender controlled sales.

If recent court decisions are any indication, we are headed for an explosion of litigation in this area. And now, Massachusetts Courts have revealed the possibility that unlawful foreclosures, dating back to 1989, might be invalidated and that buyers of foreclosed properties and short sales may have clouded titles. The implications are enormous for title companies, bankruptcy attorneys, real estate agents, those facing foreclosure, and those who have lost their homes. The problem stems from the collision of two worlds.  It illustrates what can happen when the new world fails to acknowledge or understand the old.  It is change that takes place without the cooperation of all affected parties. Real property law has an ancient tradition.  But, its laws and their purpose are not always apparent to those who want to change those traditions to benefit themselves. In the case of maintaining a public chain of title to real property, it was thought to be essential and generally required by the law. For hundreds of years, no one ever thought of any reason to change it.  It was thought to be part of the public good. That is, until Wall Street saw the money making potential in Credit Derivatives.

Credit Derivatives are packages of debts such as car loans, student loans, credit card debts, and mortgage loans to name a few.  These are collected, rated according to their risk, and sold to investors around the world. One small problem; if you are going to bundle mortgages from every county in the country, you would have to physically send someone to every county recorder’s office on multiple occasions and pay multiple recording fees.  It was costly and cumbersome to those responsible for affecting the recordings. Their solution?  Stop recording the assignments in public and track them instead in an electronic data base that the major lenders would operate through a cooperative entity.  Say hello to Mortgage Electronic Registration Systems, affectionately known as MERS.  Not only did it save them a fortune in county fees and manpower, it turned out to be a cash cow.

Well, good for them, right?  They figured out how to bring technology to the process and were handsomely rewarded.  Never mind that the cost of maintaining a county recording system is paid, in part, by the recording revenue. They still have to maintain the apparatus, but now they aren’t receiving the revenue intended to maintain the system.  Of course, this comes at a time when many counties are struggling to provide necessary services to their residents.

But, as with many new ideas, there are unintended consequences that are now coming to light as state after state are enforcing basic property rights.

Massachusetts

On October 14, 2009, Judge Keith Long of the Massachusetts Land Court said in his ruling, “The issues in this case are not merely problems with paperwork or a matter of dotting i’s and crossing t’s. Instead they lie at the heart of the protections given to homeowners and borrowers by the Massachusetts legislature.”

He was referring to the industry practice of trading notes endorsed in blank, in direct violation of securities law.  Here is what he said on that point; “The blank mortgage assignments they possessed transferred nothing…in Massachusetts, a mortgage is a conveyance of land. Nothing is conveyed unless and until it is validly conveyed.  The various agreements between the securitization entities stating that each had a right to an assignment of the mortgage are not themselves an assignment and they are certainly not in recordable form.”

Two years earlier, Judge Rosenthal in re Schwartz, found that there was no evidence that the note itself was assigned and no evidence as to who the current holder might be.

Kansas

On August 28, 2009, Judge Eric S. Rosen of the Kansas Supreme Court likened MERS to a “straw man” and not a party of interest with the right to foreclose.

“Indeed, in the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable.  The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note.  Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of a default. The person holding only the deed of trust will never experience a default because only the holder of the note is entitled to payment of the underlying obligation. The mortgage loan becomes ineffectual when the note holder did not hold the deed of trust.”

California

On October 21, 2008, Judge Samuel L. Bufford noted in his ruling that California codified the principal in 1872 in Carpenter v. Longan: “Given that ‘the debt is the principal thing and the mortgage an accessory,’ the Supreme Court reasoned that as a corollary, ‘the mortgage can have no separate existence.  An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nullity.”

Nevada

On August 19^th, 2008, Judge Linda B. Riegle concluded, “There is no evidence that the named nominee is entitled to enforce the note or that MERS is the agent of the note’s holder.  Indeed, the evidence is to the contrary, the note has been sold, and the named nominee no longer has any interest in the note.”

Arkansas

On March 19, 2009 the Supreme Court of Arkansas found that MERS was not the beneficiary under the deed of trust, although so designated in the deed of trust, because it did not receive the payments on the underlying debt.

Ohio

On October 31, 2007, U.S. District Judge Christopher Boyko dismissed 14 foreclosure actions and delivered a strong admonishment in a footnote:

“Plaintiff’s ‘Judge, you just don’t understand how things work,’ argument reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process…There is no doubt that every decision made by a financial institution in the foreclosure is driven by money.”

When you consider the origin of this problem, it is hard to disagree.  If the foreclosing entity didn’t loan the money, the original note was sold, the location of the note is unknown, and it isn’t even clear what would happen to the proceeds of the eventual sale of the property to a new owner.

Until recently, MERS had succeeded in most foreclosure actions.  In non judicial foreclosure states like California, there is no judicial review of the elements of a foreclosure.  Unless the borrower files for Bankruptcy or brings a law suit against MERS alleging RESPA or TILA violations, there is no opportunity for the borrower to challenge the foreclosure.

In judicial foreclosure states, there is a law suit brought by the party entitled to payment on the defaulted loan.  Not the trust, but the actual possessor in due course of the original note.  Its part judicial procedure, part uniform commercial code and part ancient property law.

But, the securitization business is so complicated, intentionally so, that defendants, most of their legal representation, and the judges rarely considered the consequences to the real parties in interest.  This will continue until enough people understand the importance of the actual note and its relationship to the property.

Many homes have been unlawfully foreclosed by entities not entitled to anything. The former owners of these homes have rights that will need to be addressed.

People who applied for mortgage modifications and received them may have gotten approval from a bank employee with no authority to change the underlying terms of the securities in the pools.

Many people bought these homes and have potential future claims.  If there is a cloud on title, the new owner is at risk of being unable to sell or encumber the property.  If the foreclosure were unlawful, the borrower is entitled to their property.  And, there is a very real possibility that the true holder of the actual note, once and if ever this mess is sorted out, could come forward with the actual note.

It isn’t important to only those in foreclosure. For those seeking loan modifications, potential buyers of short sales and foreclosures and those acting in a fiduciary capacity on their behalf, you may soon be demanding, “Show me the note.”

Every so often, the appellate courts issue opinions that dramatically change the legal landscape.  BAC Funding v. US Bank is just such an opinion, because no longer will banks and lenders get a free shot at foreclosure on concocted evidence and mere possession, even of original documents.  The full text of the opinion can be found here, but it should be brought to the attention of every judge in every foreclosure case across the state.

The opinion is full of great direction, but the bottom line is the appeals court has made it clear that it is no longer permissible for Plaintiffs attorneys to come marching into court with documents alone….even if they are original documents.  Throughout the foreclosure crisis, Plaintiffs attorneys have been permitted to ignore the basic rules of evidence and just enter in documents without any explanation of how they came into possession….this will now change and Plaintiffs will be required to have both the original documents and some evidence to support how they came into possession of the  documents–something they will have a difficult time doing in many cases.

Here is language taken directly from the opinion:

• U.S. Bank filed a written response to BAC’s motion to dismiss.  Attached as Exhibit A to this response was an “Assignment of Mortgage.”  However, the space for the name of the assignee on this “assignment” was blank, and the “assignment” was neither signed nor notarized.  Further, U.S. Bank did not attach or file any document that would authenticate this “assignment” or otherwise render it admissible into evidence. (That last sentence is key because it now requires Plaintiffs to “authenticate” their filings.)
  

• Despite the lack of any admissible evidence that U.S. Bank validly held the note and mortgage, the trial court granted summary judgment of foreclosure in favor of U.S. Bank.  (Although the bank had introduced an assignment, the court is saying that assignment should not have been the basis to grant summary judgment because it was not properly admitted into evidence.)
  

• When a plaintiff moves for summary judgment before the defendant has filed an answer, “the burden is upon the plaintiff to make it appear to a certainty that no answer which the defendant might properly serve could present a genuine issue of fact.”  Settecasi v. Bd. of Pub. Instruction of Pinellas County 156 So. 2d 652, 654 (Fla. 2d DCA 1963); see also W. Fla. Cmty. Builders, Inc. v. Mitchell, 528 So. 2d 979, 980 (Fla. 2d DCA 1988) As these cases show, a plaintiff moving for summary judgment before an answer is filed must not only establish that no genuine issue of material fact is present in the record as it stands, but also that the defendant could not raise any genuine issues of material fact if the defendant were permitted to answer the complaint.

• Further, it did not file any supporting affidavits or deposition testimony to establish that it owns and holds the note and mortgage.  Accordingly, the documents before the trial court at the summary judgment hearing did not establish U.S. Bank’s standing to foreclose the note and mortgage, and thus, at this point, U.S. Bank was not entitled to summary judgment in its favor. (This language is key because it directs the courts to demand an evidentiary basis for documents, not just the documents themselves.)
  

• Regardless of whether BAC answered the complaint, U.S. Bank was required to establish, through admissible evidence, that it held the note and mortgage and so had standing to foreclose the mortgage before it would be entitled to summary judgment in its favor.  Whether U.S. Bank did so through evidence of a valid assignment, proof of purchase of the debt, or evidence of an effective transfer, it was nevertheless required to prove that it validly held the note and mortgage it sought to foreclose.  See Booker v. Sarasota, Inc., 707 So. 2d 886, 889 (Fla. 1st DCA 1998) (The key word here is “validly”.  The Plaintiff cannot just show up in court with the documents, it must validate them and authenticate the documents for the court to consider.)
  

• The incomplete, unsigned, and unauthenticated assignment attached as an exhibit to U.S. Bank’s response to BAC’s motion to dismiss did not constitute admissible evidence establishing U.S. Bank’s standing to foreclose the note and mortgage, and U.S. Bank submitted no other evidence to establish that it was the proper holder of the note and/or mortgage. (The Plaintiff must introduce authenticated, properly introduced evidence to proceed.)
  

The Court Recognizes That Insuring Proper Title To Property Will Be a Real Challenge in Years to Come….

Given the vastly increased number of foreclosure filings in Florida’s courts over the past two years, which volume has taxed both litigants and the judicial system and increased the risk of paperwork errors, it is especially important that trial courts abide by the proper standards and apply the proper burdens of proof when considering a summary judgment motion in a foreclosure proceeding. Accordingly, because U.S. Bank failed to establish its status as legal owner and holder of the note and mortgage, the trial court acted prematurely in entering final summary judgment of foreclosure in favor of U.S. Bank.  We therefore reverse the final summary judgment of foreclosure and remand for further proceedings.

And so, in this brand new, and as yet, unpublished opinion, the legal landscape for foreclosures changes forever!

Courts Are Overwhelmed With Foreclosures

Across the country, circuit court judges and their staff are becoming overwhelmed and frustrated by the total avalanche of foreclosure cases that have been dumped in their courtrooms.  In Pinellas County, Circuit Court judges who used to handle like 400 foreclosure cases are now handling something like 3,000.These judges still have one judicial assistant and the same limited resources the had before the crisis.  When the judge’s loan JA sits down to start the day, they are bombarded with phone calls and mail and people in their face every single second….it’s chaos, its a burden and it is completely untenable for the long run.

I know, Let’s Throw All The Rules Out The Window

Many of the Plaintiff’s attorneys that are working so hard to throw borrowers out of their home cannot rely on good, solid, honest legal work to accomplish their job.  As an attorney who sees the work of these firms every day, I am just astonished that the Courts continue to allow such horrendous practice to continue unchecked, but there seems to be little desire to try and force a correction of the behavior.  Just in case you think I’m overstating the problem, here is an excerpt from the Florida Supreme Court’s Task Force Report on Residential Mortgage Foreclosures

• Finally, it is critical that these firms be candid, clear, and truthful and accurate in connection with pleadings and affidavits filed with the Courts.  A leading plaintiff’s lawyer and a major plaintiff’s law firm have been the subject of a public reprimand and sanctions due to untruthful filings with the courts.  Judges continue to see affidavits of amounts due and owing signed by law firm employees, and cost affidavits charging very high service of process fees for process serving firms owned by the law firm principals.  To some extent, it is fair to be concerned whether the press of the case load is interfering with a judge’s ability to police the conduct of the firms before them in these usually uncontested, unopposed foreclosure cases.

The full report can be found here but the bottom line is this, the lenders and their law firms are lying, lying, lying.  They’re committing fraud on the courts on an unprecedented scale.  The report of the Supreme Court is a bit sanitized, but the firms are whipping out foreclosure cases so quickly that they’re not even bothering to get the proper documents that prove they have a correct basis to file a suit from the outset.  Some firms have ownership interests in the process servers who are supposed to personally hand the lawsuit to a defendant and they’re both charging exorbitant fees for this service and lying about whether proper service has been obtained or even attempted.  And finally, the biggie….they’re lying, lying, lying about the evidence they’re submitting to the court, these come primarily in the forms of Affidavits and Assignments submitted to support Summary Judgments of Foreclosure.

Affidavits and Assignments in Foreclosure, Liars Re-Telling Lies Re-created From Fiction

There are several areas where the lying is reduced to black and white and submitted to the court.

Assignment of Mortgage

First, when the foreclosing Plaintiff is not the original lender, there must be a formal Assignment of Mortgage executed which says, “The Original Lender Assigns This Mortgage to the Plaintiff in This Case.”  This document is needed to give the Plaintiff the proper legal basis to be suing the Defendant. Many of the originating lenders are no longer operating so getting a real assignment from a dissolved corporation would be difficult.  In other cases, the Plaintiff introduces an Assignment of Mortgage executed by “MERS” a shadowy, shifty, shady backroom dealer of mortgages.   The Assignment of Mortgage issue is problematic even when a mortgage was only assigned from an originating lender to the foreclosing Plaintiff, but in cases where a mortgage has changed hands many times, there should be an unbroken chain of properly executed assignments from originating lender straight through to foreclosing Plaintiff.  (In fact, this requirement of an unbroken chain of assignments was originally part of the foreclosure procedures in Pinellas County, but this requirement was stripped.)  The problem is these assignments are frequently fraudulent.  The lenders know this, their attorneys know this and the courts know this, but they’re all just going ahead and pretending like it’s not an issue. IT IS AN ISSUE!

Affidavit of Amounts Due and Owing

The second area of Affidavit Fraud is the Affidavit of Amounts Due and Owing which states, “Your Undersigned Affiant is an employee of the Plaintiff and I SWEAR Based on my PERSONAL KNOWLEDGE that the Plaintiff is Owed, $150,000″.   In a case where the original lender is the foreclosing Plaintiff, an employee of that lender could sign such an affidavit based on their review of the company’s accounting records.  In most of the foreclosure cases currently pending in courts around the country, the mortgages have changed hands many times and there is simply no basis whatsoever for any person to sign an affidavit stating that they have any knowledge whatsoever of who is owed any money whatsoever.  These affidavits are legally insufficient, they’re false and fraudulent.

Affidavit of Lost Note

The third area of Affidavit Fraud is the Affidavit of Lost Note which states, “Your Undersigned Affiant is an employee of the Plaintiff who had posession of the note when it was lost and while we looked long and hard to find the note, it’s just plain disappeared and we just will never find it.”  In cases where the Plaintiff cannot locate the original note, this Affidavit is required in order to “Re-establish The Lost Note”, a technical process which must be followed in order to successfully and honestly proceed with a foreclosure case.  There are two problems here.  First, in many cases, the Affidavit does not include the correct language wherein the Plaintiff asserts that it was in possession of the note when it was lost.  The affidavit states, “the note was in possession of someone (we don’t know who) when it was lost”.  The other variation of this is when the Plaintiff is in possession of the note but they don’t bother disclosing this to the court.

Laws and Rules Just Don’t Matter Anymore, Everyone Hop On Board The Fraud Train!

So if the Plaintiffs and their attorneys are engaging in massive and systemic fraud and the courts are totally aware of this and yet it’s going totally unpunished and unanswered why doesn’t everyone just get on the fraud train? I mean why not?  Well here’s one way that consumers and anarchists could engage in fraud that would totally throw the system into chaos.  If rebels and anarchists and people who just don’t care executed and recorded Satisfactions of Mortgages across the country, it would send the entire foreclosure system into collapse.  A Satisfaction of Mortgage is a one page document that costs $8.50 to record.  It can be produced on a home computer, filled out correctly then sent in along with a money order or cashier’s check.  The Clerk of Court is required to record it and there would be no way of ever knowing where these fraudulently produced satisfactions were coming from.   While the lenders were trying to figure out how to deal with this massive problem, they would have no choice but to stop the pursuit of the foreclosure cases.

Anarchy Is a Crime- Revolution is a Crime.

Make no mistake, doing this is wrong.  It is a crime. A serious crime.  I would not do it and I’m not seriously suggesting anyone should, especially for their own mortgage.  But what if? I mean what if some modern day Robin Hood or Paul Revere set out with a few hundred bucks and a few hours on a computer and started just sending in satisfactions?  And what if, at the same time these same band of anarchist Robin Hoods also filed with the courts “Notice of Voluntary Dismissal and Release of Lis Pendens”?  I mean when the law firms that are prosecuting these cases are so out of touch that they have no idea what’s happening with their files and they have no contact whatsoever with the lenders they claim to represent, it would take them months to figure out if their law office or their client really did dismiss the case or whether this was another one of those Anarchist Dismissals.

But if the system is so broken down that judges are engaging in systematic denial of a defendant’s rights and if the Supreme Court of Florida is acknowledging in writing

that they are aware of widespread and systemic fraud being perpetrated on courts across the country and they’re doing nothing to stop it,

isn’t a little bit of anarchy in order?

TO: Members of the Pinellas County Florida Legislative Delegation

Dear Members: As you prepare for the Start of the 2010 Legislative Session, I want to thank you for all the good work you are doing for the citizens of the State of Florida and for your neighbors here in Pinellas County.

I am an attorney who represents many of your neighbors in the foreclosure cases that are pending in Pinellas County courts.  The vast majority of my clients find themselves in foreclosure because they or their spouse have lost a job, are facing expensive medical issues or have suffered some other setback that was beyond their control.  By and large your neighbors who are facing foreclosure want to stay in their homes.  They want to continue to make regular monthly payments, maintain their homes and continue to pay the taxes and other expenses related to home ownership.  These good people are simply suffering through the worst economic times of this generation.  With modest payment and term modifications from their lenders, most borrowers would be able to stay in their homes and most would gladly work with their lenders to make these modified payments.

Banks are Not Working With Borrowers

Your neighbors in foreclosure have tried desperately to work with their lender to try and modify their mortgage or come up with some solution other than foreclosure.  I know this because I require my clients to keep a detailed journal of all their attempts to call, write or communicate with their lender.  These borrowers have made dozens, sometimes hundreds of phone calls and faxed paperwork back and forth.  If they hear anything at all, it’s “Sorry we cannot help you.”  Having said that, more often than not, they get no response at all from their lender other than, “We’ve lost your paperwork, please send it again.”  This is not just my opinion or anecdotal information, these statements are confirmed by the information published by the federal government.  As of October 2009, the Federal Government’s Making Homes Affordable program reported that only 82,614 Floridians had obtained a trial mortgage modification.  That same report estimates that nearly 10% of mortgages in Florida are more than 60+ days delinquent.

(See report here)

Banks Are Receiving Billions in Federal Aid

While the federal government has provided at least $50 billion in federal aid to the major lenders in the US Troubled Asset Relief Program (See GAO-09-837 July 23, 2009), the Federal Housing Finance Agency reports that the HAMP and related modification efforts had initiated only 43,000 HAMP permanent modifications and 442,500 active trial modifications as of December, 2009.  Amazingly, according to the latest information published by the Federal government, only 8,405 Floridians have received permanent modifications from their lenders.  One more time so this is clear…..out of more than $50 billion in federal aid, ONLY 8,405 FLORIDIANS HAVE RECEIVED A FORMAL MORTGAGE MODIFICATION. (See report here.) In short, the facts published by the federal government and the mortgage industry show that while the very lenders who helped caused the breakdown of the American financial system are helping themselves to billions of dollars in federal aid, your neighbors are not being helped at all.

A Pig With Lipstick On Is Still A Pig

As my elected Representative in Tallahassee, I hope you are sufficiently aware of the popular uprising against the greed and arrogance of the banks, lenders and Wall Street in general.  As your neighbors here in Pinellas County are struggling to survive these difficult economic times, they’re watching the institutions and fat cats on Wall Street take bigger profits and bonuses than ever before.   While all the obscene profits and general arrogance is bad enough, I hope that you will share my outrage at the bank’s attempts to insult you and other elected leaders and the citizens of the State of Florida when they chose to name their new anti-consumer bill “The Florida Consumer Protection and Homeowner Credit Rehabilitation Act”.  The insult here is there is not the first thing in this proposed legislation that offers any benefit to consumers or homeowners or consumers at all.  I am insulted and incensed that these fat cat, cigar chomping anti-consumer greedy bankers think they can attach a name to legislation which totally misrepresents  the nature of that legislation in the apparent hope that elected leaders and citizens won’t be smart enough to figure out the title totally misrepresents the purpose and effect of the legislation.

The Florida Consumer Protection and Homeowner Credit Rehabilitation Act-  A Dramatic and Totally Unnecessary Change in Florida’s Homestead and Property Rights

From the time Florida became a state, laws relating to a citizen’s homestead were simple.  If law enforcement wanted to get in a citizen’s home, they made their case before a judge and if the judge determined their claims were warranted, the judge granted a search warrant and law enforcement was granted access.  Likewise, if a homeowner defaulted on his mortgage and the lender wants to take the home back, that lender need only prove up that interest up before a judge, then the judge grants foreclosure and the consumer loses possession of his home.  The problem many of the lenders trying to foreclose today face is they cannot or just don’t want to go through the effort to prove even the most basic facts to support their right to foreclose.  Rather than fix the organizational and systemic problems the lenders have created  that would allow them to prove up their right to foreclose, the lenders are asking the Florida Legislature to toss out the property rights rule book and create an entirely new system that would stack the deck entirely in their favor and totally against the homeowner. As a voter, a constituent and an attorney who is on the front lines of this issue and who sees how it affects your neighbors every day, I want to implore you to vote NO against any version of The Florida Consumer Protection and Homeowner Credit Rehabilitation Act.  Please save my information and please contact me directly if I may provide additional information or testify when this bad legislation comes before committee.

Respectfully, Matthew Weidner

It is widely accepted that Obama’s HAMP mortgage modification program is a failure, not helping anywhere near the number of homeowners leaders estimated it would help.  If you’re facing foreclosure in Pinellas of Florida or are simply trying to get some reduced payments on your mortgage you will find trying to get a modification a very frustrating process.  Virtually every client reports spending countless hours on the phone with lender representatives and sending documents back and forth again and again.  I was at first incredulous, thinking that one or two lenders were getting it wrong, but I am a first hand witness to an entire industry that is broken down. If you’re trying for a modification or short sale, be prepared for months of frustration and hours on the phone…..and you probably wont get what you want.

The Curious Case of Canceled Sales

Attorneys and other opponents of the lenders and the mortgage meltdown are at a bit of a loss regarding why the system is broken down, but several theories are supported by facts. Most of the major lenders reported major (breathtaking) profits during the last quarter of 2009.  Curiously many of the same lenders delayed or simply canceled foreclosure sales that they had every right to conclude during the last quarter.  They had no legal reason to cancel the sales and some cited compassionate grounds for doing so. (Ha Ha)  Bottom line is I believe some lenders canceled sales in order to depress their earnings. (Can’t get to high on the hog just yet.)

Today’s Wall Street Journal confirms that one effect of the canceled sales and slow pace of modifications is fewer home on the market and an increase in overall value.

The number of such homes available for sale dropped to 637,000 in November 2009 from 845,000 a year earlier, Barclays Capital estimated. Barclays expects the number to start rising again as people who don’t qualify for a loan modification or don’t want one lose their homes, and peak at 747,000 in April before declining gradually.

As recently as September, however, Barclays expected a peak of nearly 1.2 million foreclosed homes for sale in mid-2010. “Our projected peak keeps getting lower, the longer banks delay foreclosure sales,” spreading the pain over a longer period, says Glenn Boyd, a senior researcher at Barclays.

That has implications for pricing. The S&P/Case-Shiller 20-city home price index is down 29% from its peak in 2006 but has leveled off in recent months as fewer foreclosures have hit the market.

As of Sept. 30, about 7.5 million households were behind on their mortgages or in the foreclosure process, according to the Mortgage Bankers Association, a trade group.

Bottom line is those 7.5 million homes are going to continue to have a profoundly negative effect on the real estate market and the larger economy for years–even decades to come.  And as unemployment continues to rise, the number of households in trouble will only increase…..this is not just a problem for those 7.5 million in trouble….it’s everyone’s problem and we need a better system to address the problem.

Full Text of Article Here.