Friday, October 15, 2010

Foreclosure Moratorium?

Here's Todd Zwyicki at Volokoh Conspiracy speaking against a national foreclosure moratorium,
The bottom line is that these guys screwed up royally and need to take their lumps.  But equally, we should not forget that we are talking about homeowners who haven’t paid their bills.  This is a fight as to who has the right to foreclose, not whether foreclosure is valid.
Well, some of the homeowners didn't pay their bills. But thanks to the banks we don't know, from a legal sense, who those people actually are, and, in fact, there have already been reports of banks taking homes that have not been foreclosed on. So actually it is a fight about whether foreclosure is valid, in fact that's the whole goddamn point man.

I guess it's part of the glibertarian ethos to never miss an opportunity to admonish the working and middle-classes for their (alleged) moral failings? Whatever the motivation, Zwyicki has absolutely no grasp on this issue.

1 comment:

Andrew Oh-Willeke said...

The banks are also making plenty of screw ups that benefit defaulting homeowners (like not taking legal action for two years in the case of a homeowner who admits being in default and has stopped paying).

But, I would be very surprised if more than 1%-2% of homeowners have a bona fide dispute over whether or not they are in default. I've seen cases like this reported every year or two, and no doubt they are more common now, but they aren't that common.

The far more common problem is that the amount of legal fees or other amount due as a result of a default is exaggerated or miscalculated, which matters in the case where a deficiency judgment is obtained after a foreclosure and there is not a bankruptcy filing. (But, not in states like California that don't have deficency judgments in most cases.)

The system is prone to abuse, because most debtors are unrepresented, and that abuse is manifesting itself in sloppy foreclosure litigation. But, the "salvagable cases" where a debtor in default has a reasonable chance of keeping a home are much more rare than intuition would suggest, and cases where the bank claims that there is a default when there isn't one are quite rare.