To prove the point, in this month's report RealtyTrac broke out the numbers by judicial foreclosure states (where foreclosure documents are filed in court before a judge) and non-judicial foreclosure states; the former are where the banks froze most actions, but they are also slowing the process and going over procedures in non-judicial foreclosure states as well.
Notices of default, the first step in the foreclosure process were down 19 percent in judicial states in February and up 13 percent in non-judicial states. Bank repossessions, the final stage, were down 24 percent in judicial states and down 14 percent in non-judicial states.
The numbers are even more stark when you look at specific cities. I asked RealtyTrac for some specific data on that and they told me Miami ranked number seven in the top foreclosure rates in Q3 of last year. In Q1 of this year, it ranks number 41. Florida is a judicial foreclosure state. On the other hand, Los Angeles ranked 40th in foreclosure rates in Q3 of '10 and now ranks 24th in Q1 of this year. California is a non-judicial foreclosure state.
While an improving job market appears to be helping avert foreclosures, increasing negative equity is doing just the opposite; unfortunately, thanks to paperwork and judicial issues, at this point it is impossible to know which is prevailing.
RealtyTrac experts claim the foreclosure numbers have yet to show the final surge. While new defaults are falling, the pipeline is now so large that the numbers have nowhere to go but up.
Banks are scrambling to bunker up ahead of guaranteed litigation on the subject of MERS. Millions, possibly tens of millions of mortgages are potentially fraudulent right now. Banks own quite a bit of those mortgages. The latest state to take judicial actions against MERS is Oregon.
Since October, federal judges in five separate Oregon cases have halted foreclosures involving MERS, saying its participation caused lenders to violate the state's recording law. Three of those decisions came last month, the key one in U.S. Bankruptcy Court in Eugene.
Attorneys say it's not clear whether lenders in Oregon will simply start over or head to court to foreclose, steps that could prolong the crisis for months and drive up costs, attorneys say. Some suggest lenders might not have access to the documents they need to comply with state law.
"A lot of us are questioning whether there is a solution," said David Ambrose, a Portland attorney who represents lenders in mortgage transactions. "It's pretty amazing. There are a lot of unanswered questions."
MERS is listed as an agent for lenders on more than 60 million U.S. home loans, about half of all such loans.
The system is now falling apart. Title companies are refusing to do business with MERS mortgages. Foreclosures are grinding to a halt because the entire housing market is grinding to a halt. That means housing is increasingly becoming no-bid: it doesn't matter what the price is when nobody's sure who really owns the house and if they are authorized to record the sale or not. That means the cliff on foreclosures means a cliff on housing prices. The final set of blocks are about to be knocked out from under the housing market, and then it's game over.
MERS is done for. More and more states are realizing MERS screwed them out of hundreds of millions in records fees and now cash-strapped counties want years of avoided fees paid in full...plus interest.
An added bonus for the banks is the avoidance of county fees. When MERS is used to turn a regular mortgage into an investment, financial institutions don’t pay “recording fees,” which are usually small charges of between $50 and $100, to the counties where the underlying properties are physically located.
This has some county clerks upset.
“The average Joe who comes into my building, hard working people, have to pay the fees,” said John O’Brien, register of deeds in Southern Essex, Massachusetts.
“Why in God’s name can’t banks and Wall Street lenders do the same thing? Play by the same rules!”
O’Brien has officially requested that Massachusetts Attorney General Martha Coakley file suit against MERS, seeking $22 million in unpaid recording fees associated with home loans that were bought, sold, and securitized since 1998.
“I have challenged them to open their books and show me how many times they have moved people’s mortgages around,” O’Brien said.
$22 million in just Massachusetts. And you'd better believe that states are going to go after MERS on this. The game is almost over and its death throes are going to wreck what's left of our economy.
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