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Friday, October 15, 2010
Defaulting Homeowners Living For Free Are Not Foreclosure Fraud Victims
The Newark Star-Ledger has again shamed itself with a hysterical, poorly-researched and troubing editorial on the mortgage crisis, today suggesting that there are many mistaken foreclosures.
This editorial ignores one fact: Homeowners being foreclosed upon have not been making their payments. The vast majority have no real prospect of being able to meet "modified" (reduced) payments. As the average time between first default and eviction is nearly 18 months, that means the average homeowner in foreclosure has lived "rent-free" for more than one year and sometimes much longer.
There are some cases where fraud -- or horrific mistakes -- has resulted in homeowners who have been totally current on payments have faced foreclosure. These cases are very, very few; if there were many, you would be seeing press reports recounting them.
The mortgage servicing and foreclosure processing fiasco represent gross systematic problems and are the product of greed, where various parties chose to cut corners in order to maximize profits at the expense of getting it -- meaning, legal procedures -- right. Absolutely inexcusable. However, the inalienable truth remains that 99%-plus of foreclosures are on homes whose owners have not been current on their payments for a long time. Any characterization of these long-term defaulting owners as "victims" implies that these owners are entitled to live, rent-free, in homes next door to other homeowners who bought smaller homes, fewer fancy gadgets, didn't buy the new car or SUV, ate out at fancy restaurants less (or not al all) and generally lived within their means.
It is nothing less than insulting to homeowners who were responsible, who did live within their means and who have paid their bills on time (even, in many cases, despite periods of unemployment or other hardships), to hear that other spendthrift homeowners who bought more home, more gadgets and jazzier cars are now the "victims" who are entitled to the "compassion" from those who were responsible. While there is no excuse for the banks' shoddy paperwork -- mistakes which, by the way, will have a cost that will be borne by other bank depositors (in the form of even lower interest rates and higher fees) and business borrowers (it wll be even tougher to get any loan and it will be given with higher rates and other conditions) -- those mistakes (or fraud) do not excuse or negate the defaults. When the cost of some people's irresponsibility is passed on to other people, there is nothing to deter the irresponsibility from continuing; in fact, this will encourage the previously responsible to become irresponsible because there is no penalty for it. Is it any surprise there is no end in sight to the economic decline?
There are victims in this foreclosure crisis. Those victims just aren't the people who haven't been paying their mortgages!
Eric Dixon is a New York lawyer. He is available for comment or consultation at 917-696-2442 and at edixon@NYBusinessCounsel.com.