Posted on Wednesday, October 13, 2010
The current foreclosure crisis is unprecedented in American history, Barry Ritholtz said on Monday. The Fusion IQ CEO told CNBC's Larry Kudlow and Diana Olick that the flaws in the foreclosure system are not simply "a matter of paperwork." At stake are U.S. property rights, which are "being dramatically undercut due to rampant fraud throughout the whole system." The New York Times last week reported the story of a Florida woman who thought she had bought a home until the bank told her the property's foreclosure might not be valid and Olick on CNBC played a clip of another homeowner who experienced something similar. These flaws and others -- such as incidents of banks improperly changing locks on homes that aren't in foreclosure or foreclosing on homes that don't even have mortgages -- constitute a crisis of historic proportions, Ritholtz said.
Olick wasn't so sure. "You're always going to see those stories," she said in response to the phenomenon of banks foreclosing on properties that don't have mortgages. "That's a very small minority of the cases we're talking about here."
But to Ritholtz, even a small minority is too large. "This has never happened before! That is historically an impossibility. That is a legal impossibility. And yet it happened. That's how bad this is," he said. "It should never happen! This should be a hundred percent -- never, ever, ever happen."
Still, Olick insisted that these flaws weren't unusual. "It should be zero, but you know what? The cops often knock on the wrong door in other cases as well," she said.
For all their arguing about the severity of the crisis, neither Olick nor Ritholtz detailed any solutions. But that may be appropriate at this point: Foreclosure crisis explainers, like the ones by John Carney and Mike Konczal (in five parts), show that solutions will have to be implemented with care.
Reuters' Felix Salmon suggests that mortgage servicers should replace the bad loans with new ones, a process that's easier said than done.
Wall Street and the White House have expressed their opposition to a nationwide freeze on foreclosure proceedings, even though Bank of America last week said it would halt its foreclosures in all 50 states, as it reviews paperwork for errors, a move that garnered the support of Senate Majority leader Harry Reid.