Preventing a Return Engagement: Eliminating the Mortgage Purchasers’ Status as a Holder-in-Due-Course: Properly Aligning Incentives among the Parties
The stories are horrific; the human tragedy unfathomable. Millions of homeowners have lost their homes, their most valuable asset and the symbol of family,' to foreclosure. Instead of achieving the American dream of home ownership, these families are forcibly ejected from the one place they viewed as sanctuary. Moreover, these families have lost any and all investment, financial (I am going to assume that any equity accumulated before foreclosure is lost as a result of both the declining real estate market and the inequities created by the flawed foreclosure process) and emotional,that they have made in the foreclosed property. These individual tragedies are hard to understand in the abstract, yet recitation of individual cases provides no true picture of the scope and depth of the problem created by foreclosed mortgages. Suffice it to say, the human costs are incalculable, and the impact that these foreclosures will have on families will reverberate throughout American society for at least the next generation.
Just as importantly, on a macro level the impact of the huge number of individual real estate foreclosures on credit and financial markets has been catastrophic leading to the demise of venerable financial institutions, the taxpayer-government financed bailout of banks and other financial institutions,' and the collapse (deflation) of the stock market. In short, the demise of the residential real estate market (what I term the "foreclosure miasma") has caused the American economy to enter into the longest recession since the Great Depression of the 1930s.7 Doom and gloom abound and there is no end in sight.