Foreclosure Mess

As much as the big banks want to end the mess and move on; as much as the country NEEDS this mess to be over, it looks like it's around for a while.  Attorneys general in all 50 states are jointly investigating whether lenders violated state laws, lawyers for evicted homeowners are preparing lawsuits against major lenders, state judges have signaled they will review the banks' foreclosure documents with skepticism.

On top of all that, the FBI is in the initial stages of trying to determine whether the financial industry may have broken criminal laws in the mortgage foreclosure crisis. Courts have the authority to penalize bank officials who violate their procedural rules.  They could also force thousands of foreclosure cases to go to full trials rather than issue a quick ruling.  Judges won't take well to banks that filed erroneous documents with their courts.

Mortgage applications are down last week as interest rates on 15- and 30-year fixed-rate mortgages rose for the first time in six weeks.  Seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended Oct. 15 decreased 10.5 percent. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 0.4 percent.  Demand for home refinancing loans fell for the sixth time in seven weeks.

Tighten lending standards are preventing many homeowners from home loan refinancing, add in low  credit scores and high unemployment you have a mixture for homeowners concern because the underwater mortgages they hold — where the amount owed on the mortgage exceeds the value of the home — negative equity makes many of them unqualified for home loan refinancing and prevents some from even selling.

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