The Outcomes
According to the report, under idyllic circumstances, lenders would be able to continue foreclosure activity as the invalid information in the papers will be replaced with proper documents after a certain point of time. Also, the foreclosure mess could be an exaggerated problem. Anyhow, paperwork flaws related to the foreclosure will be ironed out in the long run with the employees’ experience of properly reviewing the documents.
On the other extreme, the lenders may face legal challenges related to the validity of mortgage loans. Lenders might also be unable to prove their ownership of mortgage loans that they claim to own, incurring unexpectedly huge losses as a result. Also, the moratorium will impede the sale of foreclosed properties, leading to a high chance of reduction in housing activity.
In other words, the banks have not followed the letter of the law in processing all the paperwork to create the now famed Mortgage Backed Securities.