OK, I know you’re over educated on the foreclosure mess (can’t we come up with a catchy name for this?), but let me add a couple really quick comments.

First, read this post by Felix Salmon if you need to know what this is all about. Lots of great links and an assessment of the likely fallout that I mostly agree with.

He suggests that there will be more strategic defaults in the judicial foreclosure states as the timeline for foreclosing becomes indefinite. Felix is right but I wouldn’t limit that outcome to just those states that require a court to sign off on a foreclosure. If this thing continues to spread the states that use deeds of trust, thus bypassing the need for court review, are going to get dragged in. Either the lawyers find a way to gum up the works in those states or the politicians intervene and halt foreclosures there as well, but under no circumstances does this stay contained in just the judicial foreclosure venues.

That wouldn’t be fair, would it?

Now I have to ask what is all of this blather about notaries and the bill that Congress passed and Obama sent back. As I read the bill, it simply requires that states recognize the validity of notarizations from other states. Somehow it’s being spun as part and parcel of the plot to push through suspect foreclosures.

John Carney has a good, thorough post on the subject and explains the concerns this way:

The fear was that the bill would allow banks to “forum shop,” pushing through notarized foreclosure statements from states with lose standards or courts unfriendly to challenges to notarized foreclosure statements. Proponents of the bill most likely argued that it would help avert a nation-wide slowdown to the foreclosure process that could serve simply to delay a housing recovery by leaving more houses in mortgage limbo.

Sorry, but I don’t get it. As I understand the issues, officers of various mortgage servicers were attesting that they had knowledge of certain facts when in fact they had not reviewed files and were simply affixing their names to affidavits.

Notaries only attest to the validity of a signature, not the underlying propriety of the notarized document. So far, I haven’t seen anyone suggesting that fictitious persons were signing documents which were subsequently notarized. If I missed it, someone point me in the right direction. If I didn’t then this seems to be bordering on the paranoid.

Eventually, this will get sorted out. A few borrowers will hit the jackpot and probably find some activist judge that awards them their house sans debt. Lots will get to live rent free for an extended period of time. A great deal of money is going to be transferred to the legal profession. Most troubled homeowners will still lose their homes to the foreclosure process.