legal standing anyone?
From the dusty files of the excruciating minutiae of bankruptcy court proceedings (courtesy of the NY Times) comes this story:
But while banks may have booted a few robo-signers and tightened up some lax procedures, one question at the heart of the foreclosure mess refuses to go away: whether institutions trying to take back a property can prove they even have the right to foreclose at all.
Some in the industry believe that questions about this issue — known as “legal standing” — are trivial. They say it’s just a gambit by borrowers’ lawyers to throw sand in the foreclosure machine. Nine times out of 10, bankers say, the right institutions are foreclosing on the right borrowers.
Maybe so. But the United States Trustee Program, the unit of the Justice Department charged with overseeing the integrity of the nation’s bankruptcy courts, is taking a different view. The unit is stepping up its scrutiny of the veracity of banks’ claims against borrowers, and its approach is evident in two cases in federal bankruptcy court in Atlanta.
This, to put it mildly, could be a thermonuclear land mine. There’s no reason to panic yet, since no court has ruled on the standing issue, but the action by the U.S. Trustee hints at the possibility that this issue will become larger and larger, and likely require significant litigation to resolve. And looming in the background? MERS… which is not tech-speak for merde, but the entrance of the DOJ (the parent department of the U.S. Trustee) could result in a major merde-storm.
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In light of this atrocious story, it might be time to think about some new initiatives. (H/T: Zillow Blog)
Not only is the bank owner losing any potential value in this property, but it will cost the bank an additional $10,000, “to pay $2,500 in sales commission and another $1,000 bonus for closing the $1 sale; the bank also will pay $500 of the buyer’s closing costs. Throw in back taxes and a water bill, and unloading the house will cost the bank about $10,000.”
It is well past time for us to consider a new 21st century Homestead Act. I wrote about this previously as well, but the sight of a $1 house is evidence that something dramatic needs to be done.
- Rough outline of a new Homestead Act:
- Banks surrender the property to the municipality. They can claim a loss for future tax writeoff, but importantly, they get the property off their balance sheets.
- Municipality waives all back taxes, transfer fees, etc.
- Utilities write off all water/electric bills, etc.
- Property is made available as is to any legal resident willing to live there.
- You must stay in the residence for at least five years.
- During your stay, you must maintain the house in reasonable condition and not engage in any illegal activities in the house.
- It must be your primary residence for those five years.
- You must pay all property taxes and fees associated with homeownership, such as for trash removal, water and sewage, etc.
At the end of the five year period, the homesteader receives full title to the property free and clear.
In a stroke, you have eliminated the foreclosure problem, provided a path out of urban blight issues, and provided low-cost housing to families who actually want to work at achieving their American dream.
It’s time.
-rsh
