There is a certain irony in this situation. In an effort to appease the blow-out-the-foreclosures faction (who understandably want more and rapid foreclosures so that prices decline), among others, the servicers pushed harder than they were operationally able and cut corners to, well, blow out the foreclosures. Now the cutting of those corners has led to the legal system forcing them to slow down the foreclosure machine. Now, clearly this is principally the servicers’ fault (as opposed to the lenders, although sometimes they are one and the same) and a good example of what I’ve discussed here many times previously: the servicers are over-loaded and don’t have the manpower (due to lack of financial resources) to process all of these foreclosures. So they cut corners and here we are. I’m not saying this isn’t the servicers’ fault – it most certainly is. They should bite the bullet, forgo profits, and hire and train enough people to do the job properly. I imagine, however, that this would result in such large losses that it’s not even possible. But, in any case, it’s ironic that the groups pressuring the servicers to speed up the process and blow out foreclosures have achieved the exact opposite: now this process will be going on for an even longer period of time. This is the legal system officially, albeit unintentionally, supporting extend-and-pretend (to the extent that it occurs) for the banks with exposure to these loans. The banks and servicers couldn’t have planned things any better if they tried. File under: Be careful what you wish for.
