Foreclosures, on average, take a long, long time to complete in the U.S. In fact, according to the latest data from Lending Processing Services, it takes an average of 631 days to foreclose on a property, and if current foreclosure rates persist, it could be 50 yearsbefore some states completely clear out their foreclosure backlogs.
Foreclosures, generally, are so time-consuming because of the extensive judicial processes that slowly propel foreclosure proceedings in most states, but under a nuance in mortgage law, they stand to become even more taxing, according to a story reported in HousingWire.
Under the ordinance, homeowners would be allowed to challenge the validity of their mortgage in court. Utilizing a rule the Federal Reserve passed in May call the QM, or qualified mortgage, rule, homeowners would be able to cite a “rebuttable presumption of compliance” clause and force a judge to rule on whether a mortgage was QM compliant, meaning that it did not feature negative amortization, ballooning payments and other features of risky, predatory loans.
The problem with QM, said attorney Richard Andreano to HousingWire, is that courts would be overwhelmed with mortgage challenges when they are already burdened with so many foreclosures. And banks, already spending billions on their distressed inventories, will have to spend even more money defending their loans against compliance suits.
New York, for instance, had 80,000 foreclosures backlogged in the spring of this year, and each one took roughly 900 days to work its way through the system.
“It would be much more expensive if everyone did this,” Andreano said. “It would get to a point to where it would almost be malpractice for a foreclosure defense attorney not to pursue the claim.”
Roy Oppenheim, though, a defense attorney based in Florida, said in the same article that such reactions may be overkill, considering attorneys will only challenge mortgages with clear evidence of predatory lending.
“Not every foreclosure defense attorney will do this,” he said. “If they make good loans there should never be a problem.”
Little is known, though, regarding how the CFPB will ultimately pursue the rule, considering the bureau is still operating without a director. Senate Republicans have been blocking a vote on White House nominee Richard Cordray, and the bureau has been operating in-flux the last few months.
And whenever the CFPB does decide, it will be an important factor in the future of housing finance, said Mike Heid, the head of the Wells Fargo mortgage division, in a HousingWire magazine article.