Judges Denying Foreclosures, But What’s The Point?

We’ve seen politicians proclaim the injustices of foreclosures, and now judges seem to be rallying around those ideas as well. The housing crisis has created two camps: one side which supports the homeowners, saying they were manipulated by the greedy lenders, and the other side which supports the lenders and their resolve to make a profit. The most popular side has obviously been the one supporting the homeowners; after all, it is much easier to feel for a family losing their home than a big multinational bank losing some money. Judges, though, are supposed to be impartial regardless of any personal feelings they may have.

The Wall Street Journal recently published an article about how a few judges from across the country have taken up the fight against foreclosures. They recount several cases where the judges seemingly go above and beyond in order to deny foreclosures. Here is one example as written in the article: “In June, the judge dismissed with prejudice two cases filed by a unit of Wells Fargo & Co. By doing online public-records research himself, the judge found that Wells Fargo didn't own the two loans, and his dismissals mean that even if Wells Fargo eventually obtained legal ownership, it could take up to another year to obtain foreclosure.” Wells Fargo said that they were acting as the trustee for a loan securitization trust which holds the mortgage, an arrangement which is pretty standard in the industry. This judge definitely went above and beyond in order to find a loophole which he could use to stop the foreclosure. And now, thanks to this judge, the homeowner gets to live in the home for another year on Wells Fargo’s dime. What the judge was trying to accomplish other than allowing the homeowner to mooch off the system for a while longer is not certain.

Wall Street Journal’s law blog author Amir Efrati tells another story of a judge named Arthur M. Schack. “In one of his foreclosure dismissals, Schack (Indiana, NYU Law) cited the film 'It’s a Wonderful Life' to make the point that homeowners now deal with 'large financial organizations, national and international in scope, motivated primarily by their interest in maximizing profit, and not necessarily by helping people.'” My question is, how does the fact the bank is trying to maximize profits have anything at all to do with the case? These major banks are all publicly traded and their main responsibility is to their shareholders and turning a profit, not helping people. I think Mr. Schack might be confusing these publicly traded banks with non-profit microfinance institutions.

Don’t get me wrong--I feel horrible that these people are losing their homes and having to go through the misery of foreclosure, but at the same time, I know that milking the financial system is not for the greater good. These judges can try all they want to delay the inevitable, but in the end these people are going to lose their homes. That’s the normal course of action when someone stops paying their mortgage payment. All that they are doing now is making life miserable for lenders and costing them more money in legal fees and lost interest. In case you didn’t guess it already, we can bet that those increased costs are going to find their way back to borrowers one way or another. So because these judges are making a stand and helping a few people, all the other borrowers out there can expect to pay the price. This isn’t exactly my idea of justice.