Protecting Absent Stakeholders in Foreclosure Litigation: Securities Investors, Mortgage Modification, and State Court Responses to the Foreclosure Crisis
Start Date
24-3-2010 1:15 PM
Description
The role of the judiciary has been noticeably absent from discussions about solutions to the foreclosure crisis. This Article argues that state courts have an opportunity to meaningfully intervene in the foreclosure process by addressing the competing financial interests of mortgage servicers and the absent securities investors whom servicers represent. By some estimates, foreclosures under current market conditions lead to more than 50% average loss in loan value, compared to 5% average loss in loan value with modification. This Article proposes that state courts utilize pre-foreclosure mediation programs to ensure that foreclosure is in the best interests of absent investors before permitting foreclosure to proceed. Unlike foreclosure defense, widespread mortgage modification has the potential to immediately reduce the foreclosure rate, a prerequisite to stabilizing mortgage markets and the broader economy.
Protecting Absent Stakeholders in Foreclosure Litigation: Securities Investors, Mortgage Modification, and State Court Responses to the Foreclosure Crisis
The role of the judiciary has been noticeably absent from discussions about solutions to the foreclosure crisis. This Article argues that state courts have an opportunity to meaningfully intervene in the foreclosure process by addressing the competing financial interests of mortgage servicers and the absent securities investors whom servicers represent. By some estimates, foreclosures under current market conditions lead to more than 50% average loss in loan value, compared to 5% average loss in loan value with modification. This Article proposes that state courts utilize pre-foreclosure mediation programs to ensure that foreclosure is in the best interests of absent investors before permitting foreclosure to proceed. Unlike foreclosure defense, widespread mortgage modification has the potential to immediately reduce the foreclosure rate, a prerequisite to stabilizing mortgage markets and the broader economy.
