I don’t know why so many people are happy that judges are giving banks a hard time over foreclosures because of inadequate paperwork. Slowing down the foreclosure process and making it more arduous will only slow down the housing market, bank stocks, and the U.S. economy.
These judge rulings only increase the cost of doing business. They make banks work harder. They multiply paperwork. They give work to lawyers. They increase transaction costs.
Compare California to Florida. Florida has an arduous foreclosure process while California is streamlined.
Over the last several months, some banks have been reluctant to seize homes from distressed borrowers, economists and government officials say, as they face scrutiny from regulators and the prospect of sanctions when investigations wrap up in the coming weeks and months.
The Obama administration, in its most recent housing report, said foreclosure activity fell 21 percent in November from October, the biggest monthly decline in five years. Here in Phoenix, foreclosures fell by more than a third in the same period, reflected in the severe drop in foreclosed homes being auctioned on the courthouse plaza.
“There’s no product, just nothing to buy,” complained Sean Waak, an agent for investors, during a recent auction.