When James Renfro had to stop making payments on his two-story fixer-upper in Parma, Ohio, a suburb of Cleveland, he triggered events that were supposed to result in the forced sale of his home."Restoring Equity" vs. Penalization
That Nov. 15 auction has been canceled because of defects in documents submitted by his loan servicer, Ally Financial Inc.�s GMAC Mortgage unit. Two affidavits about Renfro�s home were signed by Jeffrey Stephan, a GMAC employee who said in sworn depositions in Florida and Maine that he hadn�t read thousands of affidavits he�d signed.
Renfro�s case has created a showdown between GMAC and Ohio�s Attorney General Richard Cordray. Cordray has asked Cuyahoga County Court of Common Pleas Judge Nancy Russo not to let GMAC simply submit new documents to cure defects without consequences. He�s taken the same stand against Wells Fargo & Co., which has said it found defects in 55,000 foreclosures.
�This is just the first,� said Cordray, who filed an amicus, or friend-of-the-court, brief in the Renfro case. He argued that Russo should punish GMAC, the fourth-largest U.S. mortgage lender, for its conduct.
I am not a lawyer. Indeed I would have a damn hard time being either a defense lawyer or a prosecutor. The former has a duty to get his client off even if he knows full well his client is guilty. The latter pursues cases known to be weak, perhaps even trumped up for political reasons.
I would not want to be in either situation. I could not send an innocent man to jail, nor could I defend a client who privately admitted to rape or some other crime yet insisted on a plea of "not guilty". My sense of fairness would not allow it.
In this case, a lawyer wants to punish GMAC. I happen to agree with that. Fraud must be punished. Nothing would please me more than to see a bunch of crooks go to jail.
However, we must also deal with the issue of "Restoring Equity".
Definition of "Equity"
By "restoring equity", I do not mean equity in the sense "4. the monetary value of a property or business beyond any amounts owed on it in mortgages, claims, liens, etc."
I mean equity as in "3.c an equitable right or claim".
In regards to 3.c, there is no dispute that people have stopped paying on their mortgages for months or years. The equitable thing is for those home owners to lose their homes. The idea that homeowners deserve "equity" (principal) writedowns over robo-signing is potty.
Notice I said "deserve". I have no idea what a court of law might allow. A court of law is not interested in "equity" (fairness), it is only interested in the rule (interpretation) of the law.
What's Equitable?
To restore equity in both senses of the word, the ideal solution is to prosecute fraudulent behavior to the full extent of the law, and to otherwise speed up foreclosures, with new laws if necessary.
There is nothing "equitable" in forcing lenders to give homeowners a break over robo-fraud.
In short, this is what needs to be done:
1. Send the fraudsters to jail
2. Speed up the foreclosure process in cases of default, with new laws if necessary.
Anything else is a travesty of justice.
What to Expect
Expect a travesty of justice in regards to sending fraudsters to jail. Also expect a travesty of justice whereby some judges give breaks to homeowners who successfully game the system over a perverse sense of "justice".
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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