The State of Massachusetts has refused to settle with the big banks that used what the state says was improper paperwork in foreclosing.
Other state attorney generals had proposed a mild slap on the wrist of the banks. That joint deal is likely to fall apart.
The banks say they will fight the State of Massachusetts. This is sure to drag on for years. Meanwhile, the foreclosure process also drags on, seemingly forever.
This will keep housing prices from reaching a clear bottom It will also put pressure on home sellers to take low offers. The overhang of supply of empty houses, or houses occupied by owners who stopped paying years ago, will keep the housing market in the tank.
Any owner who is facing eviction can stall. He can hire a lawyer to force the lender to prove that he has a legal title to the property. In millions of cases, the lender doesn’t.
Some judges ignore this and let the foreclosures take place. Some states do not require a court decision. But the legal cost of foreclosing is high and now likely to go higher for years.
This will make deals available to savvy real estate investors. Sellers who have to sell will settle for less.
This is a buyers’ market. It will be for years to come.