You may have heard it being bantered about in the media. You may have also dismissed the idea the second you heard it. It remains to be seen whether or not the Federal Government , through it's mortgage arms, Fannie Mae and Freddie Mac, will actually implement a non-judicial cramdown of millions of mortgages.

Here's how it works:

Millions of homes in this country are currently "underwater", meaning the value of their homes fall well below what is owed on the mortgage. People in these homes are paying mortgage payments on homes that have considerable negative equity. Take an example: A home worth $125,000, with a 30 year mortgage with an outstanding balance of $200,000 at an interest rate of 5% would yield a monthly mortgage payment (not including hazard insurance or real property taxes) of $1,073.64. In this example, there exists negative equity of $75,000! The Government would agree to reduce this homeowner's mortgage balance and make it equal to the value of their home. The homeowner would be left with a 30 year mortgage with an outstanding balance of $125,000 at 5% interest, yielding a monthly mortgage payment of $671.03. If this idea were implemented, this homeowner would receive a benefit of over $400.00 in monthly mortgage payment savings. Millions of homes secured by federally backed mortgages underwritten by Fannie Mae & Freddie Mac could qualify for this type of write down, putting hundreds of dollars a month extra into the pocket books of millions of Americans.

Last summer, Congress almost enacted a change in the bankruptcy laws that would have allowed Judges to do the same thing that is being proposed now. That cramdown legislation, however, was defeated by the Senate, after strenuous objection by the big banks and mortgage companies. Do you think consumer spending is an issue with the economy today? Well just imagine if several million Americans all had $300 to $400 extra to spend per month! Reducing the current mortgage debt load would be a boom for the economy. It could even speed up the current stagnant recovery we are all facing and it could also save the housing market.

With approximately a million more homes estimated to be foreclosed upon this year nationwide, reducing this debt load may actually take many homes off of the chopping block. Cramming down mortgage balances in this fashion could actually also save the greater housing market. You see, the problem is that many of these foreclosures are going to flood the market with supply. Simple economics dictates that as supply increases, home prices fall. At the current inventory rate, it is typically taking 12.5 months to sell a home. In a healthy housing market, that wait is usually less than 6 months. If we want the overall economy to improve, then one way to improve it i to supply this type of relief to millions of underwater homeowners across the Country.

The Government did try to modify many of these mortgages through the HAMP Program, however, that program has now been declared an utter failure. If Congress or the President intend to fix the economy prior to election time (an impossible feat at this juncture), then more must be done to correct the supply and demand curves of the housing market. If nothing further is done to make that happen, then do not expect an improvement in the housing market for at least another 5 to 8 years.

The Supreme Court has been hard at work recently deciding two more bankruptcy issues of significant noteworthy interest. To me, anytime the Supreme Court hears a bankruptcy issue it is a noteworthy event. By this article, I summarize the two most recent decisions impacting the consumer bankruptcy practice. Although reading the decisions can be interesting, even more fascinating is reading the transcripts of the oral arguments regarding these appeals. Do yourself a favor and read a transcript, it will enlighten you.

On April 21, 2005, the Debtor, Nadejda Reilly, filed a Chapter 7 Bankruptcy petition. Upon her Schedule B, the Debtor included a detailed inventory listing of her business equipment which she valued at $10,718.00. Upon her Schedule C, applying the Federal Exemption scheme, the Debtor coincidentally exempted exactly $10,718.00 of the purported value of her business equipment. The exemption as applied was proper and within statutory limits. Debtor's 341 Meeting was concluded, but no objection to Debtor's claim of exemptions was filed within the 30 day deadline provided by Bankruptcy Rule 4003, by any party including the Chapter 7 trustee. On August 10, 2005, the Chapter 7 trustee filed an application seeking approval to employ an auctioneer and a motion seeking to sell the Debtor's business equipment. The Debtor filed an objection to the motion to sell upon the basis that because the business equipment was "fully exempted," that it could not be administered by the Chapter 7 trustee. The motion to sell did not attempt to vitiate the Debtor's claimed exemption in the business equipment; rather the motion sought only to sell equipment, so that any amounts received above and beyond the Debtor's exemption and the costs associated, could be distributed to Debtor's creditors.

The Bankruptcy Court denied the trustee's motion to sell upon the basis that the business equipment was fully exempt. In so ruling, the Bankruptcy Court reasoned that the fact that no objection was filed to Debtor's claim of exemption within the prescribed deadline precluded the trustee from administering the business equipment for the benefit of Debtor's creditors. The Chapter 7 trustee filed an appeal of this decision and the United States District Court for the Middle District of Pennsylvania affirmed the decision of the Bankruptcy Court. The Trustee then appealed the Order of the District Court to the Court of Appeals for the Third Circuit. On July 21, 2008, the Third Circuit affirmed the decision of the District Court. The Third Circuit reasoned that if a Debtor's estimation of the value of property is equal to the amount of the claimed exemption for that property, then the Debtor has stated an "intent" to exempt the property in full. A trustee should recognize this intent then either object to exemptions or contest valuations. If the trustee fails to do so within the 30-days deadline, then the trustee is not permitted to sell the property, because it has been exempted "in full."

The Supreme Court reversed and remanded, holding that when an exemption claimed by the Debtor is facially valid, the Trustee need not object to the exemption in order to liquidate property that has been claimed as exempt. The instant case is distinguishable from the case of Taylor v. Freeland & Kronz in which the Court held that where a Debtor has no colorable basis to claim an exemption, the Trustee must object to the exemption claimed by the Debtor within the 30 day period as dictated in Bankruptcy Rule 4003. An exemption in property is an interest up to a certain dollar amount as indicated by § 522(d) or the relevant state statute, and not in the property itself. The Court's ruling suggests that requiring a Trustee to object within 30 days would be too burdensome given the volume of cases Trustees administer. In addition, the Court clarifies what a Debtor can do to signal to the trustee that they intend to exempt the full market value of the property listed on Schedule B by simply listing the exempt value as either "fair market value (FMV)" or "100 percent of FMV". Such a designation would make it abundantly clear to the Trustee that the Debtor intends to fully protect the property at issue. The Court's ruling gives a clear path to Debtors and their counsel on how to complete a Schedule C, a far better result than resorting to exemption strategies that would be abusive at best and perjury at worst.

Debtor, Stephanie Lanning, filed her Chapter 13 Bankruptcy Case on October 16, 2006. Since the Debtor's 6 month gross income figure prior to filing annualized equaled $36,631.00, she was over the median income level for her household size and was required to complete the rest of the test. Per form B22C, the Debtor's monthly disposeable income was calculated to be $1,146.00. Debtor's Schedule I income was only $1,922.00 per month, when annualized equaled $23,064.00. When subtracting Debtor's actual monthly expenses on Schedule J, the Debtor's monthly disposeable income was $149.03, substantially less then as reflected on Debtor's B22C Form. Because the Debtor received two substantial buyout payments during the 6 month period prior to filing her case, the B22C Form dictated that she pay an amount that could not be supported by her current monthly budget at the time her case was filed. The Debtor then filed a Motion for Determination that Chapter 13 Statement of Current Monthly and Disposeable Income (Form B22C) Does Not Determine Plan Payment. By this motion, the Debtor reported the above facts and the Chapter 13 Trustee opposed the motion, stating basically that the motion as filed cites no statutory authority to act in a manner other than as proscribed by the Code.

The Bankruptcy Court granted the Debtor's motion in part, ruling that the "net income number obtained from Form B22C is the Debtor's 'projected disposeable income unless the debtor can show that there has been a substantial change in circumstances such that the numbers contained in that form are not commensurate with a fair projection of Debtor's income in the future." The Bankruptcy Appellate Panel affirmed the Bankruptcy Court's decision. The Tenth Circuit Court of Appeals found that the Chapter 13 version of the "means test" is a "starting point" for determining what a debtor should pay to her creditors. The Tenth Circuit Court of Appeals also found that if there was a "substantial change in circumstance" not reflected in the B22C formula, the Court should refer to Schedules I & J in order to divine what should be paid to unsecured creditors. In so holding, the Court recognized it was "reading into the statute a presumption" as the phrases "starting point" and "substantial change in circumstances" are nowhere found in the statute.

At issue was whether or not the "mechanical approach", the formulaic B22 test, should apply in determining Debtor's projected disposeable income or whether the "forward looking approach", the look at I & J, should apply in determining the Debtor's projected disposeable income. The Supreme Court affirmed the Tenth Circuit's holding that a court should apply a forward-looking test rather than a mechanical test in determining a Debtor's projected disposable income, ruling that "when a bankruptcy court calculates a Debtor's projected disposable income, the court may account for changes in the Debtor's income or expenses that are known or virtually certain at the time of confirmation." The Supreme Court reasoned that the mechanical approach rendered superfluous the statutory mandate that the disposable income applied to the plan payments be the income that is "to be received" during the plan period. In addition, the Court reasoned that the ordinary meaning of the word "projected" supports a forward-looking approach. The Court also found that the mechanical approach could lead to absurd results both when the Debtor's actual income during the plan period would be less than the income received in the six months prior to her bankruptcy filing and when her actual income would be more than her pre-bankruptcy income.

Stay tuned for future articles as the Supreme Court continues analyzing bankruptcy issues with its next edition, In re Ransom, 577 F.3d 1026 (9th Cir. 2009), cert granted, 2010 U.S. LEXIS 3359 (2010), where the Court is asked to once again rectify a split in the Circuits. The issue in Ransom is whether, when calculating the debtor's "projected disposable income" during the plan period on the means test, the bankruptcy court may allow an ownership cost deduction for a vehicle only if the debtor is actually making payment on the vehicle. The Ninth Circuit held that a debtor could only claim a vehicle ownership expense on the means test if she had a debt or lease payment. The Fifth, Seventh and Eighth Circuits, and the Sixth Circuit BAP have all ruled that the ownership expense on the means test is available regardless of whether there is an actual payment or not. In re Washburn, 579 F.3d 934 (8th Cir. 2009)(with dissenting opinion); Tate v. Bolen, 571 F.3d 423 (5th Cir. 2009); In re Ross-Tousey, 549 F.3d 1148 (7th Cir. 2008); In re Kimbro, 389 B.R. 518 (6th Cir. BAP 2008). Stay tuned as the Supreme Court decides whether the IRS guidelines that mandate that the ownership expense can only be deducted if the person has an actual payment on the vehicle or whether or the not plain meaning of the means test which makes no reference as to whether an actual payment must exist wins out or not.

More alarming still, is that some of these notes are being transferred to the MBS's just prior to or right after the foreclosure action is filed. Law firms are continuing foreclosures, even though it may be unclear whom has standing to bring the action. How culpable law firms are in this instance remains questionable, because remember they are getting their orders from the software unit that is keeping track of all of this stuff. So what you have now is the question being asked by judges across the Nation, well then who really holds the note?

Here is the best part of all of this, and it makes you realize that a select few during this crisis enriched themselves beyond anyone's wildest beliefs. Remember the last part of this chain is the final repackaging by the MBS and sale of this investment to Wall Street investors. If some notes were not properly transferred, other notes were not transferred within the legal time frame, and some of those were transferred either before or after a foreclosure sale, then what exactly did investor's buy on Wall Street? If investors were being told that these MBS's contained these income streams from these mortgages that were actually not transferred properly or at all, then hasn't the mom and pop investor been defrauded again? Money was coming through the front and back door on these transactions and Wall Street and Big Bank CEO's were being paid the biggest bonuses in history and at the end of it all, when the Banks could no longer collect on its assets and make good on its promises to pay, the Federal Government had to come in and save the entire system. No matter how distasteful it was to bail out the entire system, it had to be done to save the entire world economy. Unfortunately, it is the ordinary American that has to foot the bill as he always has throughout history.

While the foreclosure crisis meanders about, foreclosure law firms will fall, attorneys will be held accountable for their less than up front behavior, average everyday Americans that desperately need a modification will be denied an opportunity to keep their homes, and the Big banks will continue to make record profits. In a lot of cases, it just doesn't make sense to foreclose on a home when all the homeowner needs is a little relief on his monthly mortgage. Banks recognize this, and in some instances they will extend a modification that works. The fact of the matter is that there is not enough manpower to process the volume of requests. HAMP has been declared a total failure and there is no further relief in sight for homeowners. If there is a problem with your foreclosure, then maybe, just maybe that can give you leverage to force a modification from the Bank.

It seems that recently a bomb shell was being released every couple of days regarding this crisis.

Stay tuned for more developments as more of the truth comes to the surface.

So now, if the banks haven't followed the proper procedure in transferring the Notes to these various trusts, do the MBS's now have legal standing to bring an action to foreclose? Legal standing is a concept in the law that requires that the plaintiff, in order to bring an action in a court of law seeking redress for some wrong or cause of action, must be able to establish that they are sufficiently affected by the matter at hand and that there must be a case or controversy that can be resolved by legal action. Historically, there are three requirements that demonstrate a plaintiff may have standing to bring a lawsuit: 1) there must be an actual injury in fact, which typically means that there exists a violation of some legally protected interest that has either occurred or is about to occur, but this injury cannot be conjectural, hypothetical, or speculative; (2) there must be a direct and causal relationship between the injury and the conduct which is being challenged, which means that the injury must be directly traced to the challenged action of the defendant, and that said action did not result from the independent action of some third party that is not before the court; and (3) there must exist a likelihood that the injury will be redressed by a favorable decision, and that the prospect of obtaining relief from the injury is not too speculative. Foreclosure cases across the Country have been dismissed by Courts because many of the foreclosing entities cannot prove that they have standing to bring the foreclosure complaint in a court of law. Well, you might say why, how is that possible?

During the mortgage and housing boom, as was explained in my previous blog, many of these banks and mortgage trusts cut corners, a lot of corners. From not properly recording the transfer in the affected land records office, to not properly transferring the note to the proper mortgage trust, to not properly endorsing the note on the signature lines provided, to not transferring the note at all, some foreclosing entities have not been able to produce the note proving that they have legal standing to bring the foreclosure action. Although under the note, there may have been a default by the borrower, ie. missed mortgage payments, not paying real estate taxes, or not maintaining their hazard insurance. These defaults would give the note holder the ability to bring the foreclosure action. The problem that exists is that in many of these cases, no one can figure who at this point in the chain actually holds the note. And if it cannot be ascertained who the legal owner of the note is, then that plaintiff cannot prove that they have standing to even bring the foreclosure action. In Maryland, it was quite common for a number of years to have a foreclosing attorney simply attach a lost note affidavit, explaining to the Court that they could not locate the note, but that the plaintiff was still, nonetheless, the proper party to bring the foreclosure action. In the wake of the robo-signing scandal and the bogus affidavit fallout, Judges have begun dismissing these actions for failing to prove that the filing plaintiff has standing. It gets worse. Some of these notes are being transferred to the MBS's either right before or right after the foreclosure actions are being filed. More alarming , however, is the fact that with a lot of these mortgages that were sold during the boom years, many of the notes did not transfer to the MBS within a certain legally required time frame, typically 90 days after settlement. If those notes did not transfer within the specified legal time frame, then the MBS's do not hold the note either. What a mess you say? Stay tuned for Part III, it still gets better.

Do you really think that you owe the original bank the money that you used to purchase your home? Sure bet, you don't! Today's mortgage world is far different from when your parents bought their house from borrowed money at their local Savings & Loan. Today, mortgage loans are what we call securitized assets or mortgage backed securities (MBS). As my prior blog explains, the mortgages that caused the recession, specifically the sub prime stuff (bad loans with unrealistic payment terms or options), were all pooled into groups of assets which were then packaged and resold as investments on Wall Street. Most of the MBS's were mixed mostly with sub prime mortgages, sprinkled in with a little A paper (good loans that you know have a low risk of defaulting) to give it some spice appeal. Rating agencies would then provide their mark of approval on these MBS's and rate these pools as Grade A investment material. These repackaged loans were then sold to investors looking to make a return on their investment, contingent upon the expectation that those borrowers of the original sub prime mortgages would continue to make good on their mortgage payments. When those loans defaulted, big banks and Wall Street firms like Lehman Brothers lost a lot of money, insurance companies like AIG had to spend a lot of money, and private investors like you and me saw their 401K's and IRA's lose 50% of their value. As a result of the Lehman Collapse, The money markets for big business froze so much so, that the Government had to step in to bail out basically the entire Country from the mess Government Regulators, like the Office of Thrift Supervision. (OTC) & the Securities and Exchange Commission (SEC), let happen on their watch.

Now here comes the technical stuff about these MBS's. When a mortgage is transferred to one of these MBS pools or Mortgage Trusts, an assignment or transfer of the original mortgage note you purchased must occur. When you bought your home at settlement, you were given a stack of papers requiring your signature. In that stack of papers was a document called the Note. This Note was basically a promise that you would pay back the money you were being loaned to buy your house over some period of time, at some interest rate (fixed or adjustable), within a certain number of years, but if you defaulted and failed to make payment, the note holder has the right to repossess or foreclose on your home. The Note required your signature and represented your obligation to pay your mortgage. Now here is the really good part: When lending banks eventually transferred these Notes to other intermediary institutions, then finally the Mortgage Trusts, many of these transfers never actually followed the legal procedures of the local land records office where the home was situated and they never actually filed proper Assignment Documents in those land records offices to legally legitimize the assignments, ever! Instead they recorded these transfers to an electronic servicing company such as Mortgage Electronic Registration Service (MERS) that keeps track of what trust has what mortgage, and what bank actually holds the note now. This was being done Nationwide and the practice still continues today!! You might say, why does this matter? Well for starters, most States' laws dictate that in order for an assignment of a mortgage to be valid, their must be an Assignment Document filed in the land records office of where the real property is situated with a filing fee paid, so that anyone can walk in and see who holds the debt against that piece of property. As a result, these MBS Trusts were able to avoid paying millions in filing fees, however, the unintended legal consequence is that now they may not be the legal owner of the Note under State law! Wait it gets better!! Stay tuned for Part II.

avenues in an attempt to limit the damage of a foreclosure that will be caused to their credit, their pocket books, and their lives. Even millionaires are strategically walking away from their homes When loans aren't being modified, when defaults occur after a modification, or when no one will buy your home for what it is worth, many homeowners are seeking to "short sell" their homes to avoid a foreclosure sale. There are, however, risks that need to be brought to your attention

What is a "short sale" anyway? A "short sale" is when a homeowner sells their home for less than what is owed on the outstanding mortgage balances. In order to effectively and properly "short sell" a home, the bank holding the mortgage rights must agree to accept an amount less than what is owed. The agreement by the bank to accept less than what is owed, however, is fraught with peril and uncertainty. Typically, agreements entered into between banks and homeowners regarding short sales are often times silent as to the treatment of the deficiency balance that will exist after a short sale. For example: if a homeowner owes $100,000 on their mortgage, but through a short sale agreement the bank is willing to accept only $80,000 from the short sale, then a deficiency balance of $20,000 owed to the bank will arise. Short sale agreements are typically silent to the treatment of the remaining deficiency balance.

There are usually two treatments of the deficiency balance banks have been employing. The first, banks agree to forgive and release the deficiency balance, which absent a bankruptcy filing, is considered forgiveness of debt income. Upon completion of the short sale, the short selling homeowner is issued a miscellaneous 1099 for the amount of the deficiency that has been forgiven by the bank. In our example, the ex-homeowner will now be responsible to report on his current tax year's tax returns the amount of the forgiveness, $20,000 of gross income. The second, banks can also retain the right to pursue the ex-homeowner for the deficiency balance that arises after a short sale. Banks can sue and garnish wages, bank accounts and other property in satisfaction of the deficiency balance. These balances can also be sold to collection companies for pennies on the dollar, while the ex-homeowner still remains liable for the entire deficiency balance.

The only parties that usually win in a short sale scenario is the buyer, whom typically buys the home for less than market value, and the realtor, whom still gets paid their commission for the sale.

The ex-homeowner is usually left with the resulting fall out; forgiveness of debt income or liability for the deficiency balance.

Many times a person can file a Bankruptcy to eliminate the forgiveness of debt income issue and/or any deficiency balance that may result after the sale. This avenue is often the best course for a person in this situation as the bankruptcy not only replaces the foreclosure notation on a person's credit report to one of a discharge status, but also eliminates the possibility of being sued for the deficiency balance.

The State of Maryland has just adopted a new proposed rule which would allow State Court Judges more power to dismiss foreclosure actions when a Judge suspects that the accompanying affidavit certifying the action was not actually signed by the attorney. As has been the case across the nation, in the situation that has given rise to this new rule, someone other than the foreclosing attorney signed the affidavit on the attorney's behalf. Two major Maryland foreclosure law firms have been identified as firms responsible for this "mis-practice".

In my last blog, I wrote the following: "Eerily silent in any of the most recent reports is the connection that major foreclosure law firms may have had with any of the fraud that has occurred at these banks. It is safe to say that the big banks could not have at all times acted alone, but instead it is possible that some of these occurrences could have been facilitated through the assistance of counsel." Well it would seem that in Maryland that eerie silence has been shattered!

Six notaries in two foreclosure law firms have been stripped of their Notary Commissions when they failed to appear for a Court hearing to explain whether or not the attorney signing the previously filed affidavits actually signed those affidavits in the notary's presence. When none of the six notaries appeared in Court, their commissions were revoked, according to the Daily Record of Maryland. There has been no indication if any of the notaries will face sanctions or criminal prosecution, nor is there any word that the attorneys involved will face any penalty. But under Maryland's Rules of Professional Conduct, filing a false or inaccurate affidavit may be considered a violation of at least two rules of attorney conduct; Rule 3.3(a)(1) "A lawyer shall not knowingly make a false statement of fact or law to a tribunal or fail to correct a false statement of material fact or law previously made to the tribunal by the lawyer;"; & Rule 3.3(a)(4) "A lawyer shall not knowingly offer evidence that the lawyer knows to be false." As one would think, attorneys that may have filed affidavits under these circumstances would be well advised to file corrective affidavits that cure any existing deficiencies contained within the originally filed affidavits. Failure to file curative documents would be a continuing violation of the Maryland Rules of Professional Conduct.

It is suspected that hundreds of bogus affidavits exist in pending Maryland foreclosure cases.

This becomes especially disheartening when one realizes that the judicial system is being duped into approving foreclosures, when many of the documents associated with those proceedings are not true and accurate. Maryland is not alone. In the State of Florida, "ground zero" of the current affidavit crisis, it was found that notaries have been stamping affidavits when the person signing those affidavits was not present as early as 2006! Three Florida law firms are currently under investigation by the Florida Attorney General for engaging in these tactics. One can be more than certain that this practice has been happening in every State of the Union, not just Maryland and Florida.

As attorneys filing documents in Court, we are sworn to uphold the law, to be truthful in all statements, and to have the utmost candor and respect towards the tribunal and the judicial system. These duties can never be impugned because of the volume of the work or the laborious nature of the tasks involved in ensuring that the documents being filed with the Court contain a sufficient legal basis to proceed. Part and parcel to that legal basis is that the facts which are being relied upon to bring the action are true and accurate and that an attorney has certified same. Absent this attorney certification will bring into question the validity of the underlying court action. In the coming weeks, readers should expect to see many completed foreclosure actions undone.

All Fifty States have now joined forces and have opened an investigation against mortgage servicers and banks conducting foreclosures Nationwide. Being led by Iowa's Attorney General, the group task force is investigating the foreclosure practices at these banks and will review thousands of documents looking for fraudulent statements and fake signatures. The task force's goal is to immediately stop fraudulent foreclosure practices, fashion suitable remedies for the missteps that have occurred and to monitor ongoing and future foreclosure actions to ensure compliance with the rule of law.

It has been expressed through various representatives that the banks should consider complying with the requests of the task force and where fraud is found to have occurred, those banks guilty of such fraud should consider working with that affected homeowner for a resolution short of foreclosure.

At issue is the preparation and presentation of various legal documents that are required when filing a foreclosure action in state court. Specifically, the law in most states requires that an affidavit be filed with the foreclosure action that states under penalties of perjury that the documentation, monies owed, and basis for the foreclosure action are all true and accurate. The person signing the affidavit must attest that he or she has personal knowledge of the facts and allegations contained within the foreclosure paperwork and must swear to all of this before a notary public. If you recall, the act that started this tidal wave was an admission by a GMAC/Ally employee that he and his team signed-off on approximately 10,000 foreclosure action affidavits per month without ever reviewing any of the foreclosure paperwork and most importantly without having any personal knowledge of the facts contained within that paperwork. GMAC/Ally has been sued by the Ohio Attorney General as a result of filing countless false affidavits and violating state consumer protection laws as a result of those actions.

After the Ally bombshell, other mortgage companies and banks came forward to disclose that they too may have had some lapses in their foreclosure process. Several of the big banks halted foreclosures across the country in an attempt to review and analyze whether their practices were compliant with state law. Doing that was probably a good thing.

Eerily silent in any of the most recent reports is the connection that major foreclosure law firms may have had with any of the fraud that has occurred at these banks. It is safe to say that the big banks could not have at all times acted alone, but instead it is possible that some of these occurrences could have been facilitated through the assistance of counsel. The fallout from this latest crisis is sure to linger for sometime.

With foreclosure freezes becoming the norm for the big three banks, GMAC/Ally, Bank of America and Chase, you can now also add Litton Loan Servicing and PNC Bank to the mix as additional banks halting their foreclosures to review their procedures.  Because of these widespread foresclosure stoppages, many are questioning the impact this will have on the housing market and the broader economy. Opinions vary across a very broad spectrum. The White House claims that a complete halt to foreclosures will be catastrophic to the housing market. Other experts in the field also claim that such a halt will be catastrophic to the overall economy. But why is my question.

Applying simple economics and the law of supply and demand, one can clearly surmise that a halt shouldn't be as bad as everyone says. As the supply of housing increases, prices fall. Less foreclosures means less supply, which then tends to demonstrate that in the short term, home prices may stabilize, if only temporarily. Currently, houses for sale are sitting on the market for just over a year. In a normal market that wait would usually be about 6 months. To say that a halt to foreclosures will be catastrophic is simply a stretch. Uncertainty in the foreclosure process may lead investors away from buying up foreclosed homes, but with this moratorium and the industry making a concerted effort to "get it right", wouldn't the banks' review of their foreclosure process actually boost investor confidence?  The media at play has a way to create hysteria when none exists. Title insurers are even creating insurance policies to protect against invalid foreclosures. Bottom line, in my opinion it will still take another 3 to 5 years to clear out the inventory of homes in foreclosure status and a return finally to a stable housing market.

In the long run, the only way the broader economy will begin to improve and the unemployment rate begin to decrease, is once the housing market begins to stabilize. Sure, a several week moratorium on foreclosures will delay the long term stabilization of the housing market, but seriously, will a several week halt in the process make a significant impact on the time it will take to make the housing market healthy again? I think not.

There are certain immutable laws that are constant, at least relatively. The supply of land is finite, population numbers will always continue to grow, and the housing market will eventually fix itself.

The bottom line is that there are so many industries tied directly and indirectly to the housing market that it is no wonder that the unemployment rate remains stubborn. Until the housing market stabilizes plumbers, roofers, electricians, brick layers, landscapers, cabinet makers, appliance producers, moving companies, architects, real estate agents, loan officers, and any other industry even remotely connected to the housing market will continue to suffer. Only the passage of time can heal the current crisis.  A several week halt in foreclosures will not be a catastrophic event similar to the collapse of Lehman Brothers.

Senate Majority Leader Harry Reid (D-Nev.) has called upon all major mortgage lenders pleading with them to stop foreclosure proceedings in all 50 states Friday, after Bank of America announced it was stopping all foreclosure actions until it finishes an internal review of its foreclosure paperwork process. The announcement comes on the heels of GMAC/Ally's disclosure that many of its foreclosure cases were fraudulently prepared and the announcement by JP Morgan Chase that it is also halting its foreclosure actions pending an internal review of its foreclosure action document preparation process. These reviews could take several weeks. Nonetheless, it is widely believed that rampant bogus paperwork exists in connection with the foreclosure cases currently being conducted by these entities.

Reid, who earlier sent a letter to major banks asking them to suspend foreclosures only in Nevada, has since extended his request to include all 50 states. "I thank Bank of America for doing the right thing by suspending actions on foreclosures while this investigation runs its course," said Reid. "I urge other major mortgage servicers to consider expanding the area where they have halted foreclosures to all 50 states as well." "My primary focus is to protect Nevada homeowners who have been hardest hit by foreclosures in the most recent economic downturn", said Reid.

Nevada is one of the States hardest hit by the current foreclosure crisis. Attorney Generals and Governors across the Nation have called upon mortgage lenders to stop foreclosures until they can be certain that their foreclosure document processing system complies with State law. Some States have even invoked temporary moratoriums on all foreclosure proceedings until banks can show authorities that their foreclosure document process complies with State law requirements. Maryland has ordered major mortgage companies operating within the State to investigate their own procedures and report back with their findings. As of today, Maryland has not yet invoked a moratorium temporarily stopping foreclosures.

Interestingly enough, yesterday President Obama refused to sing into law a measure which would have allowed mortgage companies the ability to electronically sign foreclosure documents without the need of an actual written signature. In light of the current revelations of rampant foreclosure document fraud at the Nations biggest banks, is it any surprise that the President refused to sign this bill into law? I think not.