The hottest story in housing right now is the brewing foreclosure crisis seen at places like JPMorgan and Ally, both of whom have halted foreclosures after having found significant flaws in their paperwork and processes.
The NYT discusses the obvious implications:
Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country’s biggest home lenders in the last two weeks.
Even lenders with no known problems are expected to approach defaulting homeowners more cautiously and look more aggressively for resolutions short of outright eviction.
There’s some hope that this could actually spur some real action on mortgage modification, and keeping people in their home, but it could easily accomplish just the opposite — elongate the housing bust and recovery even further, as this just becomes “extend and pretend” on steroids.
The only chance that this will lead to something constructive for housing, we’re guessing, is if we get yet another big government intervention, via massive subsidized principal reduction and redone mortgages. Otherwise, we’re not so optimistic.