Marketplace
New foreclosure numbers sound good, but...
Feb. 8, 2012

Senior Lecturer Greg Hallman of the McCombs Finance Department weighed in on the foreclosure problem recently on the Marketplace radio program. Hallman offered insight into the recent $25 billion foreclosure settlement involving 49 states, the largest federal-state civil settlement in U.S. history. The settlement was a result of efforts to halt abusive foreclosure practices, such as "robo-signing," which stemmed from the collapse of the housing bubble.

Hallman believes that since the “robo-signing” scandal came to light, the foreclosure process in this country has pretty much ground to a halt, and the settlement may get it moving again.

Adriene Hill spoke with Hallman in a Marketplace radio segment:

The foreclosure market should flow pretty smoothly, like water through pipes: a homeowner is delinquent, the bank forecloses, the house flows through the system and back to the housing market as a whole. Turns out our pipes have a big, gross hairball clogging them up.

The robo-signing clog, [says Hallman], was created when banks got busted for improperly completing foreclosure filings. Banks have been too afraid to move ahead with other foreclosures until the mess is cleared up.

But the settlement that’s expected between states and the banks could change that. It’s like Drano: clearing things up for the banks and making the foreclosure pipes run a whole lot faster.

Hallman: “The system will work better in the long run when it gets unclogged. But really it will speed up a process that is painful for everyone involved.”

To learn more about why the foreclosure settlement could mean more pain for homeowners, click here.