Foreclosure Crisis 'A Legal Impossibility', Ritholtz Says (WATCH)

The current foreclosure crisis is unprecedented in American history, Barry Ritholtz said on Monday.

The Fusion IQ CEO told CNBC's Larry Kudlow and Diana Olick that the flaws in the foreclosure system are not simply "a matter of paperwork." At stake are U.S. property rights, which are "being dramatically undercut due to rampant fraud throughout the whole system." The New York Times last week reported the story of a Florida woman who thought she had bought a home until the bank told her the property's foreclosure might not be valid and Olick on CNBC played a clip of another homeowner who experienced something similar. These flaws and others -- such as incidents of banks improperly changing locks on homes that aren't in foreclosure or foreclosing on homes that don't even have mortgages -- constitute a crisis of historic proportions, Ritholtz said.

Olick wasn't so sure. "You're always going to see those stories," she said in response to the phenomenon of banks foreclosing on properties that don't have mortgages. "That's a very small minority of the cases we're talking about here."

But to Ritholtz, even a small minority is too large. "This has never happened before! That is historically an impossibility. That is a legal impossibility. And yet it happened. That's how bad this is," he said. "It should never happen! This should be a hundred percent -- never, ever, ever happen."

Still, Olick insisted that these flaws weren't unusual. "It should be zero, but you know what? The cops often knock on the wrong door in other cases as well," she said.

For all their arguing about the severity of the crisis, neither Olick nor Ritholtz detailed any solutions. But that may be appropriate at this point: Foreclosure crisis explainers, like the ones by John Carney and Mike Konczal (in five parts), show that solutions will have to be implemented with care.

Reuters' Felix Salmon suggests that mortgage servicers should replace the bad loans with new ones, a process that's easier said than done.

Wall Street and the White House have expressed their opposition to a nationwide freeze on foreclosure proceedings, even though Bank of America last week said it would halt its foreclosures in all 50 states, as it reviews paperwork for errors, a move that garnered the support of Senate Majority leader Harry Reid.

WATCH Ritholtz and Olick spar:

Comments

[chickenwarriors]

12:48 AM on 10/22/2010

http://www.youtube.com/watch?v=YGFZ1Jj3ui8 - This is how I feel about the Banksters

[chickenwarriors]

11:45 PM on 10/19/2010

Most mortgages are a chain of fraudulent documents. Even Obama's. What is really disturbing is that licensed professionals got us into mess. Now there will be one of the biggest grassroots movements in history to get the mortgages away from the den of thieves on Wall Street, and back into the hands of the people who rightfully own them. Title companies will go bankrupt for perpetrating the illegal transfer of Title and they don't deserve a bailout for their incompetence. Oh, and shame on all of the judges who are signing fraudulent foreclosure documents. And if you are investing in real estate you are buying properties without clear titles. This is truly an empire in decline. http://Glenn.Hersid.com

[progressivestance84]

10:30 AM on 10/15/2010

The rich own government. Soon they will own your home. Its only a matter of time before they turn you into a slave and own you. Vote democrat for more corporate control. Vote republican for more corporate control.

[Lucy1886]

10:16 AM on 10/15/2010

The driving force underneath capitalism is not "production". It is profits. By any means necessary, until you are caught. The "pure capitalism" that libertarians dream about cannot exist because in order for capitalist ENTERPRISES to survive (that's different from individual rich people), the ENTERPRISES must do whatever they can, including breaking their own "philosophical rules" to keep from being defeated by other ENTERPRISES/companies that are also breaking the rules.

Just as some religious folks defend their religions preached to them by leaders who violate those moral principles all the time....so too do many defenders of capitalism defend the philosophy and leaders of capitalism which the biggest practitioners of capitalism have no intention of following those rules and never do. They complain when we file lawsuits, but they do it all the time. They complain about big government, but they love big government as it mainly helps them. And they complain when one of their opponents cheats, but they themselves cheat all the time.

To those who say: "It is the individual capitalists--it is not the system"..........I would reply: "THE SYSTEM REWARDS THOSE WHO WIN--AND THE SYSTEM REWARDS THOSE WHO CHEAT MOST EFFECTIVELY"......so that creates a "SURVIVAL OF THE FITTEST CHEATERS".........

It's not just "a few bad apples".......

[Siebenstein]

05:20 AM on 10/15/2010

Its the biggest heist ever !

[kurd55]

11:30 PM on 10/14/2010

Olick: "Hey it's only a few--so it don't matter!" Thanks a lot, Cruella. Sheesh.

[Fred303]

11:03 PM on 10/14/2010

One sided reports are disgusting , typical on Larry Kudlow Republican show.

[Raccoon1]

10:25 AM on 10/16/2010

That's what he's about.

[Lahonda]

09:46 PM on 10/14/2010

Both were right.

[Prezident Camacho]

07:39 PM on 10/14/2010

Olick has to be the world's dumbest white woman. She's a reporter but she blindly salutes whatever the banks tell her by assuming that it's only a "small minority." Oh yeah??? How do you know? Did you actually do some investigative research or audit the banks to come up with that number??? Amazing for what passes for journalism these days.

[phishphan]

02:47 PM on 10/14/2010

I want the last 9:51 of my life back. Diana, your conservative republican smirk is showing.

[madrediterra]

02:34 PM on 10/14/2010

It appears to be a "very small minority" to Olick but it is the tip of an iceberg.

[ambrecel]

02:11 PM on 10/14/2010

Maybe the job it too big to prosecute, and that we need to figure out a fine to be able to pay for the prosecutions of the illegal activities that have happened.

[twoto2]

12:02 PM on 10/14/2010

IMO it's time to stop calling this a capitalist system. It's just a buzz word to make people think like it's the 50's way of doing bussiness. That way has been dead for a long time. When congress itself won't even protect people saving in banks by puting the Glass-Stegall law back in place you know the 'old America' is dead.

[nopilikia]

07:23 PM on 10/14/2010

That and refuse to remove the Wall Street Banks exemption to state's Bucket Shop Law's (illegal gambling) they (Congress) gave in 1999/2000 so they (Banks) could sell CDS's again.

[louishowe101]

11:22 AM on 10/14/2010

Congress had their chance this year to avoid this crisis but failed. H.R. 1106, The Helping Families Save Their Homes Act, was a bill passed by the House that would have allowed bankruptcy judges to restructure mortgages on family homes to make them more affordable. Judicial modification is already possible in bankruptcy for loans covering luxury yachts and the vacation homes of the wealthy. Congressman Michael Arcuri voted against this bill for some reason and what was eventually passed was the Senate Version of this bill sponsored by Senator Christopher Dodd, which did not contain the language of HR 1106. After the 2008 collapse of the financial system driven in part by financial chicanery and an overpriced housing market funded by playing mortgages like chips at a casino, politicians paid off the banks and wall street interests but refused to address the declining housing market asset value which would have been addressed by the House Version of HR 1106. Now, banks have instituted self-imposed foreclosure moratoriums only in states where the state judiciary has a role in mortgage foreclosures. The failure to pass the House version of this bill has continued the past practices of financial interests to the detriment of the housing market which cries out for an orderly procedure to modify middle class home mortgages to deal with the collapse of asset value caused by the Great Recession. This is no longer a problem for Senator Christopher Dodd who for some reason is not running for reelection.

[Shaun Hensley]

04:21 AM on 10/15/2010

wow. Great post.

[doctor who]

09:32 AM on 10/14/2010

The banking industry brought this upon themselves. Boo hoo. But don't worry, Obama will bail them out...AGAIN!!!