Government interferance is coming in this area because the vast majority of foreclosures are by banks that were never actually the lenders ,, they were simply a conduit/straw man for the true lenders on Wall Street. The banks foreclosing are in fact getting a “free house” that they never had an interest in. This is also why only a very small number of loan modifications are becoming permanent ,, the banks aren’t the true lender in the transaction and cannot legally modify the terms. This is one big reason why people are allowing themselves to “strategically default” ,, they know the truth and quite simply their loan docs are invalid as the true lender is not on them,, a MASSIVE TILA breach where the only remedy is recission... the worst that will happen to the informed defaulters is a few legal bills before they get the house free and clear when the bank fraud is broomed away.
I disagree. It's more a case of the banks failing to perform due diligence. They bought the loans, after the homeowners freely agreed to pay a rather foolish price for a home, presumably under the assumption that everyone would make a profit since home prices "always" go up. The homeowner's obligation to repay transferred to the new banks when the loans were sold. I am not displeased that irresponsible banks that bought loans without checking on them and steering away from risky loans based on inflated values with minuscule downpayments will still lose money.
That free house that the banks get? It's worth less than the loan they write off when they foreclose. That serves them right. It's still morally wrong to default on a promise if you have the ability to pay, but I have no sympathy for the losing bank when they get stuck with the house instead of the money that was worth more. It's not in any case (that I'm aware of) a truth in lending issue, just a massive lack of due diligence by all parties involved.