Truth in Lending Act Violations = Unsecured Mortgages
A must read over at “The Big Picture Blog”, (where the author was actually quoted in the WSJ no less), which discusses the fact that due to a lack of proper documentation, some borrowers may able to separate their mortgages from their homes, due to a violation of the truth in lending act. As a result, the lenders will find the value of these mortgages plummet, not to mention having to get in line with other unsecured creditors as far as putting a lien on the house.
We’ll have to wait and see how this develops, as there are a ton of related lawsuits that haven’t been resolved yet. However, for the smaller lenders that tended to slap together documentation and originate junk mortgages, this could be the final nail in the coffin if they find themselves with a significant number of mortgages that aren’t even secured anymore. For many borrowers, this situation could be godsend provided they can afford a normal fixed rate mortgage on their home.
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