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Obama won't sign notarization bill

I've not been covering the foreclosure mess that quickly because, well, I'm totally confused by it. Is this an unexpected gift that will slow foreclosures and give distressed homeowners more leverage to negotiate principal write-downs in court? Is this a nightmare that will throw the housing market into chaos, freaking out other markets and slowing the necessary clearing? Both?

I'm still trying to figure it out. And it looks like I'll have more time to do so. The White House has announced that President Obama will "pocket veto" H.R. 3808, the Interstate Recognition of Notarizations Act of 2010, which would've allowed banks to shortcut the current notarization process by forum shopping to states that are willing to sign off on anything. That might have fixed much of this foreclosure mess, but it would've fixed it by bailing banks out of a situation they created -- not the sort of thing the White House wants to do just weeks before the midterm.

If you, like me, are still trying to figure this out, head over to The Washington Post's page collecting all of our coverage on the issue.

By Ezra Klein  | October 7, 2010; 3:40 PM ET
 
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Comments

How could it throw anything into chaos? No one expected the bill to pass and people have managed to buy and sell houses for a long time without it. Really DC pundits spend too much time talking to industry flacks.

Posted by: Hopeful9 | October 7, 2010 3:59 PM | Report abuse

This is one of the rare occasions where I agree with Obama.

Sometimes, old-fashioned methods are preferable to modern electronic record-keeping: I wouldn't want anyone to loose a home or other property based on a distant electronic notarization of a document. While the triple-seal step currently present in the collection of a (confessed) judgment spanning multiple states is something of a nuisance, the delay it induces -- like delay induced by a filibuster -- offers benefit to the weaker party in the transaction. HR 3808 would have made a faster process... but the faster process isn't overly desirable.

Interestingly, HR 3808 passed by voice vote in the House and by unanimous consent in the Senate. The President's pocket veto is a good one!

Posted by: rmgregory | October 7, 2010 4:17 PM | Report abuse

What an embarassment for Democrats. They have overwhelming majorities, and are solely responsible for rushing this bad piece of legislation through. It's sad that Obama had to send his own party's inept lawmakers up the street into a 'timeout'.

Of course I'm sure the media is franticly trying to come up with a spin that says this is somehow all the fault of the GOP.

Posted by: dbw1 | October 7, 2010 4:23 PM | Report abuse

The title companies on the hook for sales of foreclosed properties must be sweating bricks. Tons of bricks.

Posted by: tuber | October 7, 2010 4:55 PM | Report abuse

Hi Ezra,

I generally enjoy your blog, because you examine issues in detail and are pretty fair-minded about issues.

The problem with HR 3808 is that it would have allowed two things: (1) "jurisdiction shopping" by banks, to find the most lax state for notarization rules, and (2) the use of electronic notarization, which defeats the whole purpose of the notary public knowing the person who is attesting a document.

In addition, this bill would have had the unintended consequence of watering down Sarbanes-Oxley (SOX). SOX was passed to boost companies' internal controls in order to reduce fraud. An electronic notarization could be easily manipulated and issued post-dated, which makes it a much less robust (and even unauditable) document.

At any rate, this would have been a horrible, poorly drafted and intentionally vague law which would have watered down the whole purpose of notarization. It would have had repercussions far beyond the narrow (although important) issue of the legitimacy of bank foreclosure documents.

It is just stunning that this bill became so close to becoming law.

Posted by: r_wheeler2 | October 7, 2010 5:19 PM | Report abuse

Why do I get the feeling this is what 2011 will look like?

Posted by: klautsack | October 7, 2010 6:26 PM | Report abuse

"What an embarassment for Democrats. They have overwhelming majorities, and are solely responsible for rushing this bad piece of legislation through."

--------------

Never mind the fact the bill was sponsored by a Republican. But it's still the Dems' fault. Amazing how you people will take any issue and immediately assign blame to the other side. What kind of warped reality are you living in?

Posted by: nickprzy | October 7, 2010 6:31 PM | Report abuse

"Never mind the fact the bill was sponsored by a Republican. But it's still the Dems' fault."

This is what happens when industry is allowed to self-regulate within a patchwork matrix of different state rules and regulations.

Anyway, imagine the tens of thousands of new home buyers who thought they were getting the deal of the decade by swooping in and scooping up foreclosed properties at prices 20%, 30%, 40% below the peak. They may not even hold legal title to the properties. At least the money they pay won't be lost. The title guaranty companies are on the hook for that.

Posted by: tuber | October 7, 2010 7:39 PM | Report abuse

--*I've not been covering the foreclosure mess that quickly because, well, I'm totally confused by it.*--

Karl Denninger has been yelling about the criminality-in-the-chain-of-title malfeasance for about two years.

Maybe you should trade in reading the buffoons DeLong and Krugman and Zandi for someone whose business is not pushing a political agenda.

Posted by: msoja | October 7, 2010 7:39 PM | Report abuse

I don't enjoy reading comments like yours, above. You have a job; you don't have kids(who cd risk being thrown out of their schools); you don't risk losing your possessions to a police tape.

Glad you're going to 'study' the situation.

Ezra, what do you think is going on out here?

How many kids are now homeless? Can you do the count?

Posted by: muddypaws | October 7, 2010 10:47 PM | Report abuse

Are you looking for a mortgage refinance? Best way is to contact at least three to five lenders for input on mortgage programs and rates. Also search online for "123 Mortgage Refinance" since they can do 3% refinance

Posted by: taylordirk | October 8, 2010 6:19 AM | Report abuse

Mortgage rates are historically low you can easily refinance these days your mortgage to 3%. It is the best way to save money. Search online for "123 Mortgage Refinance" they can do 3% refinance and free analysis of your current mortgage

Posted by: taylordirk | October 8, 2010 6:20 AM | Report abuse

What is the best way to shop for a mortgage refinance? It is a good idea to contact at least three to five lenders for input on mortgage programs and rates. Also search online for "123 Mortgage Refinance" they can give 3% refinance rates

Posted by: taylordirk | October 8, 2010 6:24 AM | Report abuse

Obama tries to do as he did when he was a state legislator and then later when he was a US senator and vote present.

Note: Since the democrats took over the majority in both houses of congress in the winter of 2006/2007, they have the responsibility for passing every bill since the republicans couldn't pass anything without their permission. Perhaps that is why the democrats are running away from what they have done.

Posted by: gfafblifr | October 8, 2010 9:17 AM | Report abuse

The bottom line is that if the banks are left to do as they want, they will continue bleeding the people up to the last penny.
Stopping the foreclosures because of misleading procedures set up by crooks, will hurt nobody, except the crooks.
What is important to consider is that the bill went trough Congress unchallenged, and Congress is controled by democrats. Are they blind? Have they being bought? are they stupid?
Foreclosing massive numbers of homes will not solve any problem. The banks do not want to put all the foreclosed properties in the market for that would cause a falling of the prices.
Many people are pulling out of the mortgages because the house is "under water", and people are giving their money to the same crooks who created the problem.
The solution is to get the mortgages in hands of F&F and lower their interest rate to 3% fixed.
No loss mitigation/loan modification. Just lower all the mortgages rate to 3% fixed.
Most homeowners are sincere, well intentioned people, and will keep paying for as long as the deal is fair.
The people that bought without knowing what they were doing are not so many. They were misled by brokers, and financial institutions who sold the mortages 5 minutes after closing, and kept a hefty amount of money for themselves, knowing very well what they were doing. Every single real estate broker I know, is a crook. They used to be agents, and needed to disclose all the information they had about the property they were selling, and worker for the buyer. Now they are brokers and do not have to do that anymore. They became intermediaries. They get 6% commission every time the property changes hands. Their best deal is when they sell to someone who they know will not be able to keep the property.
These are the people that want to keep the status quo.
"We the people do not like it".

Posted by: albertorparedes | October 8, 2010 10:46 AM | Report abuse

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