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Thinking About Standing-s

by Fred Cederholm

Both the S&L crisis of some 20 years ago and the banking crisis now have their roots in building booms done in an environment of deregulation run amok.
I’ve been thinking about “standing and standings.” Actually I’ve been thinking about the S&L crisis vs. our current banking/ financial mess, cash flow, foreclosures, liens and “perfection,” and rankings by locale. The more things change, the more they seem be the same. The bad NEWS just keeps on coming with more daily negatives seemingly eclipsing the (bad) “records” set just weeks or months prior. We are seeing a synergy at work now where the cumulative sum of the components of the single negatives are producing an increasing gloom for the picture as a whole. You see the statistics for real estate delinquencies and foreclosures are growing on a weekly/monthly basis. Most communities, counties, and states now find themselves having more of both than at any time since the Great Depression of the 1930s. In some cases the current status is already worse than that horrific time frame of some 70 years ago. Despite the “don’t worry, be happy – we have the situation under control” chanting(s) from the Administration, the Treasury, and the FED; reality suggests otherwise. We are a long way from turning the bend on this anytime in 2008 or even in 2009! “Prosperity is right around the corner” didn’t prove true for Herbert Hoover – and neither will it prove the case during the last year of Bush – nor during the first YEARS of his successor.

There are similarities between the national S&L crisis of some 20 years ago and the national banking crisis weighing on us now. There are also differences. This one is far greater and will prove more costly in both time and money to resolve. Both have their roots in a building boom done in an environment of deregulation run amok. In both cases financial institutions were being dragged down by a deficiency of cash flow. The S&Ls hemorrhaged money because they lent long term and funded those loans short term with funding that ended up costing more than the loans generated. The banks currently hemorrhage money because they just aren’t receiving the mortgage payments timely – that is, if they are receiving them at all! It’s impossible to meet the interest payments to your depositors (or investors) if you aren’t receiving payments, you are having problems foreclosing on your delinquent properties, and you can’t readily sell them even if you get them and TRY to market them.

Foreclosure is a time consuming and costly process in the best of times. In optimal conditions you are looking at a minimum 90 to 180 days before you get title/possession to even have a chance to put the property up in a decent sale’s market. This is predicated on your having a “perfected” lien with all “I”s dotted and all “T”s crossed showing you have proper “standing” before the judge in the foreclosure proceedings. It is also predicated on that the delinquent occupant will vacate “premises” without requiring eviction. Here we are now seeing that people are increasingly unwilling to move out voluntarily or quickly. We have also seen (in three different court jurisdictions in three different states) where judges threw out the cases because the plaintiff/investors (in the mortgage derivatives) could not prove they had standing to foreclose, showing a lien to the actual properties in foreclosure. When the mortgages were packaged/sold to investors, necessary lien transfer work was not done!

Foreclosure stats are now the worst in Nevada, Florida, and California. Illinois is #17. Ogle County (where I live) has some of the fewest (31) in our State. My hometown of Creston presently has 1 and nearby Rochelle has 7. DeKalb County just East currently has 710 with 217 in the City of DeKalb, 135 in Sycamore, and 14 in Malta. Winnebago County to the North has 2,438 with 729 in Rockford. Stephenson County to the Northwest has 47 with 33 in Freeport. While these numbers are bad and will grow, they pale in comparison to the rank standings of those on the East coast, the West Coast, and the South.

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

Copyright 2008 Questions, Inc. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at

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This story was published on March 31, 2008.