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Housing Needs Major Reform: Collingwood Chairman

Foreclosure Sign
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Foreclosure Sign

Confusion over the ownership of foreclosed properties isn’t “about fraud, but process inadequacy,” Joseph Murin, a former president of Ginnie Mae, told CNBC Thursday.

“In 2000, the total debt for mortgages in this country was $6 trillion. At the end of ’09, it was $14.4,” said Murin, who is now chairman of the investment company the Collingwood Group.

“So you have far more units in the marketplace than you did a decade ago, and you probably haven’t had any advancement in the ability to service those units than you did in 2000. When you go from 3.65 average delinquency to 12, it’s math. And if you don’t have an infrastructure to support it, this is what's going to happen.”

With millions of Americans in foreclosure and millions more on the verge of it, Murin said major housing reform is needed.

At the same time, Americans are missing a rare chance to become homeowners in the best buyers' market in 40 years, thanks to depressed home prices, low interest rates and the large inventory, said Murin. However, Americans lack the confidence to “step off the curb and get into the game," he added, because of high unemployment and uncertainty about the economy.

“Even if prices go down [another] 5 percent [later] with this oversupply,” he added, “it’s still a good time to buy. If rates start to go up 100, 200 basis points in ’11 and ’12, you’ve missed a great opportunity."

Mortgage Mess - A CNBC Special Report
Mortgage Mess - A CNBC Special Report

The latest flare-up in the foreclosure crisis may be contributing to existing hesitance on the part of potential buyers. Some say it will depress prices even further, as well as hurt interest in foreclosed properties because of possible lawsuits and other legal complications.

Wells Fargo's announcement Wednesday that it will refile documents on 55,000 foreclosures, drew immediate fire from Ohio Attorney General Richard Cordray, one of the state attorneys general who has been the most critical of banks in the foreclosure crisis.

Attorneys general in all 50 U.S. states are investigating whether lenders rushed through foreclosures and evicted borrowers from their homes without properly checking documents.