Posted on 10/14/2014 10:06:40 AM PDT by Olog-hai
Many thousands of Americans who lost their homes in the housing bust, but have since begun to rebuild their finances, are suddenly facing a new foreclosure nightmare: debt collectors are chasing them down for the money they still owe by freezing their bank accounts, garnishing their wages and seizing their assets.
By now, banks have usually sold the houses. But the proceeds of those sales were often not enough to cover the amount of the loan, plus penalties, legal bills and fees. The two big government-controlled housing finance companies, Fannie Mae and Freddie Mac, as well as other mortgage players, are increasingly pressing borrowers to pay whatever they still owe on mortgages they defaulted on years ago.
Using a legal tool known as a deficiency judgment, lenders can ensure that borrowers are haunted by these zombie-like debts for years, and sometimes decades, to come. Before the housing bubble, banks often refrained from seeking deficiency judgments, which were seen as costly and an invitation for bad publicity. Some of the biggest banks still feel that way.
(Excerpt) Read more at reuters.com ...
How long before we hear that expecting people to understand all of the provisions of a loan, mortgage or otherwise, is racist, sexist, bigoted, homophobic, etc.?
I have an acquaintance in Seattle that has not made a payment on their mortgage since the collapse. This person has been “negotiating” with the bank, strining them along, that entire time.
The thing is, there was so much hijinx going on in those days that a lot of banks don’t have the paperwork to support “legal standing” to foreclose, so those that understand this (e.g. my acquaintence) can play this out fairly well.
I know a person, a friend of a friend, who was in this position for debt that debt collector was trying to collect. He hired a lawyer that successfully argued to the court that he owed the debt to the company that he had signed the original contract with. Since that company had since sold that debt to a bill collector with whom his client had not signed any agreement (in fact the debt had been bought and sold by several debt collectors for pennies on the dollar) that he was not paying the entity that he had agreed to sign and the debt collectors had not claim to the debt he owed unless he signed an agreement with that debt collector. The court agreed and the lawyer informed the debt collectors that since his client had made no agreements with them that if they tried to garnish anything they would be sued. It worked.
Debt collectors cannot freeze bank accounts, garnish wages or seize assets without the authority of a court. In most cases it isn’t the original lenders who are collecting these debts. Most of them sold off this paper to third parties long ago.
I doubt debt collectors have that power. What is probably happening is they are suing the people in court and people are not showing up for the court date.
These guys are better off than the student loan borrowers. They are usually established in some kind of substantial income stream and can discharge in bankruptcy. They will have to use debit cards, pay for a beater car in cash, and rent; but still put it behind them and rent everything.
The student loan people can’t discharge. Often they never get established in substantial income jobs. They are true debtor slaves, living in fear. Plus a substantial drag on the economy. To bail them out, however is a punishment of the prudent.
I still remember stories from around 2006, 2007 where people who made $50,000 per year were buying $700,000 “dream homes” with interest only mortgages on the expectation that they could flip them when the value increased. The stories made it sound like that was a good thing. This story describes the consequences of that type of thinking.
You must know my BIL. :-) He has been “squatting” in his house outside of Portland for over 3 years. The bank bothers him now and then by asking him to provide a copy of the mortgage because they can’t find it.
As for the rest, no action can be taken without a court order. No one likes to do this, but filing a Chapter 13 bankruptcy can provide protection while debts are repaid. It is the best course because once this gets to court on the collection side, you are screwed.
Either you are misinformed, the documents have some fatal flaw (which is what I suspect) or the court doesn’t know the law. As long as the party holding the debt acquired it legally and is the legal holder in due course, and as long as the paper trail is intact, the debtor would owe money due to the holder. Whether the debtor has any written obligation to the party collecting the debt would be irrelevant.
Result of predatory lending, brought to you by Clinton inc.
I wonder if banks are playing hardball because Holder has been extorting them for billions.
Common mortgage holders aren’t blameless either, since some have been opportunistic.
Most student loan debt is “government” backed. When default occurs the Treasury gets involved and heavy garnishment ensues. Doesn’t matter where the borrower goes job wise, the Treasury will find and garnish them.
I ran across one young woman who was 130K deep in student loan debt. Her “degree” was in some sort of “studies” which basically meant there were really no jobs for her (her fault BTW)..
Old scam. You file the claim, but don't inform the person you filed against. They don't show up for court because they have no idea. Bonus points for doing it in another state.
I remember that as well. I also recall “Quicken Loans” offering “interest only” loans and ridiculous “arm”’s. It was out of control back then.
Since some dust has settled, I am starting to hear more and more commercials about “low interest ARM loans” and just shudder. Here we go again...
You are an honorable person. I’m always surprised (perhaps I shouldn’t be) by how many FReepers blame “predatory lenders” and even “Clinton” for the fact that some people simply cannot or will not manage their financial life, or have the good sense to understand what is in a legal document before signing it.
Imagine that, banks expecting people to pay their debts.
What’s the world coming to? /s
People who borrowed money should try to repay it. There are , however, no deficiency judgments allowed in some situations , they aren’t universal practice. (For example, on typical California trust deed purchase money loans for your residence.). The article seems to evoke tons of tears for the wrong party, though. It’s the lender who is left holding the bag when a borrower doesn’t repay the money he borrowed.
I believe failure of the complainant to produce proof of service would be a positive defense.
And if the complainant resorts to forgery — as many do — you have them by the shorts!
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