Posted on 10/11/2010 9:13:41 AM PDT by ex-Texan
If you work in the mortgage industry or for a title insurer, you might not want to make any plans for the next six months. Foreclosuregate is about to explode. It is being alleged that many prominent mortgage lenders have been using materially flawed paperwork to evict homeowners. Apparently officials at quite a few of these firms have been signing thousands upon thousands of foreclosure documents without even looking at them. In addition, it is being alleged that much of the documentation for these mortgages that are being foreclosed upon is either "improper" or is actually "missing". As lawyers start to smell blood in the water, lawsuits challenging these foreclosures have already started springing up from coast to coast. In fact, some are already calling Foreclosuregate the biggest fraud in the history of the capital markets. JPMorgan Chase, Ally Bank's GMAC Mortgage and PNC Financial have all suspended foreclosures in the 23 U.S. states where foreclosures must be approved by a judge. Bank of America has actually suspended foreclosures in all 50 states. Now, law enforcement authorities from coast to coast are calling for investigations into this controversy and it could be years before this thing gets unraveled.
This thing just seems to escalate with each passing day. It is being reported that the attorneys general of up to 40 U.S. states will be working together on a joint investigation into this foreclosure crisis. Lawmakers in both houses of the U.S. Congress, including Nancy Pelosi and Christopher Dodd, have called for an investigation to begin on the national level. U.S. Attorney General Eric Holder said last week that he is looking into the issue. Things are certainly getting very serious out there. Never before has there ever been such a national focus on foreclosure paperwork.
But apparently there are good reasons for such scrutiny....
*One GMAC Mortgage official admitted during a December 2009 deposition that his team of 13 people signed approximately 10,000 foreclosure documents a month without reading them.
*One Bank of America employee confessed during a Massachusetts bankruptcy case that she signed up to 8,000 foreclosure documents a month and typically did not look them over "because of the volume".
But the "robo-signing" aspect of Foreclosuregate is just the tip of the iceberg. Apparently there is a whole lot more going on than just a bunch of bad signatures.
Peter J. Henning, a professor at Wayne State University Law School in Detroit, was recently quoted by MSNBC as saying the following about Foreclosuregate....
"You've got so many potential avenues of liability. You don't even know the parameters of this yet."
The sad truth is that potentially millions of foreclosures across the United States could potentially be invalid because the securitization process has muddied the chain of ownership. In fact, an increasing number of judges from coast to coast have been ruling that the "owners" of the mortgage have no right to foreclose on a property because they lack clear title.
At the core of this title controversy is MERS - Mortgage Electronic Registration Systems. MERS is based in Reston, Virginia and it was created by the mortgage industry to enable that big financial firms to securitize and swap mortgages at high speed. MERS allowed these big financial firms to largely avoid the hassle of filling out more forms and submitting new filing fees every time that a mortgage was traded.
But now MERS is facing some very serious legal challenges. A recent article in Businessweek described the situation this way....
A lawsuit filed on September 28th in federal court in Louisville on behalf of all Kentucky homeowners claims that MERS was part of a conspiracy to create false promissory notes, affidavits, and mortgage assignments to be used in mortgage foreclosures. Similar class actions have been filed on behalf of homeowners in Florida and New York. Karmela Lejarde, a MERS spokeswoman, declined to comment on any pending litigation.
The reality is that as millions of U.S. mortgages have been bunched together and traded around the globe at lightning speed, it has become increasingly unclear who actually has title to them and who actually has the right to foreclose on these properties.
Title insurers have backed the titles of millions of these foreclosed properties and now potentially find themselves in a heap of trouble. Some of the biggest title insurers have already begun circling the wagons in an attempt at damage control. For example, one of the biggest title insurance companies in the United States, Old Republic National Title Insurance, has already declared that it will no longer write new policies for homes that have been foreclosed on by JPMorgan Chase and GMAC Mortgage.
So what happens if nearly all title insurers start avoiding foreclosed properties?
Won't that make it much more difficult for the banks to sell the massive backlog of foreclosed properties that they have accumulated?
In addition, Americans that have purchased foreclosed homes may now be facing some serious problems themselves. Millions of Americans may now "own" homes that they do not have clear title for. When it comes times to sell those homes, many Americans may find themselves unable to do so.
Needless to say, this is a complete and total mess.
Already, U.S. banks have a record number of foreclosed properties that they need to clear out, and now all of this scrutiny on foreclosure paperwork and all of these lawsuits are going to grind the process of getting these homes sold off to a standstill.
In fact, the true legacy of Foreclosuregate may be the massive amount of bank failures that it causes.
It would be difficult to understate how much of a nightmare Foreclosuregate is going to be for U.S. mortgage lenders. Having to go back through the paperwork of millions of old mortgages is going to be a complete and total disaster. If banks end up being unable to foreclose on a large number of bad mortgages, it could potentially be enough to put many banks out of commission for good. Not only that, but the legal fees that many of these banks will accumulate defending lawsuits related to Foreclosuregate will be astronomical.
The U.S. mortgage industry was already on the verge of death, and Foreclosuregate may just be the straw that broke the camel's back.
The reality is that U.S. banks are drowning in foreclosures and this current crisis is just going to make things a lot worse. Back in 2005, there were approximately 100,000 home repossessions in the United States. In 2009, there were approximately 1 million home repossessions in the U.S. and RealtyTrac is now projecting that there will be an all-time record of 1.2 million home repossessions in the United States this year.
For the U.S. mortgage industry, Foreclosuregate must feel like someone has dropped a bomb on them after they have already been beaten up and doused with gasoline.
Attorney Richard Kessler, who recently conducted a study that found serious errors in approximately three-fourths of court filings related to home repossessions, says that foreclosuregate could haunt the U.S. mortgage industry for the next ten years....
"Defective documentation has created millions of blighted titles that will plague the nation for the next decade."
While it may be easy to beat up U.S. mortgage lenders and say that they deserve all this, let us not forget that this is going to impact a whole lot of other people too.
It is going to become much harder to get a mortgage. It is going to become much harder to buy a home. It is going to become much harder to sell a home. The U.S. housing industry is likely to suffer a significant downturn due to all of this. There is even a good chance that the entire U.S. economy could be dragged down for an extended period of time.
So no, Foreclosuregate is not good news for anyone.
Well, except maybe for lawyers.
But for virtually everyone else this is really bad news. Any hope that the U.S. housing industry would experience a quick recovery is completely and totally gone.
Well of course she did!
40 hour week x 4.3 weeks in a month = 172 hours in a month.
8000 mortgages to review / 172 hours = 46.5 per hour. Or about 1.3 minutes per mortgage.
The person responsible is not the lady who fessed up, although she should no doubt have blown the whistle. It's whoever assigned her to process this number of documents knowing there was no way it could be done properly.
BTW, here in FL the problem extends well into the judiciary, who have rubber-stamped tens of thousands of foreclosures, refusing in many cases to even hear defense evidence that the documentation is faulty or fraudulent.
And, I guess you can't comprehend the simple difference between "contract law" and "criminal law"?
So failure to uphold a contract is a crime? Do you really think someone that has been frugal and played by the rules all their life, and then comes under financial hard times (like getting laid off from their job, something that is pretty common lately) and has trouble paying their mortage (because they can't find another job in this economy) is a criminal!!!! Should the government have the authority to fine that individual or even throw them into prison for failure to uphold a PRIVATE contract between two individuals?
Failure to fulfill a contract is not a crime, it is a civil tort (in case you didn't notice, civil courts ARE legal courts, but not criminal courts). Breaking a legal contract IS NOT the same as breaking a criminal law.
You cannot lump everyone that is failing to pay their mortgages into the same group (people commiting fraud). Individuals that cannot pay their mortgages, because they fell on hard times (and there are plenty out there in this economy) are not criminals nor are they committing any type of fraud.
“If two banks ultimately end up fighting over who owns the loan, it would not affect the home purchaser at all.”
Ma’am, with all due respect.
Would you wish to continue doing business with a bank that had defrauded you? Anytime a bank sells property that they do not actually own is fraud, and ought to be punished.
Look at it this way. If you cannot sell the house because you don’t actually have the deed, and you can no longer trust the bank not to lie to you, how fast do you think housing prices are going to drop?
This is no different then having crooked scales, and selling short.
*yikes*
This has taken on the quality of the Surreal. It’s bizaare.
Of course, when Hopper finished, Walken proceeds to blow his brains out.
I'm pretty sure Freepers have seen this coming and been discussing it since at least the 2002 primaries.
Yep, and it is just one more step for the ethically challenged bankers to start paying mortgagees that are part of the cheaply acquired MBS to go into foreclosure, as that generates a better profit for them than collecting mortgage payments for the next n years.
The banker never held the title. And the banker didn’t sell the “property.”
The home purchaser holds title — usually a warranty deed. The bank paid for the house, by lending money to the home purchaser. The bank usually holds a note and a trust deed. But the trust deed is not “title,” it is a lien that can be recorded.
In order to spread the risk of all the crappy loans that bankers have been forced to write under the Community Reinvestment Act, they began bundling the loans — some bad, some good — and selling and reselling them en masse. So the original hard copies of the paperwork have not always followed the ownership of the loan.
The purpose of the foreclosure proceeding is to obtain title, which resides in the home purchaser who has not made a payment for many, many months. The foreclosure also clears away any subordinate liens, like the second and third mortgages that some people took out, which are now, in all likehood, worthless.
By the time it gets to foreclosure, the only person who clearly has no right to the house is the person sitting in it, not paying back the bank that advanced the money for the purchase. The business over who holds the loan paper doesn’t really affect the home purchaser. It might mean (but probably not) that two banks will end up fighting each other, but that’s all. But, some lawyers have exploited this to allow deadbeats to remain in homes they are not paying for.
There has been no attempt to “defraud” the homeowners.
You are 100% correct. I was mistaken about the movie title. But you recalled the scene exactly. And understood my drift precisely. LOL, LOL !
Can I be honest?
The one couple we know that lost their home, and *all* their equity, we're two of the hardest working people we knew, that purchased a home 50 miles from work, because it was "AFFORDABLE".
Don't believe some of these people that try to convince everyone that millions losing their homes are all, deadbeats.
It's bullsh*t.
Bingo! "The dog ate my homework" doesn't work in when the judge wants to see the mortgage & note. Or, it shouldn't.
I have already explained why the banks aren’t “defrauding” the homeowners. The only claim of “fraud” is that some bank officers have signed affidavits attesting to the documentation without actually checking the documents. All this is doing is allowing people to stay in — and retain title to — houses that somebody else has paid for.
You are right. The borrow who defaults should have his home forclosed upon.
But by whom? It has to be the person to whom he owes the money, and then only if that person has the title to the home as collateral.
Otherwise the problems are obvious. If the home is resold by the forcloser, the new owner has no way to title of the home. The title holder has no further recourse to that property, or, the title holder will go after the forcloser at some future date for selling the home he had no right to sell, etc etc..
You are dreaming if you thing that foreclosure generates “profit” for the banks. Usually, every foreclosure means a huge loss.
“Any banker who sells property to which they do not actually own title to the deed, should lose the value of the entire house in a court settlement.”
But, then, under your logic, the title should revert to the person who originally held the valid title, NOT the mortgagee.
So the bank gets screwed, the buyer gets screwed, and the “seller” walks away with the money?
I’ve got a neat idea. Why don’t we work this out WITHOUT all the effing lawyers, old west style.
Sheriff: Martin, did you intend to sell this house to Gordo?
Martin: Ayep.
Sheriff: Gordo, did you intend to buy this house from Martin?
Gordo: Sure did, Sheriff.
Sheriff: And did you borrow the money from Nialls the banker to do so?
Gordo: Sure did, Sheriff.
Sheriff: Nialls, did you lend Gordo the money and he agreed to repay?
Nialls: Yes sir, Sheriff.
Sheriff: Fine. Gordo, pay Nialls the money or I’ll throw you in the blasted jail.
Oh I know it is. When it comes down to taking care of myself and my family or taking care of a bank, the bank will ALWAYS lose.
“What if people are paying a mortgage to someone who doesn’t actually hold title to the property? Sounds to me that most lenders are not capable of selling an unencumbered deed.”
You are correct, but there are many right here of FR who say: Tough! To bad for them! Those people got the short end yeah but we made sure that the ‘dead beats’ didn’t get a free house.
“You...you’re part eggplant.”
“You’re a cantaloupe.”
Bye, Dennis.
http://www.youtube.com/watch?v=kXjcf47y-zk&feature=related
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