Foreclosuregate is About to Explode

Black Listed News ^ | 10/11/2010 | Michael Snyder

[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.

[Ronbo1948]

Yes, and you don’t have to be a weatherman to know the direction the winds of civil war are blowing.

“There Will Be Blood” and I’m afraid and many of us won’t be alive at the end of it.

[JTHomes]

On the other hand, there are a lot of people in the middle trying to do the “right” thing but feeling like they are in a game of musical chairs where the actual winners will be the ones who threw in the towel early rather then watch their negative equity grow. I can’t fault someone who refuses to sacrifice their family’s current and future financial security and decides to walk away from mortgage rather than over pay for a place to live every month for the next 10 or 20 years.

[longtermmemmory]

the problem is that wall street and congress are viewing these cases in the aggrigate. This are INDIVIDUAL cases and have to be delt with in a custom individual manner. Each individual gets their day in court.

The class action solution is to strip off all mortgages from the property and leave only an unsecured claim against the borrower.

It also works for the banks, if they don’t own a mortgage claim tying a promissory note, then they don’t have to report that loan. Remember they sold the note and only retained servicing rights.

no promissory note = no forclosure = banks don’t have the debt to report.

[Fee]

This is what happens when gov fails to supervise Wall Street bankers. Traditional bankers sold notes in the past. It was a slow deliberate process where the documents supporting the property/note were processed and handed off to the new owner. Fannie Mae and the Wall Street bankers wanted to securitize the notes and sell it on an exchange electronically like stocks on a daily basis. Problem is current property documentation process was not designed for such a set up. Fannie Mae and Wall Street chose to ignore this logistics because the fees and commissions of the exchange is all they cared about. They promised the gov regulators an electronic system will be used to log on and record the document transfers. It turns out the banks did not, thus the property titles were lost in the selling and reselling of the notes. This will also impact the good homeowners because no one is sure if they will have a clear title which is needed to sell the home.

[PatriotGirl827]

bookmark for later read

[JTHomes]

It’s going to be a complete disaster for everyone.

It might well turn out that way. In normal, just times, I'd argue for people to make good on their commitments. But these aren't just times. Government and banks have distorted justice and left the people holding the bag. I can't fault people for putting their own interests first these days. That thinking collectively may doom us all, but in that case you don't want to be the last one out the door.

[netmilsmom]

>>I can’t fault someone who refuses to sacrifice their family’s current and future financial security and decides to walk away from mortgage rather than over pay for a place to live every month for the next 10 or 20 years.<<

Oh really? So if you buy a car, chose not to have insurance, then it’s stolen, you shouldn’t pay for the car, right?

Cause paying off that loan is a sacrifice for the family security.

Seriously?!?

[Kartographer]

So does a bank who can not produce legal documentation (i.e. trust deed/Note)for the said property have standing in a court to request foreclosure for that property?

[lady lawyer]

“It turns out the banks did not, thus the property titles were lost in the selling and reselling of the notes. This will also impact the good homeowners because no one is sure if they will have a clear title which is needed to sell the home.”

The “property titles” have not been lost. The banks don’t hold title. They hold liens, which they record. This will not affect the good homeowners. When they sell their property, the title company will determine who is the noteholder, pay the noteholder, and obtain a lien release.

The media are whipping people into a frenzy over this. Deadbeats are using a technical problem — which ultimately has no effect on them — to stay in houses they are not paying for.

[slowhandluke]

Deadbeat borrowers are ALSO lawbreakers.

Wrong!

Deadbeats are contract-breakers. And by burning the original documents the banksters are also contract breakers - since they claimed in the securitization process that they had a complete set of papers.

The law has a defined path for trying to enforce the provisions of a legal contract. The law understands that there is risk involved, and things don't always work out as planned by either party to the contract. And both the borrower and lender have rights in the process.

Trying to enforce a mortgage without actually having the legally signed mortgage paper and faking the paperwork to make it look like you do, is the only fraud/crime here. The rest is civil.

Maybe the deadbeat is getting an undeserved reward. But I don't think that in this case it is a crime.

[houeto]

Yup, this is definitely the "Real estate+ Scam+ Economic Holocaust" pattern that popped up about 10 days ago.

Who would have ever dreamed that an "October Surprise" could be caused by a homeowner in court telling a big bank to prove they have standing to foreclose, and the bank unable to prove it.

Sure glad I haven't bought a home loan lately.

[Truthsearcher]

So you think everyone with a mortgage should just stop paying and become squatters?

Because that’s what going to happen if people realize nobody can foreclose, which will then lead to the nationalizing of all banks, and all capital.

This is a fast train to socialism, even faster than Obamacare.

[SeattleBruce]

“Greedy crooks like this famous former CEO of Countrywide made millions”

Wasn’t this guy really tied in at the high levels to the Democrats?

[longtermmemmory]

committment to who?

the bank? they no longer own the promissory note.

The mortgage holder? Nobody knows who that is AND due to the faulty documentation then that mortgage is possibly voidable.

The plaintiff? they can’t prove they own any secured interest in anything. At best, they have an UNSECURED debt IF and only IF they can prove they actually own the promissory note by documenting each and every individual transfer.

Otherwise, regardless of people’s personal opinions, there is no enforceable debt seecured or unsecured.

[LomanBill]

[If you knew about fraudulent activities and did not blow the whistle -- you are a co-conspirator]

U.S. Code

TITLE 18 > PART I > CHAPTER 1 > § 4

§ 4. Misprision of felony

Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.

http://www.law.cornell.edu/uscode/18/usc_sec_18_00000004----000-.html

 

 

Blind, Deaf, and Dumb "Uber Managers", take note...

 

 

 

[lady lawyer]

They have been allowed to use the electronic system, and attest that they own the mortgage through use of the electronic system. The “scandal” is that bank officers have been signing attestations without actually reading them.

Foreclosures take forever. By the time they get to court, the person sitting in the house probably hasn’t made a payment for a year. If there were any real question about who held the note, the person in the house would have been getting multiple mortage statements, or a default notice from one servicer, when they have made the payments to another servicer, and the problem would long since have been resolved. It would have been resolved the first time the homeowner contacted one servicer and showed them the canceled check from the payment to the other servicer. But this is not the circumstance that is making news. It is the technical argument that the persons attesting to the documentation hasn’t reviewed it.

This is much ado about nothing. But most people are unfamiliar with the process, and it is easy for the media to whip them into a frenzy about “fraud.”

[slowhandluke]

3) Reasonable damages (NOT “give me my house for free now”)

The problem I see is that many borrowers are taking #3 to the limit. And actually winning. And that’s just sad.

Every heard of 'punitive damages'? This guy should get the house free & clear to cover the trouble and worry of having to sue to avoid being defrauded of their house.

[listenhillary]

“The media are whipping people into a frenzy over this.”

Why did the banks stop their own foreclosures?

[Kartographer]

You fail to answer the question which is:

So does anyone who can not produce legal documentation (i.e. trust deed/Note)for the said property have standing in a court to request foreclosure for that property?

[earlJam]

I didn’t mean to flame you.

This subject has just gotten personal to me in the last week.