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.
Millions of houses have been sold, and millions of liens released since the advent of this new system. It is the actions of a few activist judges that are now making the title insurers nervous.
This collaboration of Manhattan/Washington over the past couple decades has been an unmitigated disaster.
You’re right. Let’s disintegrate the private banking system and nationalize all banks just like in Venezuela! Viva la revolucion!
You are at a decision point, my friend. You will soon have to choose between a system that accepts the organizations that enable capitalism or one that demonizes them and replaces them with government entities.
Choose wisely.
Hopefully...
Normal, honest people must feel like fools for living up to their responsibilities to pay back the money they borrowed only to watch deadbeats, bums, and parasites lawyering up and squatting without consequence.
>>“There Will Be Blood” and I’m afraid and many of us won’t be alive at the end of it.<<
Yes. Some liberals make fun of me buying my farm in Kentucky and make comments that it won’t matter if things get ugly. My response is that it is a risk mitigation move, not a risk elimination move.
It will be a lot safer than urban areas if things really go south, but it is no guarantee of survival.
>>Until the proof comes out that BO is not eligble to hold office.<<
I think there are a lot of “fraud bombs” about to go off. Someone already mentioned Social Security. We may see a lot of this stuff exposed in the next couple of years. That will not go without consequences.
As Celente says, “When people lose everything, and have nothing to lose, they lose it.”
We may be quickly approaching that crossroad.
Along those lines, BoA and all banks holding property must pay the HOA dues and property taxes and keep the places up to HoA/City standards. Banks no longer want this responsibility as it is cash out of pocket to them.
Repudiate everything.
True, it'll screw the system, not to mention every single one of us, but the debt problem will be solved.
For a time, anyways...
CA....
I looked at those articles. Not a single thing alleged by the ex-employee of the law firm would have resulted in homeowners being foreclosed upon when they had actually made their payments, or would have “cheated” a defaulting homeowner in any way. They were things that the firm should not have done, but they were technical, and made no substantive difference to the defaulting homeowner.
Bottom line: Fedgov interference started it all. This is the reason that Ronald Reagan believed in small government and de-regulation. Let free-enterprise companies sink or swim. Without the Fedgov interference, the bankers would have never loaned to those who didn't qualify, as in a percentage down and percentage of monthly income.
BTW, I put the TARP fiasco entirely on Bush. He should have let them fail and go into bankruptcy to re-organize. Obambi & Co. have only made it worse, much worse.
Sheesh, what part of free-enterprise don't these socialists understand? I'm uneducated and I get it. But then, unlike many politicians, I've actually owned 3 small businesses and had 3 mortgages in my lifetime (when 15-20% down was required). Luckily, I was able to pay off my loan on my current residence bought back in 1994. My tax accounted advised against it; I knew better. Of course, I really don't own it due to local property taxes (another story).
Our children and grandchildren are so screwed. Not only are the Bush tax cuts (kudos to him for that one) are expiring on 1/1/2011, but I will take odds that other taxes (or so-called fees) will raise their ugly head within a couple of years no matter what happens this November.
We are looking at a lost economic generation, much like Japan experienced. I'm all in cash, except for a few stocks I'm about to sell and take a loss.
“It’s not about the deadbeats, but about those who are paying to the wrong person. It’s a complete and utter scam.
“
Imagine the immediate future: You pay off the mortgage to whom you *think* owns the title, the bank, only to have the real owners next year file suit claiming you still owe them.
THIS is what the issue is all about: Ensuring whomever owns the loan is accounted for before the borrower is held accountable twice. Imagine being told by the court that any previous adjudication of the loan is a different issue to be resolved later and the newly present owner of the note must be paid.
No! Forget the boxing gloves! NO Marquis of Queensbury rules here!
CA....
So forged documents are ok sometimes just not in other cases. So who gets to decide when forged documents are ok and when they aren’t?
So you are ok with going to court and being prosecuted with false documents? In many of these cases the “lender†does not even own the mortgage. I understand for you things like the law are just inconvenient when you believe the other person is a “deadbeatâ€. Thank god we have laws to protect from people like you. Original documents and valid proof are NOT loopholes.
And if they do, then what? Will there be no “Timothy McVeigh’s created, or no Muslim extremists inspired to strike when we are weak?
Who is responsible for private debt essentially becoming public debt and for there being no consequences to foreclosure? That's insane, and especially for us law abiding citizens.
Forgetting about the law for a moment, what about common sense?
So,,,, Congress doesn’t need to read their bills before voting on them, but businessmen must read the documents they certify????
“It does not matter if you were not aware of the full scheme and all the multiple ramifications of fraud. If you knew about fraudulent activities and did not blow the whistle — you are a co-conspirator. Far better to blow the whistle now or even years later. By taking that action you may help put the criminal bastards behind bars. “
I think this is a bit dramatic. What portion of foreclosures that are going on are NOT on properties where the loan is NOT in default? I wager it is very small and most of those are probably mistakes.
This is therefore a procedural issue—what hoops to lenders have to go thru to get a valid foreclosure on loans that are genuinely in default. There is certainly room for discussion about what those hoops should be. But hyperventilating about massive fraud and the like seems a bit over the top imho.
We need to quit taking that phrase as gospel. Congress created the housing bubble by forcing banks to make loans they would not have made otherwise. Everything else followed from that.
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