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.
I’m not talking about walking out on 2 years of car payments. I know people living in modest homes with 20 years left on the mortgage who’s property value has declined by 70%, putting them 100K under water. The market is not coming back to fix that type of problem. Better to walk away, the bank gets the house back, and start over. The bank puts the recourse in the mortgage contract specifically for that scenario. They entered the contract as willingly as the buyer, and share the risk. I don’t know why some people come down so hard on folks who make a rational decision to walk away. I’m current on my mortgage right now, and I like my house, but with my neighborhood in decline, and being far underwater, my only way out is to walk away. It may tip that way before long.
“The point is that he owes you money and is using legal means to screw you. Sadly this happens every day in America. If it was happening to YOU PERSONALLY, you would be pissed.”
In a very real sense this is happening to ALL of us PERSONALLY, as these private debts have become public obligations (through TARP and otherwise), and the slide in house values, the debacle in the housing market, et al. That is why those who bought too much house, the politicians that greased the skids at Fannie, Freddie, Countrywide, WAMU, et al, and those that approved those risky loans, are NOT innocent.
I don’t know how this all needs to unwind, but it sure aint with *most* people who are worthy of foreclosing getting out of foreclosing just because.
The legalities of all this are certainly also important and those legal institutions that have been cutting corners may just end up holding the bag on some portion of these foreclosures, but leave it up to lawyers who smell ‘blood in the water’ to remove any semblence of accountablity even more from the situation, than has already occured with the mortgage derivatives.
There certainly are few heroes in this situation that has saddled our children with irresponsible people’s debt.
Members of Congress are traitorous elitist bastards. They are also greedy and lazy. HR 3808 passed both houses of Congress without hardly any dissent. These traitors just nod their lazy heads like those little toy dogs we all see in the back of Mexican low riding cars. IMPO — all of them should be voted out of office.
That’s the most sensible response I’ve received thus far.
Well, unfortunately nationalization may be the response if these banks who failed to properly keep track of their title are once again bailed out. I say the proper response is for them to FAIL. Title holders who can prove they own the property can and should have the title or recourse specified in the agreements. Businesses who were are badly run as Citi, Countrywide, BoA, Wachovia, etc, should go out of business for their failures and fraud. If socialists like Obama use that as an excuse to march toward marxism, that is the consequence of electing tyrants.
When lawyers submit false affidavits to a court of law, that’s called “fraud upon the court.” Lawyers are officers of the court.
A non-lawyer lying to a court is mere perjury.
In a judicial decision that relied upon facts in evidence by way of a fraudulent affidavit (as happens in judicial foreclosures), the case law shows that a judicial decision based upon a fraud upon the court may be vacated. ie, the lender’s foreclosure action against the borrower in court can be vacated. It doesn’t have to be appealed when the bankers seize the house. The appeal could come after someone else has bought the foreclosed house.
Future buyers of the property are buying a legal land mine, in effect.
Now, since judges are notorious for getting pissed off when people LIE to them, some judges have taken to:
1. Dismissing the foreclosure complaint with prejudice (meaning that it cannot be brought again) and
2. Awarding legal fees to the defendant, even if they were represented pro bono.
Moral of the story: Don’t lie to a judge. I’ve always found this to be sound policy when in court. The bankers don’t seem to have learned this policy in their experience. They think that just because someone owes them money gives them a free pass to get rubber-stamp approval from judges.
Want to prevail in court? Tell the truth. Don’t file fraudulent affidavits.
That’s all the bankers have to do. Very simple stuff, that.
Telling the truth, however, is deadly to their business model.
Then it is definitely time to stock up on food (6 months worth per person of non-perishables) and ammo (minimum 1000 rounds per firearm).
you can’t be a squatter in a house that you own.
people forget, the borrower owns the house. It just has a lien as collateral.
Yup, that is probably what will happen under our new obambi socialist Fedgov. However, if I had a mortgage today I couldn't afford (even with a responsible down payment) and the holder of my title decided to foreclose, I would also ask for the appropriate paperwork (not computer files) to know who actually owns my loan.
The property payees have a right to know who owns their mortgage, whether they qualified for the loan or not, according to traditional standards.
This is going to go on for years! I knew I should have been a lawyer. Forget the day time ads for Mesothelioma. I can foresee the ads for millions of foreclosure "victims". Then again, maybe I should have gotten into advertising just for the coming flood for the ambulance chasers.
TV ad: "Hello, my name is Hairy Porker. Are you in foreclosure on your home? Have you been told to leave your home due to unforeseen financial difficulties? Is so, we understand and are here to help. We will fight for you. Your property rights are our concern. Call 555-bsbs now!
What is interesting is that this is so easy to predict, but my emotional mind just thinks I’m being crazy. Yet most of my (yes, my PERSONAL) predictions from before Obama’s election came true, some even worse than I expected - and I thought I was over the top at the time.
Maybe it is because I don’t have TV and am not constantly inundated with the same irrelevant stuff. I found out about the avian flu epidemic AFTER it “didn’t happen”. I found out about the swine flu just as it was starting to “not happen”.
Meanwhile, I thought and wrote, back in 2008, that this could get as bad or worse than the Great Depression and even reading my own words at the time I had a hard time believing it could really get that bad.
Now I have virtually NO doubt that it will be worse. And it will be international. And it may just be Ezekiel 39, Revelation, and all the rest.
IOW, this really may be “it”.
The volume of the loans, and their nebulous final status of ownership (who holds the deed in trust? The MBS owner?) meant that there was extreme looseness, nay, even criminal sloppiness in the handling of the origination paperwork. After all, these loans were going to be refinanced long before anyone needed to look at the details.
Boom! The recession hits with a hike in oil prices in 2007. People who are barely making their mortgage payment start defaulting, drying up the MBS interest payments enough to scare off future buyers and, more interestingly, triggering credit default swap payments that insured the aforementioned MBS. Long story short, the bubble bursts.
Now that the banks are trying to recoup (in order to stave off their own bankruptcy) these properties through foreclosure they are finding the things aren't going so smooth. The paperwork is missing and they can't quite establish that they have standing to foreclose. They forge ahead anyway.
Sorry for the pedantic outburst, I really wanted to get it down to establish for myself what I think is going on. I don't think that people who defaulted on their loan should get a free house, they too are culpable. The mega banks that are up to their necks in this mess should taken over and dealt with like any normal bank that goes into receivership. They are bankrupt right now and no public money should be used to help them or special legislation passed to haul them out of the fire. Stupid and greedy should hurt.
Still, I'm sorry your having such troubles. I blame it all on the Fedgov and their insistence that banks and other lenders give loans to the unqualified which caused the RE feeding frenzy which crashed the RE market which crashed the stock market which crash many economies around the World. Best of luck to you, sincerely.
BTW, if you can hang in there, property values will eventually increase - they're not making more land and the US population is increasing.
I just saw your post, and I have no idea if anyone has posted this to you:
http://www.zerohedge.com/article/gonzalo-lira-coming-middle-class-anarchy
It about a couple who tried to have their loan modified, then when the didn’t “qualify” were charged late fees!!!
This is a scam. I wish I knew what to tell you what to do.
We got a letter telling us Fannie owns our mortgage from a bank that never had our mortgage!!!! In our state this has to be done with “assignments”. Well, the county recorder has NO assignments, ever!!!
Things are screwed up, and it is NOT “just the deadbeats.”
“We got a letter telling us Fannie owns our mortgage from a bank that never had our mortgage!!!! In our state this has to be done with “assignments”. Well, the county recorder has NO assignments, ever!!!”
It’s clear to me you are a ‘dead beat’ so what if the county recorder has no assignment that’s just a technicality that you are hiding behind! The bank is always right and if they have to use forged and back dated documents and perjury that’s OK as long as they get ‘dead beats’ like you out!
Do you have a list of deadbeats in your area? I’d love to foreclose on them and get a nice home I can rent out.
Of course, I can’t prove that I have title to their homes or authority to foreclose, but neither can the banks.
>>I don’t know why some people come down so hard on folks who make a rational decision to walk away. <<
That rational decision is stealing. And because people have done this and flooded the market with foreclosed homes, MY HOUSE is worth less. Nice.
Have you ever taken an economics class?
Don’t forget gubernatorial candidate Andy Cuomo. I hope NYS voters demand to know what Cuomo knew and when he knew it....
Hey that’s an idea we could forge the securities then the liens/assignments and presto we be in like flint. We might have to ‘hire’ a retired Judge or two and a few arm breakers to clear out the ‘riff-raft’ but that shouldn’t eat into the cost much.
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