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.
Good chance here of both I’d say.
Does it mean the homeowner refinanced?
It just means that the mortgage was sold to a third party.
I have heard from insiders that the computer was automatically printing the Notary signature and seal when the docs printed. If that is true there are some Notary’s with their a$$es hanging way out in the breeze.
Just another technicality for the ‘dead beats’ to hide behind. (sarc)
I have the papers,and I just looked ans yes we did get Title insurance with the last refi.
Another Freeper did show me two Title links that talked about that. From what I read, that would not apply to my case. They only cover up to the time of the signing, not beyond, as I understand it. The link did talk about that being changed, but not when. Our last refi was in 2003.
We are in CA.
My buddy had his loan split and sold many times. When he bought the house ten years ago, he was on the “high risk” end.
One fine day, while current on his payments, two banks and the county tried to foreclose. Seems the servicer was not paying neither the taxes nor the banks they sold the loan to. Lucky for him, he knew a good lawyer who had a field day with everyone, and he had every canceled check showing he was paying the loan as promised.
That title will not be clear if and when he sells the house. No one knew who actually had the note, as two banks thought they did. The servicer was shut down by the feds some time after this.
Everyone needs to read this article:
SNIP>
On Oct. 10, Judge Boyko, 53, ordered the lenders’ representative to file copies of loan assignments showing that the lender was indeed the owner of the note and mortgage on each property when the foreclosure was filed. But lawyers for Deutsche Bank supplied documents showing only an intent to convey the rights in the mortgages rather than proof of ownership as of the foreclosure date.
Saying that Deutsche Bank’s arguments of legal standing fell woefully short, the judge wrote: “The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the court to stop them at the gate.”
<SNIP
http://www.nytimes.com/2007/11/15/business/15lend.html
Obama Mortgage Modification Bailout Distorts Housing Market
http://www.nlpc.org/stories/2010/10/04/obama-mortgage-modification-bailout-distorts-housing-market
The reason that I asked about title insurance is that the title to the property is in the mortgager’s name until the mortgage is paid completely.
If the mortgage was sold to Fannie Mae you should have been notified and, I believe, the mortgager would now be Fannie.
Since you say you know Fannie Mae shouldn’t be involved, if I were you, I’d be talking to a lawyer.
Yeah, I missed that part.
However, I think the problem now is that it is just way too big for that. I think this is bigger than the government can fix.
BTW, what happens to entities that are counting on living on money owed to them? I mean, all investment is debt - You’ve loaned someone money.
I agree completely, it’s a disaster. We all know what will happen is that the honest folks who have paid their bills will be charged twice. It’s a sucker’s bet.
I’d rather see the guilty free than the innocent enslaved.
“But, then, under your logic, the title should revert to the person who originally held the valid title, NOT the mortgagee.”
Oh I think they should receive the equivalent assessed value of the property from the party who tried to sell their asset.
And the poor buyer should get his house. I think that’s the fairest outcome, because the buyer did nothing wrong.
If the buyer is in arrears, and the property has been foreclosed, it’s a different matter. Then it’s between the party who actually owned the asset, and the fraudster who attempted to sell their asset. In that case, the original party with the deed will get the asset and twice the value of the repayments made on the loan.
Selling an asset that you don’t actually own is fraud. Plain and simple.
If I stole your car, and then went on ebay and sold it, what would you do?
What would you expect to happen if you tracked the buyer down, and told him that his car really isn’t his because you own the car and have the paperwork to back it up?
This is what the banks are doing. They are claiming they own the asset (a house), when they don’t really own the asset, and the poor homeowner trusts the bank. What will happen to the homeowner when he finds out that he’s been paying big money to the wrong person?
That is the problem.
Fannie thinks that they have our mortgage, but the bank that sold it, BofA, never had our mortgage that we know of. Nor does it show up at the county recorder, BofA or Fannie. The only “notice” we got was from Fannie telling us this. Even Fannie’s letter, which says, “Notification of Assignment, Sale or Transfer of your Mortgage Loan” across the top, in one paragraph a sentence states: “The transfer of ownership of your mortgage loan to Fannie Mae has not been publicly recorded.”
Which I understand is not a legal assignment.
But, we should see a lawyer.
It is just that hubby thinks we are paying the same servicer, CitiMortgage, as before, and we aren’t going to get a free home, why bother? I just don’t like it. It’s not safe.
Would filling an Affidavit stating the facts that there is no chain of “assignment” linking Fannie to our current loan, with the county Recorder and send copy’s to Fannie help?
we have reached Bernie Madoff levels of fraud and the liability is way too dangerous for the suits at the top.
I think the bank presidents are afraid of perp walks.
It is clear this is not a negligence matter but a culpability matter.
I bet there is an email akin to the infamous ford pinto memo which says fraud is less expensive than honesty.
Have you contacted CitiMortgage concerning this situation? (You haven’t said.) And by the way, don’t stop sending in your payments to them: just keep copies/originals of canceled checks.
Something isn’t right here, and it isn’t your fault. That is the reason I strongly suggest you contact a lawyer.
This ‘Foreclosuregate’ could eventually turn into a monster class-action lawsuit. It is better to have your problem untangled if it is just a simple mistake, rather than get drawn into something that would not benefit your case.
The way our government is being run today, wouldn’t surprise me if Fannie Mae screwed the pooch on this one!
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