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.
Chase Mortgage started foreclosure proceedings against us and that is not the case with me.
We have NEVER missed a payment to Chase Mortgage.... in over eight years. Never one payment!
We applied for loan modification last December. The process was supposed to take 90 days. Our payments were dropped during the trial period and we made every payment. Nine months later Chase was still telling us to "be patient" because of their backlog.
Last week we get certified letters that Chase is foreclosing on our house for non-payment. Chase is now claiming that loan modification payments do not count towards being a "current payment." And since we are "nine months behind" they are foreclosing.
Now they will not accept any payment from us because of the foreclosure proceeding.
They just want our house.
Bob, thanks for posting this. You give an accurate summation of who the crooks were and are, and how Fannie & Freddie have been hopelessly corrupted for many years.
but why?......after all the corruption and crookedness and greed on Wall Street and in the holy banking industry, is this a “new” corruption or just the continuation?
Sometimes a corrupt operating system is caused by a bad hard drive.
Which is exactly what we have now.
This is more about attorneys trying to turn a profit and in their wake destroy an industry.
If banks can’t foreclose, they will stop lending altogether, because they have no way of recovering their collateral.
And if people realize there banks won’t foreclose, even those who can make their payments will stop making them, that will really destroy the banks, and then the FDIC will have to come it and take them all over, using taxpayer money. It’s going to be a complete disaster for everyone.
Take it to a lawyer
Take it to the press
Take it to the networks.
You have a story to tell.
In this house, there was a whole lot of daily stomping around, gnashing of teeth and cursing on the way to a shower to wash off the daily stink about all of this. This went on for two years and even included extra, midnight showers when practically asleep. There were stomach ‘ailments’ and TMJ became permanent.
We do still have teeth at the moment. Dental floss and the hot towel on the head helps.
They are scum. They bought something, promised to pay and skipped out because they wanted something else. Sorry, that is scum behavior and decent people won't have anything to do with them.
My wife just called in to a local radio show this morning.
Everyone was complaining about the dead-beats who aren’t paying their mortgage.
They were blown away when they heard our story.
>>Doesn’t even come close to Social Security.<<
Yeah, I should have added, “to publicly unravel”.
I believe they will fall like dominoes and it will get very, VERY bad.
I look at all this doom and gloom talk of the last three to five years as the equivalent of discussing end of life procedures to a person who has been given two months to live due to terminal cancer. Like the doomed cancer victim, we look relatively fine, we’re walking upright, etc. However, we DO feel sick and the day is coming where we will be put into a bed one last time, followed relatively shortly thereafter by a gathering of friends in a cemetary.
People don’t realize, as we debate this, that the day the patient goes to his deathbed could come, literally, on any day.
Except when this happens to western civilization as a whole, it will be very messy and a rather dangerous time for mere mortals.
Brookhaven: Except the banks, right? They don’t deserve any equal protection from deadbeat borrowers because they are eeeeeevil money-grubbing capitalists! Right?
If the banks violated a regulation, they should face whatever sanction is on the books for violating that regulation. But the truth is, attorneys for these deadbeat borrowers are going to use this to go after the banks - in some cases to absolve their clients from any wrongdoing.
Which is BS. Deadbeat borrowers are ALSO lawbreakers. They are essentially stealing from the banks and these lawyers will make sure they get away with it. If both sides have to lose, so be it.
But, of course, gardencatz, you left out one key detail when you said, “They chose to give these loans (even deadbeats can’t hold a gun to a lender’s head and force them to give them a home loan).”
The deadbeat can’t hold the gun, but the GOVERNMENT can. Cue the Community Reinvestment Act.
Remember September 2008?
At the height of the Greatest Crisis In The History Of The Known Universe, when Hank Paulson was genuflecting at the feet of Nancy Pelosi?
When we were steadfast here on FR in advocating that the banks be made to eat their own dog food, and that nothing good would happen in the economy until they did?
Remember the huge the ration of crap we caught for this?
It was "Shut up you Commie, we have to save the investment banks!! Sweet Mother of Mercy, save the suffering banks!!" from a whole corps of Freepers who have since had the good sense to STFU.
And still, nothing good will happen in the economy until the investment banks owning MBS come clean, and honestly value their balance sheets.
>>Which is exactly what we have now.<<
Well, one can blame it on a bad hard drive or web browsing with no firewall. The solutions are all very ugly.
Here’s an interesting example of what this can mean to any attempt to revive the housing market. In the Sarasota, Fl area, the major lenders have written about 40% LESS loans for the firts 9 month os this years, vs. last year..and nearly 50% of all sales are ALL CASH DEALS.. Obviously, the area has been hard hit, and there are now lots of good values..but the title insurance companies will be in big trouble..they’re NOT writing..many may fail..and nobody in his right mind would do an all-cash deal if he can’t get a title policy..
bawney
say it ain’t so..........
...and you didn’t get anything in writing from Chase that said you didn’t need to make a payment during those nine months?
Yes I heard that too.
I interpret that as very bad news, although if one wants to become a squatter, the time is now.
>>Everyone is equally entitled to the full protection of the law. <<
And there’s the rub. What if the time it would take to litigate these works out to 3,000 years?
The problem is that this may be too big, by several orders of magnitude, to resolve while following the US constitution or preserving the US as we know it.
That hasn't stopped them before.
(Oh and, while it may not be the case with you, I don’t see how your anecdotal evidence would necessarily contradict the fact that the vast majority of foreclosures are for, you know, *actual people who don’t pay*.)
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