The flawed practices that GMAC Mortgage, JPMorgan Chase and Bank of America have recently begun investigating are so prevalent, lawyers and legal experts say, that additional lenders and loan servicers are likely to halt foreclosure proceedings and may have to reconsider past evictions.
Problems emerging in courts across the nation are varied but all involve documents that must be submitted before foreclosures can proceed legally. Homeowners, lawyers and analysts have been citing such problems for the last few years, but it appears to have reached such intensity recently that banks are beginning to re-examine whether all of the foreclosure papers were prepared properly.
In some cases, documents have been signed by employees who say they have not verified crucial information like amounts owed by borrowers. Other problems involve questionable legal notarization of documents, in which, for example, the notarizations predate the actual preparation of documents ”” suggesting that signatures were never actually reviewed by a notary.
Other problems occurred when notarizations took place so far from where the documents were signed that it was highly unlikely that the notaries witnessed the signings, as the law requires.
My father was a notary and he never notarized a document unless it was signed in front of him. He had quite a reputation as a stickler for that and he was quite proud of it.
Here comes the class action lawsuit for those that were evicted from their homes via improper foreclosures…
This is potentially a HUGE deal. There is some talk that judges may void the claims of the banks and deed the property directly to the “homeowners” undergoing foreclosure proceedings. So, in this case, you could have potentially thousands/millions of homeowners who stopped paying their mortgages suddenly owning their homes outright.
From the folks I have talked to who have done everything possible to keep current on their house payments, and who are already extremely upset with government programs that seem to reward those who just walked away from their obligations, awarding outright ownership to defaulting homeowners will release a firestorm of controversy that dwarfs anything that has already been seen from the tea party.
From a conspiracy theory side, if I am in the Obama administration, this is just what I would want to happen, so the banks, greedy corporations, and undeserving rich people could be blamed – you know, “they were so greedy that they didn’t even do the proper paperwork, just so they could screw over the poor middle class person just trying to claim the American dream of home ownership, etc.”
I sure hope the judiciary does not award outright home ownership to these folks; maybe some form of monetary compensation or loan modification instead. This situation is more worrisome to me than the Lehman Brothers collapse.
We first began learning about the “robosigners” at the heart of this about two months ago. But it is important to recognize that these defects delay but do not stop foreclosures. These do not result in borrowers getting “free” houses.
The bigger problem is the spillover effect on title insurance. Re-selling bank REO may halt if title insurance is not available.
The major, unresolved problem is that the banks have not taken responsibility foir a massive conspiracy to violate lending laws and OCC/OTS rules that disallowed most of the practices that got us into this mess.
[blockquote]The major, unresolved problem is that the banks have not taken responsibility foir a massive conspiracy to violate lending laws and OCC/OTS rules that disallowed most of the practices that got us into this mess. [/blockquote]
Absolutely! There should be a whole bunch of folks going to jail right now. Where are the Attornies General? Why aren’t they putting these criminals behind bars? If a guy hands a note to a bank teller and demands $10K, he will go to jail for about 10 years. These folks stole BILLIONS!!! They should be in prison, NOW! Failure to protect the assets of the owners and depositors is a criminal offence. At the very least, there should be some major tort action against these idiots. They have put the very currency in jeapordy, cost us all Trillions of dollars in lost housing value, and beggared our national treasury. In another age, they would literally be hanging outside the gates of our cities for such crimes. People’s entire life savings are gone, pension funds are insolvent, etc. Most of the blame is right at their feet!
Bill,
You are quite right about foreclosure delay, but knowing how our Federal judiciary operates, I can easily see a political hack judge in a Federal District Court ruling that title passes to the person who was occupying the home and making payments. I’m not saying it is right, but what is right and constitutional has yet to stop these poor excuses for judges from legislating from the bench based on personal bias and political preference.
Daniel,
Foreclosure is a state court action.
Jeff,
While foreclosure is a state process (judicial or non-judicial), some Federal court actions can destroy the lender’s security or even the debt itself. E.g. Bankruptcy or TILA/RESPA violations.