A halt in home foreclosures at the largest U.S. mortgage firms may sideline buyers worried about legal issues, further depressing sales at a time when distressed properties account for almost a quarter of all transactions.
Revelations of mistakes in foreclosure proceedings are causing buyers to have misgivings about property titles, the right of home possession, said Richard DeKaser, chief economist at Woodley Park Research in Washington. Confidence in the legality of repossessions will cut foreclosure sales more than a reduction of available properties because the market already is flooded with repossessed homes, he said.
“The legal problems we’re seeing will hit sales as people worry about the legitimacy of the process,” DeKaser said. “The implications are that there’s been shoddy work.”
It’s even worse than most people think:
http://rortybomb.wordpress.com/2010/10/08/foreclosure-fraud-for-dummies-1-the-chains-and-the-stakes/
Read the links within the above article and be prepared to be horrified.
Unbelievable. This just gets better and better. 1, thanks for the link.
Isn’t think what property title insurance is for?
Thanks, #1. I got that last week on an atty forum. It is a good, understandable explanation.
The critical point is that an estimated 60% (yes, 60/100) of all US home loans are not owned by the supposed owner. The transfers to the trusts that supposedly own the loans were NEVER MADE! This despite the supposed ease with which such transfers could be done under the infamous MERS system.
Why can’t the transfers just be done now? Most trusts are REMICs, subject to strict Federal tax rules about the window for transfers into trusts. Those windows are now shut.
This explains one prevalent kind of lender fraud: the fradulent backdating or creation of transfer documents. Of course, that is a Federal crime.
The “robosigner” scandal is due to admissions by employees at GMAC, Chase, Bank of America, and Wells Fargo that they were signing 40,000+ affidavits per month, under penalty of perjury, that they had personal knowledge of the delinquency of the borrower and could affirm that in court, despite not reviewing the file. This is perjury, folks, hardly a trivial matter. And remember, these 40k/mo (500k/year) are for just four lenders in just 23 states.
Couple that with the growing scandal with the “foreclosure mills” that routinely backdated/fabricated documents, kept stacks of preprinted notarizations, and regularly had people sign for one another.
All of this means that millions of titles past and present are thrown into question. Yet banks are in full spin mode to tell us how these are “mere technical violations” and that MERS is a wonderful system. We might as well have given TARP funds to the Mafia!
What this means is that all these transactions will have to be examined and the documents scrutinized for their truthfulness. None of the steps can be presumed to have been properly performed. It could take years to sort this out. In the meantime all these mortgages should be disallowed as assets on these banks’ balance sheets.
Please correct me if I am wrong, but doesn’t the legal ownership of the property become unverifiable as bundled loans in massive amounts are sold to other creditors and to further creditors? Sorry I am not familiar with the technical terms. My understanding is that this inability to know who exactly holds title to the property is the crucial issue.
Just what the beleaguered real estate industry needs. And don’t forget, it is this industry that is a principal source of spending in the US (people buy not only homes, but also paint, flooring, remodeling, furniture, garden supplies etc for their “castles”)
#6, the ownership is not unverifiable. But it is “clouded” and may require a quiet title action to establish clear title. The beneficiaries of the REMIC trusts are clearly the equitable owners of the notes and mortgages or deeds of trust. But it will likely take remedial legislation to allow the “orphan” notes/mortgages to be transferred into the trusts after the IRS window. What is clear is that the lenders cannot jut “fix” the documentation on their own. And the investors will want someone to pay all of the costs associated with the correction.