Article 43

 

Saturday, October 16, 2010

Blighted Titles

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Tampa Bay, Miami and Orlando are among the top five metro markets nationwide with the fastest-growing mortgage delinquency rates a harbinger of coming foreclosures.
- Robert Trigaux - Saint Petersburg Times

Newshoggers
October 2, 2010

If you think the housing crisis is over you would be WRONG.  Do you think the banks are out of trouble? You would be wrong again.  BANK OF AMERICA BECAME THE THIRD LENDER TO HALT FORECLOSURES because of BAD PAPERWORK following GMAC and JP Morgan Chase.

Bank of America, the countrys largest mortgage lender by assets, said on Friday that it was reviewing documents in all foreclosure cases now in court to evaluate if there were errors.

It is the third major lender in the last two weeks to freeze foreclosures in the 23 states where the process is controlled by courts.

But Bank of America went further than the first two lenders, GMAC Mortgage and JPMorgan Chase, which have said they will amend paperwork only in cases they think were improperly done. So far, that has amounted to only a handful of cases.

Bank of America, in an e-mailed statement, said it would “amend” all affidavits in foreclosure cases that have not yet gone to judgment.

That could mean tens of thousands of foreclosure cases would be in limbo for months or, if the consumers in default hire lawyers, years.

No where is it as bad as it is in FLORIDA and it is actually THREATENING THAT STATE’S ECONOMY.

There’s no polite way to put this. A growing cancer is infecting the backlogged legal process of foreclosing on hundreds of thousands of homes in Florida.

It’s endangering the legal and economic STABILITY of this state. And it’s exposing an appalling lack of leadership, first for allowing such a breakdown in the legal system and, now, for failing to own up to this mess and get it fixed.

How bad is it? Laws governing who actually owns a foreclosed home are becoming so suspect a new buzzword is emerging: blighted titles. Even the tepid rebound of Florida’s economy may face crippling delays in resolving hundreds of thousands of foreclosures in the Sunshine State.

What’s wrong? The accuracy and truthfulness of an immense flood of legal documents and affidavits some lenders and their hired lawyers use to foreclose on homes have come under such critical attack that some major banks are suspending their court cases pending internal reviews.

If the title the lender holds is questionable that represents a new problem.

Here’s a big one: Title insurance companies may be scared away from offering “clear title” guarantees on foreclosed homes. That would throw into doubt who actually owns many thousands of houses - those going into foreclosure and those purchased out of foreclosure all across the state.

Who’s going to buy a home if they don’t have a guarantee that they will legally own it?

Old Republic National Title has already announced it will not issue policies on GMAC foreclosures.

SOURCE

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Banks Suing Based on Counterfeit Court Summons in Foreclosure Lawsuits

Washington’s Blog
September 29, 2010

I received the following email from a source on the Hill who has a lot of knowledge about foreclosures.

Attached is a court order quashing a case because of a counterfeit court summons. Apparently whats happening is that private process servicer companies may not be serving people with summons, and are simply counterfeiting the documents so they can keep the fees without doing the work. That means that you could theoretically be foreclosed on without ever knowing there was even a foreclosure case against you.

This judge got wise to it.

Below are two more stories about the problem. The first is from the Florida Bar News, and the second is from prominent financial blogger Mike Konczal on the rampant violations of property rights.

FLORIDA BAR NEWS: FAUULTY FILINGS HAMPER CLEARING FORECLOSURES

Key quote: “If we had everyone defending their foreclosure, wed never get through this.”

FLORIDA’S FORECLOSURE NIGHTMARE

Given that the IMF and others believe a large part of the “structural unemployment” in our country is related to the struggling housing market and underwater and barely-hanging on homeowners, what is to be done? One option is to allow for options like lien-stripping in bankruptcy courts, reseting mortgages by zip code, etc. Another option is for courts to accelerate foreclosures by ignoring due process, proper documentation and legal process in order to kick people out of their homes and preserve the value of senior tranches of RMBS while giving mortgage servicers a nice kickback.

What option do you think our country is taking?

We should all be very concerned about the foreclosure situation in Florida. If you are a homeowner or potential homeowner, you should find it offensive that people’s property rights are being violated in such a flagrant way. If you are an investor, either as bond vigilante or someone with a generic 401(k), you should be worried that servicers have gone rogue and the incentive structure to maximize value instead of fees associated with foreclosures has broken down.

And if you care about basic Western liberalism, the classical kind, with a Lockean understanding of freedom to own property along with freedoms of speech and religion - you should be pissed off. This is a clear-cut instance of the rich and powerful decimating other peoples property rights, rights that are supposed to protect the weak from the strong, in order to preserve their wealth and autonomy. Unless you think property rights are mere placeholders for whatever the financial sector demands are, this should be resisted. This should be viewed as a problem an order of magnitude larger than Kelo v. City of New London.

The short problem is that banks are foreclosing without showing clear ownership of the property. In addition, ғforeclosure mills are processing 100,000s of foreclosures a month without doing any of the actual due diligence or legal legwork required for the state to justify the taking of property and putting people on the street. Even worse, many are faking documentation and committing other fraud in the process. The government is allowing this to happen both by not having courts block it from going forward, but also through purchasing the services of these mills. As Barney Frank noted: “Why is Fannie Mae using lawyers that are accused of regularly engaging in fraud to kick people out of their homes?”

And the worst part is the lack of conversation about this. Thanks to Yves Smith at naked capitalism for following this story from the get-go; her blog has become the place for anyone interested in this topic (that link is a catch-up post). The rest of the media is starting to catch up to where she was weeks ago. Here’s the Washington Post with the story of an individual caught in one of these nets.

Also Dean Baker just wrote a good SUMMARY OF THE SITUATION for the Guardian:

As a number of news reports have shown in recent weeks, banks have been carrying through foreclosures at a breakneck pace and freely ignoring the legal niceties required under the law, such as demonstrating clear ownership to the property being foreclosed.

The problem is that when mortgages got sliced and diced into various mortgage-backed securities, it became difficult to follow who actually held the title to the home. Often the bank that was servicing the mortgage did not actually have the title and may not even know where the title is. As a result, if a homeowner stopped paying their mortgage, the servicer may not be able to prove they actually have a claim to the property.

If the servicer followed the law on carrying through foreclosures then it would have to go through a costly and time-consuming process of getting its paperwork in order and ensuring that it actually did have possession of the title before going to a judge and getting a judgment that would allow them to take possession of the property. Instead, banks got in the habit of skirting the proper procedures and filling in forms inaccurately and improperly in order to take possession of properties.

And the situation in Florida is worse than most assume. The specially-created courts see it as their purpose to clear out the foreclosures, as Yves Smith covers here (must read). The most obvious takeaway is that homeowners arent being given the chance to have their documents properly viewed, have the challenges and proper legal hurdles to putting someone on the street vetted by the courts, and instead are being bribed with an additional month of house time if they don’t ask too many questions.

And the biggest fear is that the fraud uncovered at GMAC is the tip of the iceberg for what is going on nationwide. Keep your eye on this situation.

SOURCE

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From a Maine House, a National Foreclosure Freeze

by David Streitfeld
NY Times
October 15, 2010

DENMARK, Me.  The house that set off the national furor over faulty foreeclosures is blue-gray and weathered. The porch is piled with furniture and knickknacks awaiting the next yard sale. In the driveway is a busted pickup truck. No one who lives there is going anywhere anytime soon.

Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible.

It should have been a routine foreclosure, with Mrs. Bradbury joining the anonymous millions quietly dispossessed since the recession began. But she was savvy enough to contact a nonprofit group, Pine Tree Legal Assistance, where for once in her 38 years, she caught a break.

Her file was pulled, more or less at random, by Thomas A. Cox, a retired lawyer who volunteers at Pine Tree. He happened to know something about foreclosures because when he worked for a bank he did them all the time. Twenty years later, he had switched sides and, he says, was trying to make amends.

Suddenly, there is a frenzy over foreclosures. Every attorney general in the country is participating in an investigation into the flawed paperwork and questionable methods behind many of them. A Senate hearing is scheduled, and federal inquiries have begun. The housing market, which runs on foreclosure sales, is in turmoil. Bank stocks fell on Thursday as analysts tried to gauge the impact on lenders’ bottom lines.

All of this is largely because Mr. Cox realized almost immediately that Mrs. Bradbury’s foreclosure file did not look right. The documents from the lender, GMAC Mortgage, were approved by an employee whose title was “limited signing officer,” an indication to the lawyer that his knowledge of the case was effectively nonexistent.

Mr. Cox eventually won the right to depose the employee, who casually acknowledged that he had prepared 400 foreclosures a day for GMAC and that contrary to his sworn statements, they had not been reviewed by him or anyone else.

GMAC, the country’s fourth-largest mortgage lender, called this omission a technicality but was forced last month to halt foreclosures in the 23 states, including Maine, where they must be approved by a court. Bank of America, JPMorgan Chase and other lenders that used robo-signers - the term caught on instantly - have enacted their own freezes.

The tragedy of foreclosure is that some homeowners may be able to stay where they are if their lenders are more interested in modification than eviction. Without a job, Mrs. Bradbury is not one of them. Her family, including her 14-year-old daughter and 16-year-old son, lives on welfare and food stamps.

“A lot of people say we just want a free ride,” Mrs. Bradbury said. “That’s not it. I’ve worked since I was 14. I’m not lazy. I’m just trying to keep us together. If we lost the house, my family would have to break up.”

It has been two years since she last paid the mortgage, which surprises even her lawyers.

“Had GMAC followed the legal requirements, she would have lost her home a long time ago,” acknowledged Geoffrey S. Lewis, another lawyer handling her case.

GMAC, which began as the financing arm of General Motors, has received $17 billion from taxpayers in an effort to keep it from failing and is now majority-owned by the federal government. A spokeswoman for the lender declined to comment on Mrs. Bradbury’s case because it was still being litigated.

John J. Aromando of the firm of Pierce Atwood in Portland, Me., the lawyer for GMAC and Fannie Mae, the mortgage holding company that owns Mrs. Bradbury’s loan, did not return calls for comment on Thursday.

Fannie Mae and GMAC, which serviced the loan for Fannie, have now most likely spent more to dislodge Mrs. Bradbury than her house is worth. Yet for all their efforts, they are not only losing this case, but also potentially laying the groundwork for foreclosure challenges nationwide.

“This ammunition will be front and center in thousands of foreclosure cases,” said Don Saunders of the National Legal Aid and Defender Association.

Just a few miles from the New Hampshire border, this slice of Maine does not have much in the way of industry or, for that matter, people. Mrs. Bradbury grew up around here, married and had her children here, and married for a second time here. Her parents still live nearby.

In 2003, her brother-in-law at the time offered to sell her a house on property adjacent to his. It was across from a noisy construction supply site. But it was ringed by maple, evergreen and willow trees, and who does not want to be a homeowner, especially when GMAC Mortgage will give you a loan for the entire purchase price and then another loan to improve the property?

“I was very happy,” she remembered. “It was a new beginning.”

But Mrs. Bradbury lost her job as an employment counselor in 2006 and did part-time work after that. Her husband, Scott, was in poor health and had other problems. He could not work as a roofer. She fell behind and got a modification from GMAC. It increased her monthly payments and provided no relief.

Finally, in late 2008, she stopped paying altogether, and GMAC asked a court to approve her eviction without a trial. By the summer of 2009, this removal was well under way when Mr. Cox picked up her file.

Mr. Cox, 66, worked in the late 1980s and early 1990s for Maine National Bank, a subsidiary of the Bank of New England, which went under. His job was to call in small-business loans. The borrowers had often pledged their houses as collateral, which meant foreclosure.

“It was extraordinarily unpleasant, but it paid well,” he said. “I had a family to support.”

The work exacted its cost: his marriage ended and a serious depression began. He gave up law and found solace in building houses. By April 2008, he said, he was sufficiently recovered and started volunteering at Pine Tree Legal.

By the time Mr. Cox saw Mrs. Bradbury’s case, it was just about over. Last January, Judge Keith A. Powers of the Ninth District Court of Maine approved the foreclosure, leaving the case alive only to establish exactly how much Mrs. Bradbury owed.

Mr. Cox vowed to a colleague that he would expose GMAC’s process and its limited signing officer, Jeffrey Stephan. A lawyer in another foreclosure case had already deposed Mr. Stephan, but Mr. Cox wanted to take the questioning much further. In June, he got his chance. A few weeks later, he spelled out in a court filing what he had learned from the robo-signer:

“When Stephan says in an affidavit that he has personal knowledge of the facts stated in his affidavits, he doesn’t. When he says that he has custody and control of the loan documents, he doesn’t. When he says that he is attaching ‘a true and accurate’ copy of a note or a mortgage, he has no idea if that is so, because he does not look at the exhibits. When he makes any other statement of fact, he has no idea if it is true. When the notary says that Stephan appeared before him or her, he didn’t.”

GMAC’s reaction to the deposition was to hire two new law firms, including Mr. Aromando’s firm, among the most prominent in the state. They argued that what Mrs. Bradbury and her lawyers were doing was simply a “dodge”: she had not paid her mortgage and should be evicted.

They also said that Mr. Cox, despite working pro bono, had taken the deposition “to prejudice and influence the public” against GMAC for his own commercial benefit. They asked that the transcriptbe deleted from any blog that had posted it and that it be put under court seal.

In a ruling late last month, Judge Powers said that GMAC, despite its expensive legal talent and the fact that it got “a second bite of the apple” by filing amended foreclosure papers, still could not get this eviction right.

Even the amended documents did not bother to include the actual street address of the property it was trying to seize, reason enough, the judge wrote, to reject the request for immediate foreclosure without a trial.

But Judge Powers went further than that, saying that GMAC had been admonished in a Florida court for using robo-signers four years ago but had persisted. “It is well past the time for such practices to end,” he wrote, adding that GMAC had acted “in bad faith” by submitting Mr. Stephan’s material:

“Filing such a documentwithout significant regard for its accuracy, which the court in ordinary circumstances may never be able to investigate or otherwise verify, is a serious and troubling matter.”

It was not a complete loss for GMAC Judge Powers declined to find the lender in contempt ח— but nearly so. GMAC was ordered, as a penalty, to pay Mr. Cox personally what he would have been paid for his work on the deposition and related matters had he been charging Mrs. Bradbury. That, he says, is $27,000.

The court’s ruling on GMAC’s “bad faith” is already being taken up by foreclosure defense lawyers around the country. Mr. Cox “did a remarkable job of proving the lenders not only rubber-stamped these loans on the front end, but they rubber-stamped them on the back end,” said Mr. Saunders of the legal aid group.

GMAC, which this week expanded its foreclosure freeze to the entire country, is not giving up on Mrs. Bradbury. It will try for the third time to evict her when the case goes to trial this winter.

If Mrs. Bradbury is not quite victorious, she is still in her house, and for her that is the only thing that counts. If she can get her pickup fixed, she will go back to looking for a job.

“I am not leaving,” she said this week, standing out on her front lawn, the autumn splendor spread all around her. “We have nowhere to go.”

SOURCE

Posted by Elvis on 10/16/10 •
Section Dying America
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Running on Empty

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Mortgage Rates Return To 1951. If Only We Could.

By Charles Feldman
Bigger Pockets
October 14, 2010

In 1951, television was in black and white, computers were the size of a 747, and the rate for a 30 year fixed-rate mortgage was just about 4.19%

This week, a new flat panel, 3D television that does not need special glasses was revealed, computers are married to telephones which fit in your shirt pocket, and the rate for a 30 year fixed-rate mortgage is just about 4.19%

You read that right. Mortgage rates are at record lows; the WSJ saying that Freddie Mac figures they havent been this low since before “I Love Lucy” first went on the air!

So, people should be flocking to their real estate agents buying up homes left and right. Right? Wrong!

One big difference between 1951 and 2010 (other than the fact that people, in general, are far less literate but do know the entire year line-up for “Dancing with the Stars") is that in 1951, people actually went to work each morning. They were able to do this because they actually had jobs. You remember jobs? That’s where you go , usually on a daily basis, to earn enough money to afford to buy a house while taking advantage of interest rates as low as 4.19%.

Now, unlike 1951, the unemployment rate remains steady and high; the economy shows little to no signs that it will produce lots of private sector jobs anytime soon; state and local governments are laying off workers; and the housing industry, especially in states such as California, Florida, Arizona and Nevada, remains shattered. And, thats a nice way of putting it.

But until people actually have jobs - and ones that pay wages that mean something - it doesn’t matter if the 30 year fixed rate drops to 1%. If you dont have a job, you are not going to buy a house. Simple as that.

In fact, the dropping rate is a bad sign - a temperature showing the patient is not making a recovery. Except, in this case, the lower the numbers go, the worst off it means the patient is. In this case, the patient, of course, is the economy.

The rates are so low because there is not much competition out there for new mortgages. In fact, most of those thus far taking advantage of the lower fixed rates are those who still have jobs and credit and are able to refinance. But that does just about nothing to get the economy going. Only sales of new or exisiting homes will do that and the figures there have not been very encouraging for a long time now.

1951. We were so innocent. We were so socially conservative. We were so employed!

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Posted by Elvis on 10/16/10 •
Section Dying America
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