Foreclosure Past or Future? Here’s Help

stop foreclosure fraud

Federal Bank Regulators Wake Up

By now, most of us have heard about the shenanigans of Big Banks around foreclosures–robo-signing, sloppy record-keeping, fradulent foreclosures of all kinds.  Federal regulators, 4 years into this, appear to have finally woken up.  This week, regulators required 14 mortgage servicers to mail out 4.3 million letters to possible victims of wrongful foreclosure practices. It’s about time.

What’s In The Letters?

These letters will invite the borrowers to submit their cases for a free review by independent consultants that are funded by the lenders but vetted by regulators. In other words, the banks must pay for the reviews and the salaries of the reviewers, but all are under the scrutiny of the regulators.  If it is determined that borrowers were harmed financially by negligent or fraudulent foreclosure proceedings, then banks must compensate the borrowers.

The regulators under the Comptroller of the Currency have apparently determined that wrongdoing did take place. That’s why these letters are going out.  These regulations are also enforced by the Federal Reserve which, as you may remember, coughed up the TARP payments to these same Big Banks, BofA, Chase, Citi and Wells Fargo as well as a host of smaller banks.

foreclosure-fraud-cartoon

What Are Some Tricky  Bank Practices?

Banks have seemingly engaged in many activities ranging from merely negligent to downright nefarious in order to foreclose on non-paying borrowers or, even in some cases, on people who actually were paying or who even owned their homes outright. That’s right. The massive money and power of these Big Banks allowed them to foreclose on people who had no mortgages at all in a few isolated cases.  Most of these misdeeds have come to light in the so-called judicial states where each foreclosure must go before a judge and where borrowers can contest the action if they so choose.  California, by the way, is a non-judicial state where foreclosure proceedings do not involve the courts or judges.

Some judges and attorneys in these judicial states have noticed peculiar signatures, for instance, with the same signatory appearing multiple times on legal documents but clearly in different handwriting. Multiple personality disorder? It appears not–robo-signing was the name of that game. And, it is fraud. This is what some banks were doing when they couldn’t locate the original paperwork. Our system of real estate has demanded that the original paperwork be present to back any claim to foreclose for over 200 years. But, banks had instituted their own electronic system, called MERS, which made it easier to change the ownership of mortgages but more difficult to maintain the paperwork. Solution? Make it up…just do anything to kick those people out of their houses.

What Are Regulators Offering As Compensation?

Well, that’s the rub, isn’t it? The whole Wall Street fiasco has been marked by absent or weak regulators. Already more than 10 million homes have been foreclosed upon and regulators are just now making any noises about calling the banks to account. So far, the regulators have not established any guidelines for compensating borrowers found to have been  fraudulently deprived of their homes, though compensation of some sort is promised.

Plus, banks may want to be “held harmless” against further lawsuits if they pay even token compensation. Will the regulators agree to that?  Given the terrible track record of these regulators, there is every reason to suspect the real purpose of these letters rather than aiding consumers aims really to calm the situation for the servicers who are now facing massive potential litigation.   If it seems paranoid to suspect federal regulators of favoring the banks over consumers, call me guilty because I do suspect that very thing.

How Do Borrowers Sign Up?

Borrowers who want to learn more about the federal claims process can visit IndependentForeclosureReview.com or call (888) 952-9105.

Borrowers must request reviews by April 30, and the foreclosures must have been on primary residences to be eligible.

Kamala Harris Comes Through: CA Out Of Big Banks Deal!

kamala harris, attorney general of california

Kamala Harris Is My Hero, Too

This is terrific news: Kamala Harris, California’s Attorney General, has heard the people of this state, suffering under the worst mortgage and real estate crisis since the Great Depression. She has opted out of the proposed settlement of the 50 states Attorneys General with the Big Banks. That settlement, rumored to be about $25 billion, is really small potatoes and would have been a disastrous conclusion of their investigation.  $25 billion would barely settle the monetary issues for California alone, not to mention the other 49 states. In addition, the banks are seeking to limit all their legal liability in return for the meager settlement. Despite the support of the Obama administration,hoping to end financial uncertainty with this settlement, Harris has decided that California will pursue a separate investigation and, if possible, make a separate settlement with the Big Banks.

Other States Are Reluctant To Sign

Harris follows in the footsteps of Eric Schneiderman of New York who has launched a wide-ranging investigation of the activities of the Big Banks which include Bank of America, Chase, Wells Fargo, Citigroup and Ally Financial.  Other states have also signaled their displeasure with the proposed deal which, if rumors are correct, allots a huge windfall to the Big Banks and a meager settlement to the states. Besides New  York and California, Delaware Massachusetts, Kentucky and Minnesota, along with our hard-hit neighbor, Nevada have all signaled intense dislike of the proposed deal.

California, already one of the worst foreclosure states in the nation, recently made headlines again when foreclosures jumped 55% in one month as BofA, a prime supplier of SoCal mortgages during the “bubble years” via Countrywide, prepared to “dump” more seized homes on an already-bloated real estate market. Stockton, CA is especially at risk for there, it is estimated, 1 in every 7 homes could be foreclosed in the near future. Likewise,  Nevada’s Las Vegas is suffering from an especially difficult and long-lasting crisis  as estimates say that 75% of Las Vegas homes are underwater and could potentially be foreclosed.

Fraudulent Mortgage Practices

As indicated in a previous post, some of the most notorious fraudulent practices of the Big Banks, such as robo-signing, continue despite their public exposure. Since California is a non-judicial state, meaning foreclosures do not have to be approved by a judge or, indeed, by anyone, fraudulent foreclosures are harder to spot. Judicial states, in general, are the ones which have brought such practices to light. Given the huge number of foreclosures in California, though, it stands to reason that large numbers of these were not legitimate.  Victims of such practices should have the help of the state’s top lawyer, the attorney general, to help them seek redress. Except in rare cases, it is prohibitively expensive for individuals to launch suits against Big Banks. That should not give the Big Banks carte blanche to commit wholesale fraud against California mortgagees.

What Does This Mean For Distressed Homeowners?

The most likely scenario now with both New York and California posing uncomfortable questions to the Big Banks while launching probing investigations into mortgage abuse is that the 50-state deal will collapse. The Big Banks will have to live with  uncertainty. Will they be brought to the bar for their crimes? How much will it cost them? Will heads roll? And the Big Question for Big Banks: will profits suffer? will stock prices dive? Few have much sympathy left for the banks, so, aside from Timothy Geitner and Henry Paulson, few will really care.

big banks bailout cartoon

The outcome for the distressed and already-foreclosed-upon homeowner, though is a different story. With multiple ongoing investigations, quick relief in the form of monetary settlements is not in the cards.  It is really, though, to everyone’s advantage to dig deeper into this morass of abuse. If the fraud is papered over, then, equally obviously, it will happen again. If the banks made trillions by fraud and nobody cares to demonstrate the modus operandi, then they will continue to  behave in the same way. Showing the crime and punishing the criminal:  That is the basis of our judicial system and it is a vital necessity in this case.

Some of the more flagrant practices are already known, publicized, and yet continuing. Big Banks could regulate themselves in order to regain public confidence. This is, apparently, what was expected of them after the 2008 bailout which seems to have been offered with no strings whatsoever.  Did they regulate themselves?  For those imprisoned in Siberian ice caves for the past 4 years, the Big Banks went right back to business as usual. Congress needs to regulate our messed-up financial sector. The sooner, the better if we are ever to get out of this nightmare.

Eric Schneiderman Is My Hero!

Attorneys General of 50 States Sue The Big Banks

As mentioned in a previous post back in March, for months now the Attorneys General of  all  50 states of the union have together been suing the big banks over violations of real estate law. Banks transferred their mortgages repeatedly in order to create the infamous mortgage-backed-securities [MSB] filled with non-performing loans and sold all over the world. But, the banks never paid the taxes and fees due on the transfers and so have opened themselves up to lawsuit from every state.

We all know how strapped the states are for cash, so it’s no surprise that the Attorneys General would make every effort to collect.  In the meantime, though, the Obama Administration has also gotten involved and, as per usual, the Big Banks have been frantically lobbying to limit their liability-drastically limit their liability.

 

In fact, a number like $20 billion has been bandied about, leaked to the press, while yet the banks object vociferously to this number which, large though it is, is paltry in comparison to the hundreds of billions, not to mention trillions, they raked in during the “bubble” years when they were making these horrible loans to almost anyone with a pulse. Considering, too, that the final settlement amount must be shared among 50 states, that $20 billion is really small potatoes.

Banks Want To Escape Liability-Totally

The banks’ behavior, though, is far more troubling than merely limiting the dollar amounts they must pay the states. No, you see the banks want to limit their total liability to all those who lost their homes, legally or illegally. As mentioned in a previous post, foreclosure fraud via cooked-up loan documents is still going on, as was recently discovered. This plan would also limit banks’ liability to those investors, both at home and abroad, who bought the toxic investments which the banks knew were substantially worthless as they off-loaded them to the unsuspecting. The dive the pension funds took? Not their responsibility, either.

Helping the banks contain this damage into one neat little package and, as Matt Taibbi of RollingStone has it, shooting it off into deep space, are many of the AGs and the Obama Administration. It seems it would serve government’s goals as well if this whole thing would just go away.  Put into a neat, little [and cheap for the banks] package and allow the banks to then go their merry way. Never mind the millions of former homeowners who lost their homes, whose lives were ruined, whose livelihoods were destroyed by the easy money provided by the banks which fueled the bubble and made them billions of dollars.

My Hero Eric Schneiderman

 

Enter my hero, Eric Schneiderman, Attorney General of New York [my home state]. Schneiderman has refused to go along. Schneiderman actually wants to investigate the activities of these banks. Earlier this year he launched an investigation into the securitization practices of Goldman, Morgan Stanley, Bank of America and other companies. Further, Schneiderman is also blocking an individual $8.5 billion settlement for Countrywide investors. He has sued to stop that deal, claiming it could “compromise investors’ claims in exchange for a payment representing a fraction of the losses.”

Schneiderman is seriously compromising the Big Banks’, other Attorneys’ General and the Obama Administration’s efforts to shovel this huge pile of doo-doo under the rug of a tiny settlement.  He is under tremendous pressure to cave and has been summarily kicked off the negotiating team.

Banks are spouting a revisionist line: their crime is faulty paperwork, not massive corruption and fraud which, for those of us who can remember what life was like 5 years ago, a dwindling group, it appears, was their real crime. Banks knew their loans were bad. That is why they “sliced and diced” them and stuffed them into MBSs in the first place. They behaved with no regard for the effect on others; they operated solely for their own benefit. And, benefit they did, let us remember, to the tune of billions of dollars. And, when their crimes started to catch up to them, they cried “Bailout” to the federal government and the very same evil-doers got billions in tax-payers money.

Why is Eric Schneiderman the only one who remembers this? Why is he the only one who understands that he is the defender of the millions of helpless homeowners who lost their homes, often illegally, after they had already been victimized with fraudulent loans and offered no loan mods or trifling mods by these very same banks?

Eric Schneiderman is my hero. I truly hope he can hold out against the combined pressure of the Obama Administration and most of the other AGs. Please, Eric, hold fast.

Housing Takes Another Hit

Just when we think it’s getting better, the news comes out that we are in for a double-dip in housing prices. Last year in 2010 things were starting to look up in many municipalities as sales were brisk and housing prices were even starting to inch up again. This year, though, the situation has turned from hopeful to grim. Now it appears that the price increases of last year were mainly due to the home buyers’ housing credit extended by the U.S. Congress to buoy the market. Buoy it they did, but now we’re in for a let-down. In September of 2010 as the last of the home buyer credit buyers closed on their properties, housing started to slide. Of course, it’s natural for sales of homes to slide  after Halloween and throughout the winter, especially in cold-weather states, but this year’s slide began earlier and lasted longer.

Compounding the problem was the “robo-signing” scandal which halted foreclosures for several months last fall. Regular sales and short sales continued to pile up as inventory on a stagnant market, then the banks resumed their foreclosures. Foreclosures hit at perhaps a more rapid rate as banks rushed to close out their books at the end of the year. Now, at the end of February, here in Southern California we have not only a huge inventory, but I would even characterize it as a glut of properties clogging up the market.

Another issue adding to the misery is the difficulty borrowers are having obtaining financing. After the bailout, as we all know, banks, instead of spreading the wealth around as was intended, instead simply stopped lending.  Belatedly  realizing their folly during the bubble years, banks, always ponderously slow and bureaucratic, finally reacted–by clamping down on lending! Too late, banks. It has been estimated that half the population now has bad credit due to the recession in one form another, either a short sale, foreclosure, bankruptcy, late payments on credit cards  or, at a minimum, too much debt.  Lenders now will not lend to these people

For an analysis of what the near future holds for lending, check out my Pasadena Short Sale Blog. Hint: it’s another downer.

All of these factors have played a part in the current housing glut and consequent stasis. The inevitable result will be–yet lower prices as banks, short sellers and those who must sell for one reason or another, all compete with one another for the few buyers out there.  Already this year, analysts have indicated that the scant 2.25% gain in L.A. housing last year has been wiped out. Some experts are predicting that we are in for another dip of approximately 15%. I am not in the prognostication business, but I can say that it’s not looking good.

Already from 2006-2008 many cities in five states, California, Nevada, Arizona and Florida and Michigan, according to Federal Housing Finance Agency data, have lost significant value in housing. Starting with Stockton, which lost 75% of its housing value in those two years, the dreadful list continues with Modesto at negative 73%, Vallejo negative 64%, Salinas at negative 60%. These are horrible numbers. Imagine losing 75% of the value of your home in just two years through no fault of your own!

The roll of California cities continues with Riverside-San Berdo-Ontario tied with Bakersfield  at negative 47%, Fresno at negative 45%, Sacramento area at 44%, Oxnard-Thousand Oaks at 41%, Santa-Barbara-Santa Maria-Goleta tied with Santa Rosa at negative 40%. The l ist goes on-Oakland area -38%, Santa Ana-Anaheim-Irvine -36%,LA-Long Beach-Glendale -32, San Luis Obispo-Paso Robles -29% and even Santa Cruz-Watsonville lost 29% in two years.

That just us. Of course, Vegas lost 54% of its value in those years and is still hemorrhaging. Reno-Sparks lost 41%; Phoenix-Mesa-Glendale was down 31% and is still falling. Then, like California only worse because it has a less diversified economy, is Florida which was and still is a disaster zone. Cape Coral-Fort Myers lost 60% of its value, followed by Naples-Marco Island at 54%  negative, Ft. Lauderdale -45%, West Palm Beach-Boca Raton down 45% and on and on.

That was the story three years ago. Much as we would like to say it’s getting better, really, it’s not over yet.

 

Man Forecloses on Wells Fargo!

In this time of depressing and maddening news about banks and their infuriating indifference to the suffering of underwater homeowners, it’s refreshing to know that some of us are not taking their shenanigans lying down. Here’s a story I found about one homeowner who decided to FIGHT BACK! Will he win? Only time will tell…

Why Wells Fargo Became the Target of Foreclosure

According to The Philadelphia Inquirer and retold by Casey Bond of GoBankingRates.com,  it all started when music producer Patrick Rodgers, who purchased a $180,000 home in 2002, was suddenly notified last year by Wells Fargo that he needed to insure the property for $1 million. The bank demanded he insure the full replacement value of the home, not the purchase price, to prevent a total loss should devastating damage occur. Rodgers didn’t believe his home was worth that much and refused.

When Rodgers declined to up his coverage and was presented with forced-placement insurance instead, he wrote to Wells Fargo demanding further explanation. In fact, he wrote four times over the course of a year with no response.

The Real Estate Settlement Procedures Act

After some research, he learned that the Real Estate Settlement Procedures Act (RESPA) of 1974 requires that mortgage lenders acknowledge written requests within 20 business days. They are subject to damages or penalties if they fail to respond. So, when his written requests for more information were ignored, Patrick Rogers took Wells Fargo to court.

The court ruled in favor of Rodgers and he received a $1,173 judgment against Wells Fargo. However,  the bank  didn’t pay up, so Rodgers began foreclosure proceedings against  local office Wells Fargo office.

March 4, 2011 is the date scheduled for a sheriff’s sale of the contents of Wells Fargo Home Mortgage office  to cover the judgment and additional court and sheriff’s costs, though it’s likely Wells Fargo will pay a settlement to end the dispute before the sale happens.

In a late-breaking addenda to this story, Rodgers and the bank did,indeed, come to an agreement as mentioned in the Philadelphia Inquirer. Both sides declined to offer details, but Rogers said the bank had agreed to pay down his mortgage to the extend equal to the time and effort he had expended in his quest against the bank and, further, the bank agreed that his home insurance should equal his most recent appraisal at $255,000.

How You Can Learn from Rodgers

Technically, Patrick Rodgers didn’t really foreclose on Wells Fargo, but he brings an important issue to light. As a responsible, employed homeowner who felt his mortgage lender was taking advantage of him, Rodgers didn’t sit back and allow it to happen. He researched his rights and stood up against the bank, ultimately winning his case.

If you suspect your mortgage lender, or any other financial institution for that matter, is asking something questionable or even illegal of you, there are laws in place to protect you. It’s up to you to know what they are, but you don’t have to feel like your situation is hopeless or unchangeable. It’s not if you’re serious about changing it.

 


After December, The Avalanche?

Louis XIV of France, styled the Sun King, famously opined, “Apres moi, le deluge.”  After me, the flood. He was right, of course, for his excesses so infuriated the people that his successor was guillotined and his monarchy overthrown in the French Revolution.

SoCal Plunge In Foreclosure Filings

Something similar seems to be brewing in Southern California and maybe even nationwide as lenders ratchet up their foreclosure filings after the “robo-signing” lull. Though foreclosures dropped dramatically in SoCal this fall, so, too, did all home sales. The reasons seem to be many: the end of the home buyer tax credit, stubbornly high unemployment and the generally still-moribund economy. In fact, sales are down a full 16% from November of 2009. This at the same time foreclosure filings fell 14% from the previous November after a 22% decline in October for a two-month total 36% decline. Nationwide, the filings fell 21%.

December is traditionally a slow month in real estate as consumers focus on retail buying, parties and holiday travel plans. Typically, though, also in December  smart investors are out there snapping up last-minute bargains of the now-extremely motivated sellers still on the market. Competition is almost always much less, to put it mildly, and sellers are determined to close out their books for year’s end.  This year seems to be different as even investors are holding back.

That may be because the huge drop in  foreclosure filings this fall has ominous repercussions for home prices in the new year. With the foreclosure freeze over, informed observers now expect to see the banks ratchet up their foreclosures with a vengeance, restarting filings begun in October and November and barreling ahead with new ones in January. Executives from RealtyTrac, a real estate data collection firm, speculate that the housing recovery could be set back three months, if not more, as the foreclosures pile up. In fact, we can expect ” an avalanche” of foreclosures shortly.

SoCal Home Prices

The most immediate effect of an avalanche of foreclosed properties on the market will be to further depress prices in Southern California which had started a slight upward movement. Los Angeles County home prices had dropped 1.2% over November 2009 to a median of $325,000. Riverside and San Bernardino Counties, the hardest hit by the bursting of the real estate bubble, lost 2.5% and 5.0% respectively to medians of $195,000 and $152,000. But, that is a huge improvement over the 30% and 40% drops of previous years. Other SoCal counties actually gained in value. Orange County eked out a .6% improvement for a $435,000 median home price. San Diego topped the charts with a 3.1% improvement over last year to a median of  $335,000 with Ventura County just behind at 2.7% uptick to a median of $375,000.

Future: More Underwater Homes

These hard-earned gains will soon be lost as the promised avalanche of foreclosures hits the market. Perhaps sales will pick up as buyers and investors are lured back into the game. But, bargain-hunting fun aside,  another price drop for already distressed homeowners will plunge yet more homeowners underwater.  That, in turn, spirals down into more foreclosures and more equity loss in future.

Like Louis XIV, banks see this as well as anyone, yet still refuse to modify loans in any serious way. Like Louis, they see, but, obviously, don’t give a damn as long as they get their bonuses. Short-term is the only term.

Bank Breaks Into Woman’s Home

Recently, Nancy Jacobini of Orlando, Florida was terrorized when she realized someone was trying to break into her home. She thought she was a victim of bold daylight robbers.  She was afraid the robbers might be armed. It turned out it was her bank, JP Morgan Chase, apparently super-eager to grab her house. Chase had sent out a  contractor to “secure” the home and change the locks.  Jacobini was home at the time with her lights on, and the contractor scared her to death.

Do banks take over homes before the foreclosure is accomplished?

Many people are not aware that banks routinely invade homes in which homeowners have stopped making payments  and change the locks.  If a home is vacant, the  bank’s  contractors step in to change the locks and check out the property. They do this without starting the legal procedure known as foreclosure.

BofA did it to one of my listings, a local condo, vacated by the tenants. The bank  knew it was for sale because it was in the MLS and it had a lockbox. I had also contacted the bank to begin the short sale procedure.  The bank  had not bothered to file a Notice of Default, the first legal step in a foreclosure. As the listing agent, I was obliged to call the bank and request a key on behalf of my sellers. This key arrived promptly I will admit, but what legal right had the bank to change the locks in the first place? I will tell you —-none.

 

DARTH INVADER

 

More Bank Horror Stories

In another instance, someone I know had tenants leave a property in Texas which was also up for short sale. It’s easier to sell without tenants, of course.  In this case, the listing agent soon heard from other agents that they couldn’t access the property becasue the key didn’t work. You guessed it. Shortly after the tenants vacated, the bank, BofA again, had swooped down and changed the locks.  The agent was obliged to call the bank  so he could continue to list the house. Again, the bank had not bothered with the legal formality of Notice of Default before asserting its “rights” of possession.

Matt Weidner of St Petersburg, Florida is Nancy Jacobini’s attorney. Jacobini admits she had missed some mortgage payments, but she was living in the home and was actually home at the time of the contractor’s visit.

 “What we have right now is lawlessness across the country. Banks and institutions are circumventing our courts. They’re going behind our judges’ backs and they are throwing homeowners out on the street out completely improperly,” Weidner said. 

“These are jack-booted thugs driving around with a pickup truck and a clipboard … kicking down doors. And they are unregulated in most states. This has gotten out of control,” Weidner further stipulated.

In another case in Punta Gorda, Florida contractors entered the home of Darlen Dicinti and her husband who returned home from a trip to care for her sick grandmother to find the locks on their home changed. 

“These people called Safeguard Properties broke in … They went through my back window – they cracked the glass,” Decinti said.

A judge had entered a foreclosure judgment against the couple, but they are appealing it – and they have the right to remain in the home at least through the end of November.