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.

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.

 


California Mortgage Litigation: Show Me The Deed

Return of the Robo-Signers

As indicated in the previous post, foreclosures in judicial states, which all have to be approved by a judge, are starting to run into rough waters as homeowners, frustrated beyond belief at the lack of help from the banks, are increasingly turning to litigation.

One sign of trouble was the “robo-signing” disclosures which began in Florida and quickly spread to a temporary nationwide moratorium on foreclosures.  Concerned banks did a quick self-investigation, and, not surprisingly, hastily determined  that while  a few “robo-signers” had fraudulently approved foreclosures,  that all others were good to go. Foreclosures then resumed.

But, wait.  Just last week, Ally Financial suspended 250 foreclosures in Maryland because they had been processed by a robo-signer who had been rubber-stamping as many as 10,000 mortgages per month. Even though Ally expects to eventually refile the foreclosures, the legal challenges will slow the process — which could conceivably give some homeowners the chance to avoid foreclosure.

Show Me The Deed: Real Estate Law Is Still The Law


Not so fast, big banks. Traditional real estate law, which as far as I know is still the law of the land, requires that banks have to to produce physical deeds to show that they own the properties they are seizing.  Electronic blips need not apply. If the recent Massachusetts Supreme Court ruling, insisting the banks produce the physical deeds, spreads nationwide, banks are in for a rough ride. Because most mortgages over the past decade were sold to multiple owners on the global marketplace, it is no longer clear who is the rightful owner of the loan. How inconvenient that some judges turn out to be sticklers for the actual law!

“The vast majority of these loans have been diced and sliced and sold to multiple owners in investment tranches, which are likely to be owned by people who don’t even live in this country, so if courts rule that the banks have to get the real owners’ signatures to foreclose, the banks are stuck,” said one industry commentator. “That becomes very surreal, since you’re talking about millions of loans where you don’t know who the owner is.”

Surreal for the banks, that is, but highly convenient for the millions of upside down homeowners now stuck in mortgage hell and foreclosure limbo.

Jerry Brown’s Win For California v. Wells Fargo

Because California does not require the same judicial review as other states, courts here have typically rubber-stamped foreclosures. But the wide-ranging questions about the foreclosure process are having an effect even here.

Last month, Jerry Brown — in one of his final acts as attorney general before becoming the state governor — inked a settlement with Wells Fargo to provide $2 billion in loan modifications to homeowners who were struggling to pay off adjustable-rate loans, as well as $32 million in restitution to borrowers who have already lost their homes.

“Customers were offered adjustable-rate loans with payments that mushroomed to amounts that ultimately thousands of borrowers could not afford,” Brown said. “Recognizing the harm caused by these loans, Wells Fargo accepted responsibility and entered into this settlement with my office.”

So far, foreclosures in California, which do not need a judge’s approval, are proceeding apace. It is extremely encouraging, though, that in the judicial states the law is starting to be applied. The faster that spreads the better for all of us. The California judiciary and the legal profession in general are eagerly eying developments. Beleaguered homeowners, too, until now dependent mainly upon the banks’ good will to avoid foreclosure, may finally have found in our long-established law the very tools they need to keep their homes.

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.

Inept Banks Plunge Foreclosure Process Into Chaos

In yet another consequence of the “bubble years” when zero-down mortgages went to almost anyone, now the foreclosure crisis is itself in crisis.

Bank of America, largest holder of US home mortgages, has declared a moratorium on foreclosures. Other large lenders, GMAC, Chase, have stopped foreclosures in 23 states, but  all large lenders are expected to follow suit shortly and declare a total moratorium across the country.  Initially, California was not involved, though immediately Jerry Brown the attorney general who is also running for governor of the state, pledged to scrutinize the banks’ foreclosure processes.

The reason for the moratorium is the revelation of the “robo-signing” of foreclosure affidavits without even looking at the contents. This has opened the banks to claims of massive fraud.

What does this mean for my  home? Will the auction go through?

If you with a  BofA or Countrywide loan  were expecting an auction any day now, that auction has been postponed indefinitely.  As mentioned here previously, from start to foreclosure, the process has been taking over one year due to the slow pace set by the banks. Now, add to that an indefinite moratorium period. The consensus seems to be the time will be 60 to 90 days. I would bet that most, if not all, foreclosures will begin again only in the new year.

How long will I be able to stay in my property without paying the mortgage?

At this point, no one knows what is going to happen next. Most likely, BofA for now and perhaps other banks will use the period of the moratorium, no matter how long it lasts, to clear out their huge,clogged pipelines of homes which have already been foreclosed upon and remain in some part of the sale or pre-sale process.  With the pipeline cleared, once the moratorium is lifted, foreclosures should resume at a brisk clip.

I haven’t paid my mortgage on my home for 6  months and I have a Notice of Default. Does this mean I won’t get a foreclosure on my record?

No, this means that,  if you have just done nothing so far, the BofA  moratorium is allowing you time to do a short sale and avoid the worst result for your credit. If you have an NOD, that means the process has started and the clock is ticking. Once the moratorium is lifted, whenever that is, you are just that much closer to foreclosure. You  may be one of the first foreclosures after the moratorium.

For help deciding or doing a  short sale, call me at 626-641-0346 or email Diane.

I haven’t paid, but I don’t have a Notice of Default. What about me?

It’s unclear at this point whether or not the banks will continue to issue NODs during the moratorium. No matter because at some point the moratorium will be over and the foreclosures will continue.  During this lull in the foreclosure activity, you have time to get going on a short sale.

How did all this happen?

Foreclosure Heat Map

As indicated in another post, really the incredible speed and complexity of the modern mortgage system are at the root of the issue. As explained in a Washington Post article, the situation is further complicated by the various reactions and legal opinions coming from many states. Some states which have not been especially hard hit appear to have adopted either more scrupulous attention to detail or some have even passed laws making it easier for banks to foreclose. Other states, especially the Big Four Foreclosure States, Florida,  California, Arizona and Nevada, faced with entire neighborhoods shuttered and communities gutted of population, have tried to stem the tide.

What is going to be the outcome?

BofA has already said it will resume foreclosures once its internal investigation is complete and has further stated that, so far, its internal investigation has revealed no irregularities.Banks are notoriously self-serving, though, so no one is relying too much on a self-test. Rumors are that Congress wants to hold hearings on the topic to see exactly what the banks are doing to validate the foreclosure process.

It’s evident that massive lawsuits may follow any hint of wrongdoing which could throw the entire real estate and financial sector into chaos.  Bad as the foreclosures are, the spectre of another TARP to bail out the banks again is just too horrible to contemplate. Let’s hope against hope  the banks have been following the proper procedures.

For help deciding or doing a short sale, call me at 626-641-0346 or email Diane.