If you work in the mortgage industry or for a title insurer, you might not want to make any plans for the next six months. Foreclosure-Gate is about to explode. It is being alleged that many prominent mortgage lenders have been using materially flawed paperwork to evict homeowners. Apparently officials at quite a few of these firms have been signing thousands upon thousands of foreclosure documents without even looking at them. In addition, it is being alleged that much of the documentation for these mortgages that are being foreclosed upon is either “improper” or is actually “missing”.
As lawyers start to smell blood in the water, lawsuits challenging these foreclosures have already started springing up from coast to coast. In fact, some are already calling Foreclosure-Gate the biggest fraud in the history of the capital markets. JPMorgan Chase, Ally Bank’s GMAC Mortgage and PNC Financial have all suspended foreclosures in the 23 U.S. states where foreclosures must be approved by a judge. Bank of America has actually suspended foreclosures in all 50 states. Now, law enforcement authorities from coast to coast are calling for investigations into this controversy and it could be years before this thing gets unraveled.
This thing just seems to escalate with each passing day. It is being reported that the attorneys general of up to 40 U.S. states will be working together on a joint investigation into this foreclosure crisis. Lawmakers in both houses of the U.S. Congress, including Nancy Pelosi and Christopher Dodd, have called for an investigation to begin on the national level. U.S. Attorney General Eric Holder said last week that he is looking into the issue. Things are certainly getting very serious out there. Never before has there ever been such a national focus on foreclosure paperwork.
But apparently there are good reasons for such scrutiny….
*One GMAC Mortgage official admitted during a December 2009 deposition that his team of 13 people signed approximately 10,000 foreclosure documents a month without reading them.
*One Bank of America employee confessed during a Massachusetts bankruptcy case that she signed up to 8,000 foreclosure documents a month and typically did not look them over “because of the volume”.
But the “robo-signing” aspect of Foreclosure-Gate is just the tip of the iceberg. Apparently there is a whole lot more going on than just a bunch of bad signatures.
Peter J. Henning, a professor at Wayne State University Law School in Detroit, was recently quoted by MSNBC as saying the following about Foreclosure-Gate….
“You’ve got so many potential avenues of liability. You don’t even know the parameters of this yet.”
The sad truth is that potentially millions of foreclosures across the United States could potentially be invalid because the securitization process has muddied the chain of ownership. In fact, an increasing number of judges from coast to coast have been ruling that the “owners” of the mortgage have no right to foreclose on a property because they lack clear title.
At the core of this title controversy is MERS - Mortgage Electronic Registration Systems. MERS is based in Reston, Virginia and it was created by the mortgage industry to enable that big financial firms to securitize and swap mortgages at high speed. MERS allowed these big financial firms to largely avoid the hassle of filling out more forms and submitting new filing fees every time that a mortgage was traded.
But now MERS is facing some very serious legal challenges. A recent article in Businessweek described the situation this way….
A lawsuit filed on September 28th in federal court in Louisville on behalf of all Kentucky homeowners claims that MERS was part of a conspiracy to create false promissory notes, affidavits, and mortgage assignments to be used in mortgage foreclosures. Similar class actions have been filed on behalf of homeowners in Florida and New York. Karmela Lejarde, a MERS spokeswoman, declined to comment on any pending litigation.
The reality is that as millions of U.S. mortgages have been bunched together and traded around the globe at lightning speed, it has become increasingly unclear who actually has title to them and who actually has the right to foreclose on these properties.
Title insurers have backed the titles of millions of these foreclosed properties and now potentially find themselves in a heap of trouble. Some of the biggest title insurers have already begun circling the wagons in an attempt at damage control. For example, one of the biggest title insurance companies in the United States, Old Republic National Title Insurance, has already declared that it will no longer write new policies for homes that have been foreclosed on by JPMorgan Chase and GMAC Mortgage.
So what happens if nearly all title insurers start avoiding foreclosed properties?
Won’t that make it much more difficult for the banks to sell the massive backlog of foreclosed properties that they have accumulated?
In addition, Americans that have purchased foreclosed homes may now be facing some serious problems themselves. Millions of Americans may now ”own” homes that they do not have clear title for. When it comes times to sell those homes, many Americans may find themselves unable to do so.
Needless to say, this is a complete and total mess.
Already, U.S. banks have a record number of foreclosed properties that they need to clear out, and now all of this scrutiny on foreclosure paperwork and all of these lawsuits are going to grind the process of getting these homes sold off to a standstill.
In fact, the true legacy of Foreclosure-Gate may be the massive amount of bank failures that it causes.
It would be difficult to understate how much of a nightmare Foreclosure-Gate is going to be for U.S. mortgage lenders. Having to go back through the paperwork of millions of old mortgages is going to be a complete and total disaster. If banks end up being unable to foreclose on a large number of bad mortgages, it could potentially be enough to put many banks out of commission for good. Not only that, but the legal fees that many of these banks will accumulate defending lawsuits related to Foreclosure-Gate will be astronomical.
The U.S. mortgage industry was already on the verge of death, and Foreclosure-Gate may just be the straw that broke the camel’s back.
The reality is that U.S. banks are drowning in foreclosures and this current crisis is just going to make things a lot worse. Back in 2005, there were approximately 100,000 home repossessions in the United States. In 2009, there were approximately 1 million home repossessions in the U.S. and RealtyTrac is now projecting that there will be an all-time record of 1.2 million home repossessions in the United States this year.
For the U.S. mortgage industry, Foreclosure-Gate must feel like someone has dropped a bomb on them after they have already been beaten up and doused with gasoline.
Attorney Richard Kessler, who recently conducted a study that found serious errors in approximately three-fourths of court filings related to home repossessions, says that Foreclosure-Gate could haunt the U.S. mortgage industry for the next ten years….
“Defective documentation has created millions of blighted titles that will plague the nation for the next decade.”
While it may be easy to beat up U.S. mortgage lenders and say that they deserve all this, let us not forget that this is going to impact a whole lot of other people too.
It is going to become much harder to get a mortgage. It is going to become much harder to buy a home. It is going to become much harder to sell a home. The U.S. housing industry is likely to suffer a significant downturn due to all of this. There is even a good chance that the entire U.S. economy could be dragged down for an extended period of time.
So no, Foreclosure-Gate is not good news for anyone.
Well, except maybe for lawyers.
But for virtually everyone else this is really bad news. Any hope that the U.S. housing industry would experience a quick recovery is completely and totally gone.
The banking institution of JP Morgan Chase have known about a $130,000 misstatement and misrepresentation (error) of my down payment on the mortgage since it acquried the loan in 2000 - Mortgage Fraud. This bank, and the US Treasury (owner of the "note") did nothing once notified of the error(s) identified in the loan and loan process. Essentially, my home is paid for, yet, Chase Bank was granted the 'right' to illegally foreclose my property. I challenged that decision to foreclose since 2006 (still in my home)for all the reasons being cited in the so-called "Foreclosure-Gate" scenario and more) in numerous opposing briefs written by me, a Pro Se litigant, that are currently on file with the Court. In my opinion, this is not news. Instead, this whole thing is about authorities deciding to stand up and take notice by enforcing the laws that have been on the books against such practices for years. Thank you so much.
ReplyDeleteEVERYONE TELL OBAMA TO CRASH THE BIG BANKS NOW!
ReplyDeleteBig Wall Street Banksters created the Foreclose Economy because they are that greedy and “Too Big to Care” about the American Dream and basic Contract Law. It was done by design and with treasonous and willful intent strictly for power and profit.
The Illegal Securitized Mortgages that became the death blow to our economy actually bet on the foreclosure of the homeowner for as much as a 30 times return on investment. This is true financial terrorism. It is actually better for the investor to foreclose than to help someone stay in their home.
Want to know how easy it is to fix this problem? Crash all of the Big Banks now and fund local banks only that serve to enrich local economies only. Look at the example of the state owned banks in North Dakota, whose population has only a 4% unemployment rate.
The Fed and their complicit banks must be abolished to save the Republic!
It’s the only thing we can do. CRASH THE BIG BANKS NOW “Too Big Too Fail” apparently means “Too Big To Succeed” and “Too Big for their own Wallets”
The sooner the better. Why don’t we ask a 3rd grade math student what he thinks? The real problem is that a politician who could do something about it has his own mathematical challenges about healthy economies. “Bite the hand that feeds him” (by indicting Banksters), or make millions putting children in the streets for power and profit.
Apparently ALL politicians are going to make the same choice over and over again. They have always sold the souls of your children and their future and they always will. Take the big Banksters out of the picture. Build a local banking system that cares about its community and helps it thrive instead of sucking the life out of it by bribing and fixing the entire system for itself, taking us all of a cliff with it.
Crash all the big banks now. Create new local Banks only = No more Wall Street Banksters.
Problem Solved!
J Glenn Lowe
Die Banker Die – A Tribute to the Wall Street Banksters that suck the life from all of us and our economy just to get a nice Christmas Bonus – http://www.youtube.com/watch?v=YGFZ1Jj3ui8