Mortgage "Robo-signing" scandal expands today
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(Medford, MA) The "robo-signing" mortgage scandal expanded today. Bank of America (BoA) today announced a halt to foreclousure proceeding in all 50 states. Previously the major lenders announced that foreclosure activity was being postponed in only the 23 Judicial Notice State. There are only 23 states here in the USA that require all foreclousure activity be submitted & authorized by the local judiciary. The rest of the states (27 of them) have procedures to process foreclosures but don't require court action to affect foreclosure. NOTE: Massachusetts is NOT a judicial notice state.
I had made quite a few comments on a miriad of websites that it was really amazing that the major lenders hadn't found problems with their filings in the "non judicial states", they only found problems or issues with their filings in the judicial states. Perhaps this is due to the fact that judges are very fond of the rule of law & the correct following of these rule? Perhaps it was because of the HUGE liabilites the lenders or their servicing companies face if they dont' actually "own" the loans they're forelclosing on, or haven't followed the letter of the law in their filings.
In the past lenders usually "sell" their mortgages to others and quarterly or annually file the paperwork to notice the homeowner & state of the tranaction. The law here in Massachusetts requires ALL transactions to be recorded the day of the transaction. Most of the larger lenders don't like this requirement because of the individual expense of recording these transactions and would rather pay monthly/quarterly/annually for these expenses clearly in violation of the law. This results in homeowners being sent notices from potentially several mortgage servicing companies of their eminent "foreclosure".
One of the best advices I've seen is from a site called "Produce The Note" where homeonwners are encouraged to enforce the "Produce the Note" part of the party that's attempting to foreclose. Often times the foreclosing mortgage servicing company isn't in possession of the actual note or find out that they aren't currently the holder of the note. This results in the home-owner having to expend huge sums of $$ for attorney representation or in the worst case scenario they give away their property because they don't have the $$ to fight.
Many title insurance companies are starting to recognize this and are refusing to insure the transactions related to REO/Bank owned properties due to the HUGE risk. What would make a homeowner whole again after their home was foreclosed upon? There's the in-convenience of the moving expense, the ding to their credit, the public embarrasment as well as the expense of finding new living situations. I can see a HUGE liabilty for the falsely foreclosed upon lenders/title companies as well as the listing brokers that listed the properties and sold them to the new "owners"
Most purchase and sales contracts here in Massachusetts require that the seller deliver a good & marketable title to the property. Obviously the cloud on ownership of the mortgage would make these transactions impossible without proper documention. This would complicate most all buyers of REO/Bank Owned properties because of the cloud on the title and it's un-insurable status.
Now most of the foreclosures are for genuine lack of payment, but the way the laws are written the lender/owner of the note is REQUIRED to follow the local/state laws that are enacted to effect a proper foreclosure. There is NO allowance for cutting corners & I do find it good that the legislature & judicary are finding that when corners are cut the lenders and mortgage holders are held to account for this, including re-imbursing homeowners expenses to fight these costs.
Also check out the website of the attorney general here in MA for their request for all foreclosure activity to be halted in the state pending verificaition of the paperwork. http://www.mass.gov/
I'm a huge fan of paying for the home you purchased but when the lenders don't play by the rules I'm big on them paying for their HUGE mistakes. Too many people being unfairly foreclosed upon, part of the concept of better to let 1000 guilty free rather than make 1 unfairly convicted. Until the system is fully adheared to the lenders/mortgage holders are at risk & rightfully so.