As more mortgage companies “fess-up” regarding their apparent fraudulent processing of foreclosure documents, the foreclosure scandal has become pandemic. And while the early response from many, including myself, was that this issue would soon be swept under the rug, with no benefit for struggling homeowners, and allowing banks to proceed with foreclosures, the problem has exploded in significance.
Attorneys and state courts around the country have begun to question the manner in which banks have processed thousands of foreclosures each month, and numerous errors have been discovered. Court documents have revealed the casual manner in which foreclosures were often allowed to proceed even while homeowners were allegedly being considered for loan modification and in a few cases when the owner was not in default on their mortgage. Ensuing investigations and testimony have revealed a foreclosure process that lacked proper verification and review by bank officials. The issue is not about “flawed paperwork,” “oversights,” or “errors,” but whether the nation’s largest banks considered themselves above the law.
The foreclosure scandal raises several questions:
What caused this problem to surface? Since most foreclosures aren’t contested, the lack of proper documentation has rarely been an issue. Now, however, with banks needing to process thousands of foreclosures each month, it appears that many ignored the legal requirements and became little more than “foreclosure mills.” Their failure to properly review documents compounded the errors, and the resulting number of homeowners contesting their foreclosures exploded. As attorneys and judges reviewed the practices of these “foreclosure mills,” the entire system has come into question. Ultimately, it appears that banks were treating the foreclosure process as carelessly as they did the original application for a mortgage.
● Why would banks knowingly commit fraud? In order to expedite the initial packaging and sale of the various mortgage instruments that helped create the housing crisis, the mortgage industry more than a decade ago created Mortgage Electronic Registration Systems (MERS), to speed up the transfer of mortgages between financial institutions. Considered by many to be the industry’s first step in ignoring the requirements for the proper transfer of mortgage documents, including the payment of local filing fees; when first established, the actions of MERS were rarely questioned, and the lack of accountability may have emboldened banks to more serious and more blatant violations.
● What are the ultimate ramifications for both the housing market and the overall economy? Regardless of reports to the contrary, many banks, their books still overflowing with “toxic assets,” teeter on the brink of insolvency. If foreclosures are delayed for a significant amount of time, the U.S. could face the very real possibility of another banking crisis, and the potential for another bailout. Additionally, lawsuits will continue for years, making stabilization of the housing market nearly impossible.
● What about the issue of title problems? Some title companies have already announced their refusal to insure title on foreclosed homes. And buyers, concerned about title issues, may simply avoid purchasing foreclosed properties until they are confident that such problems have been resolved. Additionally, those who have recently purchased foreclosed homes may find title to the property clouded by this crisis.
● Who will pay for this mess? While other issues surrounding this controversy are more complex, the answer to this question seems clear. The U.S. taxpayer will almost certainly bear a significant portion of the ultimate costs. With almost all mortgage loans backed by the U.S. government, taxpayers will, once more, be on the hook for government negligence and the banks’ avarice. Whether or not we agree is immaterial; it is far too late to change the rules in this game.
● Will extended delays in foreclosure further damage a fragile housing market? There are more than 2 million homes currently in or facing foreclosure; a moratorium will mean the owner can’t be evicted and the bank can’t sell the home. Then, once a solution is reached—and we can only speculate when that might be—the housing market could face a potential flood of additional inventory. Not only will the market suffer, but there will be millions spent in sorting through the confusion, while defaulting owners are allowed to remain in their homes rent-free. The potential costs are staggering.
● What are the political ramifications of this problem? Nothing of this magnitude comes without political consequences, and the potential in this case could impact both the economy and housing for decades. Politicians will attempt to capitalize on the issue as a means to promote their party’s agenda, and that could impact the ultimate overhaul of Fannie Mae and Freddie Mac and the future of government involvement in home financing.
● How can this problem be resolved? I suspect we’ll have a complete moratorium of foreclosures, whether voluntary or imposed, that will seek to find ways to move ahead with foreclosure, and congress may be pressured to legislate a solution to the problem. With several states having initiated lawsuits against lenders or demanding that foreclosures be temporarily suspended, a national moratorium seems inevitable. At some point, however, foreclosure must take place, and the U.S. taxpayer will pay for the majority of the losses. Rather than creating TARP II, bailing out the banks for a second time, or doing nothing and allowing taxpayers to pick up the bill through Fannie and Freddie, we could finally create a system of meaningful modifications. Doing so would lessen the burden on taxpayers and begin to stabilize the housing market and overall economy. Regardless of the solution chosen, there will be no “free lunch” for anyone; the ultimate choice is just whether we’ll have burgers or bread and water.
What I’m proposing is not a means for homeowners who fail to make mortgage payments to get a “pass,” allowing them to remain in their home without paying, but neither is it a way for banks to ignore the law and the consequences of their reckless lending practices. Banks and their attorneys created the mortgage instruments in question, and they forced borrowers to comply. Those same banks should be compelled to work with homeowners who demonstrate a desire to remain in their homes; and if a solution isn’t possible, they must follow both the spirit and letter of the law when proceeding with foreclosure. Allowing them to do otherwise is to ignore and harm the very legal system intended to offer protections to all of us.
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John....as if I had any doubt...you hit the nail on the head....again!
Personally, unless there is absoutely NO HOPE or possibility that a homeowner will be able to start making their payments, I think they should stop foreclosures. Period. End of Statement. I mean even to the point that if I am unemployed, give me a year of no payments. If I get a job, I start making payments. The payments I missed are still tacked onto my loan, and whenever I sell, I have to make them up at closing from my proceeds, or possibly fall into a short sale situation.
If this country (or the banks in this country, more appropriately) does not stop throwing the American homeowner in front of the bus, we are just going to continue to have more and more road kill to clean up.
I personally know people who tried to do loan mods, and the banks simply said.......No.
So now what? More lower priced homes (or condos in my case) on the market, driving the price down, and making the process of selling for any other "above water" homeowner, almost impossible.
God I love real estate.......NOT!
Thom - Thanks! We need to hold banks accountable for THEIR actions, and their response to this latest crisis shows exactly why we need to do so.
John - Very well written and as Thom pointed out "you hit the nail on the head" and there is also unemployment, here in Polk County over 13%.
Banks must be held accountable no doubt. I do predict that the short sale process will be more forthcoming now than before.
The MERS system is one of the freakiest monsters I could ever imagine. It is wrong on SO many levels. But, this started a very long time ago. President Bush Jr., (Srub, as we call him in Texas), warned congress over and over and over that if they did not fix problems that this would happen. They all just called him an idiot and ignored him. It is a huge mess.
You know, it is wel documented at every 100 years, around the 10-20th year, there is a HUGE, ulgy depression. It is a cycle of economics that led to the dark ages, and the Great Depression 100 years ago. Could this be the start of the next depression?
Petra - Thanks. It will be interesting to see how the process affects short-sales.
Amy - It certainly feel as if it could develop into something worse.
When will we rise up and call out those who caused this crisis - Barney Frank and Christopher Dodd = along with Bill Clinton and Barak Obama - but the smoke and mirrors blame Bush - but facts do not lie against the truth
I don't know the solution... but it needs to involve both non-paying homeowners losing their homes AND the bank employees that were involved need to be punished... as well as the banks.
Nicholas - I doubt we'll ever see those responsible called out.
Lane - I think those who don't pay will ultimately lose their homes--the banks may again get a pass.
This is such a government cover up that is well beyond Watergate - protecting the banks and those who the banks help finance their careers -
What a great post John, so much to talk about. We have all seen how the lenders are letting people stay longer, how long until the big banks again cry poor mouth and want more money.
Another bailout President Obamacare wants - how about that spending man!
Nicholas - I think this is going to explode and splatter over everyone. There's just no easy way to resolve it.
Larry - We're looking at the potential for TARP II--even though they lied about how they would spend TARP I.
John - I think, this mess will be around for the next few years.
You NAILED IT!! Yup, the banksters caused this problemo in the first place by trying to squeeze out every penny they could with their MBS, derivatives, options, blah, blah, blah. Many -- MANY -- hedge fund investor profitted greatly by breaking the backs of the American home owner. They wanted to amass large portfolios, and they did so by approving all the loans that they could. Then they act surprised when the bubble burst. They knew!
Well said, John! I don't know that there is a solution but I imagine the government will try enacting more laws that the bankers will find ways around. If they try another TARP, they need to give the money to the American taxpayers; not the banks. "Fool me once, shame on you; fool me twice, shame on me."
Wahoo! More fun and games! The next "bubble?" Methinks.
And, gee, I haven't seen this on the news anywhere. I am wondering why...
John. excellent explanation and so many families will be affected by this. .
The bank doing the hustle to get individuals out of their homes -- I do believe are getting karmic justice. I doubt that the banks will suffer that much. I ask my local title company what they saw in the future and they believe that the lenders will be held accountable more so than they will be.
As to who the whistle blower is on this situation, is anyone guess. When the Pentagon papers surface at least Daniel Ellsberg was brave enough to admit his part.
Is there any way to resolve the problem without even more complications, when more Lawyers smell blood in the water?
Great post John. The entire mess provides more evidence that this crazy market will not get any better in the foreseeable future.
Only time will tell what will happen. Perhaps now banks will be more likely to do loan modifications or even principle reductions. This will get non performing loans off of their debit sheets.
I'm suggesting this post John. You've given a great summary of the situation and potential repercussions. Consumers will have questions and while there are no answers yet, we'll all need to stay well-versed on this topic to dialogue with them about it.
I echo the sentiments of the 1st commenter. If this crisis doesn't scream for a new paradigm regarding the way the entire private and regulatory sector has designed and implement housing finance, I'm not sure what will. Nibbling around the edges and always playing catchup seems a poor utilization of precious human capital resources as well as the havoc and destruction these inept and abysmal policies have created for everyone involved.
John - I agree.
Carla - They knew and they're still doing it.
Maria - The banks still have their tentacles tightly entwined into DC; unless we protest loudly they'll get what they want.
Jay - I suspect this will be big news next week.
Fernando - And so much of the suffering was unnecessary.
Lorraine & Loretta - This actually surfaced through testimony when some homeowners fought foreclosure.
Jon - Government and the banks will seek the most complicated solutions, and the lawyers will get rich.
Al - I agree.
Bob - That appears to be a reasonable and beneficial result.
Karen - Thanks! And yes, this will only add to the confusion for consumers.
Chris - Completely agree--but do our "leaders" have the guts to do the right thing?
The good news in all of this? The REO Agents go home to play!
WOW. Great rundown, thank you so much for synthesizing a ton of material into a concise, readable post like this. I think my brain just got 1% heavier.
do the largest banks think they're above the law...YES
why would they do this? ...it's all about money...and they think they can
see the banks, think they are both bulletproof and smarter than everyone else
time to bring the hammer down!
There are those that think this is just "water under the bridge", that foreclosures will resume in 30 days. Personally, I think this thing is going to explode to show other bank irregularities. Class action lawsuits are already being filed across the country, congressional hearings are almost a certainty. I can see the commercials already
"Homeowners, Look at your note, if it says MERS, call the law offices of XXXXXXXX". Nope, this thing is going to get ugly.
Tom - Perhaps there will be more short-sale opportunities.
Mindy - Thanks for acknowledging my efforts to condense the topic into a blog post.
Jay - We'll see if anyone has the will to bring the hammer down.
Stephen - I agree, we're just in the beginning stages of this.
John,
Very well stated, thanks for a wonderful breakdown of whats causing it and the potential results.
-Brent
John, this is a very interesting and informative post. Thank you for providing such detailed information.
Hmmm, I am very concerned about how this will end up playing out and how this will affect the economy. Does this mean that REO agents are out of business? How will banks handle short sales now? What about the people who haven't paid their mortgage and the foreclosure process hasn't started. Shoud I pay my mortgage next month?
This entire situation is getting crazier and crazier and crazier.
John, thank you for writing this post. "It is a confusing time for Consumers, Realtors, Lenders, and Title Companies." All of us hear daily from folks who have tried to modify, who want to make payments and want to keep their homes but the banks do not respond and just don't care. Everyday, I read blog posts from some very courageous folks out there exposing the truth about banks. Check out Matt Weidner the attorney in Flordia, 4closurefraud, and Neil Garfield who writes LivingLies Weblog. What a mess..
Brent - Thanks for stopping by!
Mark - Thanks for the support.
Tamara - Lots of legitimate questions that will need answers.
Benjamin - And that pretty much sums it up!
Peggy - A mess and much more.
Pandemic - it's absolutely spreading like a disease. You are so right that this goes way beyond flawed paperwork and errors. There are underlying ethical issues as to how foreclosures have been handled. The lenders have gone way out of bounds knowing full well it will take years to sort through this mess - a lot of arrogance on their part.
Completely agree--but do our "leaders" have the guts to do the right thing?
Hi John,
Do you really want me to answer that?
Susan - And a long time to correct.
Bruce - We already know the answer.
A very good blog and a very good analysis. I'd been writing about it for weeks myself. On September 30, in "First the Mortgage Meltdown, Now the Foreclosure Meltdown." I concluded: " Laws and regulations are in place for a reason. Such reprehensible behavior cannot be allowed to stand. "
On September 22, I wrote "Stop Those Foreclosures NOW!" I wrote in part: "But it looks like Ally may not have been playing by the rules, either. If that's the case, then let's go after them to the full extent of the law. And if that means stopping hundreds of thousands of foreclosures, then so be it.And if that means going after them for already completed foreclosures that can't be undone, let's do that, too."
The September 22 blog got all of 6 comments. The September 30 blog got 2 comments. Do people really care?
To quickly address a few of your points:
What caused the problem to surface? A few homeowners who contacted lawyers who knew what they were doing. Who knew to demand documents. Who actually knew how the process worked, and were willing to do more (for a lot more money as the carrot) than just take a few thousand dollars from a homeowner to try to delay what appeared to be inevitable. And read my blog "Are Banks Conning or Pressuring Owners to Give Up Their Properties?" The banks that knew what was coming down switched to deeds-in-lieu of foreclosure. In that blog, in part, I wrote: "Mass mailings to solicit deed-in-lieus from homeowners who are current on their mortgages? Repeated phone calls to owners who are current on their mortgages and their Realtors? Maybe there's an innocent explanation for this. Or maybe not." Oh, that post got 2 comments.
Why would banks knowingly commit fraud? Because that's their nature. Because they've been doing it for decades. Read The Big Short by Michael Lewis on the banks' behavior and strategies prior to the meltdown. Or read my review of it "Great Read: The Big Short by Michael Lewis." That got 3 comments. Woo-hoo! But back to your question: That's their nature. And look at the legislation that the banks sneaked through the House and Senate to legalize their robo-signers. Someone caught it before Obama signed it, and now he says he'll veto it. But you must understand: That's their nature.
What are the ultimate ramifications? It really depends on whether the underlying problems get cleaned up. They probably won't be. It'll just cause the banks to find other ways to make money. As I noted above, they've already shifted strategy to pursuing deeds-in-lieu. Maybe more short sales. They'll figure out a way. Smart Realtors will go along for the ride.
What about the issue of title problems? I may be alone in this, but I expect the cancer to spread to title companies. There's going to have to be a bailout (or something) for them, or let them fail. They've insured--probably knowingly--hundreds of thousands of bad titles.
Who will pay for this mess? The public? Uh uh. I'm not sure this time around. The public's had its fill of bailing out corrupt lenders. I don't think they'll stand for it again. And, side note, while I'm no supporter of the Tea Party movement, this may just be the issue that skyrockets them into real political power. Let the lenders fail. And send those who committed crimes to jail.
How will this problem be solved? Initially, a moratorium. A lot of posturing by politicians. But then, perhaps, some real push-back from the American public. A lot of pain. A lot of disruptions. But we swept the problem under the rug before, bailing the banks out while permitting them to proceed as they had before. I don't think that'll happen again. Am I suggesting throwing the baby out with the bath water? Not at all. I'm suggesting we throw the unflushed yellow toilet water out before baby is forced to take another swim in it.
Hi John~ It's about time the banks are held accountable and realize that they are not above the law!
So speed kills those who are above the law !!!!!!!!!!!!I feel no sympathy at this point for banks !
John- Excellent post. I fully expect some bankers to be testifying in front of a Senate Judiciary panel sometime in the near future.
My proposed solution is to take the banks out of the short sale and REO business altogether. Let's set up a liquidator (like the Resolution Trust Corporation of the early '90's) to deal with these assets and take the power away from the banks who have proven over and over again that they cannot handle the situation. Unfortunately, this "RoboSigner" situation is just more evidence that sweeping the problems under the rug and hope they go away doesn't really work.
John this is perhaps the most important post written on this subject that I am aware of. You have thoughtfully considered many issues and pointed out what people need to be aware of and thinking about. I am deeply concerned, and have been for some time, that the situation is going to worsen this next year or so and with the latest moratium on foreclosures we are certainly headed in this direction.
Will the banks be held responsible? Are they above the law? So far, yes they are. And I for one am so very tired of seeing famililes this past few years loose everything they've worked for because the banks simply say NO.
This is a problem of huge proportions that is going to deeply effect just about everyone in this country and around the world.
We need solutions - real honest to goodness solutions. I for one don't know how this is going to unravel because it is so wide, deep and perversive in the banking and politcal system.
Thankyou for writing such an excellent post and I look forward to further discussions.
Hi John. I am concerned that with the recent freeze on foreclosures from BofA and friends...
What will be the incentive to pay the mortgage? How long, if I have a mortgage from BofA, can I stay in the house?
Lots of concerns in today's market...
Thanks for writing,
Ken
This is soooo Bad for the Homeowner but in the end it's going to be difficult for the little guy to fight the banks. I just hope that the homeowner who is struggling will get some help and the one that is trying to bet the system will not get over on it.
Thom's comment (#1) really confuses me. Homeowners able to stay in their homes and not make a payment for a year? Can tenants do this too? Tell your landlord that you will not be making payments until you get a job and catch up on your other bills...I could be up to a year Mr. Landlord but just put it on my tab.
It's time to get back to reality folks and universally as a tenant or homeowner, "If you can't pay, you can't stay."
John I have no answer for this problem It is a shame how the banks have treated their customers!!!
This is a good explanation of what has gone on. I have not understood what the problem was as most documents are boiler plate ones, but I can see that if owner is negotiating OR actually paying the mortgage, for heaven's sake, and the foreclosure moves forward, what is the little guy to do? It is really sad.
Sarah
John - Awesome and thought-provoking blog- can't say I agree with all of it, but you have given me a lot to contemplate. I have reblogged it-
Great detailed analysis of the topic, John.
Who can claim to have an answer for a "quick fix?"
I believe this article will give some background and insite to what people are calling the "Foreclosure Scandal/Fraud"
http://www.washingtonpost.com/wp-dyn/content/article/2010/09/22/AR2010092206650.html
I will be reblogging this and asking people to Read the article and then offer their comments if what was being done by the bank was FRAUD or just a very bad business decision.
This is all interesting turn of events and it has definitely spurred a flood of buyer activity in the last week here. How crazy is that? I have taken on three new buyers myself (solid and ready to roll) and have been sending out several buyer referrals a day when the crickets have been chirping here since May. Before then I would get one buyer lead a day that was wishy washy at best.
At any rate, maybe this was a pre-election ploy to spur this activity sans tax credit? I am remaining cautious about this turn of events. I also believe we are headed to TARP II. The banks and our government are very committed to one another so I have issues with believing that they are being thrown under the bus all of a sudden here.
I have only one question. Why hasn't a single bank officer or investment firm executive been arrested. This housing downturn has punished taxpayers, created loss of employment, destroyed the equity in homes causing people to delay or forego retirement, and yet those who created this mess get off scott free. Why?
Very well Put. Thank you
John,We are watching the banks right now and we aren't holding our breath on all this forecloseure stuff .I hope the market gets a grip soon.Thanks for the info.
Hi there,
Interesting and distressing to say the least.
Your comment about "through Fannie and Freddie, we could finally create a system of meaningful modifications" makes me wonder how or why it hasn't been done to this point.
I'm certainly glad that none of the big banks are actually IN my market. I know they own some of the loans and foreclosures, but much less than in other areas.
This is gonna get ugly I fear.
Banks haven't been accountable for their action thus far. I can't imagine that happening now or ever. The taxpayer pays and that is all anyone cares about. Banks really need to be punished. And what about the homeowners that have been foreclosed on and paid for their house in cash. We don't hear much about those anymore.
A ver excellent post John!
After the banks were told they were too big to fail, the next question is did they assume they were too big to obey the law?
John, I remember some time back reading a post from Katerina Gasset, imploring the state of Florida to refuse the attempted change from a judicial to non-judicial foreclosure state status. It's so much more clear now, that position (and her urgency). Thank goodness for the Florida contingent who red flagged the rest of the country with their tireless efforts. If a person doesn't pay their mortgage, and simply cannot, they are going to lose their home, but it MUST be through a legal, non fraudulent process. Fraud against the judicial system can't be tolerated. Consumers are entitled to that assumption.
Those forced into bankruptcy in Florida appear to have had a few lawyers *along with their homeowners* willing to take the time to really look at documents presented, and go to battle- in non judicial states, the lack of a judicial process all but guaranteed that this alleged fraud on the courts would remain undiscovered. Now Katerina's adamant position makes perfect sense- and how horrific is it that any entity in Florida sought to further squelch what was being discovered, by removing the process that permits such discovery? It's sort of like trying to secretly jam through a method that would let notaries off the hook...oh- that attempt already happened. Those who don't pay their mortgage will lose their house, but it certainly seems as though those who can prove that a loss that has already occurred, and was accomplished with fraud, should be compensated for the loss of their property. I guess the numerous class actions in progress will provide that relief- at least, I hope so.
Great post- thank you!
Excellent post, right on, but very disturbing to think about what is ahead. Unfortunately, there is not much integrity coming from certain banks these days. It will take years to figure out, and you are correct; the taxpayers will pay the price.
Donald - Your comments bring additional depth to the problem, but the ultimate question is; Will the people sit by once more while our economy is dragged further down and more of our dollars are drained away? As you point out in your comments, the public is still pretty apathetic unless they SEE that the problem directly impacts them. I'm not yet convinced we'll take bold action.
Vickie - I agree but don't know if it will happen.
Michael - I suspect we're just seeing the "tip of the iceberg."
Kevin - While a dramatic solution is called for, it will take brave politicians (leaders) to make it happen.
Anna - Thanks for your comments and support!
Ken - There are lots of unanswered questions, and the coming weeks will uncover more.
Donna - The problem is affecting all of us, and the impact will increase.
Robert - As I pointed out in my post, I don't want to offer a free ride to anyone, but the banks who have attempted to evade their responsibilities and who have acted illegally, must be held accountable.
David - There are no easy or painless answers.
Sarah - The problem arises out of the sloppy and illegal manner in which the foreclosures were being handled; and while most should have proceeded as usual, problems with a few has pointed out the inherent flaws in the system.
Garrigus - Thanks for the comments and re-blog.
Mike - I think they'd all like to find one, but I don't believe it exists.
Tim - I've read the linked articles as well as dozens of others during the past few weeks, and I think it's easy to call it fraud or scandal when you have bank employees--or sometimes people fraudulently signing as employees--and who have made sworn statements regarding the accuracy of the documents they were signing. This isn't just poor business practices or carelessness; it was a deliberate attempt to circumvent the law.
Renee - We'll certainly hear of talk of TARP II, but will the people allow it to happen? The answer is yet to be determined.
Gail - I fear we'll see few held accountable for this fiasco; the tentacles of this problem extend far into the bureaucracy and political office.
You hit this one outta the park, John. I'm totally with you. I just wish there was a way that we didn't have to pay for all costs of these blatant scwer-ups. It's definately going to get worse, before it gets better.
Derek - Thanks for stopping by.
Jim - The effects of this could reverberate throughout the market for some time.
Lynda - The reference to Fannie and Freddie was that if we do nothing, we'll pick up the tab through losses of the mortgage giants. But we could have a meaningful modification program, we just haven't done so yet.
Tammy - It could get VERY ugly.
Jackie - The banks are very closely tied to DC and have grown accustomed to getting their ways. The only way to change that is to kick out ALL those in office and start anew, and that would take both effort and time.
Norma - I don't think they "assumed," I think they knew.
Laurie - Yes, Katerina has written several informative posts related to this topic. And the power and influence of the banks became more apparent when the recent attempt to circumvent the notarizing requirement was "rushed" through the Senate. Lost of lawyers will feed from this problem.
Phil - Ultimately, taxpayers pick up the bill for all of DC's carelessness and Wall Street's greed.
Eric - I don't see how the problem can be solved without lots of pain from all quarters.
John, I guess I'm just getting tired of being forced to cure some of the pain, when I had nothing to do with it, that's all.
John ~"In order to expedite the initial packaging and sale of the various mortgage instrument."
ummm.... Sounds familiar doesn't it. Apparently they haven't learned and again we're going to pay for it.
Eric - I think we're all growing a bit tired of picking up after someone else.
Kim - Someone will pay, and it's usually US.
This just boggles a person's mind.
My take on this is that the Banks had not on bit of interest in working with people on Modifications. They were able to take back the property in question, claim a loss, re-market the property and hopefully get someone on the hook for a 30-40 year mortgage that they could "package" and sell.
One person I know was 2 months into the HAFA program when she received a letter from BofA notifying her that her mortgage was now with company XYZ that turned out to be a "loan servicing" company. When she called XYZ she was told they had no information about her mortgage. She needed to make her 3rd and final payment in order to be in compliance with HAFA. Long story, I know, she then received a letter welcoming her to XYZ and a blank coupon to remit with her payment. When she called to ask the amount no one knew what to tell her. I checked her property and there is an auction date set......
And that is just one example....I could go on for days.
and the banks all say dont regulate us leave us alone. well now that we continue to leave them alone they continue to screw up. I posted about this yesterday
I'm sad that we're in this mess, but glad that these poor practices have come to light and now there will perhaps be some oversight.
This is so sad. The left hand doesn't know what the right hand is doing. And on and on and on.
Both a great informative post and terrific pointers by Thomas #1. The problem appears to have spiraled out of control.
Check out Dave Ramsey's common sense approach to the fix
http://www.biblemoneymatters.com/wp-content/uploads/the_common_sense_fix.pdf
wow! what a great post, I think we REALTORS are in for a long hard fight in the housing market.
Hi John. This is a huge deal in Florida. Can we say Fraud?
Wow, what a post... I sat with this open for awhile, as I read it...
CA - There are literally thousand of stories of how badly the banks have dealt with this crisis, and they're still trying to absolve themselves of any blame.
Charlie - I'm sure they'd like for us to just leave them alone until they have all the money.
Vickie - Like roaches scattering when the lights are turned on, banksters are scrambling to hide.
Faye - Unfortunately, the banks seem to want both hands in our pockets. And yes, there are workable solutions, we just haven't tried them yet.
Mike - And it's up to us to see that it gets back under control.
Alice - I agree.
Lana - What I'd like to see are "perp-walks."
Chris - Thanks. I hope you found it informative.
John- you could write a book on this. I for one find it bitterly ironic that entities which would refuse to fund until obscure paperwork from the borrower was perfectly thus and so are now themselves caught with their Ps and Qs completely in the gutter.
Meaningful modifications would make for a nice change and would help to stabilize the market.
J. Philip - It is certainly interesting how quickly the banks have been willing to say the paperwork isn't that important.
Christine - And we have yet to see "meaningful modifications."
There are still a lot of questions about the whole situation. I am still questioning the end results what they are really trying to accomplish. There are many pro and cons for the borrower and the lender.
We need to have criminal complaints taken out against these executives that did this.
John, exceptional post and from all the comments it is clear that this is just the "tip of the iceberg"... how can we help? ~ Susan
John what a great post. As a mortgage lender who works for a small company that does not service mortgages, I see this stuff happen all the time. I have distressed homeowners that tell me horror stories about how their banks foreclosed after starting a loan modification. My heart goes out to these folks who thought they were working in good faith with their bank just to have the bank slam the door on them.
I am just amazed that these big banks are not see the public relations damage that they are doing to their bank. I know some folks who will never do business with some of these banks ever again based on the way they were treated.
and I agree, this is just the beginning. More information will come out, the CA AG asked all banks in his state to stop their foreclosures.
Will extended delays in foreclosure further damage a fragile housing market?
Some think that it will give the housing market a boost. It's hard for normal inventory to compete with foreclosures on price. Foreclosures drag markets down. Short-sales not so much because of the 4-6 month delay in getting a response from the lender. The smart thing would be for the lenders to refocus onto short sales and speed up that process. In the meantime, perhaps normal home sales will get a chance to compete.
John, you summed it up so well. I've noticed that mainstream news is down playing the seriousness of the crimes these banks committed. They make it sound as if it is just some bad apples who robo-signed these papers, well, then, CEO's should be held accountable. There's no excuse for this.
California is non-judicial and that is what's working against the homeowner. Until CA homeowners start challenging their foreclosures (which they can), the truth of what these banks have done is going to be pushed down.
John,
Pandemic is the perfect word to describe what is going on out there. The only other words that I would attach to it is man-made. I feel like every time we start to get a grasp on what is happening, something "bigger and badder" gets discovered. Will it ever end?
Good Morning John
Thanks for the post. Have a great day.
Every short sale the lenders approve is one less property that goes through the foreclosure mills. Yet the banks are getting more unreasonable with their short sale obstacles.
John - you have written the words that make me shudder and congress may be pressured to legislate a solution to the problem. The last thing we need is for congress to take poorly thought out action and write poorly written legislation that needs to be passed so that we can find out what is in it.
John...you are the ruler of all you survey.....What we are finding out is that no entity is bigger than the people they serve. I knew that all the time I was blogging away at the banks, one day it would OUT all their nonsense. The scary part in this is that all the attorneys are asking for punitive damages in addition to righting these wrongs......You know John, when you have 10-15 million people who are caught up in something, that something has to be revisited and understood. Something is wrong with the system is what it says to me. Killing off millions of people (via defective foreclosures) only makes me think of Hitlers FINAL SOLUTION....John, time will tell who knew what and when. As for your Guru skills and talents, you were always all over the reality of this subject....well done my Real Estate friend...
It certainly seems that it's another great day for lawyers. The entire housing industry will ultimately suffer from the latest foreclosure mess.
REBLOG WORTHY.....
John, thanks for the great post. This should help many understand where we are. Personally, I think this will continue to get worse until homeowners get some real help. I've known too many people who tried restructure only to be lead along for way too long by the banks and then declined. I think the banks need to be accomidating with restructures. Some say more regulation, some say less. Maybe if the banks had been more regulated, we wouldn't be here. I know foreclosure needs to happen in some cases but I also believe that many people really do want to stay in their homes. I would love to link to this post from my blogs outside of ActiveRain.
Great post John...And great comments from everyone...This started long ago and the fix was in long ago to protect the banks...As a reply to a previous comment, President Obama had no choice but to extend and enhance the TARP program started under President Bush or bank failures would have been rampant...Enjoy the day.
Thanks for your thoughtful & complete post. I'd like to use it for clients who are asking what's going on. Do you mind?
My personal feeling is that if banks had to service the loans they give out, with no gov't backstop of any kind, they'd be a lot more careful with the loans they grant-- they'd want more skin in the game, better credti scores, etc. As long as they can give everything away to someone else, & get paid for it, the problem won't be solved.
Rayssa - Yes, there are lots of unanswered questions. I think we may get some clarity in the next few days.
Tim - While there apprears to have been some criminal activity, those deserving punishment will probably not receive it.
Susan - We just need to stay on top of the situation as it develops and to make our lawmakers aware of our concerns.
Gary - It will be interesting to see how it unfolds.
Gail - The effects all depend upon the timing and how the process unfolds. There could be a short-term boost to sales if foreclosures sre removed from the market, but long-term, the results could be a continual drag on the market.
Pamela - GA in non-judicial also, but the effects are going to hit us all.
Bill - It does seem as if we keep adding to our problems.
Partrick - Thanks.
Dave - Depending upon how this plays out, it may help short-sales.
Mike - But that's what they do; it seems to be their purpose in life.
Richie - Flattery may get you nowhere, but it creates a warm sensation inside : ) Thanks for your comments. It is going to be interesting watching this unfold. Unfortunately, the problem involves the destruction of peoples' lives.
Mike - The potential for lawsuits is staggering.
Richie - Thanks!
Tom - Feel free to link, and thanks for your comments. I do hope this provides some incentive for banks to work with those who desire to keep their homes and who have the financial ability to do so.
Ernie - Thanks. If TARP had been used to remove the "toxic assets" from the banks as originally described, we might not have this problem today.
Mary - I'm happy to share. But since the banks don't have to deal with the loans as you describe, they should take their medicine and cooperate with creating solutions.
John, Bank, Lenders, Services care about one thing and one thing only … their bottom line. They do not care about people or the laws that are there to protect the people.
I need some help from a professional realtor or broker.
What about short sales? Will they be frozen too? Then there will be no homes to buy if you wanted to!!
I would appreciate some feedback. Thanks!!
John,
The title issue could be with us for a long time. From now on it's double necessary to be totally careful when purchasing real estate, especially with a home that went through a recent foreclosure.
Kathleen - That's the way it appears.
Thea - Short sales may, in fact, be helped somewhat, but the banks seem to be hedging their bets right now. We'll see how it evolves.
Esko - And with the number of lawsuits in process or threatened, the litigation could take years.