Archive for 'foreclosures halted'

Breaking News Alert: President Obama will not sign foreclosure measure, says official 
October 7, 2010 1:38:33 PM
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Obama won’t sign bill that would affect foreclosure proceedings


Thousands of foreclosures are put on hold
 
During the housing boom, millions of homeowners got easy access to mortgages. Now, some mortgage lenders and state governments have discovered many mortgage documents were mishandled.

By Jia Lynn Yang and Ariana Eunjung Cha
Washington Post Staff Writers 
Thursday, October 7, 2010; 4:48 PM


Amid growing furor over the legitimacy of foreclosure proceedings, White House officials said Thursday that President Obama will not sign a bill passed by Congress without public debate after critics said the legislation could loosen standards for foreclosure documents.

The bill, named the Interstate Recognition of Notarizations Act, would require courts to accept document notarizations made out of state. Its sponsors intended to promote interstate commerce. But homeowner advocates warn the bill could allow lenders to cut even more corners as they seek to evict homeowners.

White House press secretary Robert Gibbs said the president did not believe Congress meant to undermine consumer protections regarding foreclosure challenges. Still, Obama will use a "pocket veto" on the bill, which will effectively kill it.

Democratic leaders on the Hill were scrambling to figure out how the legislation managed to sail through the House and Senate without any objection.
 
The episode may prove embarrassing for Democrats, who in recent weeks have been calling for federal investigations into flawed paperwork, forged documents and other misconduct in foreclosure proceedings initiated by big lenders.

The House passed the bill in April by a voice vote, meaning there’s no record of who voted for or against the legislation. The Senate passed the bill on Sept. 27, just before recess, without any debate.

Even the bill’s main sponsor, Rep. Robert Aderholt (R-Ala.), was surprised by how quickly the legislation was greenlighted, according to D.J. Jordan, a representative for Aderholt.

Congressional staffers said lawmakers will revisit the bill to add protections for consumers.

Jordan said Aderholt had been working on the issue since April 2005, soon after hearing complaints from a court stenographer in his district that courts in other states were having trouble using documents notarized in Alabama.

"The authors of this bill no doubt had the best of intentions in mind when trying to remove impediments to interstate commerce," said Dan Pfeiffer, White House communications director. "We will work with them and other leaders in Congress to explore the best ways to achieve this goal going forward."

This would be Obama’s second pocket veto. Last December, he killed a short-term resolution that turned out to be unnecessary for extending defense funding.

Obama’s veto comes as the uproar over document processing from lawmakers, law enforcement and union officials and other stakeholders intensified on Thursday, turning the foreclosure mess into a political issue.

National civil rights groups, including the NAACP, National Council of La Raza and the Center for Responsible Lending, joined labor unions Thursday in calling for an immediate national moratorium on foreclosures.

"If we don’t take drastic measures now, we can expect millions of additional foreclosures in the coming years, with a disproportionate number of them involving Latino and African American families," Wade Henderson, president of the Leadership Conference on Civil Rights, said in a statement.

Sen. Sheldon Whitehouse (D-R.I.) also called for a national foreclosure moratorium on Thursday, while Michigan Democratic gubernatorial candidate Virg Bernero stunned an audience in Detroit with a forceful challenge to banks to halt home foreclosures in Michigan. Bernero vowed to withdraw $1 billion in state money from J.P Morgan and Chase banks because they have refused to ease up on foreclosures – an idea that is likely please the United Autoworkers of America, which has also been critical of J.P. Morgan Chase.

As many as 40 state attorneys general are joining together to coordinate investigations into the foreclosure paperwork problem.

Patrick Madigan, the Iowa assistant attorney general who is the chairman of the group, said in an interview that they have begun to call lenders to try to ascertain the scope of the problem. He said companies that have known issues with affidavits should broaden their foreclosure moratoriums beyond the 23 states that require a court to foreclose.

"We intend to fully investigate and get to the bottom of this and find out how many companies have this issue, and for those that do to remedy the situation," Madigan said.

Also on Thursday, Iowa Attorney General Tom Miller called on three large mortgage lenders to freeze foreclosures in the state and said Iowa will take the lead in coordinating with other states investigating allegations of mishandled foreclosures.

He urged other firms with "with anything less than absolute confidence in its internal foreclosure review procedures" to also stop foreclosures.

"There appears to be an emerging pattern of careless and perhaps cavalier attitudes by a growing number of lenders when it came to the seriousness of the foreclosure process," Miller said.

The nation’s banks are also being pressured by investors.

Chris Katopis, executive director of the Washington-based Association of Mortgage Investors, said securities trustees should "audit and review the resulting losses to hold servicers accountable for negligence in maintaining the assets of trusts."

"We are afraid that people’s pensions and retirement savings are being impacted," Katopis said in an interview Thursday. "Investors are deeply concerned about possible documentation inconsistencies related to mortgages. It is vital that trustees promptly address these matters."

Staff writer Scott Wilson contributed to this report.
 
Read The Entire Article

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/07/AR2010100704254.html?hpid=topnews

 
Amid growing furor over the legitimacy of foreclosure proceedings, a White House official said President Obama will not sign a two-page bill passed by lawmakers without public debate after details emerged that the legislation could loosen standards for foreclosure documents.
http://link.email.washingtonpost.com/r/5O5UA2/WLT7JI/8AWG7O/0KHCE9/Z41ZI/4O/h
For more information, visit washingtonpost.com

 Mike,

Here is the latest, this is some pretty grim and scary stuff. The following information comes form John Stuart’s blog. If you’re not familiar with John he is a former attorney in Arizona who has been working feverishly, day and night uncovering the bank fraud involved in the mortgage industry.
 
It is almost game over. Whenever we discover their crimes the politicians make it not a crime.
 
It is coming quicker than anyone could have expected.  
 
– Nick Capra, Vegas
 
 
PRESIDENT OBAMA has headed for his desk a bill that would ratify the illegal practices revealed for the past three years on this blog and for the past three weeks and mainstream media. He might just as well issue Robo signed presidential pardons for the thousands of people involved in defrauding homeowners, investors and the entire judicial system. Send him a letter and tell him not to sign it.
 
Under the guise of simply reflecting changes in technology, the bill would force state and federal courts to recognize and accept the notarization from another state. This would be true even if the notary signed in blank.
– It would be true even if the witnesses were not present despite the recitation to the contrary signed by the notary.
– It would be true even if the main person signing the alleged document was not the person named as having signed the alleged document.
– t would be true even if the main person signing the alleged document was not present or identified by the notary.
– In other words under this new bill passed by both the House of Representatives and the Senate, both essentially bought and paid for by the financial services industry, all of the illegal, improper and criminal acts performed by the “lenders” (mainstream media insists on using this term even though it is not true) would be made legal.
 
That sounds like a pardon to me, how about you?
 
If Pres. Obama signs this bill it will become law.
 
At that point, more than half of the meritorious defenses of borrowers (homeowners) or petitioners in bankruptcy courts will go down the drain.
 
The fact that this bill even got introduced without the mainstream media taking note is not really surprising considering the fact that mainstream media has failed to grasp the true  scope of this fraud which began with the first sale of a fake mortgage bond to an investor.
 
A fake financial services product was marketed to investors who believed they were lenders and to homeowners who believed they were borrowers, both of whom were mere pawns in the Wall Street game.
 
In fact they supplied the only two ingredients that Wall Street wanted —money from the lenders and a signature from the homeowners. The nature of the document was immaterial.
 
Now that the foreclosures are obviously fake, lawmakers responsive to the demands of the financial services industry have quietly passed a bill in both houses of Congress that would allow the fraud to be ratified and the perpetrators to escape any accountability whatsoever.
 
If Pres. Obama signs this bill he will be condemning the victims of this fraud to bear the full cost of the losses.
 
If Pres. Obama signs this bill he will be awarding the perpetrators of this fraud all of their winnings. In case anybody hasn’t been looking, another development which has been ignored by our mainstream media is that countries around the world are looking for an alternative reserve currency to replace the once almighty US dollar. The reason they are looking is because they no longer have confidence in a system that produced a Wall Street scheme which in essence depreciated the value and viability of currencies and economies all over the world.
 
If Pres. Obama signs this bill he will be giving a signal to the world that the United States will be more vigilant, more sophisticated and much more involved in enforcement of laws, rules and regulations already existing in the marketplace and upon which all investors, lenders, homeowners, borrowers and foreign governments had placed reasonable reliance and suffered to their detriment. The loss of our status as the issuer of the world’s reserve currency will have profound consequences on our nation, our citizens, our businesses, and the prospects for generations of Americans yet unborn.
 

FULL TEXT OF BILL

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Sep 29, 2010 – Enrolled Bill. This is the final text of the bill or resolution as approved by both the Senate and House. This is the latest version of the bill currently available on GovTrack.
H.R.3808
One Hundred Eleventh Congress
of the
United States of America
AT THE SECOND SESSION
Begun and held at the City of Washington on Tuesday,
the fifth day of January, two thousand and ten
An Act
To require any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘Interstate Recognition of Notarizations Act of 2010’.
SEC. 2. RECOGNITION OF NOTARIZATIONS IN FEDERAL COURTS.
Each Federal court shall recognize any lawful notarization made by a notary public licensed or commissioned under the laws of a State other than the State where the Federal court is located if–
(1) such notarization occurs in or affects interstate commerce; and
(2)(A) a seal of office, as symbol of the notary public’s authority, is used in the notarization; or
(B) in the case of an electronic record, the seal information is securely attached to, or logically associated with, the electronic record so as to render the record tamper-resistant.
SEC. 3. RECOGNITION OF NOTARIZATIONS IN STATE COURTS.
Each court that operates under the jurisdiction of a State shall recognize any lawful notarization made by a notary public licensed or commissioned under the laws of a State other than the State where the court is located if–
(1) such notarization occurs in or affects interstate commerce; and
(2)(A) a seal of office, as symbol of the notary public’s authority, is used in the notarization; or
(B) in the case of an electronic record, the seal information is securely attached to, or logically associated with, the electronic record so as to render the record tamper-resistant.
SEC. 4. DEFINITIONS.
In this Act:
(1) ELECTRONIC RECORD- The term ‘electronic record’ has the meaning given that term in section 106 of the Electronic Signatures in Global and National Commerce Act (15 U.S.C. 7006).
(2) LOGICALLY ASSOCIATED WITH- Seal information is ‘logically associated with’ an electronic record if the seal information is securely bound to the electronic record in such a manner as to make it impracticable to falsify or alter, without detection, either the record or the seal information.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
 
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Another article sent from Roger

 

Flawed Paperwork Aggravates a Foreclosure Crisis

By GRETCHEN MORGENSON
Published: October 3, 2010
 
As some of the nation’s largest lenders have conceded that their foreclosure procedures might have been improperly handled, lawsuits have revealed myriad missteps in crucial documents.
 
Jay LaPrete/Associated Press
Jennifer Brunner, the secretary of state of Ohio, has highlighted examples of what her office considers possible notary abuse.
The flawed practices that GMAC Mortgage, JPMorgan Chase and Bank of America have recently begun investigating are so prevalent, lawyers and legal experts say, that additional lenders and loan servicers are likely to halt foreclosure proceedings and may have to reconsider past evictions.
 
Problems emerging in courts across the nation are varied but all involve documents that must be submitted before foreclosures can proceed legally. Homeowners, lawyers and analysts have been citing such problems for the last few years, but it appears to have reached such intensity recently that banks are beginning to re-examine whether all of the foreclosure papers were prepared properly.
 
In some cases, documents have been signed by employees who say they have not verified crucial information like amounts owed by borrowers. Other problems involve questionable legal notarization of documents, in which, for example, the notarizations predate the actual preparation of documents — suggesting that signatures were never actually reviewed by a notary.
 
Other problems occurred when notarizations took place so far from where the documents were signed that it was highly unlikely that the notaries witnessed the signings, as the law requires.
 
On still other important documents, a single official’s name is signed in such radically different ways that some appear to be forgeries. Additional problems have emerged when multiple banks have all argued that they have the right to foreclose on the same property, a result of a murky trail of documentation and ownership.
 
There is no doubt that the enormous increase in foreclosures in recent years has strained the resources of lenders and their legal representatives, creating challenges that any institution might find overwhelming. According to the Mortgage Bankers Association, the percentage of loans that were delinquent by 90 days or more stood at 9.5 percent in the first quarter of 2010, up from 4 percent in the same period of 2008.
 
But analysts say that the wave of defaults still does not excuse lenders’ failures to meet their legal obligations before trying to remove defaulting borrowers from their homes.
 
“It reflects the hubris that as long as the money was going through the pipeline, these companies didn’t really have to make sure the documents were in order,” said Kathleen C. Engel, dean for intellectual life at Suffolk University Law School and an expert in mortgage law. “Suddenly they have a lot at stake, and playing fast and loose is going to be more costly than it was in the past.”
 
Attorneys general in at least six states, including Massachusetts, Iowa, Florida and Illinois, are investigating improper foreclosure practices. Last week, Jennifer Brunner, the secretary of state of Ohio, referred examples of what her office considers possible notary abuse by Chase Home Mortgage to federal prosecutors for investigation.
 
The implications are not yet clear for borrowers who have been evicted from their homes as a result of improper filings. But legal experts say that courts may impose sanctions on lenders or their representatives or may force banks to pay borrowers’ legal costs in these cases.
 
Judges may dismiss the foreclosures altogether, barring lenders from refiling and awarding the home to the borrower. That would create a loss for the lender or investor holding the note underlying the property. Almost certainly, lawyers say, lawsuits on behalf of borrowers will multiply.
 
In Florida, problems with foreclosure cases are especially acute. A recent sample of foreclosure cases in the 12th Judicial Circuit of Florida showed that 20 percent of those set for summary judgment involved deficient documents, according to chief judge Lee E. Haworth.
 
“We have sent repeated notices to law firms saying, ‘You are not following the rules, and if you don’t clean up your act, we are going to impose sanctions on you,’ ” Mr. Haworth said in an interview. “They say, ‘We’ll fix it, we’ll fix it, we’ll fix it.’ But they don’t.”
 
As a result, Mr. Haworth said, on Sept. 17, Harry Rapkin, a judge overseeing foreclosures in the district, dismissed 61 foreclosure cases. The plaintiffs can refile but they need to pay new filing fees, Mr. Haworth said.
 
The byzantine mortgage securitization process that helped inflate the housing bubble allowed home loans to change hands so many times before they were eventually pooled and sold to investors that it is now extremely difficult to track exactly which lenders have claims to a home.
 
Many lenders or loan servicers that begin the foreclosure process after a borrower defaults do not produce documentation proving that they have the legal right to foreclosure, known as standing.
 
As a substitute, the banks usually present affidavits attesting to ownership of the note signed by an employee of a legal services firm acting as an agent for the lender or loan servicer. Such affidavits allow foreclosures to proceed, but because they are often dubiously prepared, many questions have arisen about their validity.
 
Although lawyers for troubled borrowers have contended for years that banks in many cases have not properly documented their rights to foreclose, the issue erupted in mid-September when GMAC said it was halting foreclosure proceedings in 23 states because of problems with its legal practices. The move by GMAC followed testimony by an employee who signed affidavits for the lender; he said that he executed 400 of them each day without reading them or verifying that the information in them was correct.
 
JPMorgan Chase and Bank of America followed with similar announcements.
 
But these three large lenders are not the only companies employing people who have failed to verify crucial aspects of a foreclosure case, court documents show.
 
Last May, Herman John Kennerty, a loan administration manager in the default document group of Wells Fargo Mortgage, testified to lawyers representing a troubled borrower that he typically signed 50 to 150 foreclosure documents a day. In that case, in King County Superior Court in Seattle, he also stated that he did not independently verify the information to which he was attesting.
 
Wells Fargo did not respond to requests for comment.
 
In other cases, judges are finding that banks’ claims of standing in a foreclosure case can conflict with other evidence.
 
Last Thursday, Paul F. Isaacs, a judge in Bourbon County Circuit Court in Kentucky, reversed a ruling he had made in August giving Bank of New York Mellon the right to foreclose on a couple’s home. According to court filings, Mr. Isaacs had relied on the bank’s documentation that it said showed it held the note underlying the property in a trust. But after the borrowers supplied evidence indicating that the note may in fact reside in a different trust, the judge reversed himself. The court will revisit the matter soon.
 
Bank of New York said it was reviewing the ruling and could not comment.
 
Another problematic case involves a foreclosure action taken by Deutsche Bank against a borrower in the Bronx in New York. The bank says it has the right to foreclose because the mortgage was assigned to it on Oct. 15, 2009.
 
But according to court filings made by David B. Shaev, a lawyer at Shaev & Fleischman who represents the borrower, the assignment to Deutsche Bank is riddled with problems. First, the company that Deutsche said had assigned it the mortgage, the Sand Canyon Corporation, no longer had any rights to the underlying property when the transfer was supposed to have occurred.
 
Additional questions have arisen over the signature verifying an assignment of the mortgage. Court documents show that Tywanna Thomas, assistant vice president of American Home Mortgage Servicing, assigned the mortgage from Sand Canyon to Deutsche Bank in October 2009. On assignments of mortgages in other cases, Ms. Thomas’s signatures differ so wildly that it appears that three people signed the documents using Ms. Thomas’s name.
 
Given the differences in the signatures, Mr. Shaev filed court papers last July contending that the assignment is a sham, “prepared to create an appearance of a creditor as a real party in interest/standing, when in fact it is likely that the chain of title required in these matters was not performed, lost or both.”
 
Mr. Shaev also asked the judge overseeing the case, Shelley C. Chapman, to order Ms. Thomas to appear to answer questions the lawyer has raised.
 
John Gallagher, a spokesman for Deutsche Bank, which is trustee for the securitization that holds the note in this case, said companies servicing mortgage loans engaged the law firms that oversee foreclosure proceedings. “Loan servicers are obligated to adhere to all legal requirements,” he said, “and Deutsche Bank, as trustee, has consistently informed servicers that they are required to execute these actions in a proper and timely manner.”
 
Reached by phone on Saturday, Ms. Thomas declined to comment.
 
The United States Trustee, a unit of the Justice Department, is also weighing in on dubious court documents filed by lenders. Last January, it supported a request by Silvia Nuer, a borrower in foreclosure in the Bronx, for sanctions against JPMorgan Chase.
 
In testimony, a lawyer for Chase conceded that a law firm that had previously represented the bank, the Steven J. Baum firm of Buffalo, had filed inaccurate documents as it sought to take over the property from Ms. Nuer.
 
The Chase lawyer told a judge last January that his predecessors had combed through the chain of title on the property and could not find a proper assignment. The firm found “something didn’t happen that needed to be fixed,” he explained, and then, according to court documents, it prepared inaccurate documents to fill in the gaps.
 
The Baum firm did not return calls to comment.
 
A lawyer for the United States Trustee said that the Nuer case “does not represent an isolated example of misconduct by Chase in the Southern District of New York.”
 
Chase declined to comment.
 
“The servicers have it in their control to get the right documents and do this properly, but it is so much cheaper to run it through a foreclosure mill,” said Linda M. Tirelli, a lawyer in White Plains who represents Ms. Nuer in the case against Chase. “This is not about getting a free house for my client. It’s about a level playing field. If I submitted false documents like this to the court, I’d have my license handed to me.”
 
Link to Article
http://www.nytimes.com/2010/10/04/business/04mortgage.html

Attorney Harry Borders sent this article from the Federal Trade Commission

 

Forensic Mortgage Loan Audit Scams:

A New Twist on Foreclosure Rescue Fraud

Fraudulent foreclosure “rescue” professionals use half-truths and outright lies to sell services that promise relief to homeowners in distress. According to the Federal Trade Commission (FTC), the nation’s consumer protection agency, the latest foreclosure rescue scam to exploit financially strapped homeowners pitches forensic mortgage loan audits.

In exchange for an upfront fee of several hundred dollars, so-called forensic loan auditors, mortgage loan auditors, or foreclosure prevention auditors backed by forensic attorneys offer to review your mortgage loan documents to determine whether your lender complied with state and federal mortgage lending laws. The “auditors” say you can use the audit report to avoid foreclosure, accelerate the loan modification process, reduce your loan principal, or even cancel your loan.

Nothing could be further from the truth. According to the FTC and its law enforcement partners:

  • there is no evidence that forensic loan audits will help you get a loan modification or any other foreclosure relief, even if they’re conducted by a licensed, legitimate and trained auditor, mortgage professional or lawyer.
  • some federal laws allow you to sue your lender based on errors in your loan documents. But even if you sue and win, your lender is not required to modify your loan simply to make your payments more affordable.
  • if you cancel your loan, you will have to return the borrowed money, which may result in you losing your home.

If you are in default on your mortgage or facing foreclosure, you may be targeted by a foreclosure rescue scam. The FTC wants you to know how to recognize the telltale signs and report them. If you are faced with foreclosure, the FTC says legitimate options are available to help you save your home.

Spotting a Scam

If you’re looking for foreclosure prevention help, avoid any business that:

  • guarantees to stop the foreclosure process – no matter what your circumstances are
  • instructs you not to contact your lender, lawyer or credit or housing counselor
  • collects a fee before providing any services accepts payment only by cashier’s check or wire transfer
  • encourages you to lease your home so you can buy it back over time
  • recommends that you make your mortgage payments directly to it, rather than your lender
  • urges you to transfer your property deed or title to it
  • offers to buy your house for cash at a fixed price that is inappropriate for the housing market
  • pressures you to sign papers you haven’t had a chance to read thoroughly or that you don’t understand.
Finding Legitimate Help

Housing experts say that when you’re behind on your mortgage payments, maintaining communication with your lender is the most important thing you can do. Contact your lender or servicer immediately if you’re having trouble paying your mortgage or you have received a foreclosure notice. You may be able to negotiate a new repayment schedule. 

Gold Member Roger Taylor emailed me this article in the New York Times.

This is huge and will greatly affect the real estate market across America.

Chew on this a bit, not only will this slow down and halt foreclosures creating a massive stockpile of defaults, but there will also be many other critical issues for both homeowners and investors alike.

For Example:

Title Companies will stop writing title insurance. Old Republic has already announced it will not insure any properties having a GMAC mortgage.

Investors and Homeowners alike, who have already purchased "bank owned" real estate or HUD properties, may find themselves with a toxic property because it may have an unmarketable title due to all of the huge lenders and law firms having openly admitted falsifying documents during the foreclosure process.

Homeowners in default, by the masses, will be filing all kinds of action demanding lenders produce all of the original and real documents involving their mortgage. Keep in mind, a California bankruptcy court has already ruled that "MERS" is NOT sufficient proof of ownership of notes and mortgages. In other words, the lender who claims to own the note and mortgage, must be able to produce the original promissory note and documents. (Notes and mortgages were sliced, diced, and chopped up and sold on the secondary market using MERS without any concern for the physical documents themselves. 

Stay Tuned…

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Bank of America to Freeze Foreclosure Cases

By DAVID STREITFELD
Published: October 1, 2010 in NYT
 
Bank of America, the country’s largest mortgage lender by assets, said on Friday that it was reviewing documents in all foreclosure cases now in court to evaluate if there were errors.
 
It is the third major lender in the last two weeks to freeze foreclosures in the 23 states where the process is controlled by courts.
 
But Bank of America went further than the first two lenders, GMAC Mortgage and JPMorgan Chase, which have said they will amend paperwork only in cases they think were improperly done. So far, that has amounted to only a handful of cases.
 
Bank of America, in an e-mailed statement, said it would “amend all affidavits in foreclosure cases that have not yet gone to judgment.”
 
That could mean tens of thousands of foreclosure cases would be in limbo for months or, if the consumers in default hire lawyers, years.
 
Spokesmen for the bank said that they were uncertain how many cases the lender currently had in court. They provided no timeline or explanation for the freeze, saying only that the bank planned to eventually resubmit all the cases.
 
The moratorium is likely to further fuel the uproar over the foreclosure tactics of the big lenders, which continued to have political ramifications on Friday.
 
Before Bank of America’s announcement, Richard Blumenthal, the Connecticut attorney general, asked judges in his state to put a halt to all foreclosures for 60 days. Connecticut is one of the 23 states where foreclosure is a judicial matter. Others include Illinois, Florida, New Jersey and New York.
 
Mr. Blumenthal, who is running for senator in Connecticut, said the freeze “should stop a foreclosure steamroller based on defective documents and enable effective remedies.”
 
California’s attorney general, Jerry Brown, said that Chase should stop any foreclosures in the state until it proved that it was following the law. Mr. Brown, who is a candidate for governor, earlier made the same demand of GMAC.
 
In California, lenders generally pursue foreclosures outside of the court system, so they are presumably still proceeding with evictions. Chase declined to say whether it would comply with Mr. Brown’s comments.
 
Chase said this week that it had frozen 56,000 foreclosure cases. GMAC, which is largely owned by the Treasury after receiving $17 billion in federal bailout money to prevent its collapse, has repeatedly declined to say how many cases it is halting.
 
The nation’s two other major lenders, Citi and Wells Fargo, have issued statements maintaining they have no problems with their cases.
 
The problem for all the lenders that have announced moratoriums stems directly from their attempt to deal with an unprecedented number of foreclosures.
 
According to LPS Applied Analytics, a mortgage data firm, 2 million households are in foreclosure. Another 2.37 million households are seriously delinquent and waiting for their lender to take action.
 
Sometimes these loans are still owned by the lender but often, the banks are merely the loan servicer acting on behalf of the owner. Many of the loans are owned by Fannie Mae and Freddie Mac, the mortgage holding companies now controlled by the Treasury. In other cases the loans have been sold to private investment pools.
 
Confronted with so many cases, the lenders tried to process them on a wholesale basis, with the goal of avoiding the expense of a full trial and instead getting summary judgments.
 
The tool for doing this was the so-called robo-signers, in which midlevel bank executives would sign thousands of affidavits a month attesting that they had personal knowledge that the facts of the case were as presented. The affidavits were prepared by lawyers who were paid a flat fee, which also placed a premium on volume.
 
When defense lawyers started deposing these robo-signers, they acknowledged that they could not possibly have knowledge of all the cases. The banks say this is a technicality and they will refile the proper affidavits. The defense lawyers say the practice calls the cases, and indeed the entire process, into question.
 
Thomas Lawler, a housing economist, said the current mess was predictable and probably inevitable. Lenders made their money by making loans and then simply and efficiently servicing them by collecting the checks every month. They were never prepared to deal with the labor-intensive problems of delinquency and foreclosure.
 
“However, the foreclosure crisis is now almost three years old, and not having staffed up sufficiently to deal with the problems with inadequate staffing borders on criminal,” Mr. Lawler said. “I mean, jeepers, look at the unemployment rate; how hard would it have been to hire more folks?”
 
Mark Stopa, a Florida lawyer who represents defaulting homeowners, said the magnitude of the current troubles depends on how title insurance companies react. If those firms begin to shy away from insuring foreclosed properties because they think those properties are vulnerable to claims, he said, the entire housing market could suffer.
 
“Judges have to force banks to do foreclosures correctly,” Mr. Stopa said. But he noted that would require a significant increase in staff. “I’ll believe it when I see it,” he said.
 
Stocks of the major title insurance companies dropped on Friday amid concern that their business would suffer as a result of the foreclosure freezes. Fidelity National Financial fell more than 4 percent, while First American Financial dropped 3 percent.
 
One firm, Old Republic National Title, said this week it would not issue policies on GMAC foreclosures until further notice.

 

 On my way home I heard this on the radio with ABC news and did a double take. I searched the news wires and found this.  This could be huge because they are now calling for industry wide pauses in the foreclosure process.  STAY TUNED!

 

By Ariana Eunjung Cha

Washington Post Staff Writer 
Wednesday, September 29, 2010; 8:47 PM
 
J.P. Morgan Chase, one of the nation’s leading banks, announced Wednesday that it will freeze foreclosures in about half the country because of flawed paperwork, a move that Wall Street analysts said will pressure the rest of the industry to follow suit.
 
The bank’s decision will affect 56,000 borrowers in 23 states where allegations of forged documents and signatures and other similar problems threaten to overturn court-ordered evictions. Yet the impact may be much broader, given J.P. Morgan’s stature within the industry. If other banks adopt the same approach, the foreclosure process in many parts of the country would grind to a halt.
 
Officials at Fitch Ratings, a credit rating firm that measures the health of companies, said the "defects" found in foreclosure documents at J.P. Morgan are industry-wide. Underscoring that concern, Fitch said it is considering whether to lower the grades it gives to the mortgage servicing divisions of the nation’s largest lenders.
 
"Over the next few weeks, we expect to see more and more companies come out with similar announcements," said Diane Pendley, a managing director at Fitch.
 
The paperwork problems at J.P. Morgan mirror those uncovered last week at another large mortgage lender, Ally Financial. But J.P. Morgan’s decision is expected to have a much greater effect on the industry because it is held in high regard by its peers. By contrast, Ally, formerly known as GMAC, is a still under the cloud of a $17 billion federal bailout package that it has been unable to pay back.
 
Both firms are investigating whether foreclosure files were improperly or fraudulently assembled, and whether their employees failed to review the documents even as they signed off on them.
 
A growing number of homeowners – even those who missed their mortgage payments – are now scrambling to challenge the proceedings, weighing down an already overburdened court system.
 
J.P. Morgan had declined to address the matter until Wednesday. But in a sworn deposition, one of the bank’s employees, Beth Ann Cottrell, admitted that she and her team signed off on about 18,000 foreclosures a month without checking whether they were justified.
 
J.P. Morgan spokesman Tom Kelly said Wednesday that the firm "does not expect to find any factual problems or that customers have been harmed, but if we do find any cases we will take appropriate action."
 
In addition to the measures that private lenders have taken, four states – California, Colorado, Connecticut and Illinois – have called for a moratorium on all foreclosures initiated by Ally, while attorneys general in seven other states have opened civil or criminal investigations related to flawed foreclosures.
 
Even as the extent of the problems has become more apparent, the Treasury Department has declined to answer specific questions about the matter since it surfaced last week.
 
On Wednesday, Treasury spokesman Mark Paustenbach said that officials have been in touch with Ally and that they expect it to take "prompt action to correct any errors." He added that the agency is "monitoring their progress."
 
Treasury officials raised the issue personally with Ally chief executive Michael Carpenter during a recent meeting, according to an administration official.
 
Yet the agency’s response has frustrated some consumer advocates. A few lawmakers have also been calling for investigations of whether homeowners are being improperly removed from their homes.
 
Sen. Al Franken (D-Minn.) said Wednesday that the Treasury Department and relevant federal agencies should begin their own inquiry.
 
"With millions of families losing their homes, it’s inexcusable for companies like Ally to be this patently negligent," he said. "I want the federal government to hold Ally accountable and ensure that homeowners who wrongly received foreclosure get the compensation they deserve."
 
Ira Rheingold, director of the National Association of Consumer Advocates, criticized the Treasury Department, saying it has not been forthcoming about what actions it is taking to the remedy the situation.
 
The agency has been "protecting services and investors and doing what is minimally possible to help homeowners," he said.
 
Other consumer advocates say administration officials are in a no-win situation. If they determine there is no reason to take action, they may be criticized for not helping homeowners. But taking extreme measures such as calling for a national moratorium on foreclosures could hurt the economy and damage the housing market.
 
Mark Zandi, chief economist for Moodys.com, said that, in the worst-case scenario, the document processing problems could lengthen the foreclosure process from three years to as long as a decade, especially if homeowners use the flawed paperwork to appeal their evictions.
 
The long holdup could have "macroeconomic consequences" as a destabilizing force on home prices. Banks could become more unwilling to extend credit to households or to small-business owners who use homes as collateral. And investors who had been keeping home prices propped up by buying foreclosures may stop and never come back.
 
He added, however, that that it is still an open question how the courts will handle the paperwork problems.
 
Ally officials on Wednesday declined to comment on any ongoing or potential investigations, but they have said that they are confident that "the processing errors did not result in any inappropriate foreclosures."
 
Company officials have declined to disclose how many loans may be affected and how much remedying the issue might cost, but spokesman Gina Proia said the firm "does not anticipate significant adverse effect on Ally related to this matter."

 

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