Foreclosure Crisis - FBI Steps In?
Amid complaints of fraudulent foreclosures by lenders who have not been following the protocol for paperwork, signatures - and who often don't seem to know WHO owns a loan in question - the FBI is making an appearance.
Big lenders such as Bank of America halted the foreclosure process and sales of foreclosed properties temporary just two weeks ago. On October 19, BOA and GMAC Mortgage announced they were ready to begin filing corrected foreclosure papers in 23 of the 50 states. Lenders say they are certain the new paperwork will be accurate. However, that may not be enough to put a lid on this can of worms.
In all 50 states, Attorneys General are now looking to see whether lenders knowingly violated the laws in the their state. Homeowners who were evicted are preparing lawsuits against major financial institutions. In several states, judges indicate a willing to look closely at all foreclosure documents and in D.C. there's the usual talk about "hearings".
Meanwhile, the FBI appears to be in the early states of determining whether a criminal investigation should be launched. It is difficult to imagine that so many major mortgage providers got sloppy with robo-signing. It's hard to believe mortgages have been sold and resold so many times that no one knows who now owns the mortgage but that's what homeowners are being told.
Mortgage lenders ignored the problem until it was noticed by others - and now plans to correct potentially tens of thousands of incorrect foreclosure files and then proceed as usual with foreclosure that have been rising now for more than three years. The current problem is due to violations of procedural rules of foreclosure. Documents (including ownership of the mortgage itself) must be document, court papers must be signed. Instead, the big banks (who also received millions in bailout funds) have been sloppy and have pursued fast foreclosures over accurate processes.
The announcement of resuming foreclosures by Bank of America and GMAC were met with loud objections from state officials and from citizens. Court procedures were not followed and it is possible judges will begin to impose civil fines or penalties on those banks that violated foreclosure laws.
At the least it's likely many more foreclosures will be settled in court by a judge rather than by the owner surrendering his property to the lender. The resulting full trials could delay foreclosures in many states as the courts become over burdened with foreclosure actions.
Attornies for the mortgage lenders are now requires to sign a statement that reasonable actions was taken by the attorney to verify foreclosure document accuracy. This alone places a burden of proof on the lenders. This new requirement of attorneys representing banks in foreclosure actions is effective immediately and perhaps one of the most valuable results to come of the foreclosure fiasco.
Although the disputes about procedures, robo-signing and inaccurate paperwork may seem to be a good thing for homeowners facing foreclosure, that is not really the case. It may allow some to remain in their homes for a longer period of time and there may be a few able to same their home through technicalities. However, with Bank of America planning to re-file 100,000 foreclosures beginning two weeks, it's likely this will only cause a temporary backlog of foreclosures.
After three years of rising foreclosure rates, we have reached the point where most foreclosures occuring today are directly due to the high unemployment rate and nonexistent job growth that continues month after month. The homes that were purchased with high risk mortgages or bought by those who could not afford them have been foreclosed. Today, foreclosures are affecting many families who have lived in and paid for their home for years.
There is no federal program to help these homeowners. Obama's housing bailout was designed to help those who had homes worth less than their mortgages or who had extremely high interest rates due to high risk A.R.M. loans. Banks are foreclosing faster than ever and have no motivation to work with homeowners trying to avoid foreclosure action. Lenders can acquire the properties, sell many of them quickly to large investors and then begin selling mortgage securities once again for short term profits.