Foreclosure Fraud - The Latest Consumer Boondoggle
As rumors and reports of foreclosure fraud gain traction following the freeze on foreclosures by Bank of America, perhaps the question that should be asked is why it took so long for someone in charge to notice discrepancies.
Traditionally (as in prior to 2007) homeowners were threatened with foreclosure only after missing a third or perhaps fourth payment on their mortgage. In the past two years, homeowners have complained bitterly about large banks moving quickly to complete foreclosures even though only two payments were technically overdue at the time.
These foreclosures have been moving forward at an increasing pace and at an increasing speed from the first notice to the time the lender takes possession. Why would lenders be in a hurry to add even more distressed properties to portfolios already burdened with reclaimed homes in a market where sales are difficult to come by?
Simple - once the home is foreclosed, the original loan is buried. Many of the loans were questionable to begin with when the foreclosure rates began to soar three years ago. Today, homeowners often have no way to learn what institution owns their mortgage instrument.
It has long been a practice to sell the mortgage on the day of closing for a quick profit. In recent years, mortgages have become not an instrument of home ownership but an investment package that is sold and then resold again and again.
It has become apparent that many of the foreclosure actions filed by large lenders contained falsified paperwork. Post dated legal papers, changed dates on legal documents and incorrect information about what financial institution in fact owns that mortgage - these have become the norm. A fast foreclosure action cancels the loan, makes the lender owner of record of the property, and erases any wrong doing that might have occurred both when the initial loan was granted and when foreclosure papers were filed.
A freeze on foreclosures two years ago might have provided a window of time for the lending industry and homeowners to better position themselves to avoid foreclosure. Instead, no legislators looked closely at the ever increasing foreclosure numbers and the public had been convinced by political propaganda to believe all foreclosure were the result of bad home buying decisions.
Now that so many of us have a friend or relative at risk of losing their home, questions are being asked about the foreclosure process. Big financial that were bailed out with taxpayer money continue to sell and resell securities with little interference. For the average person, mortgages are difficult to qualify for as lenders are using their money for quick profit investments rather than lending to the public.
Losing your home to foreclosure used to take anywhere from 4-8 months. During that time you were free to try to obtain a new mortgage or to finds ways to raise enough money to remove your home from foreclosure action. Today, a foreclosure may well be filed the day after a third payment is missed on your mortgage. That foreclosure could be final 2-3 months later. It's not logical and now we are learning just how polluted the mortgage system has become.
The Attorneys General of 40 states have now launched investigations into foreclosure practices of lenders operating in their state. They are not willing to trust the federal government to look into the problem but are willing to do what is necessary to protect the citizens in their state.
This foreclosure freeze may well spread to other financial institutions. Today, big Wall Street banks are complaining of huge losses in their profits should foreclosures be frozen for any length of time. The one constant since the Wall Street bailout has been the unwillingness of mortgage lending institutions to cooperate in slowing the rate defaults. Perhaps if they see their own bottom lines affect by foreclosure investigations, they may become more willing to be part of the solution to the real estate boondoggle they helped create.