Foreclosure Investigations = Delaying the Inevitable

October 13, 2010 by  
Filed under Fools of Finance

You have to be impressed with the ability of the popular media to generate sound and fury over nothing. This time it’s over foreclosure paperwork.

That’s all its about – paperwork.

Now we have attorneys general calling for a national investigation. I’m guessing that most if not all of these guys are in elected positions.

Despite all the handwringing and allegations of evilness against the banks, two key facts remain unchanged: (1) The homeowners owe the banks the money and (2) they either can’t (or in the case of strategic defaults) won’t pay it.

It matters not how many investigations are conducted.  Sooner or later the non-paying homeowners are going to lose their homes. For purposes of economic recovery, sooner is better. We want these homes on the market so that people with jobs and money can buy them. Concerns about paperwork will interfere with the resale process.

Does it matter that affidavits of default were robo-signed? Not if the homeowners were in default, which they are.

Has anyone come forward with evidence that someone robo-signed them into foreclosure on a loan that was current?

Some bank employees may have used unverified or even incorrect data to accelerate the foreclosure process. Shame on them and fire them if necessary, but please do not declare a moratorium on foreclosures. That would just facilitate more months of rent-free living by non-paying home dwellers and introduce yet another obstacle in the path of real estate recovery.

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24 Responses to “Foreclosure Investigations = Delaying the Inevitable”
  1. kitty says:

    I am not sure the investigations are only about non-paying customers but about avoiding mistakes. There have been several well-known cases in which the owners DIDN’T owe a particular bank any money at all, including when their properties were bought for cash. I am not sure which of these mistakes were do to some of these practices, but I read at least one of the cases was. Don’t you think that if shortcuts are taken in verifying paperwork, such mistakes are more likely to occur?

    If you search on “foreclosure wrong house” you’d find quite a few links. These are only well-known cases that happened because the owners were away so the process went too far. I’d imagine there are more cases like this out there.

  2. kitty says:

    Also, this article which I only skimmed seems to imply that it’s legally impossible to foreclose on the wrong house and that the reason these mistakes occurred are in fact some of the practices being investigated:

  3. kitty says:

    “Has anyone come forward with evidence that someone robo-signed them into foreclosure on a loan that was current?”

    How about this:

    • Kitty – Good find and thanks for the link. If this “wrongful foreclosure” action is not a fluke but a systemic problem, then actions need to be taken. But with BOA having to pay to fix it, I suspect that the banks will root out the process flaws before any government investigation can.

      • Rick Beagle says:

        Therein lies the catch-22 of this and other similar situations.

        If the government did NOT threaten to investigate, these folks would not change their processes. There simply is no compelling reason for them to spend money and time to get these things right.

        TML, imagine how you would feel if you were on the other end of one of these mistakes?

        Hopefully, as our regulatory systems come back on line, and become real tools to seek out and stop these sorts of abuses, businesses will take heed and just do the right thing without intervention.

        Insofar as the delinquents that are truly just postponing their eviction, as much as I empathize with their plight, you are correct, they are simply using the system to delay the inevitable. Though, I wish we could provide more to help people stay in their homes, but how to craft a solution that provides a hand up rather than a hand out is beyond my abilities.

        Rick Beagle

      • kitty says:

        I don’t know if it’s a fluke or a systemic problem since we don’t know how many cases there are. But these are the cases that I found on the web. In some cases it might be the contractors’ fault, but in most cases the mixup was at the bank.

        Now these are the cases that got media attention, I’d imagine there are cases we don’t here about…

        Sure after much stress and months, people in the articles above may get things straighened out, get compensation and a chance of a lawsuit, but some things lost like pictures of the loved ones may be irreplaceable. I can’t help but imagining it happening to me, and there are so many things at my home that have sentimental value, so many memories and keepsakes. Also, imagine the stress of it, and the effect it may have on your health. What if people in any of these cases had been old or sick or dependent on oxygen. Also, if you read it, it took these people months in some cases to straightened it out. The lawsuits can take a long time too.

        As to the banks being more careful because they fear lawsuits. I’d imagine, I’d imagine the savings they get from some of these “shortcuts” are higher than what they pay.

        I am curious about legal matters. If I were to break into somebody’s house, change the locks, through out or take furniture, I’d be arrested for illegal tresspass, breaking and entering, destruction of property, theft and whatever else. How come none of these employees are facing criminal persecution?

        • MasterPo says:

          Kitty – If you did that w/o proof of prior notice I would agree.

          But even if we presume wrongful foreclosure I’m sure the property owners were contact several times prior to the property being seized. They may have ignored it (very probably, I know many people who have been served notice of law suit, thought it was total BS and ignored it, then were ‘shocked’ when they had multi-thousand dollar judgments against them!!) but I so doubt just out of the blue the Sheriff came and seized the property.

          • kitty says:

            Master Po – read the articles. In some cases, the foreclosure was a total surprise for the owners who owned the property outright. In other cases, the owner repeatedly tried to contact the bank and tell them they were wrong, the real estate agent told the bank they had the wrong address, but the bank still went ahead.

  4. Jim says:

    Because mortgage pools were sliced and sold off as mortgage back securities, the ownership of the loan is very complicated. People looking at this as a way to stay longer in a home without paying the mortgage might like this. But the logical conclusion of conclusively identifying the loan holder as part of the foreclosure is that the loan holder will now know who to pursue deficiency jugdement. And if they do stay longer the balance due will be higher and more attractive for collection. In recourse states, that is.

  5. MasterPo says:

    I dunno.

    If all this resulted in waves of otherwise good mortgages being wrongfully foreclosed upon don’t you think the usual suspects in the media (e.g. MSNBC, CNBC, ABC, etc) would be running stories day and night about how these big rish evil bankers are kicking poor hardworking people out of their homes for no reason??

    I watched CNBC very closely the last few days and no one has mentioned wrongful foreclosuers.

    • kitty says:

      Did you read the articles I linked? Now, these aren’t that many cases, but these are the cases where the owner contacted the media. I’d imagine in the majority of such cases the owners were home and able to stop it.

      Also, how many such cases do you consider acceptable?

  6. Jes says:

    “That would just facilitate more months of rent-free living by non-paying home dwellers and introduce yet another obstacle in the path of real estate recovery.”

    So? Besides the emotions (irritation at unfairness), so what if thousands of people are living rent free?

    I would be very surprised if all that many people who are living ‘rent free’ (not paying for their housing, you mean) and who are employed have used the opportunity to build up savings. Their income is pumping back out into the economy, particularly the local economy, at a higher rate than if they were still paying the bank.

    And who really gives a rip about the banks? Fine with me if the money out there is going to other businesses than banks.

    • Are you suggesting the best path to economic recovery is for everyone to stop paying their debts and use that cash to build up savings? Delinquent homeowners should be allowed to remain in their homes – until when? Until more banks fail so the taxpayers can bail out more banks? Clearly you are a bank-hater but I’m not following your logic beyond that .

      • Jes says:

        Come on…any argument that immediately goes to “well if society…” is usually mostly passion and not much sense. If you want to go that route, ask yourself why it is good for people, but not corporations, to pay their debts. But that’s a dead horse of a topic. Way too much bloggo-blather on the topic already. (And I didn’t say anything about what people SHOULD do.)

        The point is that people with jobs who are’t paying their mortgages (yes, they’re bad and society will collapse any minute), those rotten people have money and they are spending it. Where is it going, since it isn’t going to the banks.

    • MasterPo says:

      Then that makes the rest of us who ARE paying out mortgages on time FOOLS!

      You *really* want a nation where debt is repaid only if you feel like it?!

      If people can do this for housing, why not cars? TV’s? Education? Heck – buy EVERYTHING on a credit card and just don’t bother paying!!

      Nice place to live.

      • Rick Beagle says:


        Though, honestly, it doesn’t make me cry to see these banks suffering a bit. Do you honestly think they (banks) learned their lesson?

        Insofar as punishing them only delays our recovery, I have about had it with allowing corporations get away with because they make a buck or two. What ever happened to corporate ethics and responsibility?

        If you read the links Kitty provided, you will see that NO ONE is being held accountable for this. After being trapped in the corner and threatened with an investigation, they grudgingly decided to slow their roll….

        Now if the government had “accidently” taken your home, you would declare a revolution…. But a bad bank, ah shucks they are bound to make a mistake every now and again.

        Rick Beagle

        • MasterPo says:

          One always hopes the people signing off on these kinds of things have at least read the papers.

          But shotty practices and poor oversight to due dilliegence aside, what is the great harm being caused?

          Still don’t see it.

          Seems not to be about *if* there should be a foreclosure but rather more a squabble about who as the legal standing to proceed with the forecloseur process.

          • Rick Beagle says:

            Actually, you and I agree with regards to delinquents.

            However, if you had read the articles provided, people are being foreclosed on, that are not delinquent. In one of the instances, the gentleman who was evicted had paid for the house outright.

            He did not receive notification, and simply came home to find his locks changed and his stuff gone. He had to file a lawsuit against the bank that erroneously foreclosed on a property that they did not own, and prove that he owned the house. It took a couple of months (!) before he got his house back (the article was unclear as to whether he was able to recover the items that were in the house – they were auctioned).

            If he was a fluke, this wouldn’t be such a big story, but he is not. There is are scores and scores of articles, one from just this week of a terrified woman calling from her bathroom (911) after someone had broken her window in order to access the house and change the locks. Again, the bank did not even own the loan, and the customer was not delinquent.

            Real people having to take real time off because the banks are cutting corners is absurd. The fact that they continue to get shielded by politicians is appalling.

            We have laws to protect parties on both sides, and quite frankly, it is time for the police to show up at these banks and haul off a few people. Submitting falsified paperwork to our courts from so called “foreclosure mills” is illegal, and it irks me that they are allowed to behave in this manner.

            Rick Beagle

  7. Jack Clark says:

    “Does it matter that affidavits of default were robo-signed? Not if the homeowners were in default, which they are.”
    Of course it matters TML.
    You of all people should know better. It’s called “due process”.
    It would be like a police officer saying that he assumed a suspect committed a crime so he decided to not read the suspect their Miranda Rights.
    100% ridiculous statement on your part.
    There is supposed to be a process followed for default and foreclosure proceedings.
    It’s been proven time and time again that tons of banks have skirted these rules and guidelines and have done as they pleased.

    “But even if we presume wrongful foreclosure I’m sure the property owners were contact several times prior to the property being seized.”
    But Po you CANNOT presume that.
    You’re putting way too much faith in multi-billion dollar institutions to “do the right thing” when it’s been proven over and over that it clearly has not happened.

    • MasterPo says:

      The difference is these people ARE in default on their mortgages, NOT simply ‘presumed’ to be in default (following your example).

      I agree it’s totally wrong not to have provided at least some notice.

      But OTOH I *highly* doubt these people didn’t know they were in default (who did they think was paying the monthly mortgage if they weren’t sending the checks?!) even w/o a notice so if they came home one day to find the door locks changes and a notice on the front door it still shouldn’t have come as a out-of-the-blue shocker!

      • Rick Beagle says:

        Unfortunately MasterPo, that is exactly what happened. And for the record, people are being foreclosed on that the banks don’t even own. In one of the articles it says that a foreclosure expert should be able to do one every thirty to ninety minutes. They are being forced/encouraged to do 200-400 a day.

        While I do not disagree that for the most part the right people are being foreclosed on, there is also no doubt that the banks are illegally cutting corners thereby forcing people in good standing out of their homes.

        The most infamous, they foreclosed on a home that the homeowner owned!

        Unfortunately, to add insult to injury, these same folks are making the ability to determine who made the error, and to sort things out properly nearly impossible.

        So how would you feel if you came home to your house and found the locks changed?


        • MasterPo says:

          I answered that already: If someone hasn’t been making their mortgage payments then, notice or not, they have no reason to be surprised to find the property has been seized.

          Disputes about who owns the lein on the property and therefore as the jurisdiction to foreclose a side, I still don’t see the hoards of people crying they were kicked out of their homes for no reason.

          Surely if it were so CNN, MSNBC, ABC, CBS etc would love to give 24/7 coverage to the parade of people.

          But there isn’t.

          Again, it sounds like a lot to do over bad paper work and organizational ineptness.

          • kitty says:

            Did you bother to even read the links I provided? In 3 of these cases the property was bought for cash. In others the owner was in good standing with another bank. Read the articles.

  8. Jack Clark says:

    “The difference is these people ARE in default on their mortgages, NOT simply ‘presumed’ to be in default (following your example).”

    Legal due process Po that’s what this whole thing is all about and the lack of it that financial institutions are showing.

    No offense but if the Right sweeps back into power and when the bank lobbyists quickly follow this problem will get worse before it gets better because then banks will really be allowed to run wild and unchecked.

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