Articles like this one are usually reserved for my Real Estate Investor site at www.FixerFixer.com however once the foreclosure litigation is in the Sunday paper it’s fair game. There happened to be an article about the origins of the problems in today’s paper.
Banks have had all documentation electronically filed. In many cases the original documents have been lost, so affidavits saying that the documents are somewhere in the office have been substituted. What got even more attention is that the signatures on the affidavits saying the documents are somewhere all looked exactly the same, because they were. These were electronically affixed signatures, by a process called robo signing.
A litigator deposed several bank employees responsible for following procedures to foreclose on properties. Many people have said that if people don’t make mortgage payments then the bank, of course, has a right to foreclose. Some people have challenged the bank to show they do in fact have that right.
This brings us around to the servicer of the loan. The company who services you loan in many cases is a bank. So you may be making payments to a bank when your loan is some place else, like wrapped in a bundle that has been sold as securities.
Mortgage Backed Securities have been in the news lately also, but have yet to be tied into this foreclosure mess. In my opinion the center of the storm is that no one wants to start identifying a fund that has a growing number of non performing loans.
So the foreclosure mess has stalled foreclosures. Obama said today the federal government will do everything in it’s power to ensure consumer protection. What that might mean is that banks really don’t have the proper documentation to prove legal transfer of your loan. The fear is that if this continues more people may get the idea they have more of a right to walk away from mortgage debt. This may lead to further price declines.
