Amidst the Government’s halt on foreclosures, Bank of America has stopped seizing foreclosed homes in all 50 states, but is continuing to sell homes that have already been foreclosed on and is still processing new foreclosures.
Outside the major banks and even in states that do require a judge to look over the bank’s shoulder, foreclosures are going forward at a head-spinning pace. The nation’s regrettable mortgage crisis continues. One million residences have fallen into foreclosure since 2006 and an additional 5.9 million are expected over the next four years. Lenders and investors will have to acknowledge huge losses and try to figure out how to keep borrowers making at least some monthly payments.
However, when the housing disaster ends, the lenders’ contention that they have done as much as possible to limit foreclosures and follow appropriate laws in doing so is hollow at best. The industry simply has not stepped up to address the volume of the problem. And as the crisis moves forward, more people are falling through the cracks.
For lenders and loan servicers, civil lawsuits claiming deceptive sales practices or violations of consumer protection laws are becoming more prevalent as foreclosures grow in numbers. The Mortgage Electronic Registration System, which was created to handle mortgage transfers between member banks, is facing its own legal problems. A lawsuit filed on Sept. 28 in federal court on behalf of Kentucky homeowners claims that MERS was part of a conspiracy to create false promissory notes, affidavits, and mortgage assignments to be used in mortgage foreclosures. Similar class action suits have been filed in Florida and New York.
Title insurers will also be in court bringing and defending lawsuits. The insurers will be going after banks or whoever has assured them there was a clear title. The costs for title insurers to defend customers and reimburse for lost properties rose 14 percent, to $480.5 million in 2010’s first half.
Persons buying homes in foreclosure are facing their own worries as paperwork errors raise question about the validity of the titles needed to prove ownership. Defective documentation has created millions of blotched titles that will plague the nation for the next decade.
Meanwhile, as public outrage continues to mount, many homeowners are reclaiming their homes through the Courts.
In general, Judges are unlikely to look favorably on a bank that claims paperwork flaws do not matter because the borrower was in default on the loan. There must be some integrity in the foreclosure process and the conduct of lenders pursuing their right under loan documents.