The foreclosure investigation of all 50 states’ Attorney Generals that began in October 2010 has led to a proposed settlement among the largest banks for up to $20 Billion dollars and commitments to alter their foreclosure practices. The issue erupted when it was discovered that many documents, included documents filed in state court foreclosure actions, where the product of “robo-signers.” Nowhere has this been more a problem than in Florida Foreclosure Defense.
Robo-signers are mortgage default personnel that had no personal knowledge of the particulars of a mortgage but signed affidavits filed with courts swearing they had reviewed the home loan file and were familiar with the circumstances of the loan default. In the name of expediency, robo-signers were used to simply sign pre-prepared documents in order to complete mortgage foreclosure.
Recently the New York Attorney General has objected to the proposed settlement spear headed by the Iowa Attorney General. The big disagreement appears to be whether banks will be released from future civil liability in connection with the way they securitized the loans.
Banks wish to avoid continued lawsuits against them. They are currently being sued by investors who claim improper and incomplete disclosures were given about the mortgage backed securities they purchased through which billions have been lost. And most recently, the Federal Housing Finance Agency filed suit claiming that banks misrepresented the quality of the mortgage loans sold to Fannie Mae and Freddie Mac.
The robo-signing practices of the largest banks involved in the settlement (the banks do not admit liability in this matter), resulted in thousands of falsified foreclosure documents filed in loan foreclosure actions across the country. When you consider that the banks involved include Bank of America, JP Morgan Chase, Citigroup, Wells Fargo, and Ally Financial, another problem arises for the economy trying to get past the mortgage foreclosure crisis.
When the Mortgage Loan Foreclosure Machine Starts Up Again
Many of these banks have halted or significantly slowed their foreclosure activities. Cases recently filed remain pending without any movement toward final resolution. Cases that are about to be filed are held back. Finally, loans that are already in default are not being moved forward at all.
Meanwhile, HAMP loan modifications are not alleviating this building pressure. Because HAMP modifications are voluntary on the part of the lender and because the lender and the “Investor” in the mortgage backed securities covering the particular mortgage in question need to agree on the loan modification, loan modifications are painfully slow – even though the government is footing part of the bill to get loans modified.
What this means is that without drastic relief, the dam of overflowing loans in default could break resulting in another sudden explosion in foreclosures when and if the Attorney Generals finally settle the investigation with mortgage lenders.
Troubled homeowners in loan default should nonetheless vigorously pursue the HAMP loan modification process and stay on top of it. Every request for additional information that lenders invariably ask for to get the loan modification should be provided immediately. Lender representatives spoken to over the phone should be made note of together with their extension number and full details of the conversation including the time and date. All correspondence should be in writing and copies should be maintained in good order.
For troubled homeowners who have a very good paper trail, they may be in the best position to resolve a potential foreclosure filing once lenders restart their foreclosure machine.