Thursday, March 6

"Requiring banks to produce the paperwork at a foreclosure hearing is a nuisance"

Imagine, it takes a melting housing bubble to find out that all the paperwork you were forced to go through was just an exercise to keep you busy. Funny how now the owners of these loans are complaining that they can't deal with it. Maybe they should not have shoved it in front of their customer to sign:

Requiring banks to produce the paperwork at a foreclosure hearing is a nuisance, said Jeffrey Naimon, a partner in the Washington office of Buckley Kolar LLP.

``It's a gigantic waste of time,'' Naimon said. ``The mortgage may have transferred five, six, eight times. It's possible that you don't have all the pieces of paper, but it was enough to convince the next guy in the chain. There's no true controversy over whether the owner owns the loan.''

Judges are becoming increasingly impatient with plaintiffs who produce no more proof of ownership than a lost-note affidavit or a copy of the note, said Michael Doan, an attorney at Doan Law Firm LLP in Carlsbad, California. - Bloomberg

I can understand his position, but only when the party that is foreclosing is the bank that originated the loan. After all, all the paperwork will have their name on it. But, if the loan has been sold of many times, I would expect that they be able to document all the sales of the loan. That is normally done by the seller signing the mortgage note over to the buyer, but it seems that this is yet another area of the housing industry that just tried to collect as much money as possible while the market was good.

Each time the mortgages change hands, the sellers are required to sign over the mortgage notes to the buyers. In the rush to originate more loans during the U.S. mortgage boom, from 2003 to 2006, that assignment of ownership wasn't always properly completed, said Alan White, assistant professor at Valparaiso University School of Law in Valparaiso, Indiana.

``Loans were mass produced and short cuts were taken,'' White said. ``A lot of the paperwork is done in the name of the original lender and a lot of the original lenders aren't around anymore.'' - Bloomberg

I find this pretty unbelievable. There is already talk about blaming mortgage brokers for approving loans for anyone 'with a heartbeat'. Well seems that they were just one of many careless operators in the industry.

I wonder if any loans were sold more than once. I also wonder how hard it would be for people to now foreclose on properties that they don't own, by filing a fraudulent lost-note affidavit. I am aware that there is an electronic tracking system for mortgage notes, but that is not what is being referenced in court. It is the paper work that is.

This is pretty crazy. Really, if you bought stock, would you accept a copy of the stock certificate? I see if this was something limited to isolated cases, but the story states that this is a pretty widespread problem. Unbelievable. But imagine if you were one of these lucky homeowners, you no longer have to make payments on your house, and the 'owners' of your loan are unable to kick you out. Lots of people are going to go from being very distressed owners to very big winners in getting what is essentially a free house. Sure, they might never be able to sell it because they lack a clear title, but nothing says you can't strip the place clean if you ever decide to move out after living rent free for months if not a year or two. Or better yet, just rent the place out.

I wonder, can a local government foreclose on the property if they can't clearly identify who owns it? Would clearing up matters with the taxman be the path to getting a clean title?

Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish - Bloomberg


1 comment:

Shadow said...

Things are tough all around, having to exert actual effort, uncontianable. Perhaps if the banks had employed a bit better judgement and not insisted on so much paperwork to begin with.....

On an unrelated note; sorry the USNR thing wasn't resolved in a satisfactory fashion, I worked with a number of Merchant Mariners over the years (one nearly recruited me) and was largely impressed.