House Repos Blog

Bouncing Cheques Issued by Title Companies Lead to Foreclosures

Julia Thorn — Fri, 20 Nov 2009 17:51:09 +0000

Another type of trouble is brewing for unwary borrowers – even after refinancing a foreclosure notice can come thanks to the bouncing of cheques issued by title companies. The borrowers are left to face trouble when due to no fault of theirs the refinancing cheques are bouncing.

One of the victims is Jeff Franson. Last April he refinanced his mortgage changing over from Chase to SecurityNational Mortgage Co. Suddenly in October while he was going about his daily chores in his house in Mokena he got foreclosure papers from Chase. Franson had not been defaulting on the mortgage contracted with SecurityNational. But the cheque issued by Counselor’s Title to clear the loan of Chase had bounced causing Chase to file a foreclosure suit in the Circuit Court of Will County.

The last step in the refinancing process for the consumer is to sign a stack of documents in the office of a title company. The borrower returns home happy with the assurance that the interest has gone down. But there are risks of which the trusting consumers are not aware of. Franson informed that 7 other borrowers in the Midwest who had dealings with Counselors are apprehensive of the fate of their refinancing amount totaling to $1.6 million that was supposed to clear the first loan.

The office of the Illinois Attorney General informed that after receiving three complaints it is making enquiries about Counselors Title although it has closed shop now. This title insurance agency dealing with real estate had six branches in Illinois, Indiana and Ohio.

Two other title companies (names not mentioned) are also being investigated since the last few months. All the allegations are about mortgage refinancing – cheques and wire transfers that never reached destinations and deposited. Natalie Bauer of the office of the Attorney General said, “There’s a very similar fact pattern we’re looking into. These are homeowners who were trusting these companies to protect their interests and take responsible actions, and now you have consumers in danger of potentially losing their homes.”
Very recently a cease and desist order has been issued against Counselors and its 3 principals (James Erwin, Shari Erwin both of Chicago and Damian Sichak of Homer Glen) by Illinois Department of Financial and Professional Regulation. It will not be possible for the company to run a title agency in Illinois from now on. Spokeswoman Sue Hofer said, “It will be on their records with the state of Illinois. We have no authority to make victims whole. We can stop them from doing it to the next person, but don’t have the legal authority to reverse the financial loss.”

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Increase in Foreclosures Prompting Class Action Legal Suits

Julia Thorn — Thu, 19 Nov 2009 18:47:40 +0000

Increases in foreclosures are prompting class action legal suits in Florida, North and South Carolina similar to the ones started in California and Arizona. The allegation has been false inflation of price.

A house owner in Central Florida after being pushed into foreclosure filed a legal suit (class action) against KB Home (NYSE:KBH), Countrywide Financial as well as LandSafe Appraisal Services. The charge was that the trio planned to inflate falsely the price of houses in Florida as well as North and South Carolina. This has cost the buyers millions in dollars and ultimately led to the collapse of the housing market in the region.

The legal suit was filed in the District Court of Orlando, Florida on 30th October. The allegation is that the three firms executed a meticulously chalked out plan to control the appraisal process that so far had been independent. The value of property was jacked up and this in turn determined the price of the units that were sold by the firms. Thousands of house owners were negatively impacted.

This is the third suit filed by Hagens Berman Sobol Shapiro (HBSS) against the trio. They have been charged for initiating a widespread and complex scheme of inflated appraisal. The other lawsuits were initiated by house owners in California, Arizona and Nevada.

Steve Berman of HBSS said, “Since we filed the first lawsuit in May, we’ve heard from homeowners and industry insiders who have validated our conclusions that Countrywide and LandSafe were gaming the system, causing thousands of homeowners to overpay for their home purchases by tens of thousands of dollars. No one wants to learn they overpaid for a home, and certainly not because the builder and the appraiser rigged the game” Berman observed that since the filing of the first suit he has been contacted by hundreds of suffering house owners who were pushed into a financial hole by the trio thanks to this scheme.

The complaint runs into 98 pages. According to it Countrywide sent all its customers from KB regarding valuation of homes to one person at LandSafe – it being Countrywide’s subsidiary. LandSafe gave the appraisal value instructed by KB and Countrywide.
Te Plaintiff Stephani Sullivan had bought her house in 2006 for $426,000. A year later an appraisal was conducted, that noted the worth of the house to be $310,000. It was also said that the reason for this lesser amount was not because of a drop in the market but due to wrong and deceptive appraisal.

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The Ignoring of Warnings Expedited the Foreclosure Crisis

Julia Thorn — Wed, 18 Nov 2009 18:52:19 +0000

The housing boom was the result of a tie up of understanding between speculators, investors, bankers, administration and politicians. It led to borrowers being taken for a ride that ultimately led to the expediting of the foreclosure crisis and the Great Depression.

Experts hired by Hillsborough County administration had repeatedly warned that suburban growth is not sustainable – cannot pay for itself. But the commissioners gave the green signal to innumerable projects with the assurance that each would flood the local economy with revenue earnings. Simultaneously they accepted many contributions for campaigning from the builder’s lobby. 50,000 homes have already been approved but are waiting to be built.

In Tampa the situation was the same. New Tampa made its debut in the 90’s by grabbing swaths of pasture land. Promises were made about luxurious prestigious living in communities like Arbor Greene, Cory Lake Isles, West Meadows and Heritage Isles.

Denie Layne of the Sierra Club did put up futile opposition. He said, “It was all about the tax base.” Dick Greco who was then the mayor did not contradict. He said, “That land was going to be built on one way or another. If we didn’t annex it, the city would have gotten absolutely nothing.”

The most glaring example of wrong planning is in Gibsonton in south Hillsborough – noted for its fish farms, trailer parks and travelling carnival workers Jeanie Johnson has been residing here for a long time. She complained about the lack of proper bus services, roads and jobs. So what was the point in building residential units here? The commissioners argued that Gibsonton being a slum could only be remedied by constructing homes on it. In 2000 Commissioner Jim Norman said, “It’s abominable to see the things these people have to live with out there.” He was speaking at the time the board waived all the development fees for the new construction being done there. From 2000 to 2006 the builders took out 2,700 permits in this region that was 32 times more than the total pulled from 1995 to 2000.

The commissioners were not playing the game alone – there were powerful land groups. Ralph Hughes was one of the hands behind the scenes – a Republican with a lot of clout. Before his death in 2008 he became very rich trading in building material with the developers. His customers gained by having their fees waived by the commissioners.

Mostra-se a causa do bom imobiliário, os peritos contratados pela administração do condado de Hillsborough tinha repetidamente alertado que o crescimento suburbano não é sustentável – não pode pagar por si mesmo.

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Avoiding Foreclosures by Walking Away From Loans are not Without Problems

Julia Thorn — Tue, 17 Nov 2009 18:46:43 +0000

South Florida is riddled with underwater mortgages – the loan amount being heavier than the worth of the property. This is causing many borrowers to walk away from the loan leaving the lender with no other alternative but to foreclose and take legal possession of the unit. With the social stigma no longer working against the borrowers it seems to the best way out of a bad situation. But avoiding foreclosures by walking away from loans are not without problems.

Professor Andrea Heuson of University of Miami said, “I wouldn’t blame borrowers who knew they were facing significant losses even if they could afford to stay. Every day you wake up, you are reminded how much you paid for something, and then you read every day in the newspaper how much prices have fallen.”

But walking off is weighed down with many problems – financial, legal and ethical. The lenders as well as the administration are focusing on the line of thinking and behaviour of strategic defaulters. The idea is to make them realize that the problem is tough and not without pitfalls. Ron Kaniuk an attorney dealing with foreclosure and bankruptcy in Boca Raton said, “It’s a huge problem, and it doesn’t get addressed in the process right now.” He said that by being difficult about offering loan modifications the lenders are inadvertently encouraging the trend.

Attorney Mark King represents banks dealing with commercial foreclosures. He said, “It’s really a social change in the way debtors think, and it’s taking creditors some time to absorb that” The grim scenario is that even borrowers in the commercial property sector have started to walk away.

Some are talking of the moral obligation to honour a mortgage commitment. Professor William Hardin of Florida International University said, “The vast majority knew what they were doing and were taking a risk, and the fact of the matter is [the mortgage] is a contract. We live in a world where contracts have to be honored. It’s the way our economy works.”

Researchers have noted that strategic defaulters are generally those who have jumped from being current on their loans to not paying anything at all but continuing with paying other credit dues. It was calculated that 588,000 borrowers intentionally defaulted on their mortgages in 2008.

A change in attitude towards looking at the property not as a home but as a piece of investment has led to this callous attitude.

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Foreclosure Assistance Being Taken on Tour by Housing Advocate

Julia Thorn — Mon, 16 Nov 2009 18:13:09 +0000

Housing advocate Bruce Marks is taking foreclosure assistance on bus tours. With a smile he nicknamed himself as a non-violent-bank-terrorist. He is the head of Neighborhood Assistance Corporation of America. Marks has taken many hundreds to the mansion where John Mack the CEO of Morgan Stanley lives in Westchester County of New York.

The people shouted slogans in front of the house “Save our homes! Save our homes”. Marks commented that it was outrageous that while the ordinary people were losing their homes by droves he continues in live in a dream house.

Marks has been active protesting against many other executives who are not doing anything noticeable to stem foreclosures. He went to the length of posting their photographs and details of phone numbers on his own web site.

Morgan Stanley responded that it was negotiating with Marks and his group.

For nearly 20 yeas Marks has been operating a non-profit body whose aim is to make home loans realistic and affordable. Over the previous one year he has increased the strength of his staff by double and has now 1,2000 employees working for him across the country. Recently the group has been organizing foreclosure assistance tours and been successful in lowering loan payment for about 100,000 foreclosure victims.

Marks has named his tour as “Save the Dream Tour”. At each stopping point NACA hires a stadium for a couple of days and thousands turn up. In an event in Los Angeles 50,000 arrived. Over 40,000 attended events at Las Vegas and Phoenix.

At San Francisco hundreds of tables were positioned across the stadium to accommodate hundreds of housing advisers. The house owners were instructed to bring their loan papers. Representatives of important banks and loan servicers were also pressurized by Marks to participate.

Marks claims that his team has been able to restructure loans and have the payments reduced for over 90,000 house borrowers in the last 12 months.

One of the beneficiaries is 62 year old Bernice Jackson who travelled hundreds of miles to attend these vents in both Las Vegas and San Francisco. Her husband has retired and the couple is on a fixed income. She alleges that the mortgage agent cheated on them and peddled a loan they could ill afford. She said, “Oh, man. I had a very high interest rate, and through NACA and the help of the servicers, I got the note reduced to 2 percent. So my note went from almost $4,000 a month to $1,600 a month. Yes, I’m very excited, very happy.”

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Washington Mutual, the Symbol of the Foreclosure Crisis, Continues to be in Trouble

Julia Thorn — Fri, 13 Nov 2009 18:57:29 +0000

Washington Mutual, the symbol of the foreclosure crisis, continues to be in trouble even after take over by JPMorgan Chase,

Some sections of a jumbo legal suit pertaining to securities fraud practiced allegedly by Washington Mutual – a spillover from its collapse in 2008, seems to surviving. USA District Judge Marsha Pechman said, “Something is going to survive.” She was speaking to packed gathering of defense lawyers representing executives, directors, an audit firm (Deloitte & Touche) and many investment firms that underwrote several of the security offerings of Washington Mutual. But it is not yet known which of the defendants would in the final round stand before the jury.

In August 2008 shareholders had filed a suit and revised it last June alleging that CEO Kerry Killinger together with more officers misguided the investors by not telling them about the wrong steps they took to boost up the mortgage affairs of Washington Mutual. The financial results of the company were misrepresented, the risk-management policies were undermined, the appraisal process was tampered with and proper underwriting standards were disregarded.
The plaintiffs alleged that the directors gave the go ahead to Killinger and many officers to present statements that were false and misleading regarding the financial health of the firm and the loan policies that were being undertaken. If the job had been above board Deloitte would have been able to find out the trouble. The underwriters too have to take the blame for offering false information while offering the securities.

The defendants contended that the suit had failed to indicate the particular statement of Killinger and his associates that were false or that the officials intentionally said things, knowing that these were false. Lawyer Barry Kaplan representing Killinger said that the suit was nothing but a tissue of misquotes taken out of its context and backed by nothing more than “vague, general statements” by innumerable witnesses.

Attorney representing the plaintiffs Jerald Bien-Wilner said, “These are not scattered allegations by low-level employees.” He added that many of the witnesses were not named but they were identified by the posts they held – they being senior executives who gave details about what was happening backstage at Washington Mutual.
Pechman has already permitted a portion of the suit (relating to October 2007 securities) to push forward. Later she said that a similar case filed in 2008 by former employees of Washington Mutual who had taken part in the retirement savings plan of the firm could also be moving forward.

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The Consequences of not Paying Mortgages Can be Grim

Julia Thorn — Thu, 12 Nov 2009 19:58:48 +0000

Today house owners are posing themselves the question about what will happen if they do not pay their mortgage dues. Many do not realize that the consequences may be grim.

As per the findings of First American CoreLogic nearly a third of all the mortgages in South Florida are underwater – the house being of less worth than the loan amount. This has made many wonder why they should go on paying mortgage dues.

The borrower has two options – either to change the mortgage terms or to go on paying. The latter option is tempting many but they are not aware of how quickly this may lead to problems.

If the borrower fails then either the lender or the service will notify the matter to the credit bureau by the first day of the following month. It may happen within two weeks of default and will cause a drop in the credit score of the borrower.

Within the following 30 days the borrower should be prepared for other creditors to wake up to the fact of late payment and jump into action. They have many options – increasing interest rates, shutting off credit card facility totally or lowering the limit of credit. Other troubles may come up with insurance, student and other forms of loans being refused.

If the credit limits are reduced and yet one is having a balance due then one is actually eating up more than due available credit. This leads to lowering of another round of scores.

The negative black mark stays on the report for as long as 7 years. But the impact slowly begins to lessen after the worst first two years.

Failing to make mortgage payments will cause repeated ringing of the phone. The lender will try to make contact and talk about loan modification. After the passage of 90 days one cannot start making payments at one’s own sweet will. Contact has to be made before proceeding. After the lapse of four months there is the likelihood of the borrower being served with a foreclosure notice. If the borrower does not respond within 20 days then the judge could issue a ruling against the borrower.

Following the order a date within 50 to about 120 days will be fixed for an auction sale. 120 days subsequent to the sale the sheriff will come knocking giving the borrower 10 days time to either move out or be pushed out.

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Amidst Foreclosures, Loan Modification Programs Abound

Julia Thorn — Tue, 10 Nov 2009 14:53:48 +0000

The US economy is on a tailspin what with people losing jobs. As unemployment peaks, people are faltering on mortgage payments. Hence, foreclosures have become common. Now the Federal government has come up with a new scheme – Making Homes Affordable program – to help homeowners. As a part of this program, loans of homeowners will be modified so that they are better able to handle the crisis. However, for the first three months, loan modification will be on a trial basis, after which the revision will be on a permanent basis.

However, home owners are unhappy at the slow progress of the program. Actually lenders have been swamped with so many phone calls that progress has been slow. In Hampton, Yancy and Michael A. Blaino had applied for loan modification that was approved by the mortgage company GMAC. The agreement was, however, canceled and now the lender is threatening to take over the property.

It may be pointed out that Yancy and her son Blaino represent the fast growing creed of homeowners who are in trouble because of lost jobs. Seventy three year old Yancy is a retired school teacher. Her earnings total $2,200 per month. The lady and her son bought a sprawling ranch in 2006. They made a down payment of only $123,000. The monthly mortgage payment of the house was $1,089 a month.

They could manage the payments till last year. However, when Blaino became unemployed, the family found it difficult to make the payment. They had heard about the loan modification scheme and got in touch with their lender.

After sending the paperwork, they were informed that the file was not complete. Then GMAC invited the family for a temporary plan under which they had to pay $785 for 90 days. Yancy did so but the lender returned the cheque saying it was delinquent. Yancy then sent certified cheques for three consecutive months to her lender. However, after three successive payments, she was told that the workout plan was canceled and her house would be foreclosed. It was indeed shocking for Yancy.

When Yancy asked, she was told that the mutually agreed upon payment was $1,088. That happened to be the original loan payment and Yancy says that it actually never made sense. Repeated messages to GMAC never bore fruit. Yancy said that the stress of dealing with the lender is taking a toll on her health. However, GMAC spokesperson refused to discuss the case.

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Foreclosures Continue to Put Question Marks on Recovery

Julia Thorn — Mon, 09 Nov 2009 15:14:34 +0000

Foreclosures are continuing and putting a question mark on recovery. Some experts feel that the recovery will only be temporary. A government report will give a clear picture about the condition of the economy following the worst crisis since the time of the Great Depression. During the last third quarter there were signs of a robust growth.

There are expectations that the commerce department will note that the GDP – it being the yardstick for measuring economic activity – increased for the first time since the second quarter of 2008. But the question is whether this trend will continue or if there will be stumbles.

Many say that the foreclosure triggered crisis that led to the starting of recession from December 2007 has become history. The third quarter surging of the economy was largely due to the government incentives but how far that will be sustainable is doubtful. The economy left on its own might become wobbly again. Patrick Newport of HIS GlobalInsight warned, “Don’t get carried away by the really strong number. The economy is still losing jobs and it’s still fundamentally weak in a lot of places.”

An analysis conducted by Bloomberg News noted that the growth in the economy was by 3.2% – a good pace but much below the pace that was prevalent before the crisis erupted. According to the predictions by TODAY/HIS Global Insight Economic Outlook there will be moderate growth through the early part of 2010.
The National Bureau of Economic Research has the technical authority to officially state that the recession is over. But the GDP readings of the commerce department will informally confirm the fact that recovery has started. Newport said half of the growth noted came from the impetus given by the government to the cash-for-clunkers scheme. But that has expired in August and now is the testing time to see how independent the growth of the economy has become.
Sam Bullard of Wells Fargo said, “Consumers are taking their income and putting it toward paying off … debt and increasing their savings.”

Newport explained that half of the increase was due to the liquidation of massive industry on the part of manufacturers and the retailers during the time of the recession. Once the firms restocked themselves during the next third and fourth quarters “you’re not going to continue” to pep up output with vigorous consumer demand. Another spark to the growth came from the housing sector but that was because of the tax credit offered – it too being for only a short time.

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White Plains Foreclosure Case Ruling is Sending out Stern Warnings to Lenders

Julia Thorn — Fri, 06 Nov 2009 15:56:56 +0000

The White Plains foreclosure case ruling has sent out stern warnings to lenders. The USA Trustees of the Justice Department has taken great interest in the case. It has registered itself as an interested party.

A borrower living in her home had purchased the house in 2001 after contracting a mortgage with Wells Fargo. After four and a half years she refinanced it with Mortgage World Bankers INC.

David B. Shaev a lawyer dealing with consumer bankruptcy filed Chapter 13 bankruptcy on her behalf in February 2009 when she fell behind her dues. In March PHH a firm of Laurel New Jersey claimed the debt amounting to $461,263 inclusive of arrears of $33,545. Shaev said that at the time of filing he had only hoped for modification of the loan.

Months passed and PHH obviously began to drag its feet about the modification. At this point Shaev wanted proof of the standing of PHH in the case. PHH replied that it was the servicer and that note holder was U.S. Bank – the trustee of a securitization packet of mortgages. But U.S. Bank claimed it was not a party to the suit. Shaev now wanted proof that U.S. Bank held the note. The bank produced an affidavit from the vice president of PHH, Tracy Johnson, repeating what had been stated earlier – PHH was the servicer and U.S. Bank the holder of the note. Supporting this was submitted a copy of the assignment of the mortgage but that was signed by Johnson in the capacity of being vice president of MERS. This device had done away with the requirement of recording changes of ownership of property in the county land records office.

Another startling point was that as per the document the note was assigned on 26th March 2009 – much later after the filing of the bankruptcy.

Being questioned about ownership PHH admitted that it had charged a foreclosure fee of $450 that was not proper. Interest had also been overcharged.

The attorney representing PHH had the uncomfortable task of explaining these anomalies. Attempting to justify the actions he said, “In the secondary market, there are many cases where assignment of mortgages, assignment of notes, don’t happen at the time they should. It was standard operating procedure for many years.”

It was a welcome surprise to the defendants when the judge ruled, “Right now I am in bankruptcy court with a house that has no discernible debt on it, yet I have a client with a signed mortgage. We cannot in theory just go out and sell this house because the title company won’t give a clear title on it.”

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House Repos Blog

Bouncing Cheques Issued by Title Companies Lead to Foreclosures

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