Archive for September 26th, 2010

Strategic default – on the rise

In recent weeks, I’ve seen a significant increase in inquiries from potential clients about strategic default.  I’ve blogged about the pros and cons of this in detail, below, but here’s the short version – many homeowners are tired of paying their mortgages when similar houses in the neighborhood are selling for one-third of they owe.  A lot of people just don’t see the benefit of paying $200,000 on a mortgage for a house worth $75,000. 

Apparently, the increase in strategic defaults is not limited to my practice, as numerous media outlets are reporting the same thing (throughout the country):

These articles seem to suggest that as many as one-third of all foreclosures are “strategic” in nature.  Apparently, the stigma of going into foreclosure is lessening with each passing day.

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Foreclosure fraud – from coast to coast

I just read this article and I loved it so much that I cut and pasted it below. From the suggestion of a foreclosure moratorium to the realization that taxpayers are now paying for investigations of foreclosure cases (which the greedy banks and their lawyers should have been doing on their own), this author “gets it.”  It’s great to see the media finally starting to side with homeowners.

posted by: Jessica Pieklo 6 hours ago

Foreclosure Fraud Expands to California

This week California officials demanded that Ally Financial Inc stop foreclosing on homes in the state after reports show the mortgage lender was violating the law.  The report comes on the heels of significant problems with GAMC foreclosures and shows just how little help consumers are getting in the foreclosure process.

Just cease-and-desist letter was the result of testimony from that Florida case where a foreclosure official admitted to signing thousands of documents in foreclosure cases without even reviewing the homeowners’ loan documents.

Attorneys general in Texas, Iowa, Illinois and Florida are also investigating the mortgage giant for similar instances of fraud.

The process now coming under scrutiny is known as “robo-signing” and one that is nothing short of fraud on the court.  The affidavits that get signed are executed, under penalty of perjury, that the signer has personal knowledge sufficient enough to warrant the extraordinary relief of re-taking possession of a person’s home.

The process also shows the significant economic machine that processing residential foreclosures has become.  Ultimately it is not just the homeowners that lose when this happens, it is the taxpayer.  We will now have to weed through hundreds of thousands of foreclosure proceedings to determine the fraudulent from the legitimate-a process that is supposed to happen before filing.  Had sufficient regulatory oversight of the lending industry existed, in any fashion after the meltdown of the housing industry, this is a crisis that would have been avoided.

Just to show how out of control those initiating foreclosure are, including the enormous banks involved, is news like this--homeowners having homes sold out from under them, without their knowledge, by lenders like Bank of America, despite the fact that the homeowner didn’t have a mortgage at the time.

Put these stories together and what emerges is a singular narrative of greed at the expense of individual homeowners.  The foreclosure process is expensive and ultimately damaging for the overall economic health of our communities.  But there’s not enough incentive for banks and attorneys to work with homeowners, despite the fact that many, if given a fair opportunity, would be able to save their homes. 

Given the scope of the foreclosure industry, unfortunately I think we are only going to hear more of these kinds of stories.  Given the scope of the fruad that has come to light, Congress should demand a halt on all residential foreclosures until the legitimate cases can be sorted from the illegitimate ones.

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