Archive for October 5th, 2010

Foreclosure fraud is NOT a political issue

I’m pleased to see so many high-ranking officials in our country demanding changes to the foreclosure process.  I’m disappointed, though, that all of these demands seem to be coming from Democrats, including, for example, House Speaker Nancy Pelosi.  This is not a political issue, folks!  Fraud is fraud.  Democrat, Republican, Independent – whatever your preference – it shouldn’t matter. 

Personally, for example, I am a registered Republican.  I always have been.  I’m also socially conservative, so much so that I disagree with Nancy Pelosi on just about everything.  You know what, though?  When it comes to foreclosure fraud, none of that should matter.  Presenting false evidence to the courts on a widespread basis should bother everyone – Democrats, Republicans, and Independents.  With that in mind, I must ask:

Where are all of my fellow Republicans? 

Are Republicans really that tied to party allegiances that they’re unwilling to call a spade a spade?  If so, that disappoints me.  Yes, I suppose that calling out the big banks is contrary to traditional Republican views favoring big business.  But wrong is wrong, and it’s time more Republicans said so. 

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More proof of errors in the foreclosure process

Yesterday, I had a hearing before a local judge who, prior to his time on the bench, practiced real estate law.  The hearing parlayed into a discussion about title problems, which the judge acknowledged he started thinking about because of the recent articles in the media about it.  (Consider that all the more reason to keep getting these issues into the media – they prompt thought-provoking questions).  Anyway, during the conversation, the judge made a compelling point:

In the years that he’s been adjudicating foreclosure cases – tens of thousands of foreclosure cases – he can’t ever recall seeing a case where the plaintiff’s firm moved for leave to amend to add an additional defendant after the case was filed.  As the judge noted, there will be no need for this in every case, but in a certain percentage of cases, something happens, after the foreclosure lawsuit is filed, that prompts the need for additional defendants.  Maybe the homeowner got his A/C repaired and could not pay the bill, prompting a mechanic’s lien.  Maybe the homeowner couldn’t pay the homeowner’s association fees, prompting an association lien.  Mechanics’ liens, association liens, code enforcement liens – these things happen, even after a suit is filed (in the judge’s estimation from his time as a lawyer, about 10% of the time), and if the bank wants to foreclose, and get clear title, these parties must be added to the case.  After all,

 even if the bank wins a foreclosure judgment, if the company that has the mechanic’s lien, condo association lien, or the like, is not joined as a defendant and foreclosed, then the purchaser at the foreclosure sale does not have clear title – the purchaser would own the property “subject to” that lien.

As a result, in a significant percentage of the cases being “pushed through” our courts, a second foreclosure lawsuit, or a suit to quiet title, will be necessary to remove the lien. 

In sum, if the foreclosure mills were prosecuting these cases correctly, then some percentage of the time, we’d be seeing requests to amend their pleadings to include these additional parties.  It won’t happen every case, but it should happen every so often.  But guess what?  We’re not seeing it.  Ever.  The judge I spoke with said he’s never seen it.  In all of my cases, I’ve never seen it.  If you’re a lawyer handling such issues, please chime in:

Have you ever seen an instance where a foreclosure mill amended its complaint to include an additional defendant because of a lien that arose after the foreclosure complaint was filed?

Based on my practice, and this judge’s observations, I strongly suspect the answer is “no.”  Consider this yet another illustration of the problems we’ll be facing in coming years as a result of the abuses by the banks and their foreclosure mills.

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The state of affairs, Strategic Default

I’ve read countless news articles in recent days, but this one really caught my attention.  To sum up the article: (1) banks still think they’re above the rest of us; (2) the foreclosure crisis isn’t over; (3) the moral obligation to pay one’s mortgage is decreasing, i.e. strategic default is becoming a more socially-accepted option; and (4) homeowners need to protect their families.  These two quotes jumped out at me:

“Do you think lenders would be shy about squeezing you for an extra nickel if they thought they could get away with it?”

“If you want to avoid foreclosure, you need to talk to a lawyer at the first sign of trouble.”

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