Archive for January, 2011
Despite the so-called Foreclosure-gate controversy at the end of 2010, including the robosigner controversy, banks seized over 1 millions homes in 2010 for the first time ever. The number of foreclosure filings nationwide hit a record 2.9 million.
Those numbers are absolutely staggering. Almost 3 million homes (not people, but HOMES) had at least some foreclosure proceeding started on them. If you consider a modest average household population of 3.5 persons per house, that adds up over 10 million people being directly impacted by the banks’ foreclosures nationwide. That’s more than the entire population of Michigan.
I fully expect banks to keep up the same torrid pace of foreclosures in 2011.
If the banks do, in fact, keep up 2010’s pace, that’s another 10 million Americans directly impacted by a foreclosure proceeding. In just a two year span, approximately 20 millions men, women, and children will have their lives directly touched by the actions of the big banks. If our laws allow lenders to foreclose on that many homes and impact that many lives, the least we can do is hold them to the legal standards that have been set. Foreclosure laws are written for a reason: they allow lenders to protect their investments while also setting guidelines for the protection of ordinary families.
In 2011, I hope we resolve to hold banks to the legal standards that have been set for them. As a lawyer, I’m proud to do my part.
This blog has discussed the complex subject of mortgage securitization several times. Even at its most basic level, it is still complicated and difficult for most folks (including many lawyers) to fully understand. Well, there is now a chart that shows exactly how convolutedyour mortgage has become. Daniel Edstrom of DTC Systems, who specializes in securization-related issues, put togeter a chart tracing one family’s mortgage.
It took Mr. Edstrom almost a year to gather all this information. Keep in mind this is an ordinary mortgage; it did not begin as some crazy security dreamed up on Wall Street. It could very well have been your mortgage or mine. In fact, ours probably looks very similar.
I am a firm believer in education, and I think it is of particular importance to anyone with a home loan (regardless of whether it is in foreclosure or not). As I’ve written before, the current mortgage industry is very different than what we typically think of–with the local bank down the street holding the note until the loan is paid of in 30 years.
There are two pieces I highly recommend to help educate yourself about what you don’t see about the mortgage industry. The first is “The Big Short” by Michael Lewis (author of “The Blind Side,” Liar’s Poker,” and “Moneyball”). It is a past-faced book that will give you some background into the mortgage industry and many of the things that led to this country’s financial collapse. The other piece is “The Story of the CDO Meltdown: An Empirical Analysis” by Anna Katherine Barnett-Hart. It is a much more technical analysis and pretty dense reading, but it was very well done (and don’t be fooled by the fact it was written by a college senior at Harvard–it is better than a lot of the work many professionals have put out).
A couple of months ago, we wrote an article about why we should care about foreclosures. After all, as banks and opposing lawyers have told me, foreclosures come after the home owner got a loan and, for whatever reason, did not make the payments as agreed upon. If you haven’t read our previous post, I highly recommend it reading it to get a better picture of the current state of foreclosures.
I have been preaching for a while that foreclosures are about much more than just fairness to the home owner (though I believe that fairness should certainly be the starting point). Finally, in their recent ruling, the Massachusetts Supreme Court has come out and said it too. We are a country of laws, and foreclosure defense is about making sure our laws are followed. Justice Cordy of the Massachusetts Supreme Court, in his concurring opinion, summed it up perfectly:
“Although there was no apparent actual unfairness here to the mortgagors [homeowners], that is not the point. Foreclosure is a powerful act with significant consequences, and Massachusetts law has always required that it proceed strictly in accord with the statutes that govern it. As the opinion of the court notes, such strict compliance is necessary because Massachusetts…allows for [nonjudicial] foreclosure.”
What’s true in Massachusetts here is true in all 50 states. Foreclosure is a powerful act with significant consequences. Because the state legislatures and courts have allowed for that remedy, it is crucial that the laws be strictly followed.
This is one of the reasons I fight for homeowners facing foreclosure. If you are facing foreclosure or eviction, you should hold the banks to their responsibilities and make sure they are also following the laws of our land.
The Massachusetts Supreme Court issued a ruling voiding the seizure of two homes by Wells Fargo and U.S. Bank after they failed to show they actually held the mortgage to the homes at the time of foreclosure. The mortgages of the two homes at issue had been sold and assigned numerous times until they ultimately were placed in a type of trust that was sliced up and sold to investors in the form of mortgage bonds or mortgage-backed securities. Wells Fargo and US Bank were the entities that supposedly held the title to these houses on behalf of this “holding trust” at the time of the foreclosure sale. Each bank then bought the home that it foreclosed on, at a price well below market value.
In its ruling, the Massachusetts court ruled that the chain of title of the mortgage from the original lender (the originator) to these holding trusts was not clear. Therefore, these trusts did not have the right or ability to sell the property, and the purchaser of the foreclosed-upon property did not actually own it.
What will be the fallout from this Massachutes foreclosure ruling?
This is a rapidly developing area of law, but one of the most likely immediate results will be that judges who have been hesisitant to block foreclosure sales may take a second look at the banks’ documentation. These legal actions to stop foreclosures are being given added legitimacy as more and more of the banks’ practices are coming to light. If fact, the Massachusetts foreclosure ruling included a scathing rebuke of the lenders, calling their documentation “utter carelessness” and instructing mortgage holders “to take care to ensure that [their] legal paperwork is in order.”
I have personally stopped foreclosure sales and evictions in Texas, and I can tell you from first hand experience that these developments are creating a new legal landscape in which home owners fight to keep their homes. Judges traditionally have looked at foreclosure-related lawsuits as last ditch attempts to stall a trustee sale. Now, they are starting to develop a skeptical eye toward the banks.