Archive for March, 2011

The Changing Public Opinion on Foreclosure

As a foreclosure defense attorney, I have the privilege of being on the front lines in the battles with the banks.  I get to see the fraud, misrepresentation, and questionable paperwork first hand.  And for the homeowners I represent, they have had the misfortune of seeing the banks’ incompetence up close.  For the rest of the country, this hasn’t always been the case.

Based on many comments I’ve heard, most folks used to side with the banks.  They held the opinion that if a bank foreclosed on a property, it probably had the right to do so.  After all, the homeowner got a loan, and the loan wasn’t repaid.  This public opinion–rightfully–is changing.

Recently, the Massachusetts Supreme Court ruled that banks must follow the laws of their state or they could not foreclosure.  The court expressly ruled that it wasn’t even a matter of fairness to the homeowner–it was about following the rule of law.  Clearly, the court found that the banks in that lawsuit had not followed the rule of law.  Kind of scary, considering the consequence of that failure is a family losing their home.

The judges I have appeared in front of are also beginning to give foreclosures a second look.  At first glance, the banks have an easy argument to make:  there was a loan, the loan became delinquent–hence, a foreclosure.  But as anyone who follows this blog knows, residential mortgages aren’t that simple.  The overwhelming majority of them have been securitized, making the issue of who owns the loan, and therefore, who might be entitled to foreclose, very complicated. 

The American public is also starting to come around on the idea that–surprise!–banks falsify documents to cover their mistakes.  The robo-signer controversy finally shined the light on the big banks’ questionable practices. 

Most recently, I came across an op-ed piece by Dylan Ratigan that perhaps sums up the change in public sentiment better than anything.  Dylan Ratigan was a long-time anchor and host on the financial news network CNBC, which caters to the banking and finance industries.  He even hosted a show, Fast Money, that was all about stock trading.  The op-ed piece calls out banks for making fraudulent loans and then betting against them, and politicians for not doing anything about it.  I think this criticism, coming from this source, is very indicative that there is a major shift in public opinion on the banks.

What does this mean for homeowners facing foreclosure?  Quite a bit, actually.  It means that the chances of obtaining a temporary restraining order or injunction stopping a foreclosure have increased.  It means that judges are more willing to allow attorneys, such as myself, to investigate what really went on with people’s mortgages.  In short, it means that families struggling with their mortgage have a fighting chance to stay in their homes.

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Kicking Homeowners While They’re Already Down?

Our leaders in Washington are once again stirring up talks about “mortgage reform.”  While this sounds encouraging for consumers at first glance, there may be many unintended consequences that hurt would-be home purchasers and that would further drive down housing prices.

One of the proposals once again being debated is doing away with Fannie Mae and Freddie Mac.  Fannie and Freddie are both “government sponsored entities,” or GSE’s.  While they are technically private companies, they having the support and backing of the federal government.  In fact, you may remember that in 2008 the federal government stepped in to bail out these faltering giants of the mortgage industry.  When working properly, Fannie Mae and Freddie Mac played an important role in the residential mortgage business.  They essentially injected liquidity into the market.  In plain English, that means they helped the banks free up money to lend to home buyers.  That, in turn, helped keep interest rates affordable.

Of course, Fannie Mae and Freddie Mac got greedy and their executives became more concerned with lining their own pockets than serving the public interest for which they’d been created.

Now, homeowners and future homeowners across America may have to pay for the sins of these few crooked executives.  No doubt, Fannie and Freddie became broken, and the bailout the federal government gave them has and will continue to cost taxpayers billions of dollars.  However, when your car breaks down, you don’t just throw it away–you fix it, because your car serves a valuable purpose.  The same is true of Fannie Mae and Freddie Mac. 

When Fannie and Freddie are working properly (and that is the key), they serve a valuable purpose:  they make home ownership in America more affordable and hence, a reality for more folks.  Now, that doesn’t mean that every American is entitled to a mortgage or deserves a loan well beyond their ability to repay.  And it doesn’t mean that banks should be allowed to create exotic loans that fool consumers into thinking they can afford champagne if they’re on a beer budget.  But a properly functioning Fannie Mae and Freddie Mac does mean that deserving families have a better chance at getting a loan they can afford.

Of course, Washington usually seems to be more concerned with politics than with doing right by the American people, so no one knows how mortgage reform is going to turn out.  However, stay tuned for updates, as I expect the entire industry will be undergoing major changes in the next 6 to 18 months.

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Bank of America Gets it From Both Ends

In a move that has to make the executives at Bank of America feel like there is no end in sight, shareholders of BoA filed suit yesterday claiming the Bank’s inability to properly move through foreclosures cost shareholders nearly half of BoA’s market value over the past year.

As reported in the Austin Business Journal, the suit claims BoA  “did not properly record many of its mortgages when originated or acquired, which severely complicated the foreclosure process when it became necessary.”  The real problem for BoA, which, based on my personal experience, always seemed to cross its t’s and dot its i’s, isn’t that it was funding terrible loans (while I’m sure there were some, the vast majority of BoA originated paper seems to be clean), but that it acquired a steaming pile of crap known as Countrywide  Financial.

There is a reason BoA was able to purchase Countrywide Financial in the middle of 2008 for $4.1 Billion in stock when only 6 months prior, Countrywide reported over $250 Billion in assets in filings with the SEC.

It was a risky move at the time, and several financial commentators weren’t sure it was the best move for the banking behemoth.  Charles Duhigg of the New York Times scratched the surface in this article right after the acquisition was announced, and several of his concerns have manifested themselves in the nearly 3 years since.  Namely, BoA had no idea what they were getting into.  At the time, BoA certainly didn’t realize Countrywide’s CEO, Angelo Mozilo was about to be indicted by the feds, and while those charges were recently dropped, don’t look for civil complaints against the man known as Agent Orange to stop anytime soon.

BoA also clearly did not realize just how bad was the paper Countrywide held, nor the breakneck pace they funded sub-prime loans through the early aughts.  However, you would think when the CEO of countrywide dumped over $130 million worth of his stock in 2007, constituting over 1/3rd of his entire sales over the previous 25 years, red flags would go off.  Apparently not.

Nevertheless, whether BoA failed to perform adequate due diligence, or simply determined the cost was cheap enough to outweigh the risk, it soon became apparent that in the short term, the acquisition was much more costly than $4 billion.

So…what does this all mean to you, the good readers of this blog?  In a nut shell, it means we get giddy when any foreclosure dealing with Bank of America, Countrywide or Recontrust (Bank of America’s foreclosing unit) comes across our desk.  Countrywide was so sloppy in its packaging and selling of loans, and Recontrust so disconnected from Bank of America in their foreclosure proceedings, its like a they are setting up our case for us.

If you are in foreclosure or have a loan with BoA, contact us for y our options.  Those options are more than likely better than if you had used any other lender available at the time.

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Bless Their Hearts…The Banks are Trying

Not sure whether to give the banks credit for trying, or to feel sorry for their desperate attempts at trying to figure out what in the world to do on foreclosures challenged by competent attorneys.

In the past week we have had two cases come across our desk where the plaintiff in the foreclosure proceeding was actually the trust that purportedly held the note and deed on our client’s homes.

If you have been reading our blog for any amount of time, you know that our main defense against most foreclosures is that the bank who is foreclosing is actually so far removed from the actual loan and deed that they have no standing to sue. Our argument all along has been that it is actually the Trust who funded the loans is the proper party to bring the foreclosure, not simply the servicer or originator or MERS or another party that had only a tangential interest in the loan.

While I admire the spunk of these banks for suing in the name of the trust, they are still missing an essential piece of the puzzle, and that is the chain of title. Now the problem the banks have is that this trust, claiming to be an interested party, shows up nowhere in any document or on any legal description in the county recorder’s office. This lack of documentation has allowed us to obtain two more TRO’s stopping foreclosures and we feel confident temporary injunctions will be issued as well.

Until the Banks open up the true, full chain of title on these loans, homeowners can make valid arguments as to the legality of these foreclosures, whether it is the bank bringing it or the trust.   And with proper legal representation, they can do it successfully.

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Dallas Attorney Stops Foreclosure Sale Hours Before Home To Be Auctioned

Chalk up another win in Texas for homeowners.  Attorney Walker Duke of Duke Law Office, P.C. obtained a temporary restraining order in Dallas County, stopping a foreclosure sale that was to take place on the courthouse steps just 18 hours later.  Wells Fargo brought the foreclosure, though HSBC Bank USA had a hand in it as well.  Despite efforts to negotiate with Wells Fargo, the bank would not back down from its efforts to foreclose.

“There were some serious questions about the chain of custody of the house Note and deed of trust, and whether the bank had the right to foreclose,” said attorney Walker M. Duke, who represented the homeowners.  “Because the consequences of foreclosure are so harsh, I think the Court made the right decision to take a second look at the bank’s claims.” 

Duke further advised, “Unfortunately, this is another example of how the banks will run over homeowners’ rights without blinking.  Wells Fargo would not even listen to the very same arguments that the Court accepted.  Had it not been for this temporary restraining order, this house would have been sold.”

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