A new article written by Steve Stanek in Heartland’s Finance, Insurance and Real Estate News publication examines the efforts by the Attorneys General in several states to ensure that the foreclosure proceedings taking place in their states are legal. The article outlines the efforts of several states and lenders to halt foreclosure proceedings until the documents were verified and to ensure that the foreclosures were not fraudulent.
“Attorneys general in all 50 states and the District of Columbia have thrust themselves into a mortgage maelstrom that had already stopped major mortgage companies from moving on some foreclosures.
The states’ attorneys general and bank regulators have announced they will examine whether mortgage company employees made false statements or prepared documents improperly.
The chief issue involves “robo-signers,” people who allegedly signed thousands of foreclosure documents and declared they had read the documents, understood them, and believed the foreclosures to be proper. Employees at several companies have admitted to signing thousands of foreclosure documents without reading them.”
Preventing fraud and ensuring that foreclosures are conducted according to the law is important, but some lenders warn against blanket moratoriums, because many foreclosures that are financially justified are being held up. The lenders contend that they are already actively attempting to work with borrowers.
“Five days before the attorneys generals’ announcement, the Mortgage Bankers Association, Financial Services Roundtable, and Housing Policy Council released a joint letter “to set the record straight” on the mortgage foreclosure situation.
“In several states,” the letter says, “some mortgage servicers have put final foreclosure sales on hold while they review their document procedures. It is important to note, however, that these are document process reviews; in almost all cases there are no factual disputes about whether the mortgage is delinquent, the amount of the arrears, or whether foreclosure is proper.
“Indeed, a substantial percentage of foreclosures are uncontested by borrowers. In the overwhelming majority of cases, we believe the facts presented to the courts in foreclosure proceedings about the debt amounts and delinquencies have been accurate.”
The letter also stresses that mortgage companies are trying to help borrowers. The letter says mortgage servicers completed 149,000 loan modifications for homeowners in August 2010, including 116,000 proprietary loan modifications and 33,000 Home Affordable Modifications.”
Legislators need to carefully considering enacting moratoriums on foreclosures, while fraud did occur in many instances, the majority of lending agreements were made in good faith and the government’s intervention in mortgages risks undermining the banks willingness to lend. If a bank cannot be assured that its loans will be repaid and that it may not be able to foreclosure in the event of default, it may be less inclined to lend.
Stanek’s article, “Attorneys General Enter Mortgage Maelstrom, Probe Foreclosures,” is available online at: http://www.heartland.org/firepolicy-news.org/article/28589/Attorneys_General_Enter_Mortgage_Maelstrom_Probe_Foreclosures.html
