Foreclosure limbo: What to do
News that some foreclosures have not been processed correctly could mean more time before troubled homeowners face eviction. But it also raises questions around whether completed foreclosures were legitimate.
As the "robo-signing" fiasco continues to unfold, questions about the legitimacy of completed foreclosures and those under way could mean millions of troubled homeowners face uncertainty until the crisis is sorted out.
The news that, at least in some states, foreclosures are being put on hold while lenders and title companies decide if their court actions were conducted properly, could mean people facing foreclosure may be able to stay in their homes payment-free for a while longer while lenders figure out where things stand.
Already, in Florida, it takes an average of 578 days to foreclose, beginning from when the lender sends the owner a notice of default, says Grant Nelson, a real-estate and mortgage-law expert at Pepperdine University law school. Florida, the epicenter of the foreclosure crisis, is where most of the current trouble seems to reside.
That trouble was uncovered in lawsuits by some homeowners, mainly in Florida. In several suits, clerks at lending companies acknowledged that, although they signed court papers to take away people's homes, they didn't actually look at the documents.
"All this means that people going through foreclosure are going to get more free rent," Nelson says.
The revelations are likely to trigger lengthy investigations into whether foreclosures were done properly and, if not, who actually owns the homes at this point, experts say. Lots of time will be spent and lots of lawyers will get paid, they predict. Meanwhile, people living with foreclosure hanging over their heads will continue in limbo for even longer periods while it all gets sorted out.
And even though the process could set back a real-estate recovery, it will eventually be sorted out, experts predict. Nelson says that lenders are unlikely to walk away from homes for which they're owed money, especially since most mortgages now are insured by the U.S. government, through Freddie Mac, Fannie Mae, the Federal Housing Administration or the Department of Veterans Affairs. If the homeowner doesn't pay, the insurance eventually kicks in.
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Nelson and others say that, after the red tape is unraveled, lenders will resubmit the previously flawed foreclosures. Some homeowners have been successful in fighting their foreclosures in court. But most truly have fallen into default on their loans and so, when the legal technicalities are solved and the lenders foreclose again, they'll probably lose the home, Nelson predicts.
Four lenders — JPMorgan Chase, GMAC Mortgage, Bank of America and Wells Fargo — are under the spotlight for supposed document flaws. News reports have said that the flawed foreclosure cases are in 23 states where courts oversee foreclosure. (In many states, no courts are involved and the lenders are able to repossess a home with a mortgage that's in default without going to court.)
- MSN Money: Foreclosure crisis enters new phase
The lenders haven't released which states they're concerned about.
Rick Sharga, senior vice president at RealtyTrac, which keeps track of foreclosure statistics, news and legal issues, says that 48 states allow judicial foreclosures. But some allow only courts to handle foreclosures while others use both processes.
Here's Sharga's "best guess" of the 23 states involved. These are ones that allow only judicial foreclosures, or that mostly do them in courts:
- New Jersey
- New Mexico
- New York
- North Dakota
- South Carolina
- South Dakota
Can you believe the author didn't list Michigan as a state with possible issues!!! With our record unemployment, and high labor union driven pay scale, there are lots of people in trouble here. That isn't saying that they can blame only the banks, they should have used better judgment, but they are in trouble just the same. I just spent 1 1/2 years fighting with GMAC, and it took an act of congress, one of our legislators to assist in leveraging Fannie Mae into investigating my foreclosure. After 3 months of investigation, and perseverance of a dedicated woman, we just received papers from GMAC lawyers that they are reversing the foreclosure due to an "error", and they have rewritten my loan. Fannie Mae also has required GMAC to drop the fees charged to me as well during the process. It can be won, but it has taken a toll on my family. All this happened after I gained employment that pays 90% of my original pay before I was laid off, and GMAC ignored that fact. The banks should be held responsible and they should also assist those homeowners that did not fall behind. If the market is resetting, every homeowner should benefit by a level playing field.
Dear Dabdhal...We don't need anyone's sympathy. When we bought our home, everything was working out just fine. As a matter of fact we were able to make monthly loan payments precisely for five years before my husband's construction business crushed along with the whole system. We were trying to save his company along with our beloved home. Therefore we exhausted our savings faster than we anticipated. It's always easier to give a piece of mind to the others.
So many houses, in so many locations, in so many states and they ALL have "paperwork problems"?
sniff, sniff.......I smell obama!
For those of you that are trying to get a restructured loan - forget it. The gov. gave the TARP money bail out to the banks to cover their foreclosure loses. So the bank has more incentive to foreclose than to restructure the loan....because the way that Obamas boys structered the thing is this: The banks essentially only take a small loss of 2%, or in some cases actually MAKE money by foreclosing. Why should they give you a restructured loan @ todays low interest rates? From a foreclosure they get paid the mortgage insurance premiums and also the gov. bail out money on each and every "loss" they can prove. They get very little if it is a short sale and none if the loan is restructured. Dah.....why would they NOT foreclose?
Does this clear up why they are playing this game? The banks are not stupid.....they are just playing a differant game now - they are now making money off the tax payers bail outs.
I feel very sorry for those of you that have had long term unemployment, or a major illness. The rest of you that risked your kids homes and used them as an ATM - you deserve to lose them. You are stealing the equity of your neighbors homes that are trying to do the right thing and pay for them, and you are making this a true crisis...and you played right into these Banksters hands.
Bush was on the take from the oil companies and Obama is on the take from the financial institutions - this is "change you can believe in"?
Fool me once shame on you....fool me twice, shame on me.
Go to the polls in Nov. and throw every incumbant all the way down to your local city government right out the door and let them know why.
For petes sake, stop feeling sorry for yourselves and stop blaming others. Start doing something by having some guts and standing up to these idiots in Washington....you are all just sheep being led to the slaughter right now...and if you don't stop them, the government will own every one of your houses, they will dole out the health care, the oil....and soon we will truly be a socialist society.
At least in Europe they had the guts to strike for a day. The only thing you people are doing is trying to figure out a way to stay in your houses free for another few days...until they come and take them for good.
Go back to the 50's - qualify for only what 1 wage earner can afford, and use the 2nd wage earner to pay that loan off early, stop buying all your toys, vacations, sports.....and get back to some family values, ethics and consideration for your neighbor. That is the only thing that is going to turn us back around now - it is certainly not going to be this administration.
dear OHIO 1234 thank god you are not my childrens teacher. you sound like a horrible person.
apparently you, OHIO 1234, have the crystal ball that tells us that we will have GUARANTEED income for the next 30 years. good for you. go ahead and buy that house.
as for the rest of us intelligent people, ignore those less intelligent ones such as OHIO 1234. no matter how well you plan, no matter what degree you have you can not change the economy nor the incompetents of banking. you cannot force another entity to follow the law but you can sue their pants off.
AMERICA WAKE UP *** BANKS ARE STEALING OUR HOMES !!!! CHECK OUT THIS LINK !! http://www.youtube.com/watch?v=ssl5yb7FewA&aia=true THE FORECLOSURE MESS
SEE WHY THE BANKS ARE WANTING OUR HOMES !!!! NOW THE BANKS ARE SITTING ON ALL THESE EMPTY HOMES FOR YEARS TO COME ..... AMERICA SHOULD NOT TRUST
THE BANKS >>>> THEY ARE STEALING OUR MONEY AND HOMES RIGHT OUT FROM UNDERNEATH THEIR OWN CUSTOMERS >>>> WAKE UP AMERICA