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Author’s Editorial: How Do Recent Foreclosure “Freezes” Affect Your Pending Foreclosure?

September 30, 2010 1 comment

How Do Recent Foreclosure “Freezes” Affect Your Pending Foreclosure?

By now, if you are reading this, you probably realize that two major lenders in the U.S., Ally Financial, which is GMAC Mortgage, and JPMorgan Chase Bank have suspended their foreclosure efforts in 23 states across the country.  These states are all what are known as judicial foreclosure states, meaning the lender must file a lawsuit and be granted an order by a judge to allow them to sell the property at a foreclosure sale.  These suspensions and freezes have been done because the banks have all but admitted that they filed dubious documents with the various courts in support of their Complaints, Petitions, or other filings they filed to foreclose on properties.

Essentially, the banks have admitted that they employed “robo-signors” who signed off on Affidavits or other supporting documents used in the foreclosure process, either without knowledge of the actual facts of the case stated in the Affidavits, or that the Affidavits themselves included incorrect or untrue facts.  This is a huge problem, namely, because these were sworn documents, filed in a court of law, attesting that all of the facts stated were true.  This could be tantamount to committing perjury.

These Affidavits were not only the basis of the Complaint to Foreclose, but also in support of Motions for Summary Judgment when a homeowner retained an attorney to defend them.  To put a number on the people who have lost their homes due to these dubious, untrue documents would be impossible, it may number in the millions.

Now that these two banks have frozen their foreclosures in judicial states, at least a few of the homeowners are safe, for now.  But what happens to those homeowners who have already lost their homes due to these types of foreclosures? What happens to those homeowners who are facing foreclosure by different lenders, such as Bank of America, Citi or Wells Fargo? Better yet, what happens to the homeowners in non-judicial states, such as Missouri, who are still being foreclosed on? The short answer is, we don’t know, the long answer, at least in my opinion, can be found below.

Homeowners already foreclosed on:

Despite what many may think, homeowners whose home or property has already been foreclosed upon and sold, may still have claims against their lender.  In some cases, these claims may even be able to overturn the sale of the property and reinstate an owner’s rights.

Most states have what is called a right of redemption law, which allows a homeowner to repurchase their home or property for a certain period of time after the date of the sale, if the buyer of the property was the lender or investor.  Therefore, if the property was purchased by the lender, or by the investor (typically Fannie Mae or Freddie Mac), the homeowner may be able to get title to their property, even after the sale.

With the latest “admissions” by some lenders that the signing party on Affidavits filed with the court in support of foreclosure, the claims for fraud against these lenders by homeowners who have already been foreclosed on will skyrocket.  It will be extremely difficult for a lender to come back and argue that they did not defraud their customer (the homeowner) and/or the court by filing these documents.

Additionally, a homeowner who has already lost their home to foreclosure may have claims for negligence, breach of contract, or wrongful foreclosure against a lender who has already sold their home at a foreclosure sale.  Again, these claims relate back to the averments and assertions made on behalf of the lender to the court.  Claims that the foreclosing party was the holder of the note, or that they were assigned an interest in the note may prove to be false.  These types of statements, when false, give rise to a multitude of claims against the lender.

While these will not always be enough to return a house to its previous owner, they may be enough for a significant damages award to be rendered against the lender.  These damages awards may be enough to get a homeowner who wrongfully lost their home, a fresh start monetarily.

Homeowners facing foreclosure by other lenders:

The first thing for these homeowners to do is to watch the news and see if, or better yet, when, their lender declares a halt to foreclosures as well.  With the recent media surrounding the foreclosure freezes by Chase and GMAC, it is only a matter of time before other lenders follow suit.  It is not like this problem which caused the freeze is unique to only Chase and GMAC.

In addition to keeping their eyes peeled for their lender to join the parade, homeowners facing foreclosure in a judicial state by a lender who has not yet frozen their foreclosure process, is to file an Answer or Entry, or to retain an attorney to represent them.  If you fail to appear before the court by the required date, you may waive your defenses, or even potentially other claims you may have against the lender.  The worst thing you can do is fail to Answer or Appear in time and be held in default.

If a foreclosure is already in the process, an Answer has been filed, and a homeowner is currently facing a Motion for Summary Judgment, the best answer is to contact an expert who can inspect your loan documents for errors, and who can testify as to why your lender’s supporting Affidavits or exhibits may be false.  While it is fairly limited as to who may be an expert on this, there are many people out there who have already been qualified by the courts to testify as to these issues.  If you hire an expert, they may be able to create a question of fact to defeat summary judgment.

With the recent mess created by Chase and GMAC stopping foreclosures, there should be an increased level of judicial scrutiny when a lender files for a foreclosure.  However, the fact may be that many judges and courts do not even know that this is an issue.  Many people do not watch the news, read the paper or surf the internet on a daily basis.  Therefore, it is the job of attorneys, and homeowners representing themselves pro se to inform the court, or their individual judge of these issues by filing motions or requesting judicial notice of the issue.  Unless your judge knows of these problems the banks are having, they will continue with business as usual.

Homeowners in non-judicial states:

Homeowners facing foreclosure in non-judicial states face the largest hill to climb in defeating a foreclosure and protecting their homes.  This is because in a non-judicial state, the lender does not need to file a lawsuit, or any type of court document or proceeding, in order to foreclose.  Instead, the lender simply must publish notice of a pending sale and notify the homeowner according to the rules of their individual state, and then conduct a sale of the property.

However, that does not mean that a homeowner has no recourse.  Again, just as with homeowners in judicial states who are facing foreclosure from a lender who has not yet halted their foreclosure efforts, the first step is putting the court and judge on notice of what is going on.  Many of these judges may already be aware, but it never hurts to let them know again, and make sure they know that the lenders in other states have stopped foreclosures, but are still proceeding in your state.

If you can get a court to take judicial notice of the fact that lenders are filing false Affidavits in other states, or have done so in the past, especially if that is the same lender foreclosing on you, then it may raise the bar for them in an unlawful detainer action.  An unlawful detainer is essentially a suit filed to allow the lender to evict.  In a non-judicial state, typically, a lender cannot evict the occupant of the house without filing a court action and being granted an order, just like a foreclosure in a judicial state.  However, it is almost never the actual lender who purchases the house at the Trustee’s Sale, instead, it is the investor, either Fannie Mae or Freddie Mac.  Therefore, the lenders have every incentive to go through with foreclosures in these states, as they will almost never have to affirm that they were the holder of the note, or that they had any interest in the property at all.  Therefore, the lender is at very little, or no risk, when foreclosing in a non-judicial state.

However, homeowners still have recourse against these lenders following the sale.  A suit for wrongful foreclosure may, and should, include allegations that the lender was not the note holder, or did not have an interest in the property giving them a right to foreclose.  In support of these allegations, the lender’s admission that they were filing false documents to foreclose when they had no interest in other states may be judicially acknowledged.

It is my belief that the happenings in judicial states will come to bear, and will bear great precedent, for wrongful foreclosure actions in non-judicial states as well.  These admitted mistakes or frauds committed by banks in judicial states will be firm evidence, or at least cast a shadow of doubt on the lender’s ability or right to foreclose.  If the bar is raised on the lender’s burden of proof, they will oftentimes not be able to meet that burden.  Therefore, wrongful foreclosure suits should be more effective than ever in non-judicial states based on these recent developments.

Additionally, just like a homeowner who has lost their home in a judicial foreclosure, a homeowner whose house was sold at a Trustee’s Sale may have numerous claims against the lender for damages.  Claims such as fraud, negligence and breach of contract also exist in these cases.  The only claim that these property owners would lack is fraud on the court, because there was no court to perpetuate a fraud on.  However, that claim would arise the moment the lender files a false or misleading Affidavit or other supporting document with the court, in defense of a wrongful foreclosure claim.

Conclusion:

Despite the belief by many homeowners and others, there are defenses against foreclosure other than filing bankruptcy, settling up with the bank, or walking away from your home.  There are numerous defenses, mostly based upon errors made by the lenders in the lending process, or the chain of title of the loan.  These defenses change depending on the state the home is located in, and the individual foreclosure laws of that state.

The one thing that every homeowner facing foreclosure can, and should do, is speak with an attorney as soon as they are notified of a foreclosure action.  An experienced, knowledgeable, foreclosure defense attorney can analyze the situation of each individual homeowner, and determine what defenses they have against a foreclosure.  If a homeowner has already been foreclosed on, the attorney can determine what viable claims they may have for damages, or even for overturning the foreclosure sale itself.

The author, Rusty Reinoehl, is a foreclosure defense attorney with offices in St. Louis, Missouri.  He is engaged in helping homeowners defend their houses and property against wrongful foreclosures throughout Missouri and Illinois.  He operates the blog http://www.stlforeclosuredefense.wordpress.com and can be reached at stlforeclosuredefense@yahoo.com.

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Washington Post – Illinois 4th State to Suspend Ally Financial (GMAC) Foreclosures

Illinois becomes fourth state to suspend Ally Financial foreclosures

he Illinois department of financial regulation on Wednesday called on Ally Financial to stop all foreclosures currently underway and hold off from initiating new ones until the mortgage process can be investigated.

“Home foreclosure is serious business. It is no time to start cutting corners.The department intends to keep a close watch on Ally/GMAC Mortgage to ensure that its processes are fair to homeowners and in compliance with the law,” Brent Adams, the state’s secretary for financial and professional regulation said in a statement.

The state said more than 100,000 loans in Illinois are serviced by Ally and three quarters of those are primary mortgages.

In the past few days, Colorado, Connecticut and California have also asked the company to halt foreclosures. Five other states have opened civil investigations.

The legitimacy of foreclosures handled by the company came into question after Ally said on Sept. 20 that it had found irregularities in the preparation of documents submitted to courts in support of the actions. An employee of the company’s GMAC unit, “robo-signer” Jeffrey Stephan said he signed off on up to 10,000 documents a month without reviewing them thoroughly.

Illinois was already on the list of 23 states in which Ally had halted evictions and resales of homes that were repossessed. The regulator’s request broadens the moratorium to foreclosure actions in the early part of the process.

By Ariana Eunjung Cha  | September 29, 2010; 6:59 PM ET
Categories:  Housing

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JPMorgan Chase to Delay Forecolsures – CNBC.com

Click the following link to view CNBC’s video coverage of Chase’s halting of foreclosures!

JPMorgan Chase to Delay Forecolsures – CNBC.com.

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BREAKING NEWS…JP MORGAN CHASE FOLLOWS IN GMAC’S FOOTSTEPS, HALTS FORECLOSURES

Today JP Morgan Chase Bank followed in GMAC’s footsteps halting over 50,000 foreclosures across the country. This obviously will affect many homeowners nationwide. Click the link below for more!

http://abcnews.go.com/Business/wireStory?id=11759376

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Lost in the System – Washington Post

Lost in the system that took the house

By Ariana Eunjung Cha and Brady Dennis

Wednesday, September 29, 2010

Critical papers regarding his Orlando home were missing dates, and some signatures appeared to him to be forged. The mortgage had been sold so often – including once in the middle of the foreclosure process – that at times it was hard to tell which company was trying to seizethe house. He challenged the foreclosure in court but failed.

Now, as Fernandez seeks to appeal his eviction and get his home back, he has learned that the law firm representing the banks is under investigation for fabricating foreclosure documents. And his file was signed by Jeffrey Stephan, a document processor who made headlines last week for approving what could be hundreds of thousands of cases without verifying whether the foreclosures were justified.

Fernandez says he longs for the days when homeowners knew the bankers holding their mortgage and could work out a compromise when hard times hit. Today, he said, it’s like “fighting a machine.” “You feel like you’re alone and getting beaten up by the system,” said Fernandez, 59, who missed three monthly payments after a heart attack nearly ruined his greeting card business.

Fernandez’s story provides a glimpse into the bureaucratic maze his foreclosure is caught in, along with millions of others working their way through the nation’s courts in the wake of the financial crisis. It is a system rife with shoddy documents, forged signatures and, some state law enforcement officials allege, outright fraud by lenders eager to rid themselves of bad loans.

As more of these practices are coming to light, the entire foreclosure system is facing the threat of grinding to a halt. Connecticut, California and Colorado have frozen all foreclosures by one major lender, and other states are pondering whether to follow suit.

Critical papers regarding his Orlando home were missing dates, and some signatures appeared to him to be forged. The mortgage had been sold so often – including once in the middle of the foreclosure process – that at times it was hard to tell which company was trying to seizethe house. He challenged the foreclosure in court but failed.

Now, as Fernandez seeks to appeal his eviction and get his home back, he has learned that the law firm representing the banks is under investigation for fabricating foreclosure documents. And his file was signed by Jeffrey Stephan, a document processor who made headlines last week for approving what could be hundreds of thousands of cases without verifying whether the foreclosures were justified.

Fernandez says he longs for the days when homeowners knew the bankers holding their mortgage and could work out a compromise when hard times hit. Today, he said, it’s like “fighting a machine.” “You feel like you’re alone and getting beaten up by the system,” said Fernandez, 59, who missed three monthly payments after a heart attack nearly ruined his greeting card business.

Fernandez’s story provides a glimpse into the bureaucratic maze his foreclosure is caught in, along with millions of others working their way through the nation’s courts in the wake of the financial crisis. It is a system rife with shoddy documents, forged signatures and, some state law enforcement officials allege, outright fraud by lenders eager to rid themselves of bad loans.

As more of these practices are coming to light, the entire foreclosure system is facing the threat of grinding to a halt. Connecticut, California and Colorado have frozen all foreclosures by one major lender, and other states are pondering whether to follow suit.

But lawyers and law enforcement officials in a handful of states contend that they have found far more serious examples of fraud. These officials argue that the companies filing foreclosure claims often did not have legal standing to kick people out of their homes and used forged paperwork to cover their tracks. Problems with foreclosures have caught the attention of attorneys general in Texas, North Carolina, Ohio, Iowa, Illinois and Florida, among other states.

During the housing boom, investment banks and hedge funds constantly packaged and repackaged mortgages into massive securities that could be traded just like stocks. This mechanism, fueled by the tremendous appetite to make money off mortgages among Wall Street investors, ensured there would be enough financing available to offer a mortgage to almost anyone who wanted one.

But in the wake of the housing bust, the constant shuffling of loans has left a baffling paper trail and, at times, confused even big lenders about who has ownership over a mortgage. In Pinellas County, Fla., for example, two banks tried to foreclose on the same house, just one of several similar cases that are being highlighted by homeowners’ attorneys across the country.

“Something’s not right here,” said Michael Holmes, a 56-year-old real estate agent whose house in Belfast, Maine, is in foreclosure. “When you make phone calls, you can never speak to anyone who can speak to anything you needed. And when you send in paperwork, you don’t get a response.”

Despite evidence of such problems, some judges focus solely on whether a borrower missed their monthly payments.

John Kenneth Hautman, a D.C. area lawyer, says the statement by Stephan and other processors that they are not checking the foreclosure files they are signing raise doubts about the documents’ accuracy and authenticity. It’s possible that some people who should have kept their homes are now on the streets.

Hautman made these arguments when defending a couple facing foreclosure in Potomac. But the judge brushed off the concerns, he said.

Hautman said he was shocked. “Signing an affidavit saying you have personal knowledge when you don’t is perjury,” he said.

“No one has responsibility of oversight for the foreclosure process,” Hautman said. “It’s totally run amok.”

On his quiet block in Orlando, Fernandez had no idea his loan had been traded from bank to bank. J.P. Morgan Chase and its document processor, Ally, served him his papers. But months later the loan was transferred yet again to Bank of New York Mellon Trust.

If Fernandez’s documents were forged, it is unclear who would have done so and for what purpose. Housing experts say in general, fabricated foreclosure documents often indicate that banks and document processors have lost track of the papers that prove who owns a loan.

When Fernandez tried to ask the banks about his file, he was referred to a local company called the Florida Default Law Group, which gave himvague answers. He later learned this law firm was under investigation by state law enforcement for fabricating foreclosure documents.

Lisa Nason, a spokeswoman for the Florida Default Law Group, said the firm will not comment on active cases. In regards to the state investigation, she said the company is “confident it will continue to be vindicated as a high-quality law firm.”

Ally spokesman James Olecki also declined to comment about individual cases, but he said his firm is “confident that the processing errors did not result in any inappropriate foreclosures.” Ally, he added, is no longer sending new referrals to Florida Default Law Group.

J.P. Morgan Chase and Bank of New York Mellon declined to comment.

Until his eviction, Fernandez was confident he could work out a plan to keep his home. He and his wife, Miriam, had missed three payments while he recovered from a heart attack and quintuple-bypass surgery, but they had at least $50,000 of equity in the home they had bought for $180,000. Surely the bank would let them tap into that equity to make up their missed payments.

ernandez drafted and filed an affidavit challenging his foreclosure, but when he missed the ensuing court date, a judge ruled in favor of the lender. Case closed.

In February, the house was sold to an investor for $79,000. In April, Fernandez and his wife were evicted. They didn’t have the courage to tell their daughters, who are grown and live elsewhere.

While Fernandez’s business has revived, he and his wife are homeless. These days, they drift from motel to motel in central Florida, determined to keep fighting for a home they feel they never should have lost. Their lodging costs come to about $1,000 a month, only a shade less than the $1,200 monthly payment they used to make on the home that somebody else now owns.

chaa@washpost.com dennisb@washpost.com

Research editor Alice Crites and staff researchers Magda Jean-Louis and Julie Tate contributed to this report.

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BREAKING NEWS, CHASE FOLLOWS GMAC’S LEAD AND SUSPENDS FORECLOSURES!

JPMorgan Halts Some Foreclosures on Procedural Worries

Published: Wednesday, 29 Sep 2010 | 5:06 PM ET

By: Diana Olick
CNBC Real Estate Reporter

JPMorgan Chase has announced it will re-examine documents filed in current foreclosure cases.

The review could affect at least 56,000 foreclosures. JPMorgan Chase [JPM  38.41   -0.54  (-1.39%)   ] is the third largest mortgage servicer in the nation, with $1.35 trillion in business and a 12.6 percent market share, according to Inside Mortgage Finance.

“It has come to our attention that in some cases employees in our mortgage foreclosure operations may have signed affidavits about loan documents on the basis of file reviews done by other personnel—without the signer personally having reviewed those loan files,” says JPMorgan spokesman Tom Kelly.

In the meantime, the company has requested that the courts not enter judgments in pending matters until the review is complete, a process they say should take a couple weeks.

“We believe the accuracy of the factual loan information contained in the affidavits was not affected by whether or not the signer had personal knowledge of the precise details,” Kelly adds.

About 7.5 percent of total Chase servicing is either three months or more in default or in foreclosures, “which translates to about half a million borrowers either already in foreclosure or heading towards foreclosure,” says Guy Cecala, CEO and publisher of Inside Mortgage Finance.

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WASHINGTON POST LOOKING FOR EXAMPLES OF ROBOSIGNERS

Please click here for a link to the Washington Post

The Washington Post has put a notice (click above) on its website looking for examples of affidavits signed by Jeffrey Stephan and Beth Ann Cottrell. If you have been foreclosed and that was a result of an affidavit signed by either of these people, please share that with the Washington Post. What the Post doesn’t realize is that those two robosigners are just the tip of the ice berg. There are hundreds, if not thousands of these robosigners, and they don’t work just for GMAC. They work for every “lender” who is involved in foreclosing homes.

It seems as though the foreclosure industry is standing on the brink of disaster as I type this. The media has finally caught wind of what they have been doing to innocent homeowners for YEARS, and they are running with it. The media has started standing outside the homes of these robosigners, almost like paparazzi! As this thing begins to snowball, it is only going to get worse and worse for every lender, and they are hopefully going to be forced to clean up their acts!

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