Who's who in the mortgage foreclosure mess

As detailed in earlier posts much of the current scandal does not directly impact Michigan homeowners due to the fact that most foreclosures in this state proceed by advertisement rather than judicial action.  Many mortgagors, however, have questions about what the problem is in other states and why banks have place a temporary halt to foreclosure actions.  The attached article summarizes the situation nicely and explains the role played by various entities in the foreclosure fraud.

Bank of America loses $9,000,000,000 in Michigan deposits.

BoA claims these dramatic loses have to do with the reclassification of deposits, but I can't help but wonder if it has something to do with the way they treat their mortgage customers.  As an ominous sign to any mortgagor heading to Trott and Trott's offices trying to save their property from foreclosure, Bank of America ATMs are placed prominently in the law firm's lobby.

Vacant land has little value in Metro Detroit

With lending for construction almost non-existent greenfields that can be developed for single family residential have become virtually worthless.   The only reasonable approach would be to hold the land until lending practices ease or values increase dramatically.  That may be a possibility if you hold a single lot with a modest mortgage, but is challenging or impossible when you own hundreds of lots.  In those instances where you can't hold the property and service the loan, perhaps a loan modification is your best bet even if it is just to extend the term of the original loan - "pretend and extend" is not an uncommon practice for lenders - pretend the value is there and extend the term for repayment.  Although the loan may be inadequately secured, as long as the mortgagor continues to make payment, both parties have avoided having a loan slip into default.

Wayne County Family Law Bar Association

This afternoon I will be speaking to a group of a couple hundred family law attorneys at the Coleman A. Young Municipal Center in Detroit.  We will touch on short sales in the context of divorce.  This upside down housing market touches on many practice areas, but none more so than divorce law and the resulting property settlement.  In many instances former spouses end up living in the former marital residence after their divorce becomes final because they can't sell their house. 

Banks were quick to write and foreclose mortgages but slow to modify them.

All the usual players - Bank of America, Wells Fargo, GMAC and Litton Loan Servicing are implicated in this article which describes poorly trained and overwhelmed staff on both sides of the mortgage transaction resulting in bureaucracies that sloppily document a loan application and are challenging to work with for a loan modification.  I have been working with bank loss mitigation departments for 15 years and this has always been a problem, the only thing that has changed is the number of people experiencing the lack of concern and incompetence of these large companies. 

Loan servicing does not make any money for the banks and accordingly they do not devote sufficient resources to the needs of their customers.  Typical scenarios include overseas call centers with customer service representatives that can only read from a script to poor notes in a file to documents that are lost and files closed prematurely.  The result is a system that works slowly and poorly at a time when homeowners need it to work quickly and efficiently to keep their property out of foreclosure.  An attorney experienced in working with mortgage lenders may be able to help you obtain a loan modification that keeps you in your home.

The Federal Home Affordable program has options for borrowers who are current and in default of their mortgage loans.  It makes sense, however, to discuss the different options available so you can understand whether loan modification is either likely or, if obtained, will address your financial concerns. A loan modification my be a long or a short term solution to your situation, but is often is not the only approach for a stretched homeowner. 

Loan modification, in the long term, often provides only incremental or marginal relief for a homeowner.  If, because of a loss of income or new expenses your house is no longer affordable without significant payment reduction, it may be time to consider a short sale or other option before foreclosure is imminent. 

For my entire legal career I have counseled clients in danger of losing their homes and helped them identify pre- and post-foreclosure options that help them reach their goals.

Michigan non-foreclosure real property sales are on the rise

I'm not an appraiser, but information like this can only be good for the market.  Once people can actually start to sell their homes when they have to move, we'll be taking the very first small steps toward returning to something approaching stability in the market.  Even though these numbers show improvement, for most people who financed or refinanced their property in the 21st century, moving is going to require a short sale.

Mortgage Foreclosure Fraud

The news is filled with large banks acknowledging that they have or may have fraudulently foreclosed on properties throughout the United States in jurisdictions that require foreclosure by judicial action (i.e. lawsuit) Michigan allows foreclosure by judicial action, but the vast majority of residential mortgages are foreclosed by advertisement. Michigan foreclosure law was, however, recently changed to encourage and facilitate banks modification of mortgage loans. If a borrower timely invokes their rights to a mediation hearing and demonstrates that they are eligible for a loan modification and the bank denies the loan modification, then the borrower can force the bank to foreclose by judicial action which may cause problems for the bank.

The problem arises from the way that banks became the owners of the loans they now seek to foreclose upon. If the paperwork wasn't put in order when the account/contract was securitized and sold, then perhaps the homeowner has a defense to the foreclosure. Ultimately if the money was borrowed for the purchase of a property and not repaid the homeowner is likely to be required to pay or move, but what is important here is for the borrower to create some leverage in their negotiations with the bank be that for a loan modification, a deed in lieu of foreclosure, treatment of the deficiency or simply more time to move.

Consulting with an attorney can provide you with direction on how to use this situation to your advantage.

Why the foreclosure mess could last for years - Business - Real estate - msnbc.com

Why the foreclosure mess could last for years - Business - Real estate - msnbc.com

This story explains how we just keep getting deeper into this mess. Shorts sales allow a home owner to be pro-active in the handling of their property and the deficiency on their indebtedness. It is not a great solution, but its better than all the alternatives.

Bank of America to Freeze Foreclosure Cases - NYTimes.com

Bank of America to Freeze Foreclosure Cases - NYTimes.com

These defective documents cause concern for lenders in states which require foreclosure by judicial action. Michigan allows for foreclosure by judicial action, but the vast majority of residential foreclosures are by advertisement. A very different process which should not be affected by the apparently fraudulent affidavits described in this case.

Michigan has put in place additional processes to slow down a foreclosure by advertisement, but it remains a challenge to stop such a foreclosure since there is no ready process for getting in front of a judge. Although a temporary restraining order may be appropriate in some instances, that is the exception rather than the rule. Instead the best bet is to be proactive and get in touch with an attorney as soon as it becomes obvious that you are having difficulty making your mortgage payments. My rule of thumb is that if you've missed one payment and don't know how you are going to make the next payment, then it is time to speak with an attorney. You may need assistance working with your bank's loss mitigation department or the attorney might suggest other options for you.