Fraud, greed, and government regulations led to the crash of the housing market. Now banking fraud, greed and general carelessness could lead to a stabilization in the housing market.
Why?
Because the expected glut of foreclosed homes is not going to hit the market soon. Thousands of foreclosures are being delayed and could even be cancelled.
As of now, JPMorgan Chase and GMAC have suspended all foreclosures in 23 states. GMAC didn’t provide a number, but Chase is suspending 56,000.
Home sales have been undermined these past months by the expectation that large numbers of foreclosures were about to be released – causing housing prices to slide further. That expectation has caused many consumers to put off buying a home.
If the flood stops or slows considerably, housing prices may stabilize.
How did this happen?
In their quest to speed up the foreclosure process, banks have been cutting procedural corners. Both GMAC and Chase have admitted to filing affidavits for summary judgment without knowing if the facts stated in those affidavits are true.
By signing the document, the signer indicates that he or she has personal knowledge that those facts are true. That means the signer is saying that he or she has reviewed the cases and knows the documents are correct. And that hasn’t been the truth.
It appears that banks have been taking their procedural cues from our Senators and Representatives – stating in their own defense that since they have so many foreclosures to process, they simply didn’t have time to review the cases before signing the affidavits and other documents.
The term “robo signers” has been coined to describe the way banks have handled the signing of legal documents.
Unfortunately for them, those lawmakers who sign bills into law without reading them aren’t stepping up to say its OK to file affidavits without reviewing the cases.
Shifting the blame is nothing new, and apparently banks are shifting the blame to the legal firms who supply the documents for signing. According to the South Florida Sun-Sentinel, Florida’s four largest foreclosure law firms are now under investigation for fraud.
Flordia is one of the 23 states where Chase and GMAC have suspended foreclosure activity for the time being.
Consumers are “lawyering up”
Lawsuits are already being filed, and according to lawyers representing homeowners, the lenders will likely be defeated in court due to their own carelessness. Many of the necessary documents have been misplaced or otherwise disappeared.
This will come as no surprise to real estate professionals who deal with short sales. They have been struggling with the lenders’ “lost document syndrome” for the past couple of years.
Although no others have admitted wrong-doing, Chase and GMAC are not the only banks affected. Experts predict that all banks will now take a closer look at procedures in an effort to avoid lawsuits from homeowners who feel they have been wronged.
The expectation is that banks will make a greater effort to keep people in their homes rather than rushing to foreclose. That, of course, would be good for homeowners, neighborhoods and housing prices.
Exposing and halting fraudulent activity is always a good thing. But there is one “fly in the ointment” in this situation.
Homeowners whose foreclosures are final and whose previous homes have been sold may be stepping forward to file lawsuits. If the courts find that the completed foreclosures were in fact done improperly, families who bought those foreclosed homes could find themselves entangled in a legal mess not of their own making.
Could this possibility at least temporarily slow the popularity of buying banks’ REO properties?
Tags: foreclosure, fraud, mortgage news
