Document Flaws Have Put Brakes on Foreclosures

[sonomak]

Source: New York Times

The foreclosure machinery that has forced millions of Americans out of their homes is beginning to seize up as some lenders and their lawyers are accused of cutting corners in their pursuit of rapid home repossessions. Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country’s biggest home lenders in the past two weeks. Even lenders with no known problems are expected to approach defaulting homeowners more cautiously and look more aggressively for resolutions short of outright eviction.

Despite the turmoil, some economists said the breakdown could ultimately lay the groundwork for a real estate recovery. Stricken neighborhoods across the country, for example, could benefit. One big factor undermining home sales is fear of a large number of foreclosed homes coming to the market. If the foreclosures are delayed or never happen, housing prices might find a floor. “Maybe this is like shock therapy,” said the economist Karl E. Case. “Maybe this will actually get the lenders to the table and encourage them to work out deals that are to the benefit of everybody.”

While such a happy ending is possible, the near term is more likely to produce paralysis and confusion. If foreclosures were not properly done, families who bought the troubled homes could be vulnerable to claims by the former owners. And as more defaulting homeowners become aware of the lenders’ problems, they are expected to hire lawyers and challenge the proceedings against them.

Apparently alarmed about such a possibility, one of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that “until further notice” it would not insure title to properties foreclosed upon by GMAC Mortgage, the country’s fourth-largest home lender and one of the two big lenders at the center of the current controversy. GMAC declined to comment, and Old Republic representatives did not return calls. Both GMAC and JPMorgan Chase have acknowledged legal missteps in processing mortgages — 56,000 in the case of Chase alone — and have suspended all foreclosures in the 23 states where they need a court’s approval.


Read more: http://www.nytimes.com/2010/10/01/business/01mortgage.html

[Xipe Totec]

1. Flaws? Is that the new euphemism for fraud? nt

[Skink]

2. Sounds like Obama is playing hardball now.

these companies don't voluntarily do anything.

[dixiegrrrrl]

3. These are STATE courts and title companies not federal.

I have not heard that the President is involved at all.
I HAVE been following this issue closely, posting a lot of stories bout it in the economy forum, and to date only
ONE referral has been made to the Feds, that was for illegally notarizing about 18,000 mortgage records.

However, having said that, there has been LOTS of publicity and Grayson just made a marvelous video on YouTube
outlining the entire mortgage fraud process, so the banks are feeling the heat.
It would be preferable to keep the cases in state courts, lots and lots of state courts.

[girl gone mad]

4. Obama has nothing to do with this.

[DirkGently]

5. There is no federal requirement that lenders slow down or be more careful. And they don't care.