This article will be a very short explanation of how the robo-signing scandal occurred and really why it occurred.
In about 25 states a lending institution or bank with an outstanding mortgage must go through the courts to foreclose on a mortgage.
More important, they must produce all the necessary documents that they, in fact, are the owner of that mortgage.
The problem was that most banks sold their mortgages off by electronically transferring them without any paperwork changing hands and little or no documentation as to who really owned the mortgage.
That is precisely the reason why so many mortgages, especially in New York State (and many other states)(see additional info: http://www.nolo.com/legal-encyclopedia/how-foreclosure-works-30066.html) could not be foreclosed upon, since the banks and lending institutions had no real paperwork.
In 2010, where if all began, the robo signing in most cases was done by employees of the several of the larger banks, (Bank of America, J. P. Morgan Chase, Citibank, Wells Fargo and Ally/GMAC, who just signed thousands of documents every month, maybe spending 30 seconds or less, reviewing the paperwork.
I am not sure if they even knew the extent to which they were signing up people’s lives and properties and that what they were doing was out and out fraud and illegal.
Attorneys defending these homeowners forced the issue of who owned the actual mortgage and that is where the hold up came about. Banks could not foreclose on homes, without the proper documents, actually showing that they were the lien holder of the mortgage.
Even states that didn’t require judicial process to foreclosure on homeowners; the home owners sued their banks and what came out of these lawsuits was the fact that the judges saw discrepancies in the paperwork, without the necessary and crucial documents showing that they owned the mortgage.
This in fact, held up almost all the foreclosures moving forward and kept people and their families in their homes for a very long period of time (three to six years or longer).
This also allowed owners to negotiate or modify their mortgages and workout a situation that would allow them to stay in place. The banks, if they could, might have been able to get some kind of monetary settlement, but could not take possession of the real estate.
Unfortunately, anyone having a mortgage owned by Freddie Mac and Fannie Mae, but serviced by those banks, were not part of the settlement.
However, you can still check and see if you are eligible by calling Rust Consulting at 1-866-430-8358. You can also see whether Freddie Mac or Fannie Mae owns your mortgage by going to: www.knowyouroptions.com/loanlookup
In February 2012, 49 state attorneys general and the federal government reached a historic settlement with five of the nation’s largest banks.
A $25 billion settlement was reached, whereby distressed current and previous owner occupied homes found some relief.
However, the states that were part of the settlement, received $2.5 billion.
Homeowners who lost their homes because they were not properly offered loss mitigation options or were otherwise improperly foreclosed on between Jan. 1, 2008 and Dec. 31, 2011 are eligible for cash payouts from a $1.5 billion fund. Each homeowner, who filed by the initial deadline of Jan. 18, 2013, received $1480 for the bank’s violations of inadequate and false paperwork. Checks went out first between June 10 2013- June 17, 2013. Owners that were under water, where their mortgages were greater than the value of the home, could go back to the bank and renegotiate or modify their mortgage (as discussed in last weeks article) but who were current with their payments.
First and second mortgages were included in this settlement, as long as the homeowner was a primary resident.
However, 44 percent of the funds, unfortunately, never made it to the homeowners hurt by the crisis, but were redirected to rainy day funds, budget balancing efforts, and economic development funds.
Lastly, I believe a great many intelligent and ignorant homeowners who took out mortgages, way beyond their financial means, were also to blame for the crisis.
We all want to own or be in a larger home, but the banks should have protected the public from the greed that took place.
The subprime loans given out made no sense at all, but even today, some are getting 3 percent down payment loans, but can they really afford them one, two or even three years from now?
Debt to income ratios should be adhered to and even though I have seen 60 percent debt/income ratios, with mortgage approvals, creative mortgages still do not make any sense whatsoever.
Are we going to bail the system out one day again in the near future?
Hopefully Not! We shall wait and see…..
Philip A. Raices is the owner of Turn Key Real Estate in Great Neck. He can be reached by mail: [email protected] on by phone at (516) 647-4289.