This one is worth a re-post: http://www.mortgagenewsdaily.com/10012010_servicer_lawsuits.asp
It’s about time somebody did something. Granted: compared to all the financial excrement I’ve seen raining down on borrower’s heads in the past couple of years, this little bit of relief is a mere drop in the proverbial bucket, but it’s SOMETHING.
I’ve seen FannieMae waltz in and foreclose on homes that had short sale deals already worked out (so both seller/borrower AND buyer got shafted). I’ve seen BigOl’Bank (pick one – you’d be right) agree to a short sale and then – after closing and after the new owner had taken possession – “accidentally” decline the payoff funds, wipe out the agreement, and threaten to foreclose anyway. I’ve seen short sale agreements come together for reasonable purchase prices, only to have the loan servicer appraisal value come back 50% higher than the total amount owed (and completely out of line with anything like current market value). And in two years of watching, working, and waiting to learn that someone – anyone – I know personally has received a viable loan modification from a loan servicer, I still have not heard of any! The only conclusion one can safely reach in the face of all the evidence is that the banks hold all the cards and that’s the way they want to keep it.
I wondered how long it would be before borrowers started suing their loan servicers.
It’s not a surprise, on the other hand, that the loan servicers seem to have an unlimited capacity to screw up the loan documentation so completely that even the courts can’t make sense out of them. Whether intentional or not (and in this case it appears to be intentional on some level), certainly there is harm done whenever a loan servicer proceeds to foreclose without satisfying the requirements of due process.
Home mortgage contracts are by their very nature take-it-or-leave-it agreements drafted by the lenders to give them every advantage in the event of default. Unless you’re a skilled real estate attorney (and most of us aren’t), odds are slim that a borrower will fully appreciate the consequences of agreeing to the terms offered by the lender. That appreciation can only come full circle in the event of a default.
So, here we are. Homeowners are defaulting on their loans, for reasons as unique as the individual borrowers, in droves. The loan servicers, who could have and should have seen this meltdown coming, instead of ramping up staffing and training to deal with the defaults in an ethical and legally defensible way, have apparently opted to take shortcuts and jump over barriers in their rush to repossess properties and re-sell them. Yes, the mortgage notes they hold (if they truly hold them) generally give the lenders this right, but that is why they must demonstrate that they are the rightful note-holders. If they’re not the rightful note holders, then the lenders are exploiting the judicial process to throw people out of their homes (and onto the mercy of whatever social services may be available) in the interest of capitalizing on a potentially very lucrative resale market!
Never mind the individual borrower consequences of foreclosure (which under any scenario are nothing short of severe); the repercussions of these foreclosures en masse will be ringing in our economic ears for at least a generation.
If Congress won’t act to restructure not just lending rules going forward but also the ways in which lenders are allowed to deal with current defaults, and if the banks can’t or won’t figure it out for themselves, then perhaps it’s time we let the judicial branch take a crack at this mess.
Go here for more ideas on what can/should be done to alleviate the stupidity: http://www.nytimes.com/2010/10/03/opinion/03sun1.html?emc=eta1 Thank you, NewYorkTimes, for keeping tabs on this for us.
