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Debt Relief – Insolvency – Bankruptcy Information » Uncategorized » Seven Things Coming From The Nationwide Stoppage of Foreclosures

Seven Things Coming From The Nationwide Stoppage of Foreclosures

The stop foreclosure message seems to have taken hold in light of the recent hoopla surrounding the “robo signing” mess created by mortgage lenders who have been caught red handed filing bogus and fraudulent affidavits in order to steamroll over distressed homeowners and take their homes through foreclosures that are in many cases illegal.

Major mortgage holders who have been very active in their bank foreclosure departments have now brought home foreclosures to a halt. J.P. Morgan Chase, GMAC and Bank of America, among others are leading the way in a massive foreclosure stoppage across America. Chase and GMAC have stopped foreclosures in 23 states. Bank of America in response to increasing pressure from congressional inquiry and court cases has now announced it is stopping home foreclosures in all 50 states.  It is only a matter of time that other lenders will follow suit.

What does this all really mean? How will it help or affect homeowners in distress? Where is it all going?  Following are seven things coming from the nationwide stoppage of foreclosures.

1. MORE TIME TO WORKOUT A LOAN MODIFICATION FOR THOSE WHO TRULY QUALIFY.

Under the Making Homes Affordable Program (HAMP) homeowners behind in their payments and who qualify are given options to apply for and must be considered for a loan modification of their mortgage where the payments of the mortgage constitute more than 31% of their income. Almost all lenders agreed with the federal government, in return for bailout funds, to work with distressed homeowners and give those who qualify a loan modification they can afford based upon reviewed financial criteria.

Unfortunately, under the pressure of so many thousands of foreclosures in process and lack of communication between mortgage lender departments such as the collection department and the loss mitigation departments, a homeowner who is being seriously considered for a loan modification often gets a notice that the home is proceeding to foreclosure from the collection department while being told by the loss mitigation department they are under review for a loan modification and no foreclosure will occur during that period of time. The collection department and the loss mitigation department have not coordinated or communicated and the property often is sold at foreclosure. This violates the regulations under the HAMP program and the foreclosure in all likelihood occurred due to a robo signing incident.

Stopping the foreclosure process will provide time for the lenders to get their acts together to ensure (a) the collection and loss mitigation departments are in sync and following the guidelines of HAMP. Homeowners who truly qualify for the program will then be given the benefit of the program. Those that don’t qualify will be given ample time to exercise appropriate alternatives such as a deed in lieu of foreclosure or other appropriate possibilities.

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2.  SHORT SALES WILL BECOME EASIER AND TIME SHORTENED.

It is no secret that many homeowners facing foreclosure simply will not be able to keep their homes because of changed financial circumstances or they are in a home that they should have never bought. Nevertheless, these homeowners may avoid a foreclosure on their records by selling the distressed property through a short sale. This means the home will be sold for less than the mortgage owed on the property. Whatever the difference is termed a “short sale” because its short of the whole amount being paid off.

A short sale saves the lender costs and expenses of a foreclosure and ensures a certain sum of money without the lender having to take the property back into its inventory, expend money to fix it up or maintain it. It provides the homeowner with a record free of foreclosure. Generally it also provides the homeowner with relief of not having to pay a deficiency judgment (the amount of difference between what the bank receives on the sale and the mortgage debt owed on the property).

The problem has been the inordinate amount of time taken for a lender to approve a short sale offer made by a willing buyer. 90 to 120 days or more is not unusual. By that time the buyer who wants the property often becomes impatient and backs out of the deal.

Halting the foreclosure process will provide more time for lenders, distressed sellers and buyers to work out an amicable deal that best fits all parties. During foreclosure moratorium lenders can concentrate on short sales in process and shorten time periods for approval and moving the property off the books and giving the homeowner the desired relief. Indeed, Congress has introduced legislation to shorten the time period of short sales in order to affect this process.

3.  THE FORECLOSURE PROCESS SHOULD HAVE MORE INTEGRITY

“Robo signing” has clearly tainted the already highly suspected ways in which mortgage lenders are handling foreclosures. Fraudulent documents submitted to courts of law have caused substantial damage to the integrity of the system and have wrongfully foreclosed and taken homeowners’ property, who in all likelihood qualified for a home loan modification program or could have avoided foreclosure through a genuine short sale.  Time can now be taken to ensure that foreclosure laws are clearly complied with before a foreclosure sale. The courts will have confidence in signing approval of the foreclosures and homeowners will not be subjected to arbitrary unlawful taking of their homes. Interestingly, President Obama just vetoed legislation that would have added to the confusion and lessened the integrity of the foreclosure system.   

4.  WRONGFUL FORECLOSURES SHOULD BE RESCINDED

An untold number of homeowners have been wrongfully foreclosed upon and evicted from their homes as a result of the bogus filings of foreclosure affidavits throughout the United States. Where the homes taken were returned to the lender and are now in the lender’s real estate owned (REO) inventory illegal foreclosures can and should be rescinded, trustee deeds cancelled and homeowners given their property back until the foreclosure process is property conducted. In numerous of these instances there is a very good likelihood that the homeowner qualifies for a loan modification. Alternatively a short sale or other foreclosure preventing measure may be available. In the event a home was taken wrongfully by the lender and sold to another party, the banks should pay appropriate damages to make the homeowner whole.

5.  EVICTIONS OF HOMEOWNERS WILL BE HALTED

After a foreclosure sale a homeowner still in possession of a home is subject to being removed by an eviction process in court. Halting the foreclosure process will keep deserving homeowners in their homes until the foreclosure mess can be cleaned up. Where a homeowner can show that loan modification guidelines or foreclosure laws have not been complied with an injunction from a court will likely be readily issued stopping the eviction until the lender can prove its entitlement to the property.

6.  BETTER OVERSITE BY REGULATORS AND ADDITIONAL LEGISLATION WILL BENEFIT DISTRESSED HOMEOWNERS

Congress is abuzz with new calls for over site of lenders foreclosure processes and numerous states Attorney Generals have weighed in with pressure for lender accountability. H.R. 6133 is a bill introduced to require a lender to take no more than 45 days to approve or decline a short sale offer on a distressed home. Other legislation is pending to prevent any deficiency judgment against any homeowner who sells a home for less than is owed. The difference will be just written off.

 7. WITHHOLDING OF TITLE INSURANCE WILL BE A HUGE FACTOR

Two major real estate title insurance companies are refusing to write title insurance policies on properties that are sold at foreclosure and trustee deeds issued. Old Republic Title Insurance and Stewart Title, two of the largest title insurance companies in the country have made it clear they will not have any part of the foreclosure fiasco created by mortgage lenders. The reason being the high likelihood that the titles and deeds issued are bogus and based on fraudulent actions by the mortgage lenders. With inability to obtain title insurance unless proof of assured compliance with foreclosure laws are in place banks will be forced to go slowly and comply with the law. This gives homeowners time to negotiate workout solutions that can be a win-win for all parties involved.

When the dust clears the lenders, homeowners and the economy will be better served because of the present foreclosure housing crisis. Until the banks get their act together the economy will continue to lag behind.

 

Roy Landers is an attorney/real estate broker with over 20 years experience in litigating real estate, tax, business and consumer law matters. He regularly writes articles on real estate and other issues. He publishes a free newsletter – The Real Estate Playbook, which can be obtained at www.housingamericans.com. Updates on foreclosures, short sales and real estate investment strategies are also available at his blog. www.renegadeforeclosurefighter.com. onsumer law.

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