San Diego Bankruptcy Attorney Douglas G. Farquhar

Foreclosure Help

Bank of America freezes foreclosures! “Robo-signing” gone wild! ...

Bank of America has decided on its own to freeze foreclosures in all 50 states. This will probably be only a temporary freeze but it’s good news if you currently have a pending foreclosure. If B of A has your loan then you should get some delay in the processing of your foreclosure from the current freeze. B of A has said that it will take weeks to check their books so presumably you will get weeks more to stay in your home.

PNC Financial, JPMorgan, GMAC, and Litton loan servicing have halted foreclosures in 23 states. These 23 states are the ones where foreclosures require a court action. In California a foreclosure can take place without a court action so for lenders other than Bank of America it seems that California will not be affected for now.

This self-imposed freeze comes when the feds are opening an investigation into bank foreclosure policies. There is a growing public demand across the country for a halting of all foreclosures. Bank of America has apparently instituted this freeze because of irregularities in their preparation of the foreclosure documents. There are allegations of “robo-signing” which is when 100s or even 1000s of foreclosure documents are signed by bank employees without the documents being reviewed at all.

“Robo-signing” sounds ominous and it is possible that this could blow up into something larger that could affect all foreclosures. If banks are just signing documents in bulk without any review then that could have serious implications. They are required to read and review these documents. It is possible that they don’t have the time to do so with the volume of foreclosures that are occurring. In my experience this will not fly though. Banks cannot get away with having employees sign something that states that they have reviewed documents which they have not. If some judge gets ahold of this he will demand that banks read and review these documents and maybe a moratorium will be put on foreclosures until the banks can hire the staff to do the required reviews. This could be good news for people in foreclosure as any delay will mean more time in their houses. Stay tuned for further developments…….

Are banks incentivized to do a foreclosure on your home instead of a short-sale or modification?

Several clients have come to me lately and complained that they have been declined for their home loan modification after they have successfully made payments on a trial loan modification for a period of time. After a long period of making the payments on time and without fail they naturally believe that the have been approved for the permanent modification. This is a natural and logical conclusion. During a “trial” period you would naturally show that you are capable of sustaining payments on a loan. It is logical that after you pass that test then you get to keep the new payment schedule.

This is not true in the strange and mysterious world of the banks. My clients are receiving no notice but just a returned check one day when they send their payment in. They then call the bank believing there is some mistake and then they are told that their loan modification has been refused because they “don’t have enough income”.

The homeowners have made the payments faithfully but the bank has suddenly determined that the don’t have enough income. I smell a rat. Information is beginning to trickle out that these banks are incentivized to do foreclosures. They are paid when they first sell the loan to Fannie mae or Freddie mac but they are apparently paid again if they take back a home in a foreclosure.

They seem to get no such benefit if the homeowner keeps the property with a loan modification or if the home is sold to a buyer in a short sale. The incentives are all wrong. Apparently the Obama administration has put this incentive in the bailout plan and now we are now reaping the whirlwind. Homeowners are being thrown out of homes that they should stay in so the banks can make money which they make only because of government incentives. Shouldn’t the incentives be to keep homeowners in their homes?

Anyone miss the era when the bank lent out its own money? I do. This is an unsustainable situation and apparently people are getting wise and lawyers are beginning to sue the banks. One lawyer who does these suits in federal court told me that the banks can’t answer or defend all the suits that are coming because of this foreclosure crisis. He says that this is why they are suspending foreclosures and why there is a growing cry from all over the country to do just that.

It is clear that something has to be done as this foreclosure mess is unfair, unsustainable, and as badly managed as it can be. More to come……

The “shadow market”- banks could be holding back foreclosed homes from the market

Why do they do it? We don’t know. It might be that they don’t want to crash the housing market now or it might be that they don’t want prices to drop any lower so they lose even more money. But according to my sources in real estate there apparently is a shadow market of homes the banks don’t release or list on the MLS. These are homes that they have already foreclosed on and they own and hold in their portfolio of properties. But these homes don’t appear in the Multiple Listing Service (MLS) used by realtors to see what properties are on the market.

Realtors only realize what has happened when one of these shadow homes suddenly appears on the MLS. Then by looking at the original foreclosure date the realtors realize that the home was foreclosed on some time ago and the surmise that it was held in the “shadow market”.

It appears that the banks are holding these properties back and releasing them slowly when they are ready. Some appear to be vacant and some are overgrown with weeds with pools that are filling up with slime, but the shadow homes remain unreleased into the real estate mainstream.

There are also reports that the banks are now renting these homes. The banks appear to want to be landlords now too. They have this real estate which they can’t or won’t put on the market, they hold it back in a shadow market and they then apparently rent these properties to tenants. Is this because prices are so low and rents are high? Are the waiting for prices to climb again or have the banks just found a new profit center?

These are unanswered questions about the current state of affairs with the banks and foreclosures and real estate and it seems to be getting stranger and stranger. More to come……

Douglas G. Farquhar, Esq.
1901 First Ave. Suite 217H
San Diego, CA. 92101
(619) 702-5015
E-mail: click here