There is no escaping this media headline. Nationwide, State Courts have been approving and ratifying tens of thousands of foreclosures sales based upon bogus affidavits and paperwork. These already completed foreclosure actions will inevitably have to be overturned and undone, forcing those lenders that are guilty of this fraud to begin the foreclosure process on the affected properties all over again. GMAC Mortgage currently known as Ally, admitted several weeks ago that about 10,000 affidavits that are required to be filed with foreclosure cases in State Courts were false. These affidavits serve to ensure that an agent of the lender has reviewed all of the loan documents, deeds of trusts, and pay histories to ensure that the information is truthful and accurate and to also ensure that the lender has a valid legal basis upon which to foreclose on a person's home. Ally's agent admitted under oath that he and his personnel would very often simply sign the affidavits without certifying that any of the information was true and accurate. The sheer volume of foreclosure cases alone would dictate that in the time it took to certify 10,000 affidavits in one month, Ally's agent would have had to review a file once every one and a half minutes, an impossible feat. Apparently, this practice was duplicated at several of the other big mortgage banks. These "Robo Signers", under oath and under penalties of perjury, certified to many State Court Judges where foreclosure cases were pending, that the foreclosure action was rightfully brought, certifying that all of the mortgage documents had been reviewed and that those documents were all truthful and accurate.
Horror stories across the Nation have developed where these Robo Signers have certified to State Courts that the lender foreclosing on a person's home was the rightful bank which possessed a security interest or mortgage on the subject property. Florida, one of the States hit hardest by the foreclosure crisis, has seen its share of horror stories. In one case, the lender through sworn affidavits certified to the Florida State Court that it held the mortgage/security interest on a person's home and requested that it be allowed to foreclose, as the owner of the home was delinquent on his mortgage payments. After much wrangling back and forth, it was finally determined that the lender actually held no mortgage on the subject property and in fact, the owner that was being foreclosed upon had paid cash for 100 % of the purchase price of his home and that no mortgage against his home ever existed. Even though sworn affidavits and bogus documents were filed with the State Court evidencing that there was a mortgage against this property, it was determined that those documents were all fraudulent. In another shocking case, a woman lost her home to foreclosure because she was behind to her mortgage company in the amount of $75 representing late charges that had accrued on her mortgage!! Not only are these banks at fault for this new crisis, but many of them have been helped along by "foreclosure mill" law firms. Many of these law firms are also being scrutinized and investigated regarding this new foreclosure fraud.
What readers must understand is that today's mortgage world is not like the days of old, where local banks lent you money to buy a house, and the mortgage payments you paid went to that same bank in repayment of your mortgage. Today, mortgage loans are what we call securitized assets or mortgage backed securities. Part of what led to the "Great Recession " was that these "new" mortgages were pooled into groups of assets which were then packaged and resold as investments on Wall Street. The problem is that the originating banks of these loans never retained the mortgage debt, but instead sold that debt to another bank whom in turn would sell those mortgages to a Wall Street firm, which would then pool those mortgages as investments. The originating banks had no incentive to be sure that borrowers were qualified and could afford the mortgage they were being sold, because that originating bank knew that in a month or two, that risky mortgage sold to an unqualified borrower, would be sold to another bank who would then assume the risk of default. That second bank would then eventually sell it to a Wall Street firm, thus eliminating all risk for all of the banks in the chain that were funding that original bad mortgage. Once these mortgages, bad and good, made it to a Wall Street firm, like Lehman Brothers, they were repackaged and sold to investors looking to make a return on their investment, contingent upon the expectation that those borrowers would make their payments. As you know, many were unable to continue to make those mortgage payments. Regardless, even though these mortgages were now packaged and sitting somewhere on Wall Street, some entity still had to service the underlying mortgage obligation, ie.: collect payments, analyze escrow accounts, pay property taxes and hazard insurance, and do everything else that needs to happen with a mortgage. But guess what, there is no real money to be made just by servicing an on time mortgage account. These mortgage loan servicers make real money when there is a default on a mortgage by collecting late charges, penalties, and conducting foreclosures. It is estimated that these servicers on average earn $6,000.00 per foreclosure case that goes to completion. Servicers have an incentive to misapply mortgage payments and the like. The more delay, confusion, and chaos created, the more likely that servicer can earn an extra buck.
It is no wonder why a foreclosure crisis with bogus documentation is now an epidemic. Corporate greed is again at work, and that greed seemingly continues to undermine the housing market.
Stay tuned for more developments.