I’d be very cautious about buying even now. How sure can you be about the title of a property you purchase?
Will title insurance cover this mess? Will it even be financially able to do so?
I think if I were buying now I’d either buy something newly built or I’d buy from someone who’s lived in a house forever and paid it off 20 years ago.
FYI, here’s an article from the New York Times on what this mess might mean for the title insurance companies. For example, if you bought a house out of foreclosure, but the previous owner wins a suit alleging that the foreclosure was invalid, they might win the title back. So what happens to you? Are you out the door? If so, the title insurance should cover your purchase price but not any money you subsequently put into the house.
Personally, I’m glad I’m still a renter.
Title insurance should certainly cover it. Especially if you express doubts to them. Your interests are aligned in that the company selling you a mortgage wants to make sure there is valid collateral.
Regarding Asteron’s question, I’ve been thinking about this a lot myself. I received a sub-prime mortgage myself about 6 years ago. About a year into the mortgage, the mortgage was sold. I don’t know if it was sold only once, and to be honest, I’m not sure if the mega-bank I pay is the owner or just servicer of the the mortgage.
Anyhow, I’ve been trying to think of a way that I can verify that they have the actual note and I think the only way to do it would be to compel them via subpoena in a foreclosure proceeding or other lawsuit. If they don’t actually have the note, I can’t see them telling me about it unless they’re absolutely forced to squeal.
I plan on refinancing in the very near future, and I’m hoping that I can get the title insurance company to make them show the note.
You can try through www.wheresthenote.com, one of a few sites out there that has some resources forcing your servicer to come up with the note.
wheresthenote.com redirects to a seiu action page that sends a letter to your mortgage company on your behalf.
The text is as follows:
*To whom it may concern:
This is a qualified written request under Section 6 of the Real Estate Settlement Procedures Act (RESPA). I own the property at the address listed above, and your bank services my mortgage.
Over the last several weeks there have been many stories documenting the problem that banks are foreclosing on homes without proof that they own the loan. I have learned that in many cases, banks like yours do not even know who owns the loans you service. Employees at several leading banks have admitted to rubber stamping tens of thousands of foreclosures every month, without even checking to make sure that the bank had a legal right to proceed with foreclosure. In some cases, banks allegedly falsified mortgage documents to cover up their mistakes. There have been reports of two banks trying to foreclose on the same home, banks foreclosing on homeowners who were current on their payments, and even of a bank foreclosing on a home where the homeowner had never taken out a mortgage to begin with. This is not merely a “technical problem”–it is the difference between having a warm bed at night and being out on the street.
As a homeowner and a customer of your bank, I am horrified. I had always believed that it I played by the rules, I would be protected, but now I know that banks like yours think the rules don’t apply to them.
To protect myself and my family, I need to know who owns my mortgage. Within sixty days, I would like to know the name, address, and phone number of the bank or investor that owns my mortgage. Furthermore, in light of the recent allegations of foreclosure fraud, I demand to see the original mortgage note proving ownership over my home loan. If you fail to produce a mortgage note proving that you have a right to collect my mortgage payments, I will be forced to consider all options available to me to ensure that my family and my home are protected.
I ask that I receive my response in writing. I understand that under Section 6 of RESPA you are legally required to acknowledge my request within twenty business days and must try to resolve the issue within sixty days.
Thank you for your attention to this matter."*
Later on I’ll discuss with my wife whether it’s a good idea to send. I suppose they could probably make my life hell with repercussions should they chose to.
I’d probably take out this paragraph as it really serves no purpose:
“As a homeowner and a customer of your bank, I am horrified. I had always believed that it I played by the rules, I would be protected, but now I know that banks like yours think the rules don’t apply to them”
And at the end, I’ll receive a letter with name/address/phone of the note holder. Then what? I take a trip to visit them to see the note in person? And if they don’t produce the mortgage note, what are my “further actions?”
Politically, this is a golden opportunity for Obama and the Democrats. The foreclosure mess has brought the mortgage industry to the brink, and once again Wall Street and the banks who backed them are on the edge. So the administration is back in the same situation as Bush was 2 years ago, and i hope they learned from his mistakes.
The problem with the previous bailout (TARP), of course, is that the administration didn’t use the leverage they had then to insititute reforms and/or improve the economy for Main Street–it was basically a money grab by the banksters. Now it’s Obama who has the leverage, and his administration has had two years to examine the shortfalls and missed opportunities of the 2008 TARP. It will take an act of political courage to endorse more government intervention, but if a fix for the foreclosure issue is tied to real relief for homeowners (and, by extension, Main Street), Obama can potentially recapture his popularity and quite boldly underscore the limitations of Republican ideaology.
Obama has been trying to get the banks to refinance/modify distressed mortgages via the HARP and HAMP programs, but the banks have had no incentive to cooperate. Obama should quickly propose a government plan to eliminate the legal problems in foreclosure with a bold requirement that, say, toughened HAMP and required all potential foreclosures to go thru the HAMP process first.
Doing nothing is clearly not the answer; as much as I would love to see investment banks get hoist by their own petard in the inevitable lawsuits, the systemic threat to the rest of the economy would be huge (see: Shearson-Lehman). But placing a moratorium on foreclosures just delays the inevitable, and could have serious negative impact on the credit market and real-estate values. Obama’s economic team will no doubt do something, but if they don’t tie the fix to real relief for homeowners in distressed mortgages, he will be making the same mistake as his predecessor and muffing a once-in-a-lifetime do-over.
http://www.rawstory.com/rs/2010/10/unemployment-pay-wall-street-climbs-144-billion/ Yeah, these are tough times for bankers.They are on the edge…of making more money than they ever did before. In hard economic times ,that they caused, they are set to increase salaries and bonuses again. I understand when people don’t want to share in others hard times, but when they caused them, and don’t feel the pain they caused, it is an abomination.
Something I’ve been wondering: a lot of the more serious consequences this could have on the economy, it seems to me (judging by commentary I’ve been reading) seems to be connected to trust, and the possible loss of it in the market and banks because of this.
But as I said in my OP, I wonder… Do enough people know about this AND care to have a major impact? (And “care” as in both “that won’t happen to me” AND “I know it’s a risk, but I have little choice”.)
Well, I can definitely see attorneys contacting people that have been foreclosed and offering to represent them on commission. It’s all public record, so it shouldn’t be hard to find the people most likely to have had problems.
Since their homes are no longer available, they’d have to go after title insurance which would be a cash judgement. Or so I understand.
Here’s another wrinkle, not directly related to the foreclosure crisis itself, but still part of the broader clusterfuck that was our mortgage securitization process. From Felix Salmon:
Jesus. I mean, just, Jesus those motherfuckers couldn’t do anything right.
Jesus.
At least let’s keep in mind that Congress passed, and President Obama signed into law, a financial reform act with “resolution authority”. The last time, Treasury didn’t have the authority to make exposed counterparties take a cut for their mistakes. For example, Goldman made a hundred cents on the dollar with its AIG contracts, because AIG never technically went into bankruptcy. (As Lehman taught us, using the standard bankruptcy code for these institutions was too destabilizing.)
This time, the knives come out. No more excuses. Treasury asked for, and received, the authority to wind down these TBTF institutions in a safer way. They now have the legal power they wanted, and it’s a very real possibility that they’re going to have the opportunity to use it before too long. No more moral hazard nonsense. If a big bank fails, then it dies. It dies painfully, publicly, violently, and example-settingly. The shareholders are wiped out, the bond-holders take a cut, the executives are thrown out on their asses, and we finally clean up those balance sheets for serious this time.
So the investment banks invested in what they knew were risky loan pools in order to get something for a discount that they could then sell to their investors for a higher price by withholding negative information. Seems to me that’s outright fraud. No shades of gray - outright fraud.
By all rights, we should be seeing perp walks.
If Goldman could palm it all off on one or two bad apples then sure, the public’s faith in the market could handle that. The public’s faith in teh market cannot handle the spectacle of all the structured products guys on wall street being led out of their office in handcuffs. Most of these guys didn’t have criminal intent on their minds, they were just making so much money they couldn’t tell (or didn’t really care) what was right or wrong anymore. That Fabrice Tourre guy was making 8 million dolars by the time he was 28 years old. You stop asking really deep questions when you get close to making a million dollars a month.
“Couldn’t tell” seems unlikely and “didn’t really care” sounds like criminal intent to me, unless you’re going to define “criminal intent” as something like “gee, movie criminals have so much fun… how can I become a criminal?”.
I think that not really caring about right and wrong in order to make a million a month counts as criminal intent.
Are you saying that they were blinded to right and wrong by the amount of money? If so, isn’t that basically saying that the more you steal the less morally and criminally culpable you are?
Calling AtomickTom. In an earlier thread on this topic he claimed that this argument was smoke and mirrors, that lenders had these notes and this argument was basically a stall tactic.
I understand that he represents banks in foreclosures and may not be able to speak candidly, but some input from him in this thread would be great.
I can’t help but thing that the endgame to all of this will be some massive rewrites of the mortgage terms. No way in hell do the banks want to be owners of vast amounts of real estate that is deteriorating by the day.
Stall tactic my ass.
That is a different class of fraud. What is going on here is a lot more frightening.
My manufacturing process engineering friends always told me that the one thing you do not do is to try to run a factory at anywhere near 100% utilization. You give up potential throughput by having idle machines, which can take over for a machine which goes down or because of a spike in demand.
The banks to increase their profits and to cut corners, clearly did not want to file paperwork the way the process typically worked, and came up with MERS. I’m sure that it was not funded or staffed to do anywhere near a perfect job, since that would eat into the profits from the mortgages. Usually. nothing goes wrong - the mortgage is paid off when the house is sold, and no one will really notice. Today things were different and their cheapness came back to haunt them. The Times reported that even when the banks staffed up to handle the rush of foreclosures, they hired unqualified cheap staff, and so of course things got screwed up.
The notary fraud came from trying to keep up. Reminds me of Lucy and the chocolate assembly line.
But that isn’t what is scary. What is scary is that a good chunk of American industry has been cutting corners the same way. Without immediate feedback on the impact of poor quality, a maximize the profits environment will encourage people to take out this check and that check. This was likely the cause of the oil spill. It might have been the cause for the gas pipeline explosion in San Bruno. Someday postponing infrastructure repair as the result of budget cuts by government is going to kill someone. And who knows what the impact will be of the cutting to the bone in the past few years?
I guess I was talking about the movie criminal example. These guys didn’t scheme in their back offices to figure out how they could break the law and make a boatload of money, they just got closer and closer to the line and the money made them forget that the line was even there.
BTW, I am not saying they re not criminally culpable, I think we should put the lot of them in jail and some of them are friends of mine (I don’t want them to be victims of prison rape but some of these guys only understand one thing).
You apparently have not gotten the memo about all the waste fraud and abuse that will be cut to pay for tax cuts in the next congress.
60% of the nation’s mortgages may be invalid or questionable.
http://www.washingtonsblog.com/2010/10/what-is-mers-and-what-role-does-it-have.html
It’s a long article but worth the read. It’s conceivable that our whole financial house of cards could come tumbling down over this.
The banks acted again in a fraudulent and dishonest way. But ,again, they are too important to pay for their crimes. So we must allow foreclosures on properties they don’t hold title to, or they have not honestly dealt with the home owners, to go ahead. They hired people to blindly sign foreclosure documents all day long, without reading them, to attest that they had carefully and fully reviewed the cases. The judges rubber stamped the processes. That is the American way.
The banks don’t own many of the houses. But they should be allowed to take them over. They need more money. This whole mess is due to the greed of bankers. They streamlined mortgages that they sold they packaged up and sold around the world. Now our courts should say forgeddaboutit. They deserve to take over the homes. Forget about the fact they don’t own the home. They need it worse than the residents.