So, even though the bank services the loan (i.e. accepts payments, sends bills) the actual owner of the note must be the one to initiate foreclosure? That would be, say, the owner of the mutual fund that has bought the mortgage? How would this fund even know that they own such a note?
In fact, aren’t they stripped and owned by mulitple parties?
In other words, if the neighbor got a mortage with the National Bank of the Dope and the Dope bank sold it to Citigroup, and Citigroup sold it to an investor who sold it to chicken farmers in Jamaica in a hedge fund that they rated AAA, who has standing to foreclose?
But this isn’t why the bill exists and it’s ignoring the central issue here, which is that banks have indeed foreclosed on houses that they did not have any right to foreclose on. It’s not about creating a windfall for the irresponsible; it’s about protecting the responsible.
How would you like it if your house that you’re paying your mortgage on was foreclosed on wrongfully? Or seized by a bank that you didn’t owe money to? It’s happened. Situations like that are what the bill is trying to combat; it’s a “stop foreclosures that aren’t justified” law, not a “free windfalls for freeloaders!!!” law.
The fact is someone getting a free house isn’t cheating the person who pays his mortgage out of one red cent.
At least on the surface, yes we all pay with higher interest rates, but that is a cost we must bear.
For instance, I had a credit card stolen and the thieves charged over $2,000 on it. All the charges were reversed and I owed nothing. Who do you think made up that $2,000, the bank? No way they passed on the cost to their other members and myself with higher interest rates.
So should I have just accepted the loss, because even though I called the credit card in stolen a half hour after I used it, charges were still going through a week later?
Because the bank is passing on the cost of their irresponsible behaviour (not keeping track of their work) to their customers, doesn’t mean that the customers who benefitted from that error are to blame.
If a bank does what it should do, it will not have any problems with this bill. Only the ones who want to act careless and irresponsible will have a cost
And they wonder why foreclosure filings are down in Florida! They are down because plantiffs cannot meet the initial burden just to file them. This will get more interesting before the dust clears.
Actually, truth be told, it’s probably about trying to stop, or at least slow, the torrent of foreclosures in Florida. By announcing this rule (it’s a court rule, not a bill) the Florida Supreme Court is probably just trying to slow things down, rather than really addressing a particular issue of wrongful foreclosure.
Anyway, as I have said repeatedly, I have no sympathy for the banks that will suffer the consequences of creating such complicated financial networks.
But we also have homeowners who aren’t paying their mortgages. Many because they have made foolish financial choices. (We aren’t talking about people who are paying their mortgages and then get hit with a foreclosure out of the blue. We are talking about people who definitely owe someone for the house, and have definitely stopped paying.) Should these people walk away, not only without consequences, but with a very large reward?
Good behavior is it’s own reward. I don’t care if my neighbor gets a free house due to the bank messing up. If I have saved for a house, then my reward is the house. I don’t and shouldn’t expect that just because I’m doing things the right way, I get some kind of bonus. It’s all luck.
Let’s turn it around. If I have saved for my house and am paying it off, and I somehow found out the bank cannot locate a scrap of paper proving they own it, I’m not going to suddenly stop payment on the house.
I agreed to my mortgage when I bought my house. I was happy with the deal, and I still am. The fact that some banks, due to their own sloppy paperwork and lack of due dilligence, might have difficulty foreclosing on someone else’s house does not affect my mortgage or suddenly make the deal I agreed to unfair.
Securitized mortgages aren’t held by the people who buy the derived securities, any more than mutual fund shareholders own the underlying securities. Rather, companies are selling the risks and profits borne by the holder of the mortgage. So, ABC Securities buys 5,000 mortgages*, and creates a derivative tied to the performance of them. Mortgage-backed securities are much like bonds in this regard; they have an tangible value backed by the actual property, which is why they were so popular when they came out. Although most countries outside the U.S. forbid such derivatives, a lot of non-U.S. institutions got into the U.S. market for them, which is why the fall-out was so severe.
Actually, ABC Securities is more likely creating a derivative for mortgages held by a big “mortgage” company, who gets most of the profits from the sale of the derivatives. However, that’s a needless complication to understanding the basic idea.
On the other hand we have banks that are getting involved in complex financial transactions without bothering to keep adequate records of what they’re doing. If we ignore their screw-ups and allow them to foreclose anyway, aren’t we allowing them to walk away with a very large reward and no consequences for their actions?
And consider the wider picture. There are, certainly, people who have not been repaying their debts and deserve to lose their houses and some of them will benefit because their records are lost. But suppose I did repay my mortgage and the bank lost those records? What would stop a bank from deciding I still owed them money and filing to foreclose on my property? With no records, how do you differentiate between people who owe money and people who don’t?
And even if you can determine who’s defaulting on their mortgages, what stops Smith County Bank from filing for foreclosures on every defaulting property in Smith County. Some of those defaulters owed money to Smith County Bank and some owed money to other banks, so they file against every defaulter and get whatever they can. What happens if the court awards your house to Smith County Bank and six months later First National Bank shows up and they’ve got the paperwork showing you borrowed from them and now they want their money?
I don’t even know where everyone is getting the “free house” scenario from anyway. I’m sure that each of these homebuyers received a bill each month and that bill stated the terms of the loan and they paid this bill at least sometimes and there is a record of them paying it. (one thing that is absent in the “so why can’t I foreclose on a house I don’t own” scenario)
It sounds to me like this is a delaying tactic to slow down foreclosures but I don’t see it as releasing anyone from the loans, the banks are just going to have to work harder and spend more time foreclosing and possibly suing.
That said, I recently heard of a woman who had a judge release her from her mortgage obligations and award her the home free and clear. In her case, her loan had been sold multiple times and she kept sending mortgage checks to the party she thought had the loan but they weren’t being cashed and she was told she had no loan with them. She made a strong effort to find out who held her mortgage and who she should be paying and ran into dead-ends. Apparently the courts couldn’t find the real debtor either, so they discharged the debt.
i actually bought a house that had not been properly foreclosed by a bank. i wish i had a better lawyer representing me. by the time the facts had come to light, there was no practical recourse for the multiple violations of law that the bank had engaged in. i probably did not suffer any great loss in the end. but the owners or eventual purchasers of another house with the same street address in a different part of the state may have suffered greater damages.
I’m assuming they could make a plausible case theat they had some reasonable degree of belief that they held those mortgages. Maybe they arranged 95% of the mortgages in Smith County. The worst you can say was that they were mistaken about their beliefs in some cases but it’s going to be difficult to prove they had fraudulent intent.
Neither are defaulters getting free houses willy-nilly. There may be a very few people who end up with a free house, in the unlikely event that no bank can prove that they own the house. But that’s going to be a small amount, because for the most part banks do keep records of this sort of thing, even if the mortgages have been sold dozens of times.
This American system sounds like something out of an 80s action movie. Are mortgages treated like bearer’s bonds or something, where you literally need the actual piece of paper to prove ownership?
Around here, if you want to register a lien against a piece of land, you do it at the land titles office where all the documents are kept on record. I can go to their website right now and download the original lien documents of any particular piece of land in the province. No one needs to keep track of anything, it’s all right there at the office.
