Barry Ritholtz posts a clear summary of the foreclosure process, to help understand the massive unfolding foreclosure fraud scandal. Here is, document by
Barry Ritholtz posts a clear summary of the foreclosure process, to help understand the massive unfolding foreclosure fraud scandal. Here is, document by document, the typical paper-trail for when a homeowner defaults and a bank repossesses her house (the process varies a bit state by state).
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Fraud has happened — though nobody knows the extent yet — in steps four through seven. Banks did not have the proper legal documentation to move forward with the final foreclosure — meaning the foreclosure itself might be illegal. We know that’s a major problem for banks, which will, at the very least, have to spend some serious time answering various state courts about violating consumer-protection and banking laws. And Mike Konczal — in a great series of post called “foreclosure fraud for dummies — shows that there are serious repercussions for homeowners undergoing foreclosure as well:
“„[T]he process of trying to get people behind on their payments current instead of driving them into bankruptcy has broken down. But for now it’s clear that mortgage servicers don’t have great incentives to get distressed homeowner’s records correct.
“„There’s well-documented evidence that extra fees are tacked on to mortgages that have fallen behind, fees that aren’t following the terms of the note. This is usually only found out in bankruptcy where there is a lawyer (and multiple parties), not in foreclosure cases. But if homeowners wants to challenge whether what the servicers claim is the correct final due amount, the terms of the note are necessary for the court.
“„This will matter a great deal for many homeowners. Small, marginal differences in the total owed could allow for a short sale. It could determine if the homeowner has any equity in their home. And this can only be determined by producing the note.
The hope is that homeowners might be empowered to seek better terms and fewer fees from banks and servicers, now that everyone from local courts to the federal government is calling for major investigations of what has gone on.
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School of Hock
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