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Oct 04

Foreclosure Monster Turns on Its Master

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Nationwide, the fraudulent foreclosure nightmare that has haunted homeowners for years is now getting awareness, attention, and reaction. With each successive corporate statement and homeowner lawsuit, the momentum to restore the rights of the borrower grows. In fact, as foreclosures are grinding to a freeze, the right to enter mediation has also helped homeowners still at risk stave off judgement and reach long-sought settlements. 

The Lenders

Bank of AmericaWith a noncommital statement, Bank of America joins GMAC/Ally and JP Morgan Chase in admitting that tens of thousands of foreclosures were judged on because of fake documents and improper procedures.

“To be certain affidavits have followed the correct procedures, Bank of America will delay the process in order to amend all affidavits in foreclosure cases that have not yet gone to judgment,” spokesman Dan Frahm said in a statement.

The dedicated projects of a few attorneys and activists are now being covered by major news outlets across the country. NY Times blogger Peter Henning covered the implications:

“The potential breadth of the problem, involving multiple states and thousands of foreclosures, means that the Justice Department could initiate a grand jury investigation to look at how companies acted throughout the country. Mail and wire fraud are the most likely violations that would be considered, based on any misstatements in legal filings that were transmitted to courts.

“…Because JPMorgan and Bank of America are public companies, I would not be surprised if the Securities and Exchange Commission were to open a civil investigation of their disclosures to investors about foreclosures and potential losses.

“…On a larger scale, there are likely to be two potential classes of plaintiffs pursuing civil suits against the banks and others for their roles: first, homeowners who earlier lost their properties to foreclosure in which questionable documents were filed, and second, title insurance companies that may be on the hook for claims by purchasers of foreclosed properties who now have a cloud on the title to their house.”

“…Normally these types of claims would be under state law for fraud, misrepresentation and civil conspiracy, but the cases could be brought in federal court under the Racketeer Influenced and Corrupt Organizations Act, better known as RICO.”

Indeed, a class action RICO suit was just filed in Kentucky along these lines, naming MERS, DOCX, all 5 of the largest banks, and virtually the entire mortgage lending system as defendants. Between the complaints of citizens, attorney generals, and members of congress, the halt and review of foreclosures seems almost certain to become a nationwide moratorium.

The Attorneys

In a rare but revealing case in Manatee County, foreclosure firm Smith, Hiatt, & Diaz is challenging a $49,000 fine Judge Janette Dunnigan leveled against them for civil contempt of court. The firm’s vice president spent 20 minutes defending their improper filings and assured the court that they no longer missed hearings that they had filed for – only for the judge to point out that they’d skipped a hearing they had scheduled earlier that same day!

Florida Supreme CourtOver and over again a pattern emerges of foreclosure mills creating improper filings, assigning loans without verification, and often lying to the borrowers and courts about their cases. Law blog 4closurefraud.org recently posted a report of over NINE THOUSAND instances where plaintiff’s attorney claimed that their summons accidentally never reached the homeowning defendant. As Florida’s investigation into foreclosure firms continues, lenders have now stated that they will no longer refer cases to “mills” such as the Florida Default Law Group. Growing complaints to the Supreme Court, State Bar, and local congressmen are casting a wide shadow on the blending of law practices with corporate profiteering.

The Borrower

“We are seeing fewer cases because of required mediation. We are also finding lenders more willing to refinance and negotiate new terms.” reported Larry Glinzman, spokesman for Community Legal Services of Mid-Florida, a HUD certified housing counseling agency.

In counties statewide foreclosure statistics have been slipping, and often mediation is a growing factor. Months of waiting, wrangling, and attempting to qualify can be simplified into a straight forward meeting between lender, borrower, and their attorneys. While, in the future, these investigations may aid wrongfully prosecuted borrowers, mediation is currently the best defense for Florida’s struggling homeowners. Homeowners must be aware that lenders are REQUIRED to halt foreclosure when they have requested mediation, and that this session can result in a home-saving loan modification or restructuring!

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