Nov 10

Lenders, Servicers, & Attorneys All Under Scrutiny

While most lenders are attempting to move past the foreclosure review they went through, the  paperwork problems have already consumed several of their business partners and most government investigations have barely started. 

Adding to the hundreds of thousands of foreclosures that have been reviewed, investigated, or refiled in recent months is the fallout of the almost total collapse of the Law Offices of David J. Stern, the country’s largest foreclosure law firm. Last week, Fannie Mae and Freddie Mac physically took back the majority of the files that they had retained David Stern to foreclose on, wiping out almost their entire business. Days later, upwards of 500 employees were laid off, with many of the law office’s former cases likely to be closed and refiled by their new attorneys.

Growing impatience with the banks has also motivated judges to slow the state’s foreclosure process even further. Recent appellate rulings in Tallahasse and West Palm Beach have seen judges ordering foreclosure cases back into the “Rocket Docket” for ignoring affirmative defenses and particularly for cases where the lenders did not produce a mortgage note.

Meanwhile, Bank of America continues resist some of its largest investors, including the Federal Reserve & Freddie Mac, in their claims for hundreds of billions in buybacks of bad mortgages. This dispute has been growing even as the amount that taxpayers and the Treasury Department are expected to spend buying up foreclosed homes through Fannie & Freddie has continued to expand, which is now estimated to cost up to 250 billion dollars over the next 3 years.

The fate of many of the large lenders may now rely on upcoming Pam Bondiinvestigations. Even though he lost re-election, Ohio Attorney General Richard Cordray will still be using the rest of his term to challenge the validity of foreclosure documents in his state, while Pam Bondi will hopefully continue Bill McCollum’s investigation into the state’s foreclosure mills when she becomes Attorney General in a couple of months. It is hoped that evidence of wrongdoing and findings of bad faith in the lender’s procedures may create the pressure necessary to make the banks stop dragging out foreclosures, as well as accept more successful loan mods and mediation sessions with their borrowers.

Mediation has been slow to take off Florida due to lack of awareness, says the American Arbitration Association. Vice President India Johnson reported that “There is great fear in the community that it is something fraudulent.” While many homeowners were difficult to reach, a large amount of homeowners said they were busy seeking a loan modification and would not try mediation, even though it is state law to stop foreclosure for a mediation request, unlike loan mods. Mediation also ensures the lenders and borrowers will meet face to face. However, since mediations have to be scheduled about 60 days in advance, most mediations scheduled since the start of the program in many counties have yet to take place. Find out more about mediation now to see if it can save your home!

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