Study Finds Huge Errors and Illegal Practices in Foreclosures – People Were Wrongly Thrown Out of Their House – Just Paperwork Errors?

Doesn’t Look Like It

A few days ago the Wall Street Journal editorial pages, or as they are known in key circles, the mouthpiece of Wall Street was aghast, literally aghast that banks were willing to pony up $25 billion to settle claims that the banks had not followed legal procedures and due process in their foreclosure activities.  To the Journal this was just a bunch of sloppy paperwork, and no big deal.

The banks did have sloppy paperwork practices, but they were also dealing with a historic wave of foreclosures created in large part by government-backed Fannie Mae and Freddie Mac. To date there's no evidence that borrowers current on their mortgage payments were improperly ejected from their homes

Well now there is evidence, substantial evidence that at least in one jurisdiction almost no foreclosure were following practices and procedures required by law.

Commissioned by Phil Ting, the San Francisco assessor-recorder, the report examined files of properties subject to foreclosure sales in the county from January 2009 to November 2011. About 84 percent of the files contained what appear to be clear violations of law, it said, and fully two-thirds had at least four violations or irregularities.

Kathleen Engel, a professor at Suffolk University Law School in Boston said: “If there were any lingering doubts about whether the problems with loan documents in foreclosures were isolated, this study puts the question to rest.”

Wow, 84% had clear violation of the law.  Boy that is some sloppy paperwork.  Of course it is not sloppy paperwork, it was the illegal action by banks to foreclosure without following the right procedures.  And it may well have amounted to having thousands of people, maybe hundreds of thousands nationwide if the California practices were representative of the nation being illegally evicted.

In a significant number of cases — 85 percent — documents recording the transfer of a defaulted property to a new trustee were not filed properly or on time, the report found. And in 45 percent of the foreclosures, properties were sold at auction to entities improperly claiming to be the beneficiary of the deeds of trust. In other words, the report said, “a ‘stranger’ to the deed of trust,” gained ownership of the property; as a result, the sale may be invalid, it said.

In 6 percent of cases, the same deed of trust to a property was assigned to two or more different entities, raising questions about which of them actually had the right to foreclose. Many of the foreclosures that were scrutinized showed gaps in the chain of title, the report said, indicating that written transfers from the original owner to the entity currently claiming to own the deed of trust have disappeared.

And how are banks handling the problem now.  Are they fixing the problem?  No they are requiring borrowers to give them carte blanche to do this all over again.

Banks involved in buying and selling foreclosed properties appear to be aware of potential problems if gaps in the chain of title cloud a subsequent buyer’s ownership of the home. Lou Pizante, a partner at Aequitas who worked on the audit, pointed to documents that banks now require buyers to sign holding the institution harmless if questions arise about the validity of the foreclosure sale.

That’s right, to get a loan you have to sign over your rights to have a claim against the lender if the lender improperly and inappropriately and even wrongly forecloses.  But theWSJ and Wall Street will be ecstatic, after all this will legalize the $25 billion worth of “sloppy paperwork”.