Howdy folks. Zandar again. You know that whole foreclosure crisis we’ve been going through over the last two years or so?
Well, now we’ve got a problem.
In the last week multiple news stories have dropped involving what amounts to massive institutionalized mortgage fraud on the part of the big banks running the foreclosure mills in states like Florida, Michigan, and California.
The question at stake is simple: Who really owns the mortgage that these banks are trying to foreclose upon? In the age of securitized mortgage products, when bundles of mortgages were stacked up and chopped into financial cole slaw, the answer is nobody knows. Many of the middlemen and intermediates vanished in the financial meltdown of 2008. The rest were bought up by the megabanks: GMAC Mortgage (now Ally Bank), JPMorgan Chase, Bank of America, and Wells Fargo.
The bottom line is that these megabanks have been acting like they own the title to houses and have been foreclosing on them at record speed. The reality is in many cases, possibly hundreds of thousands of them if not millions, that simply isn’t true.
One Circuit Judge in Florida decided to ask about this in early September and discovered a clear case where JPMorgan Chase was servicing the loan, but Fannie Mae owned the mortgage. JPMorgan Chase foreclosed on the home anyway, and the judge nailed them to the wall on it.
The problem is that ruling in Florida has thrown a harsh spotlight on the entire foreclosure industry in the last two years.
And here’s where things get interesting. GMAC/Ally Bank last week, as a direct result of this hearing, halted home evictions in 23 states as well as sales of foreclosed properties while the company suddenly had a real (and not to mention massively fraudulent) need to double and triple check all the foreclosures it had been dealing with.
Then, on Wednesday, JPMorgan Chase announced it was doing the same thing.
“It has come to our attention that in some cases employees in our mortgage foreclosure operations may have signed affidavits about loan documents on the basis of file reviews done by other personnel–without the signer personally having reviewed those loan files,” says JPMorgan spokesman Tom Kelly.
In the meantime, the company has requested that the courts not enter judgments in pending matters until the review is complete, a process they say should take a couple weeks.
“We believe the accuracy of the factual loan information contained in the affidavits was not affected by whether or not the signer had personal knowledge of the precise details,” Kelly adds.
Then today, Bank of America announced that they too would be looking over their foreclosures.
Bank of America is delaying foreclosures in 23 states as it examines whether it rushed the foreclosure process for thousands of homeowners without reading the documents.
Bank of America isn’t able to estimate how many homeowners’ cases will be affected, Dan Frahm, a spokesman for the Charlotte, N.C.-based bank, said Friday.
The move adds the nation’s largest bank to a growing list of mortgage companies whose employees signed documents in foreclosure cases without verifying the information in them.
That last sentence there should scare the ever loving shit out of you, because that means that in 23 states, the last two years of home foreclosure sales may be completely fraudulent. Hundreds of thousands of sales, if not millions.
Millions of people foreclosed on, evicted, and their homes sold to new people.
People evicted when they had no legal right to be by a bank that didn’t legally have the right to evict them. Millions possibly thrown out of their homes without legal reason to have been.
And ad bad as that is, how about the entire foreclosure industry locking up like an engine with no oil and taking housing prices with it?
So, guess what happens to the assets of the banks if they don’t own the mortgages they say they do, and there’s no real way to prove that they do own the mortgages even if they do because of two years of fudging the paperwork and carrying on anyway?
Why, those assets would be worth…zero. And what about the fourth megabank in this scenario? That would be Wells Fargo, and they are doing everything they can to sweep the mess under the rug. In fact, they are now speeding up foreclosure and short sale procedures instead of halting them.
In a memo e-mailed to short sale vendors last month and obtained by American Banker, Wells said it will no longer postpone foreclosure sales for those who do not close short sales by the date in their approval letter from the company. Only extension letters dated Sept. 14 or earlier would be honored, Wells said.
Hmm. Three banks when caught are halting foreclosures. One bank is making a mad dash to clear their decks instead. You don’t think that’s where most of the mortgage fraud is, right?
Things are getting scary to the point that insurers will no longer underwrite foreclosure sales because of the liability of these massive numbers of possible fraud cases.
As more defaulting homeowners become aware of the lenders’ problems, they are expected to hire lawyers and challenge the proceedings against them. And if completed foreclosures were not properly done, families who bought the troubled homes could be vulnerable to claims by the former owners.
Apparently alarmed about such a possibility, one of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that “until further notice” it would not insure title to properties foreclosed upon by GMAC Mortgage, the country’s fourth-largest home lender and one of the two big lenders at the center of the current controversy.
And if the insurance underwriters aren’t going to play ball anymore, the game is truly over.
In the span of roughly two weeks, the entire foreclosure machine has ground to a near halt, and there are potentially hundreds of billions if not trillions of dollars worth of mortgage fraud cases here, folks.
Talk about your October surprise.
Turn on the lights, and watch the roaches scatter…only that these roaches are so big, that they may very well trigger another financial crisis in the very near future.
We’re about to field test those Wall Street “too big to fail” regs, people. And I don’t think anyone’s going to like the results.
Buckle up. Pay attention. This one’s going to be HUGE.
