Robo-Signers and Robo-Foreclosures

6

As I’m sure you recently heard, Bank of America announced that in 23 states it was halting foreclosures due to documents that were rushed through the system;  some wrongful foreclosures were definitely included.

Oops.  Way to go BofA.

Well, JP Morgan Chase, GMAC Mortgage, and PNC Financial Services basically followed suit.  I can only assume that they smelled their own lawsuits coming their way and were quick to follow the leader (of course these big 4 are in constant communication).

Now Bank of America is stopping the foreclosure process in all 50 states until they can sort out the mess.  Yes, you read that correctly.   All 50. As of the writing of this article, I’m not sure what the other big boys are going to do, but I have a feeling that there is a good chance that they will follow suit.

So what does this mean for us as investors?

  • If you’ve been buying foreclosure deals via the MLS ( bank owned properties listed by REO agents), the supply of these properties will decrease in the short term.
  • The demand for well renovated properties will go up (at least in the short term).
  • It is time to shift your marketing efforts to other means — letters, postcards, bandits — in order to diversify away from foreclosures (which you should already be doing).

These are only my predictions based on simple economics.  Many variables can have an effect on supply and demand.  Once you learn the basics of investing and have some deals under your belt, what becomes important is keeping up with your local marketplace.

What do you think will happen due to the current foreclosure situation?

Photo: Adam Pieniazek

About Author

Brooks Conkle

I am a Real Estate Investor and REO Agent focused on Wholesaling, Rehabbing, and Selling Foreclosed Homes on the Gulf Coast. I also like the occasional Bungee Jump, Skydive, and World Travel -- time permitting.

6 Comments

  1. Jeff Brown

    I’ve said all along there would be a political solution for this. One cringes at what that solution might be. The courts, however, have some options I haven’t seen discussed much, one of which is a game changer.

    If nobody can prove to the court who exactly owns a given promissory note, and all other options have been played out, the borrower may petition to have the lien eliminated permanently. They would then own the home sans debt.

    Think about THAT happening a few hundred thousand times. 🙂

  2. Jeff Brown

    Make yourself the judge. After many weeks, even so-called note holders, servicers, and related players can’t prove, or likely more accurate, bamboozle you into what amounts to a totally arbitrary decision about who is in fact the rightful owner of the note.

    What are you to do? Nobody can even come close to proving ownership of the note . The legal requirements for a note to have legal standing no longer exist — or at least cannot be shown to you, the judge, to exist. The trust deed is recorded as evidence of the note, securing it. It now secures…what?

    Think about a contract without one of the four elements. What does the court rule?

    There is no contract. If there’s no note owner…?

  3. william dziedzic on

    I just do not understand why this is such a big deal. First off, there has not been one documented instance where a borrower has lost their home due to some oversight from a “robo-signer”. These are essentially ministerial functions. The figures are not just pulled out of thin air or randomly. All this is is pent up frustration towards the large loan servicers and banks.

    Have the banks been sloppy? Sure. But does everyone in America love their 30 year fixed rate note with no prepayment penalty? Well, you can thank securitization. (which is a major reason for the current issue). These issues are technical in nature and rely on personal knowledge of business records in an affidavit.

    As for the contention that a 300,000 loan can be extinguished because of a lack of standing, that is totally counter to the commercial law axiom that security follows debt, i.e., the mortgage deed secures and follows the promissory note. I find it astounding that a lender, between the MERS membership registration, blank endorsements, and allonges cant ultimately present a properly endorsed or assigned note to the court to properly prosecute their foreclosure.

  4. William, thanks for getting in on this!
    Hey, I must admit, the media Loves a Juicy story 😉
    I don’t know about a specific case either, but apparently the big banks see some need for caution given the recent actions that they’ve taken.

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