Las Vegas Sun

March 28, 2023

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A foreclosure mess

Mortgage servicers accused of not verifying foreclosure documents

Anyone who has purchased a home knows full well all of the myriad mortgage documents that must be signed and notarized before getting your loan documents approved, enabling you to get the keys to the house. And, if there is a document missing, no matter how seemingly inconsequential, a bank or title company will stop the loan process dead in its tracks until it is satisfied. That is perfectly understandable, especially in light of the considerable sum of money that is being exchanged.

Now we come to learn that a number of mortgage servicers, in their rush to foreclose on homes, have been taking shortcuts when it comes to verifying all of the documentation. It’s not easy determining just who holds the loans, which is one part of the problem. As The New York Times explained in a Monday story: “The byzantine mortgage securitization process that helped inflate the housing bubble allowed home loans to change hands so many times before they were eventually pooled and sold to investors that it is now extremely difficult to track which lenders have claims to a home.” It also is clear that there have been instances where the mortgage servicers have been derelict in determining the authenticity of information that documented their right to foreclose on properties. In but one terrifying example, a GMAC employee testified that he signed 400 affidavits for the lender each day without reading them or verifying them to make sure they were accurate.

Indeed, it has been so bad that some of the largest mortgage companies in the country — GMAC Mortgage, JPMorgan Chase and Bank of America — have suspended foreclosure proceedings in states where a court’s approval is required. According to a story last week in The New York Times, Chase said it was stopping 56,000 foreclosure cases, while Bank of America and GMAC declined to say how many of their cases were involved; the Times added that roughly 2 million cases currently are in foreclosure and that millions more could happen soon. Title companies also will become leery when it comes to writing policies for foreclosures.

Nevada, which has the highest foreclosure rate in the country, isn’t one of those states that require a court to sign off on a foreclosure, but we are glad to see that Sen. Harry Reid has sent a letter to the largest mortgage servicers with Nevada customers, calling on them to suspend foreclosures until there are safeguards in place to make sure that they are being correctly directed into foreclosure proceedings. Furthermore, Reid requested that mortgage servicers work with renegotiation efforts at the state level through the U.S. Treasury Department’s “Hardest Hit” program. Nevada, Reid noted, has received $200 million for this program intended to prevent foreclosures by helping unemployed homeowners.

There are serious doubts about whether the foreclosure process is being carried out legitimately. Until these mortgage servicers can demonstrate that their own house is in order, such foreclosures should be suspended, including in those states that don’t require legal proceedings.

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