The stop foreclosure message seems to have taken hold in light of the recent hoopla surrounding the “robo signing foreclosures in Phoenix” mess created by mortgage lenders who have been caught red handed filing bogus and fraudulent affidavits in order to steamroll over distressed homeowners and take their homes through foreclosures that are in many cases illegal. Major lenders have brought foreclosures to a halt. J.P. Morgan Chase, GMAC and Bank of America, among others are leading the way. Chase and GMAC have stopped foreclosures in 23 states. B of A, in response to increasing pressure from congressional inquiry and court cases has now announced it is stopping home foreclosures in all 50 states. Here is the fall out:
1. MORE TIME TO WORKOUT A LOAN MODIFICATION FOR THOSE WHO TRULY QUALIFY
Under the Making Homes Affordable Program (HAMP) homeowners behind in their payments and who qualify are given options to apply for and must be considered for a loan modification of their mortgage where the payments of the mortgage constitute more than 31% of their income. Lenders agreed with the federal government, in return for bailout funds, to work with distressed homeowners and give those who qualify a loan modification they can afford based upon reviewed financial criteria. Unfortunately, under the pressure of so many thousands of foreclosures in process and lack of communication between mortgage lender departments such as the collection department and the loss mitigation departments, a homeowner who is being seriously considered for a loan modification often gets a notice that the home is proceeding to foreclosure from the collection department while being told by the loss mitigation department they are under review for a loan modification and no foreclosure will occur during that period of time. The collection department and the loss mitigation department have not coordinated or communicated and the property often is sold at foreclosure. This violates the regulations under the HAMP program. Stopping the foreclosure process will provide time for the lenders to get their acts together to ensure (a) the collection and loss mitigation departments are in sync and following the guidelines of HAMP. (b) Homeowners who truly qualify for the program will then be given the benefit of the program. Those that don’t qualify will be provided other alternatives.
2. SHORT SALES WILL BECOME EASIER AND TIME SHORTENED
It is no secret that many homeowners facing foreclosure simply will not be able to keep their homes because of changed financial circumstances or they are in a home that they should have never bought. Nevertheless, these homeowners may avoid a foreclosure on their records by selling the distressed property through a short sale. This means the home will be sold for less than the mortgage owed on the property. Whatever the difference is termed a “short sale” because its short of the whole amount being paid off. A short sale saves the lender costs and expenses of a foreclosure and ensures a certain sum of money without the lender having to take the property back into its inventory, expend money to fix it up or maintain it. It provides the homeowner with a record free of foreclosure. The problem has been the amount of time taken for a lender to approve a short sale offer made by a buyer. 90 to 120 days has been the norm. By that time the buyer usually loses patience and backs out of the sale. Halting the foreclosure process will provide more time for lenders, distressed sellers and buyers to work a deal that best fits all. During foreclosure moratorium lenders can concentrate on short sales and shorten time periods for approval and move the property off the books.
3. THE FORECLOSURE PROCESS SHOULD HAVE MORE INTEGRITY
“Robo signing” has clearly tainted the already highly suspected ways in which mortgage lenders are handling foreclosures. Fraudulent documents submitted to courts of law have caused substantial damage to the integrity of the system and have wrongfully caused foreclosures on properties that might have qualified for a home loan modification or a short sale. Time can now be taken to ensure that foreclosure laws are clearly complied with before a foreclosure sale.
4. WRONGFUL FORECLOSURES SHOULD BE RESCINDED
An untold number of homeowners have been wrongfully foreclosed upon and evicted from their homes as a result of the bogus filings of foreclosure affidavits. Where the homes taken were returned to the lender and are now in the lender’s real estate owned (REO) inventory, illegal foreclosures can and should be rescinded, trustee deeds cancelled and homeowners given their property back. In numerous of these instances there is a very good likelihood that the homeowner qualifies for a loan modification. Alternatively a short sale or other foreclosure preventing measure may be available. In the event a home was taken wrongfully by the lender and sold to another party, the banks should pay appropriate damages to make the homeowner whole.
5. EVICTIONS OF HOMEOWNERS WILL BE HALTED
After a foreclosure sale a homeowner still in possession of a home is subject to being removed by an eviction process in court. Halting the foreclosure process will keep deserving homeowners in their homes until the foreclosure mess can be cleaned up. Where a homeowner can show that loan modification guidelines or foreclosure laws have not been complied with an injunction from a court will likely be readily issued stopping the eviction until the lender can prove its entitlement to the property.
