“Facing Foreclosure? Stay in Your Home for Up to Three Years!” – Is this possible?
As a response to the surge in home buyers up against foreclosure, some crack-pot self-help sites and e-publications across the internet have carried articles with headlines such as this.
They have offered quasi-legal ways to help home buyers forestall the foreclosure process. However, these articles and their methods were generally pooh-poohed by realtors, lending institutions (banks, credit unions, mortgage brokers, etc.), as well as by attorneys, judges, and financial gurus.
Maybe those articles aren’t really so far-fetched after all. They have consistently warned borrowers to understand their house purchase contracts—that a home buyer, with an attorney, should scrutinize every dotted “I” and every crossed “T” on all documents related to the home purchase.
Judges rebuke foreclosure attorneys—What’s going on?
Foreclosure attorneys are showing up in court with papers that have blanks where the real property owners should have been listed, or with papers that have those blanks filled in, but are back-dated.
In what has been termed a “landmark decision” by financial gurus, a lower real estate court in Massachusetts decided to throw out those foreclosures and, on appeal, the highest court in the state ruled the decision valid. The justices said that basically the foreclosure attorneys couldn’t prove that their lender-clients actually owned the property to be foreclosed.
An attorney who represents home buyers in Florida said the ruling would “send shockwaves throughout the entire mortgage, foreclosure, real-estate service industry.” A New York-based analyst said, “This is likely to open the floodgates to more law suits in Massachusetts and strengthens cases in other states.”
Blowing bubbles—How did all this happen?
Once upon a time, people had a little bit of money to spend. Home ownership was a likely place for this money to go. The building industry responded and new housing availability shot up. Then, banks discovered that they could make money by bundling up mortgages and selling them to investors as so-called securities.
Since the banks knew the mortgages were going to be transferred, they left naming ownership off the initial contracts so they could be easily transferred after the bundling and selling had taken place. If not a violation of real-estate law, at least this was very sloppy paperwork, paperwork that wouldn’t hold up in court. (To add to the confusion, further scrutiny has brought to light the use of “robo-signers” by lenders and “robo-notaries” by foreclosure attorneys.)
As banks saw their profits soar in bundling mortgages for investors, they started to loosen their lending requirements. And, of course, the construction industry was goading the banks to lend more money to folks as well – more home buyers. This financial activity on the part of lenders, builders, and borrowers created a lot of hot air and the so-called real estate bubble got bigger and bigger.
The predators and the patsies—Who’s to blame?
Of course, with a greedy eye on profits, banks and brokers became predatory and snared buyers with low down payments and affordable starting payments. They were approving loans on a rush basis and not properly qualifying or explaining contracts to their new borrowers. Many patsies signed up for adjustable rate mortgages, not really understanding what an a.r.m. does. Their house payments were pretty reasonable for the first year or so. Then, interest rates spiked, payments due went up, and people couldn’t pay. Foreclosures ensued and the bubble burst.
Now, thousands of borrowers are facing foreclosure and homelessness. And foreclosure attorneys are showing up in court with worthless ownership papers. What’s not clear now is the state of ownership of almost any real estate that has changed hands lately. One financial analyst speculated, “As of this point in time, there are approximately 50 million transactions over the past ten years that fit this pattern.”
Even home owners who aren’t facing foreclosure may not know the identification of the real lien-holder on their property. The owner might be an investment firm in Saudi Arabia at this point. Indeed, sloppy paperwork may have accompanied other bank loans, not just the predatory ones. The benighted investors are getting pretty upset and starting to sue those lenders who bundled the loans for their investments.
Forestalling foreclosure—What does this mean to a home buyer?
Buying a home is a dizzying process anyway. Being rushed through the process by a greedy, predatory lender is worse. Fees and profits blew the real estate bubble. Now greedy lenders are having their sloppy processes burst back on them – in court. And all this should serve as a warning to any who might want to buy foreclosed property.
Articles as mentioned earlier may be closer to the truth now than just before the Massachusetts ruling. As noted, they did carry at least one good piece of advice: Home buyers should familiarize themselves with their state’s foreclosure laws and examine all their domicile contracts and documentation with the help of an attorney.
With a little home work and legal assistance, many beleaguered home buyers, especially those who were victims of predatory lenders, may be able to hold off getting kicked to the curb. That is not to say that some sort of recompense won’t be owed for the housing enjoyed, but this could be a path to better terms and conditions. Hopefully, this will send a moral and financial lesson about greed to those most responsible for this real estate debacle – the lenders, the brokers, and their profiteering partners in crime.
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Lazaro Law Group, Professional Corporation represents immigrants all over the United States and the US Embassy in Manila. The firm’s offices are located in San Francisco, Fremont/Newark/Union City, and Sacramento, California. Attorney Johnson Lazaro can be reached at (415) 800-5775 or toll free at (855) 4-LAZARO. His email is This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
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This article should not be taken as legal advice for any individual case or situation. The information is intended to be general and should not be relied upon for any specific situation. This is not meant to create a lawyer-client relationship.
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