October 18, 2010
Bank Of America To Resume Judicial Foreclosures Next Week
While Bank of America has announced that it will resume foreclosures next week in the 23 states which require judicial proceedings, foreclosures in the 27 non-judicial states (which includes California) remain in a holding patern and under review.
First Published: October 18, 2010 1:45 PM
Comments from "Plugged In" Readers
Can someone help me understand why BAC would resume in JUDICIAL states but not NON JUDICIAL states? I though it was supposed to be much tougher in JUDICIAL states. People were saying that is where the moratorium would take a long time. Thanks
Posted by: dumb question at October 18, 2010 2:20 PM
There's a WSJ article with some more detail, but no real explanation:
It seems like they anticipated this problem earlier than the other banks, perhaps, so they were already on their way to fixing the paperwork. I remember reading that Bank of America's foreclosure moratorium only ran through the end of October because they stated they will have fixed or re-checked the affidavits by then:
There are other potential reasons why, but I don't have enough detail. Maybe their paperwork was better; maybe Countrywide's paperwork was better?
Posted by: sfrenegade at October 18, 2010 3:07 PM
I forgot to address the non-judicial states. While it may be easier to foreclose in non-judicial states under a deed of trust, that doesn't mean the paperwork is in order. The ease might encourage more short-cuts.
It's entirely possible they picked a legit lawyer for judicial foreclosure states in the first place, instead of one of the foreclosure mills that engages in huge amounts of fraud. In the case of deeds of trust, they may not have had the proper oversight over the process since it could be done in-house.
Posted by: sfrenegade at October 18, 2010 3:11 PM
Here's another example that it could be bad lawyers causing the problem in judicial foreclosure states:
Perhaps Bank of America had the good sense not to use lawyers who commit fraud. We'll find out in the next few days.
Posted by: sfrenegade at October 18, 2010 3:19 PM
well this just sounds backwards
Posted by: an honest MB at October 18, 2010 3:44 PM
you ask a very intelligent question
the short answer is: nobody knows what exactly is going on. as I've said before, there are 3 distinct concerns, two of which are proven and one is speculated but has no proof.
1) robosigners were perjuring themselves by not having full knowledge of the foreclosed upon property (PROVED)
2) foreclosing entities were using fabricated documents (PROVED)
3) the foreclosing entity may or may not have possession of the note (a legal requirement in 45 of 50 states I believe, but am not 100% sure). they may not have the note because of flaws based on MERS, or due to issues related to securitization, or even due to destruction of the paper note. (ONLY SUSPECTED, NO PROOF).
the 2 proven allegations were most problematic in the Judicial states and that has opened BofA and other parties up to the most scrutiny.
As I've said before, fixing the first two issues (although costly to the bank) is rather easy. the third allegation is unknown and is extremely problematic.
please understand that these releases are masterfully written and can be interpreted many ways.
A Bank of America spokesman said the bank has found "no cases" thus far of foreclosures that shouldn't have "gone through."
this has a double meaning (by design).
It may mean that the Bank had full LEGAL authority to foreclose in all of their review.
it could go back to the banker's tired excuse of "well, we screwed up, but we really did deserve to foreclose".
the press campaign that the banks have been running goes like this:
"there are terrible deadbeats out there and they haven't paid their mortgage, so they DESERVE to be foreclosed upon... and yeah we made a few technical mistakes (which means lying to the courts) but really there was no true error... just a technical glitch".
"We're not evicting people who deserve to stay in their house," James Dimon, J.P. Morgan chief executive, told analysts Wednesday.
their press statement doesn't elucidate if their legal papers are in order or not.
it only states that no foreclosures happened that "shouldn't" have happened, whatever that means.
think about how the bank jerks you around if you don't comply with the full letter of the law. Now they fall back on what the homebuyers "deserve"...
if you make a "technical glitch" they nail you to the wall. If they lie and perjure themselves to the court, well it's an innocent mistake... anybody could have done it... and the borrower is a Deadbeat anyway.
they are not being clear as to WHICH foreclosures are to proceed again.
is it all scheduled foreclosures?
or just foreclosures on mortgages that were not securitized?
the banks are purposefully obfuscating the issue.
they are trying to divert attention away from the fact that they are liars and cheats (perjuring themselves and fabricating documents) and trying to focus us in on the "Deadbeat" borrowers.
in doing so: they then make us think "whew, it's all over" when they have instead said nothing of the sort. they have used double meaning sentences to further confuse. (again on purpose).
lastly: in case you think I'm reading too much or little into it:
they could have said this instead, killing the question about lost notes once and for all:
"we have evaluated XXX number of foreclosures per state over the last one month. we have found that in every case the borrower did in deed deserve to be foreclosed upon, and moreso we found that every aspect of the file, including all documentation, was in perfect order in full compliance with all local state and federal laws"
Posted by: ex SF-er at October 18, 2010 4:00 PM
I mentioned on an earlier thread that this problem would be short lived, and that they would test the first ones out on judges.
So, dumb question, the answer is that no one will buy a foreclosure from them in any state until the judges in judicial foreclosure states have blessed the processes. So you start in the judicial foreclosure states, let the judges poke under the covers, check the whole process out, and when they say everything was Kosher, you can sell in the non judicial foreclosure states where no judge has passed judgment on the process with some confidence that they have the process under control.
The fact is that in 99.999% of these cases, the BUYER STOPPED PAYING!!! The only problem was the bad press before the elections. Seeing families of 7 getting thrown out on the street makes bad pre-election press for the incumbents.
The foreclosure evictions won't resume now until after the election, so frankly, no one really cares. Sorry, they just don't care. The houses are going back to the bank. If they lied about who notarized this document or that, the politicians just aren't going to care: the buyer stopped paying and the election cycle is shorter than the foreclosure eviction cycle, so no one cares any more. Sorry.
Posted by: tipster at October 18, 2010 5:24 PM
I agree with you that nobody cares about the foreclosure itself or the foreclosed upon borrowers. Few ever have.
but my guess is that MBS investors are looking hard at these documents as are title insurers and everybody else who has big money to lose (or gain).
some people for whatever reason are interpreting a vague press release as "all is clear!"
this from the same group that said that Lehman and AIG were fully capitalized. hahahahahah. I mean c'mon... their press release said so right there.
nothing to see here. move along.
Posted by: ex SF-er at October 18, 2010 5:34 PM
"I mentioned on an earlier thread that this problem would be short lived, and that they would test the first ones out on judges."
It's worth noting that Citibank said their foreclosures were clean too. It's possible that it was specific banks' processes that were problematic, namely Chase. Note that Chase still had some judgments issued during the supposed moratorium:
They give as an excuse that those judgments might be cases where Chase was a trustee or owner, rather than just a servicer, but it should have been easy for them to find the facts here instead of speculating.
Posted by: sfrenegade at October 18, 2010 5:36 PM
It is not so simple as "they're deadbeats who deserved to lose their house anyways". The servicers have been playing all sorts of games such as applying homeowner payments to penalties instead of principal&interest, levying fees and penalties not permitted by the note or by state law, etc. These acts can push a homeowner underwater that otherwise might be breakeven. There's also the question of a taxable gain for "forgiveness" of a debt that was larger than it should have been due to these servicer acts.
Basically, the servicers have very unclean hands here and should not be permitted to do jack shit unless they can produce the actual note and demonstrate their actions are permitted by said note.
This is described more eloquently here:
Then there's the whole question of junior lien-holders versus senior lien-holders, and were (are) the servicers actually allocating funds correctly to those lien-holders.
It appears right now that the entire 2 trillion dollar pile of MBS were constructed without the legal right to foreclose. One corner too many was cut.
Posted by: Delancey at October 18, 2010 6:50 PM
I have to totally agree with ex SF-er on this one, this is looking increasingly like a replay of the events of October, 2008 when all the Very Serious People were on every talk show saying that "the problem" was "contained to subprime". We all know how that turned out.
And to finish the thought that ex SF-er and Delancey had regarding residential mortgage-backed securities, what about the derivatives based on them? Joseph Tauke's editorial on the 14th was the best commentary I've read that tried to put all the pieces in one place, and in a right-wing web magazine I normally don't subscribe to (I'm not a right-winger), which you owe it to yourself to read; here's his final section:
Trusts haven't been selling mortgage-backed securities. They've been selling nothing-backed securities. And as people discover this fact, the value of both the "mortgages" that banks only think they own and the nothing-backed securities will become $0, unless homeowners decide to get their jollies by giving banksUnfortunately, we're at the point now where the toothpaste can't be stuffed back into the toothpaste tube. Every lawyer out there is trying to find an angle to prevent foreclosure on their clients, and they've found two or three that are valid avenues of attack.
money for no reason.
The equally-infamous credit-default swaps that bankrupted AIG will come roaring back with a vengeance as the foreclosure process grinds to a halt…When a mortgage isn't really a mortgage, a derivative based on that mortgage is suddenly called into question. Banks own trillions in derivatives. They also own derivatives of derivatives. Amazingly, they even own derivatives of derivatives of derivatives. The total dollar value of all derivatives in the American financial system is listed by the Office of the Comptroller of the Currency at an absolutely incomprehensible $233 trillion. And much of that will simply vanish into thin air, crashing major banks into the groundOf course a lot of these swaps and related deals have been unwound since 2008. I think we're going to find out before the end of the month how many are left around and in force. I think Tauke's last 'graph sums up what to think about BofA's latest "statement":
They can't survive without the fraud. So they've decided to rob America blind. They just don't want you to know. Thus, only one question remains. When do we foreclose?Of course, the banks aren't going to simply eat all of the mortgage-based securities that they are going to be forced to buy back at the original price. That would send their balance sheets into a cocked hat. Look forward to TARP II, coming soon to a cowed U.S. House of Representatives near you.
Posted by: Brahma (incensed renter) at October 18, 2010 11:19 PM
When the law threatens the system that provides our elite with power and money the law will be changed.
"All those in favor?"
Look for the MBS reconciliation act of 2011.
Posted by: diemos at October 18, 2010 11:53 PM
It's worth noting that Citibank said their foreclosures were clean too.Uh huh. And Citi Investment Research & Analysis, was so convinced by this statement that they hired an outside academic lawyer to research the issue and come back and brief them on it. That briefing is summarized here, but the nutshell 'graph of the summary is this:
•Three Potential Outcomes — Levitin articulated three possible outcomes to the aforementioned issues and assigned an equal likelihood to each. In his best case scenario, these issues are deemed merely technical in nature and are successfullyEmphasis added. Note that the best case scenario implies that distressed inventory will essentially keep increasing for a year, depending on how fast soon-to-be-foreclosed on homeowners get smart and start challenging foreclosure fraud en masse. So it's in the banks' interests to act like nothing is wrong, or this is just a minor problem, so that people about to get foreclosed on don't get wise to the game.
resolved but it takes at least year to do so and all foreclosures are delayed by at least a year. Levitin disputed the claim by banks that these issues can be resolved in a month or so and attributed the banks’ claims to "legal posturing." In the medium case scenario, litigation ensues and it takes years to sort out these matters. In the worst case scenario, the aforementioned issues become a "systemic problem" which causes the mortgage market to grind to a halt as title insurers refuse to insure mortgages involving existing homes.
Posted by: Brahma (incensed renter) at October 19, 2010 9:23 AM
Agree, Brahma, it's starting to look more like it's about reassuring shareholders that the banksters aren't going to lose a ton of money from this. These statements about the foreclosure moratorium ending seem to be bogus. Time to short the banksters!
The homeowners should start making quiet title filings if the security interests haven't been perfected.
Posted by: sfrenegade at October 19, 2010 11:01 AM
When the law threatens the system that provides our elite with power and money the law will be changed…Look for the MBS reconciliation act of 2011.I agree that they'll attempt it. I just don't think they'll be successful at getting congress to give them cover.
Yves Smith, of the blog "Naked Capitalism", addresses this in her op-ed today in the New York Times, How the Banks Put the Economy Underwater:
The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior. But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code. A challenge on constitutional grounds would be inevitable.And the legions of lawyers engaged in forclosure fraud litigation right now would be the natural challengers to any such federal statute, if it actually managed to pass and be signed into law. Are the "tea party" favorites that win in November going to vote to absolve the bank CEOs of their sins?
Asking for Congress’s help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings. Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?Answer: Not the 111th Congress. Perhaps the banks can extend this out a while longer and try their luck with the next one, after their executives have funded the campaigns of candidates more acceptable to the elite with power and money.
Posted by: Brahma (incensed renter) at October 31, 2010 1:25 PM
Answer: Not the 111th Congress. Perhaps the banks can extend this out a while longer and try their luck with the next one, after their executives have funded the campaigns of candidates more acceptable to the elite with power and money
I hope this is true, but after the flood of money unleashed by the Citizen United decision, I would be astonished if the new members of all Congress didn't owe Wall Street major favors.
Posted by: NoeValleyJim at November 1, 2010 9:57 AM