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We have judicial foreclosures in Oregon as well, but they just aren't the norm. The difference is that a trustee sale doesn't require a court action. As part of the agreement between the lender and the buyer, the lender only has to serve the Notice of Default and can proceed with an auction if the payments haven't been restored. There is no paperwork to mess up.
It's the paperwork for the court action that is causing the problem. No court action means no paperwork. This is a judicial foreclosure problem. Now in the rare cases in the primarily non-judicial states where a judicial foreclosure is part of the deed, then yes assuming there was a robo signer involved you could have a problem. There are so few of those in trustee states that I really doubt they would have paperwork issues as the local attorneys that would handle the process see so few of them.
I'm really missing where you see this as not a national issue... I keep trying to find info that everything will continue as normal in non-judicial states and I can't find anything. In fact, I just read that Chase put a moratorium on all foreclosures NATIONALLY. Here's the latest update from a source that's following it closely.
I'm really missing where you see this as not a national issue... I keep trying to find info that everything will continue as normal in non-judicial states and I can't find anything. In fact, I just read that Chase put a moratorium on all foreclosures NATIONALLY. Here's the latest update from a source that's following it closely.
I didn't see on that article anything about Chase, but I don't doubt it. I'm not surprised and I wouldn't be surprised if others followed suit. I think they way the deed is written in a trustee state is different than a judicial foreclosure state. With the deed of trust the Trustee is granted the power to foreclose, sell the property and convey ownership to the purchaser. I don't think that clause exists in the judicial foreclosure states. In those states, I don't think the lender has the right to transfer ownership without going through the court action. Here borrower gives the Trustee that right from the get go. As such, I don't think we will have the title issues that judicial foreclosure states have because that right was assigned to the Trustee at the time the note was executed. That's my understanding of how it works, anyway.
Our commercial properties will be affected because those are judicial foreclosures, so it may impact some commercial projects.
This could be the craziest thing ever if it's true... But, assuming it's not - could you imagine them halting all RE transactions in an entire state?
The Chase reference was in the AFL-CIO link:
AFL-CIO NOW BLOG | Banks Should Follow Chase and Declare Moratorium on Foreclosures (http://blog.aflcio.org/2010/09/30/banks-should-follow-chase-and-declare-moratorium-on-foreclosures/ - broken link)
Quote:
The rest of the banking industry should follow JPMorgan Chase’s example and declare a nationwide moratorium on home foreclosures, AFL-CIO Executive Vice President Arlene Holt Baker said today. Chase has announced it is temporarily halting the processing of home foreclosures.
Thanks for the explanation, which makes some sense to even me. But, I still have concerns with that trustee wording - I mean, these banks sold off mortgages as fast as they wrote them. At incredible mind bending volumes the past 10 years. That's where all these foreclosures are being generated from now. It's almost like it was a giant oversight that this many would default and they've gone retarded.
This could be the craziest thing ever if it's true... But, assuming it's not - could you imagine them halting all RE transactions in an entire state?
The Chase reference was in the AFL-CIO link:
AFL-CIO NOW BLOG | Banks Should Follow Chase and Declare Moratorium on Foreclosures (http://blog.aflcio.org/2010/09/30/banks-should-follow-chase-and-declare-moratorium-on-foreclosures/ - broken link)
Thanks for the explanation, which makes some sense to even me. But, I still have concerns with that trustee wording - I mean, these banks sold off mortgages as fast as they wrote them. At incredible mind bending volumes the past 10 years. That's where all these foreclosures are being generated from now. It's almost like it was a giant oversight that this many would default and they've gone retarded.
TampaKaren and PalmCoasting are on here and they could answer that Florida question. I haven't heard anything like that, but honestly if title insurance companies won't issue title insurance then essentially you have stopped real estate from happening unless someone wants to forgo a title insurance policy and only a crazy person would do that in this market.
Think about it from a business perspective. Foreclosures are not a profit center for a company in this market. So do you spend more money to hire the staff needed in order to process all the short sales and foreclosures or do you skimp and hope to get buy. They took a business risk to skimp...and now it will cost them way more in legal fees than actually hiring more staff every would have. So it ended up being a really bad business decision.
In a non-judicial foreclosure action, the legal basis is usually something called a "power of sale" provision contained within the deed of trust. The deed of trust acts as a contract between the person paying the mortgage and the lender.
The problem is this - in contract law (and this is more or less true in all the non-judicial foreclosure states), in order for a contract to be enforceable, there needs to be something called "privity" between the parties to the contract. This is a legal relationship. So for instance, if your neighbor takes out a loan, and defaults, the company that made the loan cannot simply stick you with the bill (unless you co-signed it for some reason). There is no privity between you and that company, and you have no legal relationship when it comes to that money.
If your mortgage has been sold and securitized, the foreclosing entity may not be the same as the entity that signed the original documents with you. That can be legal, as long as the correct formalities were followed to transfer ("assign") the mortgage rights to the new party.
But thanks to the sloppy nature of these securitizations, and the reliance on electronic systems such as MERS, it has become possible to challenge some of these foreclosures in non-judicial foreclosure states on the grounds that the foreclosing entity lacks contractual privity with the person they are trying to foreclose upon.
A lot of this is simply due to the extremely lax rules that governed mortgage securitizations in the first place. There were no real state or federal standards for things like recordkeeping or record clearinghouses. This wasn't a problem until foreclosures began to rise, and some folks realized that the foreclosures were not being done in accord with state laws.
And here is a brief summary of all the moving parts in this rapidly deteriorating scandal which will blow holes in most mortgage servicers income statements and balance sheets:
Other states are taking similar action. In neighboring Maryland, Gov. Martin O'Malley, Attorney General Doug Gansler and Rep. Elijah Cummings sent a joint letter Monday to seven mortgage lenders, including three of the firms targeted by Biden's office in Delaware, asking them to similarly suspend foreclosure proceedings and review their procedures to make sure foreclosures in Maryland were done properly. In Texas, Attorney General Greg Abbott asked 27 loan servicing companies on Monday to suspend all foreclosure activities over concerns about the accuracy of foreclosure documents.
Actually I think there is a class action going on down in Florida already, but I think they are suing someone different. Not sure on that, I'd have to find the article about it again.
The good news is that attorneys are going to make loads of money on this fiasco, which means they can buy those higher end homes that are just sitting there...
Another nail in the coffin for holders of pre-foreclosed properties was mentioned in a WSJ article today.
"But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bond holders, including the junior debt holders, even though the home loan itself is producing no revenue stream."
Payments on second trust deeds, etc. can be significant. I can understand the interest in getting through the foreclosure process as quickly as possible. The amounts involved here can be huge. Yes, what a mess.
And, as a follow-up to my comment above, wouldn't the junior debt holders want to consider legal action of their own against the major bond holders for attempts to usurp their rights or opportunities to collect debts by rushing through the foreclosure process?
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