Foreclosures Halted In 23 States: Plantiffs' Lawyers Rejoice
GMAC Mortgage, JP Morgan Chase and Bank of America have suspended foreclosures in 23 states to evaluate if there were errors due to "robo-signing". "Robo-signers" are bank middle managers who sign the paperwork that allowed banks to repossess homes that are in default, without properly reviewing the underlying documents they were signing. (Separately, the state of Connecticut has called for a 60-day suspension of all foreclosures in the state and a large title insurer has ceased insuring homes foreclosed by some of these companies.)
Here are the 23 states affected by the foreclosure freezes:
- Connecticut
- Florida
- Hawaii
- Illinois
- Indiana
- Iowa
- Kansas
- Kentucky
- Louisiana
- Maine
- Nebraska
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Ohio
- Oklahoma
- Pennsylvania
- South Carolina
- South Dakota
- Vermont
- Wisconsin
However, it's not apparent that the banks were executing a nefarious plot to swindle homeowners out of their homes. Rather, overworked bank employees likely relied on the assertions from other employees that the homeowner was delinquent, without verifying the details contained in the affidavit. Again, that's wrong, but it doesn't mean that the homeowner didn't deserve to lose his or her home.
Take the example cited in today's Wall Street Journal ("Foreclosure? Not So Fast"). Homeowner Israel Machado is behind on a $400,000 mortgage and has hired a lawyer not to dispute the fact that he's delinquent, but "to convince the owners of the mortgage to cut Mr. Machado's loan balance to between $150,000 and $200,000-the current selling price for comparable homes in his community near West Palm Beach. 'The whole intent was to get them to come to the negotiating table, to get me in a fixed-rate mortgage that worked,' Mr. Machado said."
OK, so Machado had a mortgage and is seriously delinquent. Even if the bank employee signing the foreclosure documents goofed, it doesn't really change the facts: the guy is on course to lose his home because he can't meet the monthly obligation and financial institutions are reluctant to reduce the mortgage principal balance that would allow him to stay in the house.
To me, it looks like this whole fiasco is good for only one group: plaintiffs' lawyers. Check out this ad from a Florida attorney:
If you are a defendant in a foreclosure case in which GMAC was or is the Plaintiff, or in which GMAC was or is the servicer, I welcome you to contact my office for a free consultation, especially if (the ad mentions a specific name here, which I have deleted) signed an affidavit in your case. Even if your foreclosure case is already over, there may be grounds to vacate it. In fact, you may be able to move back into your home (even if you've already been foreclosed).It's highly doubtful that any significant number of foreclosures will be reversed or that beleaguered former homeowners have the money to hire one of these attorneys based on the hypothetical promise. Of course that doesn't prevent lawyers from preying on those who have already been through an emotional nightmare.
Image by Flickr User quinn.anya, CC 2.0