Since A.D. 2009, I’ve published 25 articles on the fraud that appeared to infect most home foreclosures (see, Foreclosure). This will be the 26th.
Most of those articles focused on reports that the banks making mortgage loans had defrauded the borrowers. The fraud worked like this:
1) The banks seemingly loaned money to people to buy new homes.
2) These loans were based on the home-buyers’ signatures on Promissory Notes and Mortgage documents that memorialized the home-buyers’ promise to a) repay the loans; and b) surrender possession of the house if they defaulted on repaying the loans. These written documents created the banks’ rights foreclose on the home-buyer and seize his home if he defaulted on making his loan payments.
3) But the banks often sold the Notes and Mortgage documents to third parties within days or even hours after they’d negotiated the loan with the home-buyer. Thus, the bank was fully paid for whatever they’s invested in the loan shortly after the loan was negotiated. Nevertheless, the banks continued to collect the mortgage payments from the home-buyer. But, most importantly, by selling the Notes and Mortgage documents, the banks lost their right and standing to foreclose on the mortgage loan. It was like selling the “certificate of title” to your car. Once you sold the “title,” you lost your right to drive the car. Once the banks sold the Notes and Mortgage documents associated with a particular loan, the banks lost their right and title to foreclose on the the particular house.
4) Nevertheless, the banks did foreclose on nearly four million homes during the Great Recession. If those foreclosures were instigated by banks that no longer owned the Notes and/or Mortgage documents associated with particular homes and loans, those foreclosures were arguably based on fraud. Once the bank sold the Notes and/or Mortgage documents, the bank had no more right to foreclose than I did. No tickee, no washee. No Note, no foreclosure.
When the banks sent foreclosure notices to borrowers, most borrowers simply packed their bags and moved out of their homes. They consented to be foreclosed upon.
But some borrowers who’d come to sense or even understand the fraud perpetrated by the banks stood their ground and refused to move out of their homes. Some of those people are still living in their “foreclosed” homes, five years after the banks sent their first notice of foreclosure–and haven’t paid a dime on their mortgages during the past five years.
It takes a certain amount of brains and lot of nerve to not only refuse to pay on your mortgage for five years, but also to remain in your house.
Here are some excerpts from an article in The New York Times entitled “Foreclosure to Home Free, as 5-Year Clock Expires.” That article explains that thousands of people who stayed in their “foreclosed” homes without paying a dime on their mortgages for the past five years may get to keep their homes for free. Legally, they may never have pay any more on their mortgages.
“In September, Susan Rodolfi celebrated an unusual anniversary: five years of missed mortgage payments.
“She is like a ghost of the housing market’s painful past, one of thousands of Americans who have skipped years of mortgage payments and are still living in their homes.”
Why are these borrowers still living in their “foreclosed” homes? One answer may be that they refused to leave when they received notices of foreclosure from the banks. That takes nerve.
But I’ll bet that at least some of these people refused to leave because knew that the banks were engaged in fraud and couldn’t take/foreclose on the homes without the home-buyer’s consent. That takes brains.
“Now a legal quirk could bring a surreal ending to her foreclosure case and many others around the country: They may get to keep their homes without ever having to pay another dime.
“Legal quirk,” my butt.
“Surreal ending,” my you-know-what.
The “legal quirk” they’re referring to is the statute of limitations which is as well-established as any law can be.
The only thing that was “surreal” about the foreclosure process was not the “ending” (home-buyer gets to keep the house without paying the sum due on the mortgage), but the beginning (banks sold the Notes and Mortgages and thereafter engaged in fraud against borrowers).
“The reason [why home-buyers will get to keep homes without paying the mortgages], lawyers for homeowners argue, is that the cases have dragged on too long.
“There are tens of thousands of homeowners who have missed more than five years of mortgage payments, many of them clustered in states like Florida, New Jersey and New York, where lenders must get judges to sign off on foreclosures.”
In other words, in order to foreclose, the banks would have to take their foreclosure petition to court. The problem was that the banks has previously sold the Note and Mortgage documents that created their right and standing to foreclose. Without the original Note and Mortgage documents, the banks would have not standing to foreclose on a particular house. In fact, without those original documents, the bank might not have had standing to claim the previously collected mortgage payments. In theory, the banks might be required to refund all mortgage payments received after they sold the Note and Mortgage documents to some third party.
More, if it came out in court that the banks were trying to foreclose on a house where the bank owned no Note or Mortgage documents, that might not only be construed as fraud on the borrower, but might even be construed as fraud on the court, itself. Fraud is a crime. Bankers (and even their lawyers) might go to jail.
But. According to The New York Times article,
“[I]n a growing number of foreclosure cases filed when home prices collapsed during the financial crisis, lenders may never be able to seize the homes because the state statutes of limitations have been exceeded, according to interviews with housing lawyers and a review of state and federal court decisions.”
To which I say, “Bunk.”
In fact, let me rephrase that to say “Bunk!”
Are we to believe that the banks–and their lawyers–lost track of tens of thousands of homes that should’ve been foreclosed five years ago?! Are we to believe that those homes will now “accidentally” escape foreclosure and the home-buyers will get to keep their homes without paying another dime?
Is the “statute of limitations” the real reason these homes will never be foreclosed? Or is that statute a mere pretext for not litigating some foreclosures?
“No one gets a free house,” Judge Michael B. Kaplan of the United States Bankruptcy Court in Trenton wrote in an opinion late last year, reflecting what he characterized as a longstanding “admonition” he and others made during the foreclosure crisis. But after effectively ending a New Jersey homeowner’s foreclosure case in November because the state’s six-year statute of limitations had expired, he wrote in his opinion, “With a proper measure of disquiet and chagrin, the court now must retreat from this position.”
But, did the homeowner really get a “free house” because the statute of limitations expired? Or did he get a free house because the lender had engaged in fraud, had approached the court with “unclean hands,” and may’ve been criminally liable for defrauding both the borrower and the court?
Was the statute of limitations merely a way for banks to give up the homes without having to admit that their foreclosures were based on fraud?
I strongly suspect that the real cause for abandoning those homes to home-buyers was to avoid be charged with fraud. The statute of limitations provided an excuse to abandon those homes without having to admit that the banks had engaged in fraud.
Again, the banks frequently sold the note and/or mortgage documents to homes after the loans were first granted. Those notes and mortgage documents were frequently attached to mortgage-backed bonds that were subsequently sold around the world. Result? The banks don’t have the original note and/or mortgage documents that entitle them to foreclose. Without those notes/mortgage-documents, the banks have no standing to foreclose.
And, again, without those notes/mortgage documents, the banks may not have had legal authority to collect mortgage payments prior to foreclosure. Thus, it’s conceivable that if these cases had come to court, the home-buyers might’ve countersued to the banks to recover all mortgage payments received by the banks.
If these foreclosures suits had gone badly for the banks, they might not have only lost the homes where mortgages weren’t being paid, they might’ve even lost all the money that had been previously paid on the mortgages, and even wound up exposed to being charged criminally for fraud.
Thus, instead of facing those possible risks, I believe the banks simply caused or allowed the cases to “drag out” until they reached the statute of limitations. The banks would lose the houses, but they’d save face and thereby limit their potential losses to “only” the homes they’d sought to foreclose.
I think that’s a wonderful story. Private individuals figured out that the banks were engaging in fraud. Some private individuals relied on on that theory. The banks apparently didn’t want to confront that theory in court. Some private individual with sufficient brains and nerve got to keep their homes.
Now they’re trying to conceal that victory by claiming the home-buyers get to keep their homes due to the statute of limitations. But I believe that’s simply standard operating procedure for the “system”. When they win, they shout it from the rooftops. When they lose, they go silent or explain the lose as caused by a “quirk” or a procedural error.
First point: we have to hunt for evidence of our victories. But there are some victories.
Judging from The New York Times article, there might’ve been 100,000 homes where the borrowers had sufficient knowledge, intelligence and courage to successfully resist the banks. That’s not much out of 4 million foreclosed homes (one in 40). Still, that’s something to remember and respect.
Every once in a while we can beat these bastards. As more people understand that victory is possible, more people will fight to win.
Second point: I don’t imagine that my previous 25 articles on foreclosure fraud played a big part in saving tens of thousands of homes from “fraudclosure”. But I like to imagine that those articles played a small part. It pleases me to think that I might’ve helped save a few homes from “fraudclosure”.
Final point: It also pleases me to write this 26th article as a conclusion to the previous 25. I’ve been writing articles on foreclosure fraud for six years and hoping that I might make a difference in some borrowers lives. Well, maybe I did. In any case, it appears possible that the insights and arguments I presented over the size years resulted in the victories that I’m reporting on today.
How nice, hmm?
You write for six years, and then you catch a glimpse of some victories. There is cause-and-effect–if you’re patient enough to persist.