Mortgage Lenders Not Following Law on Modifications

Posted on February 24, 2011

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A great Washington Post story talks about the efforts of state Attorneys General and the Federal Housing Administration to reach an agreement with mortgage lenders to have them follow the law regarding loan modifications. According to the article, an agreement is near.

“State and federal officials, who have been negotiating with financial firms over how to address widespread abuses in foreclosure practices, are moving closer to a settlement that could force banks to reduce the principal on mortgages for some borrowers who owe more than their homes are worth.”

Contrast that story with the International Business Review. It seems obvious the reporter is barely rehashing a banking industry press release. In “Robosigners- What is Fact and What is Fiction” the reporter lists reasons why robo-signers did not make a difference to the outcome of a foreclosure. Tell that to someone whose home was taken.

“The so-called Robo Signing scandal occurred because proper processes were not always followed. When a big bank buys another big bank, there needs to be a corporate assignment of the first bank’s mortgage assets from the seller to the buyer. Even though the sale had been consummated, often times the mortgage assignments were not properly executed. However, that in and of itself does not make a foreclosure invalid. Even the White House has backed away from endorsing a national foreclosure moratorium.”

Actually, improper assignment is a basis to declare the foreclosure invalid. There is case law on this point. The reporter, if he had done basic research, should know it. But he didn’t. He just decided to rewrite a banking industry press release.

A basic google search would reveal that the Arizona legislature has introduced a bill making improperly-assigned mortgages invalid. Bloomberg has an article on that here.

“Nothing is being accomplished by delaying the inevitable” he writes. Actually, quite a bit is being accomplished. It is called ‘following the law.’ People are willing to sink quite a lot of their money into buying a property expressly because they feel they can rely on those laws to be followed. If they didn’t feel that way, there would be no real estate market to speak of at all. And then where would the mortgage companies be? Broke.

See the Washington Post article here.

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