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Moving forward on ‘valid’ foreclosures

By Holden Lewis · Bankrate.com
Monday, October 11, 2010
Posted: 3 pm ET

The White House, yielding to common sense, opposes a national moratorium on foreclosure sales on the grounds that it would harm the housing market.

David Axelrod, a White House senior adviser, said on CBS's "Face the Nation" on Suday: "I'm not sure about a national moratorium because there are, in fact, valid foreclosures that probably should go forward."

That brings up the question of what a valid foreclosure is. My definition: When a homeowner hasn't made mortgage payments in at least three months, and the servicer has notified all necessary parties that it intends to take back the property, and the borrower doesn't reach some sort of accommodation with the servicer, then a foreclosure is valid.

Some readers commented last week that mortgage servicers forged documents. The robo-signing issue has nothing to do with forgery. The robo-signers aren't accused of faking documents. They're accused of not closely reading the documents, which mostly are legal boilerplate.

Other readers say the foreclosing servicer should be required to prove ownership of the loan. I'm not sure what the argument is here. The borrower doesn't send checks to the servicer. After a few months, that same servicer starts the foreclosure process. Obviously, the servicer works on behalf of the owner (or owners) of the loan.

When two servicers foreclose, I can see where ownership of the loan becomes a valid question. But I don't think there are a lot of cases of multiple servicers foreclosing on the same loan.

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4 Comments
connie allen
October 13, 2010 at 7:56 am

Litton loan servicing has a big problem with accounting for payments and charging for fraudulent corporate advances. I was told by an executive resolution representative that there are infinite reasons for adding fees and i would not be able to stop them, because litton can do whatever it wants to do. Thousands of dollars have been added to my loan and litton keeps a side book called a control panel account on each loan. Items are charged and sold that amount to tens of thousands of dollars on a mortgage with a balance of $58,000. Second and third mortgage services simply wrote off my loans and i cannot find them and if they find me, they cannot prove the right to collect payments because no assignment exists in mers or the court house. what are we to do?

Dave
October 11, 2010 at 6:01 pm

Holden - I agree with your comments here. Unfortunately, from a legal standpoint if someone cannot prove that they had the legal right to foreclose, meaning they can produce the original Note to satisfy the legal system, an attorney can take that and stall a foreclosure action until it can be determined who legally has the right to foreclose. This then gets into where is the Note and who is the owner? Is MERS a valid concept that entiles MERS designees to foreclose? Remember that one of the purposes behind MERS was to increase efficiency by not having to record numerous assignments as mortgages were sold and transferred. If lenders/servicers got sloppy and did not endorse the Note over to the next owner/trustee then there may be a problem.

Because this issue has come to the forefront people will likely think twice about buying a foreclosed property, further delaying a recovery. Hopefully, a remedy will be developed that makes sense and satisfies the legal aspects and makes sense to the public at large (I am not going to hold my breath on that however, if you don't mind).