NY POST: FRAUD-CLOSURE BIZ FIZZLES OUT

Nov 17, 2010

EDITOR’S NOTE: I wouldn’t exactly agree that foreclosures are fizzling out, but it is true that despite the announcements from BOA, Chase etc. that they were resuming foreclosures, the number is dwindling. It seems that when they announced the moratorium a sharp rise in strategic defaults (people just stop paying) caused them to at least pose a credible threat to homeowners. There is no doubt though that with more Judges piling on every day with angry pronouncements of fraud on the court and tricks played by pretender lenders and with the virtual closing of David Stern’s offices the tide has turned.

The big question remains WHAT NOW? We know they will continue to put pressure on the market with as many foreclosures as they think they can sneak through. And we know that there is at least a high probability that a slew of lawsuits are coming that will unravel the foreclosures that have been completed. Will homeowners get their homes free and clear? The answer to that is unclear. Politically it seems that the answer is in the negative. Judicially it seems that the direction we are heading is definitely more attacks, and more successes on the validity of the mortgage closing. But that doesn’t mean you won’t owe the money to somebody — and in many states if they manage to come up with a credible creditor the money judgment can be recorded as a lien against the property. So don’t think you are out of the woods just yet.

My opinion for the last three years remains the same: AMNESTY FOR EVERYONE. Settlements are inevitable here because of the number of people who have just moved on and the number of people who are not up to a fight down to the last wire. If there is anyone with any perspective at the banks, they ought to be thinking of a modification strategy codified by legislation. A settlement initiative led by the banks will be far more beneficial to the banks than a settlement in which they have lost their bargaining power. Whatever the answer, it must include clearing title on some 60 million transactions, and equitably distribute the losses amongst the various parties involved. The benefit of getting into a policy and program that puts this mess behind us outweighs the political in-fighting points that the ideologues are trying to make. If we do it, the possibility of US regaining its credibility and leadership in the world is enhanced immeasurably.

Fraud-closure biz fizzles out

By JOSH KOSMAN

Last Updated: 4:25 AM, November 15, 2010

Posted: 10:34 PM, November 14, 2010
Comments: 1
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Bank lawyers prosecuting the 80,000 foreclosure cases in New York are all but admitting that the cases they have filed over the past number of years have been riddled with fraud.

In the three weeks-plus since New York State Chief Judge Jonathan Lippman put the foreclosure lawyers on notice that any fraud in foreclosure paperwork would be met with severe penalties — he is making lawyers sign affirmations promising they took “reasonable” steps to make sure the legal papers are true — practically no new foreclosure cases have been filed, The Post has learned.

And existing cases have ground to a halt, a source close to the state’s foreclosure practice said.

“Banks do not want to be the first to test the new rules,” the source said.

The virtual shutdown of New York’s foreclosure business comes despite chest-thumping, bravado-filled statements made by some banks in October that they had nothing to be afraid of when it came to foreclosure fraud and that the lawsuits aimed at kicking delinquent homeowners from their houses would continue shortly.

It seems lawyers pressing the foreclosure cases are not willing to bet their law licenses on such claims.

The foreclosure fiasco will be the subject of Senate hearings tomorrow and a House hearing Thursday, when execs from major lenders like Bank of America and JPMorgan Chase are expected to testify.

“Foreclosure should be the last option and we need to examine barriers to mortgage modifications,” Sen. Tim Johnson (D-SD), expected to lead the Banking Committee next year, said in an e-mailed response to Reuters.

While many banks are not prosecuting foreclosures, they are still preparing those cases by sending paperwork to law firms on new homeowners who are behind on payments. The cases are just not being filed in court.

“The spigot has not been shut off much, to my surprise,” a foreclosure industry insider told The Post, of the bank’s sending of the foreclosure paperwork to their lawyers.

Meanwhile, the New York State Bar Association, which believes it should have been included in the rule-making discussion, is asking Lippman for a review. “The thought is the rules will stay in place and be modified over time,” the source said. The NYSBA did not return calls.

Over the past four years the number of homes in foreclosure in New York has grown to 80,000 from 20,000, according to statistics compiled by the Mortgage Bankers Association.

In Gotham, it now takes plaintiffs almost two years to repossess properties, double the time it took in 2006, the statistics show.

Lawyers may look to increase the roughly $600 fee for prosecuting foreclosures to compensate for the risk and time in pressing cases. Banks who pay those fees would likely tack them on to mortgage balances, the source said.

josh.kosman@nypost.com

Posted in bubble, Corruption, Eviction, securities fraud |