The problem started when banks were given the incentive to work out new mortgages with homeowners and the Feds were going to pick up a part of the bill. The banks were needing to be bailed out so they agreed to this.

Then the refis started coming in and the banks had the attitude of they could do what they wanted. They had their money so everything was OK.

Yet people kept showing up for the refis that the banks had agreed to and not allocated any resources for. Loan officers were told to process the paperwork and many of them just stalled, hoping it would all go away.

Then the amount of people seeking a refi became unmanagable and loan officers did the same thing they did when they were granting mortgages: They just started pencil whipping the forms. The problem with this is, just like a lot of the mortgages they made a few years ago, a lot of paperwork was cooked.

I am not in the banking or mortgage biz, but I know people who are and they are the ones that are telling me this. One of them recently packed his bags and blew the country. He did not say why, but I think I am beginning to understand his motivation.

The big mistake here was trusting the people who created this mess to clean it up. A few perp walks might cause a few of these people to take a harder look at the paper work in the future.

The banks themselves are the ones that started this freeze. Until they can get a grip on what is going on nothing will be moving in this area.

Correct. Neither do I.

After speaking to the lawyer I know that is going through this I found that what much of this is coming down to is... Who holds the 'note'.

The Note is what a person signed in order to get the loan on the house. If you do not have ownership of the note you cannot demand payment or foreclose as you have no ownership in the loan.

It turns out that after trying to get proof from his mortgage company that they have the note on his house they have been unable to produce it. It is all very complicated, but unless a bank or mortgage company can produce the actual note they have no legal right to anything concerning a property.

It is just like a car title. You can make a loan to someone on a car if you wish, but if they cannot provide the title at the time of the loan then you are just out the cash if you try to repo it.

This appears to be at the root of what the Attorney Generals are looking into. Some properties have been foreclosed on that were owned free and clear by the homeowner and some have been foreclosed on by two or more companies. Until the banks are willing and able to take a persons property in a legal manner they have decided to stop taking them at all.

Without the note this is just plain old stealing.

We have neighbors three houses down from us who are in the process of being foreclosed on. They tried to go the "assistance" route with the bank but the bank wasn't interested. They were only able to get a reduction in about 20 bucks a month on the deal which is almost insulting it's worthlessness. It will be interesting to see what happens to them. Inevitably of course it would be one of the families I'd least like to see leave but that's life I guess.

- Peter.

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As a side note, the banks here have pulled all their bank owned properties of the market.
I'm hearing that the government is going to buy them up and sell them as low income housing.

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That sounds a little flakey, where's that info coming from?

perfect, now the low-incomers (read: no incomers) will move into middle class neighborhoods further driving values DOWN. perfect.

Yep, there goes the neighborhood, literally.

The info came from my son in laws real estate agent. All the bank owned properties were pulled off the market about a week ago.

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The Resolution Trust did this in the 80's. What made the market recover then was that they owned the property and took it off the market until they could sort it all out.

If you wanted to buy a house you had to buy one currently for sale and could not buy a foreclosed one since there were almost none to buy. The housing market recovered due to this.

When the gov owned homes came up for sale there was a bidding process and high bid won so the homes sold at true market value.

That's not quite the same thing as the government buying all these properties.

Not the way Pooka explained it.

But time will tell if they really intend to sell them as low income housing.

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Largest Bank Will Resume Foreclosure Push in 23 StatesBy NELSON D. SCHWARTZ and ANDREW MARTIN
Published: October 18, 2010

Bank of America announced on Monday that it would resume home foreclosures in nearly two dozen states, despite the running controversy over how banks handled tens of thousands of cases of homeowners facing eviction.

Bank of America, the nation’s largest bank and the servicer of roughly one in five American mortgages, insisted that it had not found a single example where a foreclosure proceeding was brought in error.

The move is also likely to encourage other giant lenders, like JPMorgan Chase, to resume the foreclosure process that threatens two million homeowners.

Meanwhile, GMAC Mortgage, whose procedures helped prompt the controversy when one its executives testified that he had signed 10,000 documents in a month, is also proceeding with foreclosures.

“We announced a temporary suspension of evictions and foreclosure sales in the 23 judicial states several weeks ago so we could commence the appropriate review,” said Gina Proia, a spokeswoman for GMAC. “As cases are being reviewed and, when needed, remediated, the foreclosure process moves forward as appropriate.”

Guy Cecala of Inside Mortgage Finance, an industry publication, said: “This draws a line in the sand that the banks expect this problem will be over in relatively short order and it will be back to business as usual. If Bank of America can do it, certainly the smaller ones will follow suit.”
Bank of America plans to begin filing new paperwork for 102,000 foreclosures by Monday.

Consumer advocates and lawyers for homeowners expressed skepticism that Bank of America could complete a review of the paperwork so quickly. But the banking industry has come under increasing pressure from investors to resolve the problem.

Investors have fled bank stocks in recent days, worrying that the foreclosure halt would cost banks billions of dollars and inflict further harm on the nation’s struggling housing market. Bank of America is scheduled to report its latest quarterly results on Tuesday. Its shares have suffered more than those of other big banks, so any sign that the crisis is easing is likely to be greeted favorably by shareholders.

Reports of improper procedures at mortgage servicers, like having officials sign thousands of documents a month — so-called robo-signers — also have set off a political furor. On Wednesday, all 50 state attorneys general announced an investigation of mortgage servicing.

Bank of America said it would resume foreclosures in the 23 states where judicial approval was required after an internal review turned up no evidence that cases were filed in error.

However, Bank of America’s suspension will remain in effect in the 27 other states that do not require a judge’s approval to foreclose, as the bank’s paperwork review proceeds state by state. It was the only bank to initiate a nationwide freeze.

“We did a thorough review of the process, and we found the facts underlying the decision to foreclose have been accurate,” said Barbara J. Desoer, president of Bank of America Home Loans. “We paused while we were doing that, and now we’re moving forward.”

In the other 27 states, Ms. Desoer said, she expects foreclosures to resume within weeks.

Bank of America was careful to note that the major holders of mortgages — Fannie Mae and Freddie Mac — as well as private investors had signed off on its decision and had been consulted during the review. Of the 14 million mortgages it services — about $2.1 trillion worth — about half are owned by Fannie Mae and Freddie Mac, the giant mortgage holding companies now controlled by the Treasury.
About 30 percent are owned by institutional investors, like hedge funds, pension funds and insurance companies, while Bank of America holds 20 percent.

“We voluntarily paused our process in the 23 judicial states, not because there was evidence of problems — there was not — but because we wanted to ensure our customers they are being treated fairly,” said Dan Frahm, a bank spokesman.

Even as Bank of America and GMAC signaled their resumption of foreclosures, a Citigroup executive said the company was confident in its procedures. “The integrity of Citi’s foreclosures process is sound,” John C. Gerspach, Citigroup’s chief financial officer, said on a conference call.

In Bank of America’s case, the foreclosures are resuming in the 23 states where judicial procedure is required because the halt was initiated there first, on Oct. 1. It was extended to the other 27 states on Oct. 8.

From the beginning, Bank of America signaled that it did not expect the review to go on for an extended period. On Oct. 8, its chief executive, Brian Moynihan, promised a quick conclusion..............

http://www.nytimes.com/2010/10/19/business/19mortgage.html?_r=1&ref=business