Martha Coakley warned that Fannie and Freddie that they were about to be sued if they did not change their buyback policies. The current industry standard practice is to prevent former homeowners from regaining ownership or possession of their homes after foreclosure. Several nonprofit organizations and other entities have sought to provide relief not only to the homeowners but to the communities in which the homes are located. The current policies prevent any third party from buying or bidding on such properties if they intend to consummate a deal with the homeowner in which the homeowner can either rent or repurchase the property based upon realistic terms, including the current value of the actual property.
Before the era of securitization was considered axiomatic that the lender would attempt to work things out with the homeowner rather than go through the expense and trouble of foreclosure. Once the bank owns the property and is responsible for all taxes and other expenses related to the ownership of the property, including dues for common maintenance. The banks say they don’t want to allow homeowners to regain ownership or possession of the property they lost in foreclosure because this would lead to an avalanche of strategic defaults. As the attorney general of Massachusetts has stated, there is absolutely no evidence that this could occur.
This policy is particularly egregious because of the other policies in the industry which prevent modification based upon economic reality and actually result in a much higher loss to the investors who advanced the money for the loan. There is no reason for the existence of these policies other than the fact that the intermediaries are making more money doing foreclosures than they would ever make by modifying the loans. Of course there is the other issue which is that parties doing the foreclosures probably have no right to initiate any collection or foreclosure because they have no money in the deal nor any right to represent the investors directly. The reason they need to have a right to represent the investors directly is that their money was most likely not used to fund any trust.
As we have seen in many other circumstances, these policies result in ghost towns in which criminal elements take up residence. The only way to clean them up is by bulldozing the entire neighborhood which is happened to tens of thousands of homes across the country.
It is my hope that the AMGAR program will provide some assistance in breaking this logjam. Hopefully the lawsuit filed by the Atty. Gen. of Massachusetts will do the same. It is obvious to me that the intermediaries who have interfered in the relationship between the borrowers and lenders are taking advantage of their superior position of knowledge and sophistication to prevent borrowers and lenders from getting together and comparing notes. The business plans of the charitable organizations and other organizations in which they either by or offer to buy or satisfy the demands of the party demanding foreclosure has led in numerous cases to attorneys for the banks explaining why they don’t want the money, they don’t want the house, but they do want the judgment of foreclosure and the foreclosure sale.
Some of this nonsense is the subject of numerous regulations preventing dual tracking, as you can see from the article below.
For more information on these subjects or for assistance please call 520-405-1688 or 954-495-9867.
Filed under: foreclosure |