By the Lending Lies Team
Losing your home by foreclosure to a bank that used fabricated documents to foreclose is a tragedy that has tainted the American dream for millions of Americans. The process is unjust, unlawful and dehumanizing. But even years after the former homeowner has moved forward with their lives they sustain another injury they are probably not even aware of- and that is the loss of rebound gains in the market.
Oddly, homes that are foreclosed on tend to gain value back at a higher rate than properties that have not been previously foreclosed according to real estate website Zillow who conducted research on the matter. Former owners missed out on potential profits generated by the “recovery” and therefore sustained even more financial harm. Instead, the profits went to governmental agencies, GSEs (Fannie/Freddie), hedge funds, investors and flippers who bought these properties for pennies on the dollar.
In the Miami-Dade, Broward and Palm Beach, homes that were foreclosed had a 79 percent increase in price from the market’s lowest point. The research also shows that the homes that were foreclosed upon were the homes of lower-income people and young families.
These families who were illegally foreclosed upon were thrust into an inflated renters market where they likely secured accommodations that were inferior to the living conditions of the home they lost and even less affordable. The prior owner lost their down payment, any equity and any appreciation in home value. Many of these families may never recover from the financial slaughter they suffered.
“You had a ton of appreciation for these foreclosed homes, but the [prior] homeowners weren’t getting the benefits,” said Svenja Gudell, Zillow’s chief economist. “Lower-end and foreclosed homes were bought up by investors who would transform those homes into rental properties. … Had they held onto their home in many markets, homeowners would’ve made back their original investment plus much more.” The foreclosure crisis has contributed to the massive wealth gap that has evolved since the 2008 market crash.
Even more concerning are the actions of the Veteran’s Association that guarantees the loans of United States service members who obtain VA-guaranteed mortgages. The VA is not assisting veterans who served their country to retain their homes when default threatens. In fact, the VA is known to foreclose on the homes of veterans for pennies on the dollar, evict the veteran, hold the property and then sell the property at a large profit.
Recently the Lending Lies team learned of a veteran with health issues caused by Agent Orange exposure. The VA foreclosed on his home that had a remaining balance of 7k. The VA held the property for a year and then sold the home for over 100k. The displaced veteran who had paid on his home for decades did not share in the profits the VA made from the sale of his home.
Homeowners have the potential to be damaged at three different junctions during their loan: at closing, during default, and post-default. The homeowner is damaged at closing when they receive a table funded loan, there is no disclosure regarding WHO the true creditor is, and they are not told that they are signing a Note that is actually a security and not a mortgage. The homeowner does not receive disclosure that investors will make millions of dollars from the homeowner’s signature and is not told that he/she will carry all of the risk when the game of securitization is put into play.
A homeowner may be damaged during the term of their loan by the loan servicer who is looking for an opportunity to create a default so they can foreclose on the home. The homeowner may be given erroneous information by the servicer or may not receive service to resolve an issue that may occur during the life of the loan. The servicer may create a default by misapplying payments, inflating the balance by applying illegal fees, and other tactics to engineer a default. When a homeowner facing default contacts their loan servicer looking for assistance, the homeowner is not engaging with a servicer who is looking to find a solution. Instead, the homeowner is dealing with an agent who is trained to find the homeowner’s Achilles heel in which to exploit and create a default.
At this point the homeowner in default will experience the Foreclosure Machine where documents disappear into ether or magically transform, bank presidents have G.E.D’s, and due process means you had your three minutes in front of a judge. The majority of homeowners caught up in this stage of foreclosure will gladly do anything to end their misery. Despite their knowledge that the servicer foreclosing has no standing- the wounded homeowner may prefer to chew off their own arm to escape the clutches of attorneys, motions, and bank intimidation. This is the stage where the homeowner should refuse to back down and dig in their heels, but the majority flee.
After the homeowner has lost their home to an entity who had no standing to foreclose, the homeowner will suffer further economic decimation. The vultures who made millions off of the economic destruction of the American middle and lower-middle class will become their landlord. While the tenant works to make his monthly rental payment and is not building any equity, the landlord will sit back and collect the passive income while the foreclosed property appreciates at 18% plus a year.
Can there be any doubt that taking out a home mortgage from a mega-bank is not a method of middle-class mass destruction? Caveat Emptor.