As much as state and federal officials want to describe the foreclosure fraud settlement as a beginning, in many respects it was most certainly an ending. Analysts invested in the meme that “uncertainty” was crippling the housing market now are heavily invested in saying that the clearing of this uncertainty through the settlement will speed up the foreclosure machine. Diana Olick gives a version of that today which makes absolutely no sense, because all the data comes from the fourth quarter of 2011.
But nevertheless, she’s onto something. With state AGs releasing liability for foreclosure fraud, legislators in some key states are picking up where they left off, removing additional barriers to foreclosure, shutting down due process and subverting the implications of judicial rulings.
For example, in Massachusetts, lawmakers have introduced a bill to indemnify buyers of foreclosed properties from title defects that have been exposed by the Ibanez case.
The bill, if approved, will amend the state foreclosure laws to validate a foreclosure, even if it’s technically deficient under the Ibanez ruling, so long as the previously foreclosed owner does not file a legal challenge to the validity of the foreclosure within 90 days of the foreclosure auction.
The bill has support from both the community/housing sector and the real estate industry. Indeed, the left-leaning Citizens’ Housing and Planning Association (CHAPA), non-profit umbrella organization for affordable housing and community development activities in Massachusetts, has filed written testimony in support of the bill.
Properties afflicted with Ibanez title defects, in worst cases, cannot be sold or refinanced. Homeowners without title insurance are compelled to spend thousands in legal fees to clear their titles. Allowing such foreclosed properties to sit and languish in title purgatory is a huge drain on individual, innocent home purchasers and the housing market itself.
While those may be the implications of the Ibanez ruling, it remains the law of the state of Massachusetts. And a bill like this, setting up an artificial window to allow for the theft of the home, simply seeks the elimination of due process, even if you can find a stray case here or there where the new owner of a foreclosed property deserves some security. The consequences for foreclosure title defects should not be borne by a borrower who didn’t learn about his rights until it was too late. They should be borne by those who corrupted the process.
But Massachusetts’ effort pales in comparison to the legalization of theft they’re trying down in Florida, one of the biggest states for foreclosures:
A faster, significantly overhauled foreclosure process is close to becoming state law after legislators in the House approved the changes by a wide margin on Wednesday [...]
The law would require homeowners to mount a stronger defense against foreclosure more quickly, providing for fewer initial hearings and less likelihood of slowing down a final judgment for lenders.
It also empowers condominium and homeowners associations to push foreclosures along, shortens the time that banks can go after homeowners for the difference between the mortgage balance and what a foreclosed property sells for and requires stronger efforts to identify abandoned properties.
This assumes that only the borrower slows down the foreclosure process and not the lender, with constant motions and the finding of new and improved documentation. But no matter. You can see the writing on the wall in Florida. The Attorney General got an unfavorable ruling that she claims stops her from looking into the conduct of the foreclosure mills. So her investigation is done. They got a minimum payment in the foreclosure fraud settlement. And now they’re rolling up the judicial process. I’ve heard that the “rocket dockets,” special foreclosure courts with the emphasis on speed over accuracy, are poised for a comeback. And this “speedy foreclosure” bill, which now moves to the state Senate, fits right in with that. Hundreds of thousands of foreclosures could get fed through this system with little regard for homeowners’ rights.
The only reversal of this form, of using the settlement to wrap up the foreclosure process in the states, comes from California, where Attorney General Kamala Harris and legislative leaders released an intriguing package of bills yesterday, and called for a moratorium on foreclosures while they worked through the system. The bills include some interesting measures:
• “Require creditors to provide documentation to a borrower that establishes the creditor’s right to foreclose on real property prior to recording a notice of default,” as well as that same documentary evidence and chain of title at the time of default. California is a non-judicial foreclosure state, so unless that changes, the evidence has to go to the borrower, who would then have a private right of action to sue if the documents are insufficient. So this is kind of a back door to a judicial foreclosure process.
• Mandates single point of contact and ending dual track. Both of those things are in the servicing standards of the settlement.
• “Require that certain documents be recorded in a county recorder’s office.”
• Institutes a $10,000 fine for each robo-signed document. We know that robo-signing is still going on.
• Increases fines against owners of blighted property to $5,000 a day.
• A new fee on the recording of a notice of default will go to the AGs office, to fund a fraud prosecution office. Also statutes of limitations would be extended, mostly on mortgage fraud scams.
• “Authorize the Attorney General to impanel a special grand jury for the purposes of investigating and indicting multi-jurisdictional financial crimes against the state.”
Some of this amounts to closing the barn door after all the horses are gone; the special grand jury, for example. But other requirements here are pretty decent, especially if you think, as I do, that robo-signing has simply continued unabated. The only problem is that promising bills that would harm big money interest groups in the past have run into a brick wall in the form of a collection of Democratic moderates in the state Senate, led by the awful, corrupt Juan Vargas (who’s running for, and will probably win, a San Diego-area Congressional seat this year). The leadership is on board with this raft of bills, giving them a somewhat better chance, but I’m not holding my breath.