Bankruptcy

Foreclosure Relief Could Help Economy and End Chaos Faced By Borrowers

By Nathalie Martin

A bevy of recent New York Times articles claim that several lenders will now freeze certain foreclosure actions. Look,here, here and here. Why the sudden desire for reconciliation? Problems in the paperwork supporting lenders? right to foreclose. News of these "problems? is not new. The June 2010 deposition of  GMAC exec Jeffrey  B.  Stephan revealed that he at times signed 12,000 affidavits a month, verifying personal knowledge of loan debts and even note ownership, when in fact he had no such knowledge.

As a result of widespread verification problems, GMAC Mortgage and JPMorgan Chase now say they will amend paperwork in cases in which affidavits were files that were not actually verifying known information.  Bank of America will go a step further, amending all affidavits in foreclosure cases that have not yet gone to judgment.

Lenders claim the entire verification problem is cause by understaffing and an inability to keep up with the volume of foreclosures. Lawyers who defend foreclosures will likely agree that lenders are understaffed, or at least staffed in the wrong way. Lenders call customers five or six times a day to tell them to pay the mortgage, but these people who call have no idea what the actual status of the mortgage is.  Even pre-foreclosure, customers and their attorneys are often unable to get anyone on the phone who actually knows anything about an account. Paperwork that is sent to the borrower is often in conflict with other paperwork sent by the same lenders, and in big ways. One piece of paper says a modification is approved, another says it is denied. One letter says a debt is current, another says the loan is $10,000 in default. In one case in our clinic, we had to file a pleading in bankruptcy court to find out what was due. Let?s hope the freeze will be good news for everyone, not just those in foreclosure. It could result in more staff, thus improving customer service.  At the very least, the freeze may cause lenders to settle with more borrowers, and thus help get the economy back up and running.

Full post as published by Credit Slips on October 04, 2010 (boomark / email).