The following article is brought to you by Wesley P. Hester at Richmond Times Dispatch.
Susan Brooking’s husband, Robert, a victim of the recession, lost his job in 2008. With two young children to care for, the couple applied for modifications to the loan for their Greene County home.
After a long-fought battle, they were approved by the lender. Or so they thought.
Several months later, the Brookings received a letter informing them that the modifications had not been approved after all. They were told to resume regular payments and pay $16,000 to make the mortgage current, Susan Brooking said.
With no way to pay the balance or afford an attorney, a foreclosure notice soon followed. Out of times and options, the family packed its belongings.
“I cried and said goodbye to the house and all the trees, bushes and flowers I had planted,” said Susan Brooking. “My son said, ‘Mommy, why are you crying?’ I told him mommy was sad and didn’t want to leave home.”
Susan and her two sons now live with her sister in Orange County while her husband lives with his parents 20 minutes away.
Their home of nine years went to Fannie Mae, which sent the family a check for $3,686 for leaving it tidy, Brooking said.
Pointing to stories like that, Virginia legislators from both sides of the aisle are trying to add protections for homeowners through an overhaul of state foreclosure laws. The laws would address a range of issues from record-keeping procedures to notice periods and judicial oversight.
A record 2.8 million homes nationwide received foreclosure filings last year, or one in every 45 households, according RealtyTrac, an online researcher of foreclosed properties. Virginia fared better, with one in 64 households.
In the Richmond area, filings rose 77 percent from two years ago to a record high of 9,100 households, or one in every 57 households.
Virginia also has one of the fastest foreclosure processes in the country, with only two weeks required between the time of notice and foreclosure. Bills sponsored by legislators on both sides of the aisle look to expand that period to between 30 to 45 days.
Todd Condron, a Northern Virginia attorney who works with distressed homeowners, said extra time is the key piece, predicting that 2011 would be the peak for foreclosures.
He said that of the 208 clients he’s worked with in the last 21/2 years, 74 were foreclosed on because there was not enough time to stop the foreclosure.
“If you want to stop this wave of foreclosures, the limit has got to be extended,” he said. “We just don’t have enough time.”
Matt Bruning, with the Virginia Bankers Association, disagrees, pointing out that while the time between notice and foreclosure is short, there’s about a year between time of default and foreclosure.
“Increasing the amount of time … does not solve the problem,” Bruning said. “The longer that foreclosures are kept on the market, the greater harm it is to the entire market as we’re trying to come back from this economic recession.”
But the problem has been that many borrowers, like Brooking, who thought they had been approved for loan modifications have suddenly received rude awakenings in the form of foreclosure notices from their lenders.
As they scramble to deal with their lender, gather evidence, find the title, find an attorney and find money, the clock runs out. In such cases, record-keeping is often the nail in the coffin.
“The borrower closes and they think their loan is with Chase Home Finance,” said Karen Kennedy, a Virginia mortgage-modification attorney, using Chase only as an example. “It gets sold. It gets sold again, it gets sold again, and finally, it’s deposited with a trustee in New York.”
The transfers are often not properly recorded and the borrower loses track, she said.
“Why do they want to foreclose? These banks don’t lose money on foreclosure, they make money,” Kennedy said. “They get paid from the FDIC, our federal tax dollars at work, they get paid by the credit default swap insurance, they get paid by the mortgage insurance.”
Del. Robert G. Marshall, R-Prince William, has sponsored legislation that would require banks to maintain mortgage-transfer records in local land records. Lenders would also have to document the chain of title there before foreclosing, and the bill would add civil penalties for fraudulent filings.
Currently, banks have their own system of records, the Mortgage Electronic Registration System, or MERS, in which 60 percent of the nation’s residential mortgages are recorded.
That allows lenders to bypass local recordation offices and avoid the fees, but it makes finding the documents more difficult for borrowers.
Marshall says that his bill would prevent lenders from seizing homes based on shortcuts and abuses. His bill and others would also add civil penalties for faked documents and forged signatures, cases of which have been documented across the country.
Testifying in support of the bill last week, Dena Roudybush, a Northern Virginia attorney, referred to an incident last year in which four separate banks claimed to own the note on one of her client’s homes.
State Sen. Chap Petersen, D-Fairfax City, has introduced three separate bills that would essentially accomplish the same safeguards and calls MERS a “non-governmental system run by the banks for the banks.”
“While there is plenty of blame to go around, the MERS recording and foreclosure system was an additional contributing cause of the American mortgage foreclosure crisis,” said Christopher L. Peterson, an associate dean for academic affairs and professor of law at the University of Utah.
Bill Hultman, a representative of Mortgage Electronic Registration System, described the company as “very transparent” and suggested it has been misunderstood.
Describing the company’s role as the “agent of the lender,” Hultman said the problem is often that homeowners are not seeking out the mortgage servicers, who are the ones that can help when it comes to crunch time.
Marshall’s bill is up for a vote Monday afternoon in a House Courts of Justice subcommittee.
Virginia is among 29 states and the District of Columbia in which nonjudicial foreclosures are permitted, meaning the lender is not forced to prove in court that the borrower is in default.
Instead, private trustees oversee the process. The problem is that trustees are hired by the lender.
“We don’t deprive people of life without going to court, we don’t deprive people of liberty without going to court, I think people are struggling to understand why we would deprive people of their home without some sort of due process,” said Sen. A. Donald McEachin, D-Henrico.
“To me, it’s ridiculous that we don’t already have that,” Brooking said. “At least let the homeowners say, ‘This is what’s going on.’”
Rebecca Kearney, who lost her home in Amelia County to foreclosure last year, said the proposed laws would have helped her greatly.
After falling on hard times, Kearney spent a year trying to get her lender to reduce her principal. The lender refused, despite the fact that an appraisal showed the value of her home to be $80,000 less than what she owed.
“I went through hell for a year,” she said. “They just wouldn’t work with me at all.”
Ultimately, she declared bankruptcy and the bank foreclosed, selling the home for $84,000, which was $136,000 less than her purchase price.
“They didn’t even have the title,” she said. “I just wasn’t able to fight it.”
The reason these illegal foreclosures continue is because people just give up and don’t believe that they can fight the big banks. YOU CAN FIGHT THESE BANKS! These big banks have abused thousands of families across this country and unless more people challenge these illegal actions the more it will continue, because today’s foreclosure mills are still profitable for the banks. Another reason the illegal foreclosures continue is that these banks are preying on the good nature of many innocent people that truly believe that there is nothing they can do, or the bank has convinced them that there is nothing they can do. There is something you can do. If you want to help yourself and your fellow man save homes and money then FIGHT, GET AN ATTORNEY!