A Foreclosure Moratorium Is Not the Only Hope for Keeping Your Home

October 28, 2010 (Press-News.org) The housing industry's roller coaster ride of boom highs and foreclosure lows has left many participants saying that they want the ride to stop. As evidence of poor record keeping, improper procedures and possible fraud in foreclosure proceedings has came to light, many borrowers and legislators have called for a nationwide moratorium on foreclosures.

In response to the potential for problems, some major lenders have halted foreclosures in many or all states. Importantly, though, borrowers who are behind or in default on their mortgages do not have to rely on a foreclosure moratorium as the only way they can keep their homes.

A Foreclosure Crisis

According to data from a marketer of foreclosed properties, there were 930,000 foreclosure filings just in the first quarter of 2010. On average, that is more than 10,000 filings every day. The number of foreclosure filings increased 7 percent from the previous quarter and 16 percent from the same quarter of 2009.

In addition, the New York Times reported that six million borrowers were more than 60 days behind on their mortgage payments, and nearly 12 percent of borrowers were in default on their mortgages in the first three months of 2010.

After the housing boom, plummeting property values led to foreclosures, and foreclosures further depressed the value of neighboring homes. Lenders lost money as the value of the properties they foreclosed on sank, and borrowers feared the loss of their homes as the recession led to even more delinquencies.

When borrowers began to default on their mortgages in droves, lenders were ill-equipped to handle the increasing number of foreclosure proceedings. They hired people to process and file foreclosure documents who often had minimal qualifications or little work experience. A former JPMorgan Chase & Co. executive called these new hires the "Burger King kids."

Faulty Foreclosures

Whether age, inexperience, corporate practices or lack of oversight is to blame, problems with foreclosure documentation, processing and filing emerged. One area of particular concern is notarizations on mortgage assignments that transfer ownership of underlying mortgage notes from one institution to another and are required for foreclosure proceedings.

The New York Times reported that, in some cases, the notarization of documents predated their preparation, which suggests that the signatures on the documents were not reviewed by a notary. In other cases notarizations occurred in offices physically distant from where the documents were signed, signaling that notaries likely did not witness the signing of the documents as required by law.

There is also evidence that many foreclosure documents were not even read before lender employees signed off on them. In addition, the Mortgage Electronic Tracking System (MERS), the nation's largest electronic mortgage tracking system, is also under criticism for losing documents and other faulty practices.

Calls for a Foreclosure Moratorium

The revelation of improper procedures and failure to accurately verify foreclosure documents has some people calling for a moratorium on foreclosures until the problems are straightened out. Borrowers and law enforcement officials in many states are now challenging notarizations and questioning whether lenders rightfully hold the mortgage notes underlying foreclosed properties.

All 50 state attorneys general have announced that they will investigate foreclosure practices. Additionally, some lenders have voluntarily stopped foreclosures in all states or in the 23 states where foreclosures must be approved by a judge.

A moratorium on foreclosures would benefit borrowers who are on the verge or in the process of losing their homes. It would allow them time to catch up on payments or gain capital or leverage for mortgage modification. On the other hand, some fear that halting foreclosures would further disrupt an already unstable housing market.

Saying that growing evidence that lenders have used inaccurate documents to evict borrowers is "a serious problem," a top White House aide nonetheless spoke against a national freeze on foreclosures. He pointed out that "there are in fact valid foreclosures that probably should go forward" because the documentation is accurate and stopping foreclosures could further hinder home sales.

Other Options for People to Keep Their Homes

For borrowers at risk of losing their homes, hoping for a foreclosure moratorium is not their only option. Chapter 13 bankruptcy also offers individuals the opportunity to save their homes from foreclosure.

Chapter 13 bankruptcy allows borrowers with a regular income to develop a plan to repay all or part of their debts over a certain period of time. By filing for chapter 13 bankruptcy, borrowers can stop foreclosure proceedings and gain the ability to cure delinquent mortgage payments over time. However, all mortgage payments that come due during the chapter 13 plan period must be paid on time.

If you are struggling to make mortgage payments or are faced with foreclosure proceedings, contact a knowledgeable chapter 13 bankruptcy lawyer in your area. An attorney experienced in crafting debt solutions can help you live without fear of losing your home.

Article provided by Trepeck Bane PC
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