Bank of America slows foreclosures as Fannie Mae steps in
10/02/2010 © South Florida Sun-Sentinel
Bank of America announced it is delaying foreclosures in 23 states – including Florida - - after the Associated Press reported that a bank official acknowledged in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically didn't read them.
Bank of America said late Friday it is delaying foreclosures in 23 states, becoming the third major lending institution to acknowledge mortgage documentation problems. Meanwhile, Fannie Mae stepped up efforts to hold lenders accountable, saying it will warn loan servicers to report problems with cases that may violate financial laws.
Bank of America -- one of the largest mortgage lenders in Florida and the nation's largest bank -- did not give an estimate for how many homeowners' cases will be affected in South Florida and elsewhere.
Bank of America spokesman Dan Frahm said the institution was "assessing our existing processes" and would be delaying some actions.
The Federal National Mortgage Association – commonly known as Fannie Mae -- said it is alerting 1,400 loan servicers nationwide that they would be in violation of their contracts on federally-backed Fannie Mae loans if their foreclosure processes don't comply with state and local laws.
In two South Florida cases, representatives of GMAC Mortgage and JPMorgan Chase have said under oath that they signed tens of thousands of documents in foreclosure cases every month without having personal knowledge of the information that they contain, which is required by state law. Both companies said they have halted some foreclosure procedures as they review those cases in question. The new twists in the foreclosure crisis concerned South Florida real estate executives, lawyers and lenders.
For homebuyers, there may be a slowdown in processing loans if they're using one of the large banks that's in the regulatory spotlight, said Claudine Claus, president and chief executive officer of Home Financing Center, a mortgage servicer that operates throughout South Florida. She said Fannie Mae "won't mess around."
Rashmi Airan-Pace, a foreclosure defense lawyer in Coral Gables, said this crisis may give "more leverage to the average homeowner" in reaching a solution other than foreclosure – such as a short sale or a reduction in the principal amount owed on a mortgage.
Attorney Gary Handin of Coral Springs said, "These are not good things for the real estate market, but they are a good things for people in danger of losing their homes." Handin, who said his firm has handled hundreds of foreclosures, short sales and loan modifications, added: "If proper procedures aren't followed, we don't have due process in the law."
Fannie Mae, which purchases mortgages from lenders, has $189 billion in single-family residential mortgages from Florida in its portfolio.
In other developments Friday:
Federal bank regulator, the Office of the Comptroller of the Currency, confirmed that it instructed the nation's seven largest mortgage loan servicers to review their foreclosure procedures. A spokesman said as soon as the GMAC announcement was made, "OCC examiners immediately contacted senior management at our largest mortgage servicers to determine whether procedural breakdowns could be resulting in foreclosure affidavit problems similar to Ally Bank." The banks contacted were JP Morgan Chase, Citigroup, HSBC,PNC, Wells Fargo, Bank of America and U.S. Bank.
Chase spokesman Tom Kelly said the lender had no comment. Jason Menke, spokesman for Wells Fargo/Wachovia, said the company continues to stand by the documents its employees have signed and "if we find an error, we will take the appropriate corrective action." Neil Brazil, spokesman for HSBC North America, said the company had not altered its mortgage practices, "which is always to regard foreclosure as the last resort." Amy Vargo, spokeswoman for PNC Mortgage, said no one was available for comment. Spokemen for U.S. Bank and Citigroup could not be reached for comment despite several emails and one phone call.
Maine homeowners filed a lawsuit seeking class action status charging that GMAC Mortgage, a subsidiary of Ally Financial, routinely files false certifications that it has a right to foreclose on Maine homeowners. It was not immediately clear whether the suit – which must be certified by a judge for class action status -- might extend to Florida borrowers.
Old Republic National Title Insurance, a major title insurer in Florida, told its agents it would not issue title insurance policies for some GMAC Mortgage-owned properties, according to Weston attorney Roy Oppenheim. Old Republic refused to comment. Spokeswoman Jodi Fredericksen said the company had "a policy of not speaking to the press."
California Attorney General Edmund G. Brown Jr. said he has demanded JP Morgan Chase prove immediately that the company is complying with state law or halt its foreclosures in the state. Brown had sent a similar letter to GMAC last week, according to California officials.
The questions surrounding the foreclosures could have both positive and negative ripple effects on the housing market in South Florida and across the nation, lawyers and real estate agents say. The immediate result is that thousands of foreclosures are being delayed, meaning the market won't be flooded with these properties for resale. That, in turn, could help stabilize prices in the near term. But Shari Olefson, a real estate lawyer in Fort Lauderdale, said this recent firestorm won't suddenly reverse or eliminate foreclosures. The problem is a procedural one that doesn't have anything to do with delinquent borrowers, she said. "You still owe the money to someone," said Olefson, who has represented banks and borrowers. "All the i's will be dotted and t's crossed, but we're still going to have the same outcome. It's just going to delay the process by a couple of months, and it'll cost a lot more money. And we all know who's going to pay those costs." A mountain of lawsuits likely will be filed on behalf of clients alleging that they lost their homes to improper foreclosures. Those people will have a hard time getting the homes back, especially if they've been resold, but the homeowners still will be seeking damages, said Jerron Kelley, a foreclosure defense lawyer in Delray Beach.
Diane C. Lade contributed to this article.
Harriet Johnson Brackey can be reached at hjbrackey@sunsentinel.com or 954-356-4614.
Paul Owers can be reached at powers@sunsentinel.com or 561-243-6529.
10/02/2010 © South Florida Sun-Sentinel
Bank of America announced it is delaying foreclosures in 23 states – including Florida - - after the Associated Press reported that a bank official acknowledged in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically didn't read them.
Bank of America said late Friday it is delaying foreclosures in 23 states, becoming the third major lending institution to acknowledge mortgage documentation problems. Meanwhile, Fannie Mae stepped up efforts to hold lenders accountable, saying it will warn loan servicers to report problems with cases that may violate financial laws.
Bank of America -- one of the largest mortgage lenders in Florida and the nation's largest bank -- did not give an estimate for how many homeowners' cases will be affected in South Florida and elsewhere.
Bank of America spokesman Dan Frahm said the institution was "assessing our existing processes" and would be delaying some actions.
The Federal National Mortgage Association – commonly known as Fannie Mae -- said it is alerting 1,400 loan servicers nationwide that they would be in violation of their contracts on federally-backed Fannie Mae loans if their foreclosure processes don't comply with state and local laws.
In two South Florida cases, representatives of GMAC Mortgage and JPMorgan Chase have said under oath that they signed tens of thousands of documents in foreclosure cases every month without having personal knowledge of the information that they contain, which is required by state law. Both companies said they have halted some foreclosure procedures as they review those cases in question. The new twists in the foreclosure crisis concerned South Florida real estate executives, lawyers and lenders.
For homebuyers, there may be a slowdown in processing loans if they're using one of the large banks that's in the regulatory spotlight, said Claudine Claus, president and chief executive officer of Home Financing Center, a mortgage servicer that operates throughout South Florida. She said Fannie Mae "won't mess around."
Rashmi Airan-Pace, a foreclosure defense lawyer in Coral Gables, said this crisis may give "more leverage to the average homeowner" in reaching a solution other than foreclosure – such as a short sale or a reduction in the principal amount owed on a mortgage.
Attorney Gary Handin of Coral Springs said, "These are not good things for the real estate market, but they are a good things for people in danger of losing their homes." Handin, who said his firm has handled hundreds of foreclosures, short sales and loan modifications, added: "If proper procedures aren't followed, we don't have due process in the law."
Fannie Mae, which purchases mortgages from lenders, has $189 billion in single-family residential mortgages from Florida in its portfolio.
In other developments Friday:
Federal bank regulator, the Office of the Comptroller of the Currency, confirmed that it instructed the nation's seven largest mortgage loan servicers to review their foreclosure procedures. A spokesman said as soon as the GMAC announcement was made, "OCC examiners immediately contacted senior management at our largest mortgage servicers to determine whether procedural breakdowns could be resulting in foreclosure affidavit problems similar to Ally Bank." The banks contacted were JP Morgan Chase, Citigroup, HSBC,PNC, Wells Fargo, Bank of America and U.S. Bank.
Chase spokesman Tom Kelly said the lender had no comment. Jason Menke, spokesman for Wells Fargo/Wachovia, said the company continues to stand by the documents its employees have signed and "if we find an error, we will take the appropriate corrective action." Neil Brazil, spokesman for HSBC North America, said the company had not altered its mortgage practices, "which is always to regard foreclosure as the last resort." Amy Vargo, spokeswoman for PNC Mortgage, said no one was available for comment. Spokemen for U.S. Bank and Citigroup could not be reached for comment despite several emails and one phone call.
Maine homeowners filed a lawsuit seeking class action status charging that GMAC Mortgage, a subsidiary of Ally Financial, routinely files false certifications that it has a right to foreclose on Maine homeowners. It was not immediately clear whether the suit – which must be certified by a judge for class action status -- might extend to Florida borrowers.
Old Republic National Title Insurance, a major title insurer in Florida, told its agents it would not issue title insurance policies for some GMAC Mortgage-owned properties, according to Weston attorney Roy Oppenheim. Old Republic refused to comment. Spokeswoman Jodi Fredericksen said the company had "a policy of not speaking to the press."
California Attorney General Edmund G. Brown Jr. said he has demanded JP Morgan Chase prove immediately that the company is complying with state law or halt its foreclosures in the state. Brown had sent a similar letter to GMAC last week, according to California officials.
The questions surrounding the foreclosures could have both positive and negative ripple effects on the housing market in South Florida and across the nation, lawyers and real estate agents say. The immediate result is that thousands of foreclosures are being delayed, meaning the market won't be flooded with these properties for resale. That, in turn, could help stabilize prices in the near term. But Shari Olefson, a real estate lawyer in Fort Lauderdale, said this recent firestorm won't suddenly reverse or eliminate foreclosures. The problem is a procedural one that doesn't have anything to do with delinquent borrowers, she said. "You still owe the money to someone," said Olefson, who has represented banks and borrowers. "All the i's will be dotted and t's crossed, but we're still going to have the same outcome. It's just going to delay the process by a couple of months, and it'll cost a lot more money. And we all know who's going to pay those costs." A mountain of lawsuits likely will be filed on behalf of clients alleging that they lost their homes to improper foreclosures. Those people will have a hard time getting the homes back, especially if they've been resold, but the homeowners still will be seeking damages, said Jerron Kelley, a foreclosure defense lawyer in Delray Beach.
Diane C. Lade contributed to this article.
Harriet Johnson Brackey can be reached at hjbrackey@sunsentinel.com or 954-356-4614.
Paul Owers can be reached at powers@sunsentinel.com or 561-243-6529.
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