Solving the Foreclosure Crisis

Posted on November 23, 2008. Filed under: Foreclosure Defense | Tags: , , , |

As discussed previously, the pooling and servicing agreement requires the servicer to forward payment to the securitized trust regardless of whether the borrower is making the mortgage payment.  This must continue until the loan is removed from the trust, and that can only happen by foreclosure.  This seemed like a great idea when these securities were created at the height of the subprime-lending craze, but with homeowners unable to pay the exploding adjustable payments, servicers are hemorrhaging cash and going under.

Because there is an incentive to default the homeowner and get the home through the foreclosure process as quickly as possible, servicers and default servicers hire law firms that promise speed as their top priority, even at the expense of truth and justice.  Literally, law firms receive a score from Fidelity National Default Solutions, known as an Attorney Performance Report (APR), for the speed with which they dispatch homeowners from their homes.  The top performers receive the prestigious Summit Award, bestowed annually at Fidelity’s annual meeting, but those firms who do not meet an acceptable foreclosure rate are terminated.

These foreclosure mills are under a tremendous pressure to perform.  Predictably, they have systematically degraded the judicial process as a byproduct of their fast but sloppy practice and procedure.  Below I have outlined the common wrongdoing seen in the state courts throughout Northeast Florida where I routinely appear and my personal suggestions for strengthening justice.  I suspect many of these same problems occur in courthouses throughout the United States:

•    Problem:  Questionable service of process. An astounding three percent (3%) of my clients deny ever being served foreclosure papers.  In one case, an attorney ad litem was appointed to “represent” a homeowner who allegedly could not be found.  The homeowner is a real estate agent with a home-office and a “For Sale” sign in his front yard that included his cell phone number!  The first notice he received was an eviction notice after his home had been sold on the courthouse steps.  The foreclosure attorney had filed an Affidavit of Due Diligence, stating that she had exhausted all reasonable steps to ensure personal service upon the homeowner.

Solution: Impose strict personal liability upon any attorney who files a false Affidavit of Due Diligence, and allow an immediate stay of eviction for a homeowner who files an affidavit contesting service, even after a sheriff’s sale to anyone other than a good-faith purchaser.

•    Problem:  Lack of public education. Most foreclosures are uncontested because homeowners believe they have run out of options.  Currently, in a few counties in my area, a Notice is attached to every summons advising the defendant that the local legal aid office might be able to represent them in the foreclosure.  However, the Notice is often buried underneath the Summons.

Solution: The clerk should be instructed to attach the Notice on the top of the papers being served upon foreclosure defendants.  Additionally, local legal aid offices and clerk’s office should maintain on their web sites a list of all attorneys willing to represent foreclosure defendants, since most defendants do not meet income requirements to receive free assistance.  The Notice should be expanded to inform defendants of the web pages of private attorney names maintained by the clerk and legal aid.

•    Problem:  Lack of standing. Plaintiffs almost always allege that they have “lost the note and mortgage.”  This is a “white lie” that is tolerated by the judicial bench.  The truth of the matter is that one cannot lose something it never had.  As explained previously, the trustee rarely takes possession of the note and mortgage prior to case commencement.  Since (a) actual possession of the promissory note which has been duly endorsed by the originator and (b) execution of an Assignment of Mortgage by the originator are an indispensible requirement to file a foreclosure, the real issue facing judges today is ensuring that the plaintiff actually owns the right to foreclose when the case is filed.  Quite frankly, courts take more care to ensure that someone has the right to get divorced than to foreclose on a home.

Solution: Require plaintiff’s attorney to file an Affidavit of Standing which states affirmatively that, before the filing of the foreclosure case, the plaintiff (a) had taken actual physical delivery of a duly endorsed promissory note and (b) the plaintiff had actually received an Assignment of Mortgage.  Additionally, no judge should ever allow anyone, other than the originator, to seek to establish a lost note unless the plaintiff files an affidavit specifically detailing when it took delivery of the note and how it subsequently lost it.

•    Problem:  Fraudulent affidavits. Foreclosure attorneys often file fraudulent affidavits from their employers, the servicers and default servicers.  Persons without knowledge of the books and records of the servicer and without ever reviewing the homeowner’s account routinely execute Affidavits of Indebtedness.  Furthermore, it is widely known that the affiant rarely signs the affidavit in the presence of the notary.  Once again, the diminution of justice results from the need for speed.

Solution: Greater oversight and scrutiny of affidavits by judges, even when there is no defendant present.



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