Newsvine.com has posted an article that discusses how the mess surrounding the foreclosure epidemic can cause banks to lose billions of dollars, which would make the housing crisis even worse and hamper the government’s various programs that are designed to keep people in their homes.
It’s common knowledge that multiple large mortgage companies sped through thousands of foreclosures and failed to properly process, or even check, paperwork. The full impact of this error hasn’t been seen yet, but if the errors were “widespread” then the consequences can be very severe. Some employees at major banks have even testified in court that they signed, and sometimes even backdated, thousands of documents that authorized home seizures. $6.4 trillion in mortgages is involved and some of the larger banks-JPMorgan Chase, Bank of America, and Ally Financial Inc.’s GMAC Mortgage- have paused foreclosing on homes due to the sloppy and incorrect documentation. State and federal regulators in all 50 states are investigating if the mortgage companies cut corners when they foreclosed on homeowners.
“Clear and uncontested property rights are the foundation of the housing market,” the report says. “If these rights fall into question, that foundation could collapse.”
This leads to three possible scenarios: borrowers may not be able to determine if they’re paying their mortgage to the right company, judges might put a hold on all current foreclosures, and potential buyers and sellers will be left in “limbo.” If major banks discovered that they still owned millions of bad mortgage loans that they thought had been bought, the loss of revenue could reach into the billions of dollars.
Despite all the problems, the Obama administration says there is no need to put a hold on foreclosures in all 50 states. The Treasury Department’s foreclosure prevention program would face difficulty if the mortgage companies participating in it found themselves unable to initiate foreclosure, thus affecting their ability to modify home loans.
Treasury officials say a review has been undertaken of the procedures for certifying documents for foreclosures of the 10 biggest mortgage companies participating in the program.
“We strongly believe that the reported behavior within the mortgage servicer industry is simply unacceptable, and (companies that) have failed to follow the law must be held accountable,” Treasury spokesman Mark Paustenbach said in a statement. Treasury, various regulators, the Justice Department and the Department of Housing and Urban Development are investigating, “and we will continue to monitor the situation closely,” Paustenbach said.
Just one action of mortgage investors against banks, in this case Bank of America, could force B of A to buy back and harbor partial losses on about $47 billion in bad loans.
“Treasury should explain why it sees no danger” and regulators should subject Wall Street banks to new stress tests to gauge their ability to deal with a potential crisis, the report states.
If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447. You may also obtain a copy of our free book on stopping wrongful foreclosures and the problems of hidden fees by emailing us.
You can join our Facebook Fan Page – Alabama Consumer Protection Attorneys where we share useful information about the same types of issues that we cover in this blog.
You can also sign up for our free email newsletter sent out every Thursday morning – we cover topics such as the one in this post. We would love to include you!