The latest action(and inaction) on foreclosure fraud

The foreclosure-fraud story continues to mushroom. This is going to end up affecting every person in the country, possibly more than the bursting of the housing bubble itself. Real estate investors, who are currently buying most properties at foreclosure auctions, could see a huge impact on their business very shortly. Anyone trying to buy any REO property will be impacted for the foreseeable future. If investigation force banks and other lenders to actually reveal all of the REO properties currently "off-the-books" many more financial institutions will be facing bankruptcy. Florida will feel the affects of this situation more than most because of the high numbers of foreclosures in the state. Last night(10/1/2010) this story was mentioned for the first time on national network television evening news.

The Florida State Supreme Court has refused to take action, in the form of halting foreclosure actions by lenders, even after a formal request from U.S. Representative Alan Grayson of Orlando. Grayson wanted to suspend foreclosure actions handled by the four law firms currently under investigation by the Florida Attorney General’s office for possible foreclosure fraud. The investigation started in August amid growing concerns that foreclosure paperwork was not being processed in accordance with the law. One of the law firms being investigated is based in Tampa and the four firms together handle nearly 80% of foreclosure paper-processing in Florida. The court said they did not have the authority to take the requested action in cases of alleged fraud.

Bank of America announced that it is delaying foreclosure proceedings in 23 states, including Florida, to investigate whether proper procedures were followed on the paperwork. The question is if employees were signing off on documents related to foreclosures without even bothering to read them and personally verify that the facts stated in the documents were true. These actions are required by law and affect the validity of the foreclosures in question. GMAC and JP Morgan Chase have already taken this action to review their procedures.

Connecticut Attorney General Richard Blumenthal has ordered a suspension of all foreclosure proceedings in that state as of Friday, 10/1/2010. The moratorium will be in effect for 60 days. California’s previously imposed moratorium on foreclosures by Ally Financial has been expanded to include foreclosures by JP Morgan. Bank of America foreclosures will probably be added to this list soon following testimony that they also were not verifying information on signed documents.

 John Walsh, acting director of the federal Office of the Comptroller of the Currency, has told seven of the largest lenders to review their foreclosure-processing methods. The lenders include JP Morgan Chase, Bank of America, Citibank, HSBC, PNC Bank U.S. Bank and Wells Fargo. Walsh is the top federal bank regulator. In hearing testimony Walsh said some lenders clearly had deficiencies in their foreclosure processing systems.

Adding to the pile-up is Old Republic National Title Insurance Company  telling its agents to stop issuing insurance policies on GMAC-foreclosed properties. This action will immediately stop all sales of the affected properties. Expect other title insurance companies to follow suit shortly. Also expect more lenders to be added to the list of affected properties. The spokeswoman for Old Republic refused comment because of a company policy prohibiting speaking to the press.