Foreclosure dismissed because Chase doesn’t have the authority

This is interesting.  A judge dismissed a foreclosure action with prejudice (meaning they can never try to foreclose again) after ruling that Chase, as an intermediary and not the owner of the mortgage debt, did not have the authority to foreclose.

It is not clear from the blog post all the circumstances that led up to this decision, so it isn’t clear if it might apply to a broader base of Chase mortgage holders where the loan has been sold off.

Chase freezes 56,000 foreclosures due to incorrect documents

We’ve reported a few instances where Chase has filed foreclosures without the proper documentations that it actually owns the loans or has proper authority as servicer of the loan to foreclose.  In one case that we’ve found, Chase couldn’t prove it owned the loan and the balance was dismissed by a judge.

It looks Chase’s documentation problems are a lot more widespread that the few cases we’ve seen, as they’ve just announced they are freezing 56,000 foreclosures because Chase employees signed off on documents without having properly reviewed them.  Mind you, this is only the foreclosures, there are hundreds of thousands of additional loans that are delinquent that Chase may not be able to prove they own or have the right to foreclose as the loan servicer.

If you have a mortgage with Chase and are having problems, you may benefit by asking Chase to prove it has the proper documentation.  In some cases they will not be able to prove this and you may have the leverage necessary to negotiate much better terms on your loan.

Update 10/1/10:  Ohio is now asking Federal prosecutors to investigate possible defects in legal papers for thousands of foreclosures in Ohio.

Another WaMu/Chase foreclosure dismissal, this time with finding of fraud

A couple recently was able to get their foreclosure by WaMu then Chase dismissed and the court went a step further and found WaMu and Chase guilty of fraud.

At the heart of the issue was the fact that the bank was claiming it owned the loan rather than being the service of the loan which was owned by Fannie Mae.  The loan was originated by another bank unrelated to WaMu or Chase so neither bank (WaMu, then Chase as the purchaser of WaMu’s assets) had the right to claim that they owned the loan.

The court found WaMu and Chase guilty of fraud because they knew as servicer and not owner of the loan, they were not entitled to foreclose; only Fannie Mae was entitled to foreclose.

11.  The court find by clear and convincing evidence that WAMU, Chase, and Shapiro and Fishman committed fraud on this court.

This is why you should challenge a Chase foreclosure

Another useful tidbit from a great Chase-related blog post.

Quite often, when a big bank like Chase (and it seems especially Chase) forecloses on someone, chances are they have not dotted all ‘i’s and crossed all the ‘t’s.  In fact, there is a good chance they might not actually be able to prove that they have the right to foreclose upon you, and you could quite possibly get your foreclosure dismissed, and perhaps even get your loan forgiven.  Take for instance this deposition of Beth Ann Cottrell, Operations Manager of Chase Home Finance LLC:

Q.  So if you did not review any books or records or electronic records before signing this affidavit of payments default, how is it that you had personal knowledge of all of the matters stated in this sworn document?

A.  Well, it is pretty simple, I have personal knowledge that my staff has personal knowledge of what is in the affidavit on personal knowledge.  That is how our process works.

Q.  So, when signing an affidavit, you stated you have personal knowledge of the matters contained therein of Chase’s business records yet you never looked at the data bases or anything else that would contain those records; is that correct?

A.  That is correct.  I rely on my staff to do that part.

Q.  And can you tell me in a given week how many of these affidavits you might sing?

A.  Amongst all the management on my team we sign about 18,000 a month.

Q.  And how many folks are on what you call the management?

A.  Let’s see, eight.

Foreclosure document provider being investigated

If you are being foreclosed upon, this article should be very interesting to you. It seems that major provider of documents that banks use in court to prove they own your loan is being investigated for providing inaccurate documents. Basically, it seems that with all the slicing and dicing of mortgages, banks may not actually be able to prove they own your loan and have the right to foreclose upon it. Several foreclosure actions have been dismissed because of this.

Who really owns your loan?

On Thursday, the stock market reacted negatively to the foreclosure crisis and punished bank stocks.  Why the negative outlook?

According to a story in yesterdays Marketplace program, investors are worried about the validity of documents, but not just the documents between the banks and the homeowner, but the documents between the banks and the scads of people who they sold the loans to, in little bits and pieces.

It may just be that in all the excitement, the banks didn’t do a very good job of tracking all the transactions and the documentation for those transactions, which might make it extremely difficult to actually prove who owns the loan.

So what does this mean?

If it isn’t possible to prove who owns the loan, it would be very difficult to banks or anyone else to prove they have the authority to demand that you pay them your mortgage payments, in a court of law.  This likely means though that, barring some high-level litigation by state’s Attorney’s General or a class-action lawsuit, you would have to challenge the bank in court to prove it has the authority to accept your payments or foreclose on you.  This is not without precedent; people have successfully gotten their loans dismissed because the bank couldn’t prove it owned the loan.

Another scenario is that banks might be forced to take back the loans they can’t properly document, and this is perhaps the main reason the banks stocks got hammered yesterday.  If the securitazation transaction is reversed, the bank would still have to document the original transaction, but I think they are more likely to have this paperwork.

A little bright news for borrowers.

Are banks trying to discourage concerned borrowers from taking action?

In light of the allegations against shoddy verification practices in the foreclosure process, most of the large banks have halted foreclosures in some or all of the 50 states.  The biggest reaction so far has come from Bank of America, which has suspended foreclosures in all 50 states pending review of its process.

I’ve suggested a few times in the last couple of weeks that this might be a good time for borrowers to ask their bank to prove they actually have the proper documentation that says they own the loan or have sufficient authority over it to do anything significant, like foreclose.  Believe it or not, there have been a good number of cases where the courts have not only found that banks didn’t have the proper documentation (like when they can’t find the trust deed), but the judges went further and dismissed all the debt.

Apparently banks are well aware of the possibility that large numbers of people make take this opportunity to ask them to verify their mortgage, if the recent fee notice from Bank of America is any indication.

Fee Notice Information

Fees for Special Services and Paying Off Your Home Loan

Generally, there are no fees for the routine servicing of your loan. The following fees are the maximum fees that may apply if you request certain special services regarding your mortgage or home equity loan:

Verification of mortgage $15.00

Faxing a payoff statement (FHA only) $ 5.00*

Expediting a payoff statement $30.00*

“”There is no charge for mailing the payoff statement by regular U. S. mail.

If you payoff or refinance your loan, you may incur a fee for the preparation of the documents to release or reconvey your lien (up to $45). Reconveyance is a release of your mortgage when the security instrument on your loan is a deed of trust.

You may also incur a fee to record this reconveyance or release document (in the amount of the actual fee charged by the county recorder, normally not more than $100). In addition, if you have a home equity line of credit (HELOC) that is subject to an early closure fee, you may be charged an early closure fee as described in your HELOC Agreement.

There is also a returned payment fee of up to $40.00.

If you request information or services that incur a fee not listed above, Bank of America will inform you of the fee prior to
processing your request. However, in the event of a returned payment, fees will automatically be applied to your loan account. The information above is not a complete list of the types or amount of fees that could be charged to you over the life of your loan, and the amount of any fee shown above is subject to change.

I think part of the motivation for these fees is to make up for the recent fee haircut banks received from the Credit Card Act of 2009, but I find the fee for verification of mortgage particularly timely.  Could BofA be trying to discourage people from challenging their loan.

Charging for the documentation to prove that you have paid off your loan is also very timely.  There have been some high profile cases where banks have hounded people for mortgage payments long after their mortgage was actually paid off in full and perhaps as a result banks like BofA are getting hit with a lot of requests for documentation to prove a loan is paid off, which they should be providing for free.

BofA, I am happy with you for now; I sure hope this doesn’t mean you are a becoming a crappy, fee hungry bank like Chase.