In October 2008 I sent letters to members of Congress, Fannie Mae, ALTA and MDLTA relating to the fact that the large servicing entities had made decisons to begin to use foreclosure mills nationwide in an effort to streamline their foreclosure processes. In so doing they may well have streamlined the process, but, we all see now just what that has meant to those of us in the title industry as well as for the consuming public. My particular concern at that time was not so much related to the actual foreclosure filings, but was related to the lack of oversight of the transaction when the property went to sale on the open market.
To read the entire report go here:
My concerns evidently were valid and now, two years later, it has finally coming to light. In the preamble to the Four-Point Policy Framwork we read:
"The country's housing finance system remains fragile and I intend to maintain our focus on addressing this issue in a manner that is fair to delinquent households, but also fair to servicers, mortgage investors, neighborhoods and most of all, is in the best interest of taxpayers and housing markets."
Let me now go through these items point by point, bear with me here, and if my thoughts are totally off the mark, then please let me know. I am not going to reiterate what has been posted here in the press release, I am just going to offer my opinion of these four points.
1. Verify processes- If a servicer learns of a deficiency in the process they are tasked with remediating the problem. As outlined in item 2.
2. Remediate actual problems:
a) Review filed affidavits and if found to be defective, correct them. Ok, so now those of us in the industry are going to start seeing "corrective" affidavits in the court files, which we must assume are now going to be properly executed, and we are going to be asked to rely upon these "corrective affidavits" .
b) Post Judgement- Again, review and correct, as necessary, any defective affidavits and ask the court to ratify or amend the foreclosure judgment. Again, let us be reliant upon these "corrective" affidavits for final ratification of sale.
c) Post Foreclosure- Now this is where we get into the meat of the problem as it relates to consumers. Servicers are being asked to confirm that the information contained in any affidavits were complete and in compliance with applicable law. The servicer is tasked with working with the foreclosure attorney to take actions as may be necessary to insure that title insurance is available to the purchaser of the subject property in light of facts surrounding the foreclosure action.
Unless I have totally missed something, those same folk who are currently being investigated for fraudulent transactions and whose practices have been called into question are those who are being tasked with taking remedial action.
As an REO title expert I have, on many, many occassions, questioned the use of the foreclosure mills in conducting the "out-sale" of the REO property. As has become evident lately, we cannot rely upon these "mills" to offer us a feeling of comfort in insuring these titles. As a point in fact, many of these firms have been given blanket "Powers of Attorney" authorizing them to sign any and all documents necessary to effecutate the transfer of the properties out of REO. So, now I must question, because of facts presented in may law suits nationwide, whether or not the DEEDS that were filed in thousands, if not millions, of these cases were actually executed by the person named in the POA or were they too presented to a "Robo-Signer" and notarized sometime thereafter.
And, equally as important, and seemingly of no concern to members of Congress or the national servicing entities, is the fact that at NO POINT has a proper title search ever been done on these properties either at the time of the foreclosure filings nor at the time of transfer out of REO. Oh, certainly, we are told by many of these "mills" that they are not required, pursuant to their contracts with the various and sundry banks, to research the title any farther back than to the foreclosed party. As you will see from other blogs I have posted here, even then, these "mills" are overlooking such things as giving proper notice to actual OWNERS in the foreclosure process. When presented with such "deficiencies" the mills either request, and generally receive, a Letter of Indemnity from their title insurer, or as one case I had recently, self insure the property.
I can tell you that here in my office we do full 60 year searches on all properties. No longer an industry standard, I fully realize, but a standard I believe needs to be re-introduced into this industry. I can further tell you that on each and every of these files we find something in the back title, sometimes as recently as one owner back, that need to be addressed. Now when we call the "mill" and ask that they at least give us a copy of the LTP (Lender's Title Policy) that they SHOULD have in their file we are told over and over again that the LTP cannot be located. This truly does not surprise me given that in thousands, if not millions, of cases, you will find a "Lost Note Affidavit" filed in the foreclosure case. If these mills and the servicers cannot keep track of the debt instrument what would make anyone think they could keep track of something as incidental as a TITLE POLICY!
It is not my contention that people who are legitimately in default on their loans should be afforded any "special protections", nor do I contend that foreclosures should come to a screeching halt. I do however feel strongly that these "mills", who are tasked with handling the outsale of these properties once they are in REO status be barred from handling those transactions, either through their foreclosure mill or through any entity "owned or controlled by" the foreclosure mill. In this way we can at least offer assurances to the public that there will actually be a set of independent eyes on the foreclosure transaction and that the consumer, and the lenders offering loans on these REO properties, have an additional layer of protection against potential future problems.
Naturally, as we in the industry are not handwriting experts we will be forced to rely upon these "corrective" affidavits to enable us to offer title insurance on these REO transactions. But if we can at least assure the consumer and the lender that someone other than the foreclosure mill or their controlled entity has reviewed the "corrections" maybe we can get a better comfort level in insuring REO properties.