Forget it. You're not getting your house back

By Charles Riley, staff reporter October 18, 2010: 11:13 AM ET

NEW YORK (CNNMoney.com) -- Is this the break that millions of people have been hoping for?


Evidence continues to mount that major banks flouted their own foreclosure procedures -- and possibly the law -- when repossessing homes from owners who fell behind on payments. And that begs the question: Can owners who were wrongfully evicted take their home back? What if a new owner has already bought the place and moved in?

That's the messy scenario that lawyers, banks and hordes of ex-homeowners are facing, after revelations that loan servicer employees might have signed off on documents without a proper review, a process dubbed "robo-signing."

Experts say that very few homeowners will ever get their houses back. The possible exception: The handful of people who were wrongfully swept up by the mortgage tsunami, despite the fact that they were current on their payments.

But getting a judge to unwind a foreclosure is tough.

"The law imposes a very heavy burden on those seeking to attack final court judgments," says Robert Lawless, a professor at the University of Illinois College of Law.

If a court does rule a foreclosure invalid, either because the lender didn't have the paperwork in order or because the mortgage was not actually in default, a home's title will revert to the original owner, even if the property has since been purchased by a third party.

So where does that leave the original homeowners? It's difficult to say, because this is truly uncharted territory, and because foreclosures are subject to state laws, which vary widely.

But one thing is clear: If the original homeowner doesn't have the cash to catch up on the mortgage, the lender will restart the foreclosure process and, with the paperwork in order this time, repossess the house.

"The bottom line is that for the vast majority of these cases it's just going to delay the inevitable," said George Craft, a Texas based real estate attorney. The new owner should be able to stay in the house while the second foreclosure works through the courts because by this point, the original homeowner has probably found a new place to live.

Even someone who was wrongly evicted has probably found a new home and would prefer to take a cash settlement rather than try to reclaim their house. Most of these homeowners will almost certainly sue their lender, which is of course exposed to a tremendous amount of liability.

"Monetary damages will be the way people are compensated, because it's much easier for courts to monitor and institute," according to Andrew Raines, a California lawyer who specializes in real estate.

In the rare case that a foreclosure victim does want a house back after a third party has moved in, the new buyers will be compensated by title insurance.

Almost all lenders require mortgage applicants to purchase title insurance, which is designed to guard against gaps in the title record due to human error. If a title reverts to the original homeowner, title insurance should cover any financial loss incurred if the new owner is ordered to vacate the house.

Of course, that might not be the end of it -- there will probably be a flood of lawsuits bouncing between victims, title insurers and lenders that will further jam up a system that's already backlogged.

"One of the best and worst parts of our judicial system," said Lawless, "is that anyone has access to the courts to assert their grievance against another."

JPMorgan Chase expanding foreclosure review

By Charles Riley, staff reporter October 11, 2010: 2:00 PM ET

NEW YORK (CNNMoney.com) -- JPMorgan Chase is expanding its review of foreclosure documents, according to a person close to the bank.


In September, Chase announced a review of 56,000 foreclosure cases in 23 states that require a judge to sign off on a foreclosure. The recent move expands the inspection to states that do not require judicial approval.

Under the latest expansion, the foreclosure process will continue while documents are being examined, expected to take a few weeks.

In the initial review, Chase requested that the courts not enter judgments until completion of the audit. Without a judgment from a court, those homes cannot be sold.

The initial review was announced after the lender discovered that its employees may have signed affidavits on the basis of reviews done by other personnel.

In those 56,000 cases, JPMorgan Chase has asked its local foreclosure attorneys to communicate to courts, affected homeowners and their lawyers. The notification process is underway, a company spokesman said.

Foreclosure freeze FAQ

Banks have come under increasing pressure from lawmakers in recent weeks to review foreclosures or to expand existing reviews.

On Friday, Bank of America announced it was halting foreclosure sales in all 50 states as part of a widening investigation into flaws in the process. The bank said the foreclosure process on delinquent borrowers will continue, but it will not proceed to judgment or a foreclosure sale.

Ally Financial, previously known as GMAC, the finance arm of General Motors, has said it is temporarily suspending evictions and post-foreclosure closings in states that require judicial review while it conducts a review of documents.

Bank of America halts foreclosures in 23 states

By Hibah Yousuf, staff reporter October 1, 2010: 7:12 PM ET

NEW YORK (CNNMoney.com) -- Bank of America is the latest in a string of banks to freeze home foreclosures in 23 states as it investigates whether there were flaws in its process.


"We have been assessing our existing processes," Bank of America said in a statement. "To be certain affidavits have followed the correct procedures, Bank of America will delay the process in order to amend all affidavits in foreclosure cases that have not yet gone to judgment in the 23 states where courts have jurisdiction over foreclosures."

Bank of America did not have an estimate of the number of homeowners that will be affected by the delayed process.

The announcement comes two days after JP Morgan Chase said it will also halt foreclosures for about 56,000 homeowners after learning that its employees may have approved foreclosures without personally reviewing loan files.

A Chase spokesman said it is working with outside counsel over the next few weeks to review its process to confirm that it meets the appropriate standards.

Last week, Ally Financial, previously known as GMAC, the finance arm of General Motors, said it will also pause foreclosures in the 23 states.

Mortgage lender Freddie Mac said Friday that it is "deeply concerned" with the recent reports and said the alleged practices are not in compliance with its guidelines.

"We expect to provide instructions to our servicers later today that are intended to ensure that their foreclosure processes are in compliance with state law and Freddie Mac's servicing requirements," the lender said in a statement. "It's essential that the industry work together to protect borrowers' rights and ensure the integrity of the foreclosure process."

Homebuyer tax credit: 950,000 must repay

(CNNMoney.com) -- Nearly half of all Americans who claimed the first-time homebuyer tax credit on their 2009 tax returns will have to repay the government.


According to a report from the Inspector General for Tax Administration, released to the public Thursday, about 950,000 of the nearly 1.8 million Americans who claimed the tax credit on their 2009 tax returns will have to return the money.

The confusion comes because homebuyers were eligible for two different credits, depending on when their homes were purchased.

Those who bought properties during 2008 were to deduct, dollar for dollar, up to 10% of the home's purchase price or $7,500, whichever was less. The catch: The money was a no-interest loan that had to be repaid within 15 years.

Had they waited to buy until 2009, they could have gotten a much sweeter deal. Congress extended the credit and made it a refund rather than a loan.

Now, the IRS is developing a strategy for separating the 2009 taxpayers who are required to repay the credit from those who are not.

A review by the Inspector General earlier this year found that the IRS could not easily distinguish between home purchases made in 2008 and 2009. That heightened concerns that some claims could be erroneous or even fraudulent, that buyers could, for example, claim their purchase came later than it actually occurred.

Thursday's release reported that 73,000 claims, more than 4% of the 1.8 million homebuyers who received the credit, had incorrect purchase dates recorded by the IRS.

Some of the inaccuracies counted against the taxpayers, Nearly 60,000 were listed as purchasing in 2008 (meaning they had to repay the credit) or had no purchase dates at all, rather than their correct 2009 purchase dates, which would free them of the obligation to pay it back.

It is also taking a look at all those deceased taxpayers who received credits.

The inspector general reported that 1,326 single people listed as dead by the Social Security Administration claimed more than $10 million in credits. The IRS threw out 528 of those 1,326 claims, saving $4 million.

By Les Christie, staff writerSeptember 9, 2010: 2:40 PM ET

So Where's the Good News? by John Mauldin

Ok, I could go on for hours, sorting through the problems. Where is the good news I promised?


Here's what I should have said to Tiffani's group: Let's face it. Running a small business is never easy. I am a serial entrepreneur. I have started and run a lot of very different businesses. Some have been very, very good and some went down in spectacular flames. I can remember some near-death experiences when the economy was booming. I have watched a million-dollar income stream dwindle to zero and there was not a damn thing I could do about it, except enjoy the money while it was there and use it to buy the next income stream. I have had to rebuild several times from scratch as markets shifted drastically underneath my feet. And I've changed directions as new opportunities revealed themselves.


In all this I'm like every other small-business entrepreneur out there. It is never easy. But that is what we do. We get up in the morning and figure it out. Some 80% of startups die within ten years. But we pick ourselves up and start over.


I know unemployment is 10%. But that means almost 90% are employed. Consumers are saving more. So adjust. Figure out what your New Normal looks like.


The '70s were a bitch. I woke up many times in the middle of the night with real pains in my stomach wondering whether to pay the rent or make payroll. So did a lot of people. But look at all the new companies that came out of that era and changed everything: Microsoft, Apple, Intel, etc. Cell phones. The internet. The list is long.


Yes, we have to make our way in this Muddle Through World. It will be challenging, but I can almost guarantee you that when we do get through there will be other challenges. If it was easy everybody could do it and there would be no money in it. Embrace the challenge!


I asked one of my really close (36 years) friends and business associates last year how his business was doing. "We are doing great!" he said. That was not the answer I was expecting. "Why? How?" I asked.


"Well, most of our competitors have folded. We survived and got the business."


Ultimately, that is how we get out of this. A hundred million families and millions of businesses figuring it out, learning how to adapt to the New Normal. Sadly, some of them won't make it. But most of us will!


As I said, I am a serial entrepreneur. I have a friend who designs and oversees large teams of programmers of really robust analytic software, very cutting-edge stuff. She is a winner, and I am backing her (I know nothing about software but the rule is, invest in people!). We'll see how it goes, but my bet is that in a few years there will be a lot of people getting jobs because we take on some risk now.


We are adapting our own business here. We will soon have new websites. I will be doing (at first) an audio podcast called the Mauldin Minute and then (hopefully) by the end of the year morphing into video. That's the wave of the future and I need to keep up.


I am addicted to information and reading . We are going to try and make some money from my addiction. What would you pay to look over my shoulder and read the 5-10 most important things I find in a week? I will become your personal reader. Will that be a life-style changer? No, but it will provide some income diversification.


When Tiffani made her presentation to her Vistage group about our business, she had a lot of charts and graphs. I was surprised how our sources of income have varied over time. Some previously large (at least on my scale) sources literally dried up within a few years, completely askew from our original optimistic expectations. It was very apparent that we cannot sit and assume things will be the same year to year. So we adapt.


I have been presented with a very different opportunity in a non-finance field that is right in my wheelhouse, as they say. Tiffani and Ryan and I are going to pursue it. Will it thrive? Be a real business in five years? We will see, but I have the ability to take that risk and I am going to do so.


And so will hundreds of thousands of other visionaries and dreamers. That is how we get through this. We work through the ugly and then we get to the 2020s, and I think we will once again be talking about the Roaring 20s! Whole new industries will come into existence. Pay attention to the advancements in robotics. Biotech will be HUGE this decade, but we need to change the rules so we don't lose the intellectual property and the jobs. Electric cars will boom as we replace our fleet all over the world. Nanotech later in the '20s. Green energy and nuclear. Artificial intelligence (finally!). Really cheap (I mean really cheap!) wireless high-speed broadband all over the world will open the door to all kinds of possibilities. I met last night with very credible scientists who have developed a way to filter water very cheaply. A desalinization module that fits in a cargo container. Yes, they need a lot of money to finish, but they will figure it out. And on and on. The opportunities are going to be huge. Trillions will be made.


So, we get through this. We Muddle Through. We figure it out, one business and family at a time. And as a culture, a world, we get to a better place. My bet is that in 2020 no one is going to want to go back to the good old days of 2010. We will be excited about the future and all the cool stuff that is happening.


Recessions and tough times are God's way of telling you that you need to adjust a few things, both on a personal and business level – also nationally and globally. I am an optimist. I believe we will adjust and grow, not just in the US but as an emerging world. There are just so many opportunities.


So, don't let the problems I write about in this letter make you crawl into a cave. Just be realistic and figure out where your opportunities are. And then go make them happen! You are responsible for creating your own future. And I hope it is a good one. I plan on making mine one.

I found John Mauldin’s article inspiring. I hope you enjoy it as well. Wishing you all a great week!

Obama Administration to Provide $3 Billion in Housing Aid

The Obama administration is providing $3 billion to unemployed homeowners facing foreclosure in the nation's toughest job markets.


The Treasury Department says it will send $2 billion to 17 states that have unemployment rates higher than the national average for a year. They will use the money for programs to aid unemployed homeowners. Some of those states have already designed such programs.

Another $1 billion will go to a new program being run by the Department of Housing and Urban Development. It will provide homeowners with emergency zero-interest rate loans of up to $50,000 for up to two years.

The administration was required to launch the HUD emergency loan program by the financial regulatory bill signed by President Barack Obama last month.

The Treasury are using money from the $700 billion Wall Street bailout to pay its share of the program. Officials said they won't know until next month how many people are likely to be helped.

California will get the largest share of money for the Treasury program, at $476 million. Florida is in line for nearly $239 million. Illinois will receive $166 million and Ohio will receive $149 million.

The Obama administration has rolled out numerous attempts to tackle the foreclosure crisis but has made only a small dent in the problem. More than 40 percent, or about 530,000 homeowners, have fallen out of the administration's main effort to assist those facing foreclosure.

That program, known as Making Home Affordable, provides lenders with incentives to reduce mortgage payments. So far, it has provided permanent help to about 390,000 homeowners, or 30 percent of the 1.3 million who have enrolled since March 2009.

Also receiving money are Michigan, $129 million; Georgia, $127 million; North Carolina, $121 million; New Jersey, $112 million; Indiana, $83 million and Tennessee, $81 million.

Alabama is due to receive $61 million, South Carolina, $59 million; Kentucky, $56 million; Oregon, $49 million; Mississippi, $38 million; Nevada, $34 million; Rhode Island, $14 million; and Washington, D.C., $8 million.

Published: Wednesday, 11 Aug 2010

2:22 PM ET (CNBC)

Mortgage brokers to be fingerprinted and registered

Mortgage loan originators will have to be fingerprinted and sign up to a central registry to do business in future, according to final rules issued on Wednesday by the Federal Reserve and other regulators.


The rules are part of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, also called the S.A.F.E. Act.

They were issued by the Fed, Comptroller of the Currency, Federal Deposit Insurance Corp, Office of Thrift Supervision, Farm Credit Administration and National Credit Union Administration.

Mortgage brokers came under tough scrutiny in the wake of the 2007-09 financial crisis, with some lawmakers and regulators sharply critical of underwriting standards and practices that were seen as so loose they helped foster a housing price bubble.

The S.A.F.E. Act specifies that mortgage brokers who are employees of agency-regulated institutions must register with the Nationwide Mortgage Licensing System and Registry,

"As part of this registration process, residential mortgage loan originators must furnish to the registry information and fingerprints for background checks," a joint release from regulators said.

The final rules take effect on October 1 and it is anticipated that the registry could start accepting registrations as early as January 28, 2011.

Industry sources say that thousands of brokers have gone through mandatory education, credit checks and state and federal testing in order to retain the right to handle mortgage originations.

The process has thinned the ranks of brokers, who may be even fewer soon given talk of a 30 percent fail rate on testing, said Bob Moulton, president of Americana Mortgage Group in Manhasset, New York.

"It cleaned up the industry," said Moulton, who nonetheless cautioned that he felt credit availability for mortgage lending has been reduced as a result of uncertainty caused by U.S. financial regulatory reform.

Published: Wednesday, 28 Jul 2010

6:51 PM ET (CNBC)