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US Foreclosure - The Robosigning Scandal

February 21, 2012 | Comments: 0 | Views: 148

An Alarming irregularity

Foreclosure is the legal process enacted by the bank or lending institution in order to repossess a home that has not paid regular mortgage dues for several months. It is usually a lengthy process that requires significant documentation. However, according to a recent report, there were rampant instances of foreclosure abuse in many parts of the United States. An audit of around 400 foreclosures in San Francisco California showed that a whopping eighty-four percent of these were done illegally. Diane Thompson, an attorney representing the National Consumer Law Center said that those statistics are accurate even on a national comparison.

In another instance in North Carolina mortgage documents scrutinized from January 08 to December of 2010 showed that 4,500 had significant irregularities in signatures. A clear example of the illegal practice of robosigning paperwork to speed up the process.

What is Robosigning?

For those not in the know, robosigning is the act of utilizing fake documents in order to force foreclosures without the banks needing to analyze the mountain of paperwork that is usually involved in mortgages. This act was at the core of a $25 billion dollar settlement that five major banks agreed upon with the US Federal government. What is disturbing about this is the fact that the involved lending institutions never had to admit any impropriety on their part. What they were only willing to say that there were only "deficiencies" in the way they handled the foreclosure process.

Since the peak of the housing bubble in 2006, application for mortgages fell thirty-three percent. At present there are eleven million US homeowners that owe debt that is greater than the overall value of their property. The root cause of this issue is the fact that during the peak of the Housing Bubble, many generous loans were given out to a lot of people and most of them had poor credit histories to begin with. The lax policies at the time created the conditions that eventually led to the housing market crash when the global financial crisis hit.

Non-Judicial Foreclosures

A major possibility that could have caused the very high rate of illegal foreclosures in San Francisco may be due to the fact that the state of California follows a non-judicial foreclosure guideline. Meaning to say, foreclosure proceedings in the state need not be supervised by a judge. The fact that there was almost no oversight in the process made California one of the hardest hit areas of the robosigning scandal that peaked in the waning months of 2010.

The report also pointed out that one of the important issues that has come out in the foreclosure crisis is the issue of repackaged loans resulting to blurry proprietorship. In other words, it is unclear sometimes who actually owns the mortgage and so have the right to take legal action against them. There had been a lot of cases reported on mortgages being repackaged and sold to willing investors during the peak of the housing crisis. It is not uncommon to find property owners that presumably have defaulted on a mortgage they did not agree to pay and are being taken to court by lenders that possibly did not really have the right to take payment for such loans.

Source: EzineArticles
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