PBS Newshour 10/6/2010
SLEAZEBAGS! As if Americans don't already have enough trouble.
Excerpts from transcript
MICHAEL CALHOUN, president, Center for Responsible Lending: Well, this is a critical breakdown in one of the most important safeguards in the foreclosure process.
Before a bank or lender goes to court to take somebody's home, they're required by law to have someone individually review the paperwork and the payment history to make sure that the person is, in fact, behind on the mortgage, has not been charged improper fees.
And then they certify, under oath, under personality of perjury, that they have done this individual review. We have now found that, on an industry-wide basis, that was totally ignored.
And that means there are a lot of people out there who had foreclosure proceedings brought against them when they shouldn't have. And we're talking a lot of people. There are about 2.5 million households in foreclosure right now. Another 2.5 million people are at risk of foreclosure because they're behind on their mortgages.
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JEFFREY BROWN (Newshour): So, it's just that we don't know?
MICHAEL CALHOUN: It's sort of throwing darts against the wall determining who has got a foreclosure and who has a defense and shouldn't be foreclosed.
And Professor Mayer makes a real important point. It used to be that you would get a home loan from your local bank. They would keep the loan, and you would deal with them throughout the process. Now the model has been, you take out a home loan, and then that loan is sold off to investors and to other institutions.
And another company, who doesn't own the loan, is the one collecting, processing your payments, and also bringing these foreclosure proceedings. So, there's a real disconnect there. These companies are not the ones typically that own the loan. They're just foreclosing for someone else.
And so they don't have the same incentives, the same need and incentive for care if -- they would have if they actually held the loan and had a lifetime relationship with you.
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JEFFREY BROWN: What kind of impact do you see on these people in their homes and on the larger housing market, of course?
MICHAEL CALHOUN: You make an important point about the modifications, because the people who were supposed to fill out these foreclosure papers correctly are also the same companies that are supposed to determine if homeowners are eligible for modifications of their loan to keep them in their house.
JEFFREY BROWN: Which has been a big issue over the last few years, of course, right.
MICHAEL CALHOUN: And it's been a big issue.
And it's just further evidence. These stories echo the ones that have been aired, that people trying to get loan modifications, would send their paperwork in over and over again. It would get lost, and then they would end up being foreclosed on, without ever getting an answer to their modification.
Make special note of the last paragraph above. This MAY mean that many foreclosures ARE improper.
Also note the paragraph highlighted blue. Could this be a breakdown in regulation of institutions that collect and process loans that do NOT own the loan?
Should we allow "selling off" of loans, especially home loans?
LATEST
"Largest U.S. Bank Halts Foreclosures in All States" by DAVID STREITFELD and NELSON D. SCHWARTZ, New York Times 10/8/2010
Excerpt
Bank of America, the nation’s largest bank, said Friday that it was extending its suspension of foreclosures to all 50 states.
The plan swept states with some of the highest foreclosure levels, including California, Nevada and Arizona, into a swelling crisis over lenders’ flawed paperwork that had been mostly confined to 23 other states that require judicial review of foreclosures.
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