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> subsequently forclosed a lot of homes that should not have been forclosed on I don't understand this bit; what, other than non-payment of mortgage, makes a h

> subsequently forclosed a lot of homes that should not have been forclosed on I don't understand this bit; what, other than non-payment of mortgage, makes a house a "should have been foreclosed on" as opposed to "should NOT have been foreclosed on"?

Duff 16y ago
You can only forclose on a home on which you hold a lien. One of the big problems associated with this mess is that banks couldn't figure out which bondholders owned which mortgages. The junk mortgage companies (one of which BOA acquired) were as good with record keeping as they were with underwriting. (That is, really bad) Many homeowners skated through this mess with a free house because the banks could not actually prove that they have a valid lien on the home. The downside for these folks is that they are trapped in the home, as the title isn't clean.
- yummyfajitas 16y ago
  It's also worth noting that while they couldn't track down the lien, they probably didn't screw up and foreclose on anyone who didn't deserve to be foreclosed upon. At least, that's what the Fed's audit (of a sample of foreclosures, not all foreclosures in the US, obviously) said. http://www.huffingtonpost.com/2011/03/10/fed-reports-finds-no-wron_n_834010.html http://www.huffingtonpost.com/2011/03/10/fed-reports-finds-n... The bondholders are the real victims in this mess.
  - Duff 16y ago
    I can't speak to the numbers, but I've read about foreclosures thrown out of court by judges in the WSJ and Economist, so it has happened -- at least in the early days of the mess.
    - yummyfajitas 16y ago
      As you noted above, a foreclosure might fail for more reasons than simply foreclosing on someone who doesn't deserve it. Every case I've read about has simply involved the bank screwing up paperwork and a real estate speculator being permitted to keep the house even though they failed to make payments.
      - jbooth 16y ago
        If I screw up the paperwork on my end, the bank slaps me with 20k in legal fees at the drop of a hat. Just for reference.
  - Vivtek 16y ago
    That was based on a review of only 500 selected mortgages. At the same time, the Defense Department is pursuing JP Morgan for incorrect foreclosures on military personnel overseas. There have been lots of cases (anecdotal) of foreclosures on mortgages that have already been paid off or houses that weren't even mortgaged. It's been a massive, massive screwup.
melvinram 16y ago
I know someone who owned a ton of different houses. Let's say they bought 20 of them for $500k each on avg and put $80k down as deposits. Once the recession hit, the market value of these homes dropped like crazy. Instead of being worth $500k each, they were valued at $300k. This meant that the loan on the homes were more than the market value of the homes and apparently there was a clause in the bank contract that allows them to call the entire amount of the loan if the loan amount is more than the market value of the house. That is exactly what they did, which seems crazy to me as he had really good tenants in each of the homes and they all continued paying on time so he was actually making ALL his payments on time for all houses. This is one way that a bank could forclose on a house even if non-payment isn't an issue. Contract details are crucial.
- michaelcampbell 16y ago
  Wow, thanks; I have never heard of such a contractual clause.
  - dhimes 16y ago
    My understanding is that those clauses (or similar ones) are standard. We have one on our house. The point is, the bank doesn't gain anything, usually, by foreclosing. They are (at least in theory) better off receiving the payments they are certain to get rather than trying to find someone new to make them (for probably a smaller loan amount- because the property wouldn't sell for as much).
    - anamax 16y ago
      > My understanding is that those clauses (or similar ones) are standard. We have one on our house. Really? Where and what originating financial institution? I read my notes and I don't remember anything like that. (I found a lot of other things that I wasn't happy about.)
      - dhimes 16y ago
        They call it "acceleration." It's applicable as a "remedy" for certain acts the lender doesn't like. My latest was with GMAC, FWIW. For example, his friend may not have, by law, owned the houses, but may have transfered rights to his business. If the lender somehow knew this and didn't like it (not a "natural person), it may have triggered an "acceleration." Don't know his contract details, just a possible scenario.
capstone 16y ago
You will find the following read illuminating. I’ve been in contact for with attorneys involved in foreclosure defense. One thing they stress is that a significant number of their clients facing foreclosure has made every single mortgage payment. Read that again. Now how can that be? It’s actually very simple. http://www.nakedcapitalism.com/2010/11/servicer-driven-foreclosures-the-perfect-crime.html http://www.nakedcapitalism.com/2010/11/servicer-driven-forec... One number that stood out for me: Thompson estimates that servicer-driven foreclosures represented about 50% of the cases she handled.

Duff 16y ago

You can only forclose on a home on which you hold a lien. One of the big problems associated with this mess is that banks couldn't figure out which bondholders owned which mortgages. The junk mortgage companies (one of which BOA acquired) were as good with record keeping as they were with underwriting. (That is, really bad) Many homeowners skated through this mess with a free house because the banks could not actually prove that they have a valid lien on the home. The downside for these folks is that they are trapped in the home, as the title isn't clean.

yummyfajitas 16y ago
It's also worth noting that while they couldn't track down the lien, they probably didn't screw up and foreclose on anyone who didn't deserve to be foreclosed upon. At least, that's what the Fed's audit (of a sample of foreclosures, not all foreclosures in the US, obviously) said. http://www.huffingtonpost.com/2011/03/10/fed-reports-finds-no-wron_n_834010.html http://www.huffingtonpost.com/2011/03/10/fed-reports-finds-n... The bondholders are the real victims in this mess.
- Duff 16y ago
  I can't speak to the numbers, but I've read about foreclosures thrown out of court by judges in the WSJ and Economist, so it has happened -- at least in the early days of the mess.
  - yummyfajitas 16y ago
    As you noted above, a foreclosure might fail for more reasons than simply foreclosing on someone who doesn't deserve it. Every case I've read about has simply involved the bank screwing up paperwork and a real estate speculator being permitted to keep the house even though they failed to make payments.
    - jbooth 16y ago
      If I screw up the paperwork on my end, the bank slaps me with 20k in legal fees at the drop of a hat. Just for reference.
- Vivtek 16y ago
  That was based on a review of only 500 selected mortgages. At the same time, the Defense Department is pursuing JP Morgan for incorrect foreclosures on military personnel overseas. There have been lots of cases (anecdotal) of foreclosures on mortgages that have already been paid off or houses that weren't even mortgaged. It's been a massive, massive screwup.

melvinram 16y ago

I know someone who owned a ton of different houses. Let's say they bought 20 of them for $500k each on avg and put $80k down as deposits. Once the recession hit, the market value of these homes dropped like crazy. Instead of being worth $500k each, they were valued at $300k. This meant that the loan on the homes were more than the market value of the homes and apparently there was a clause in the bank contract that allows them to call the entire amount of the loan if the loan amount is more than the market value of the house. That is exactly what they did, which seems crazy to me as he had really good tenants in each of the homes and they all continued paying on time so he was actually making ALL his payments on time for all houses. This is one way that a bank could forclose on a house even if non-payment isn't an issue. Contract details are crucial.

michaelcampbell 16y ago
Wow, thanks; I have never heard of such a contractual clause.
- dhimes 16y ago
  My understanding is that those clauses (or similar ones) are standard. We have one on our house. The point is, the bank doesn't gain anything, usually, by foreclosing. They are (at least in theory) better off receiving the payments they are certain to get rather than trying to find someone new to make them (for probably a smaller loan amount- because the property wouldn't sell for as much).
  - anamax 16y ago
    > My understanding is that those clauses (or similar ones) are standard. We have one on our house. Really? Where and what originating financial institution? I read my notes and I don't remember anything like that. (I found a lot of other things that I wasn't happy about.)
    - dhimes 16y ago
      They call it "acceleration." It's applicable as a "remedy" for certain acts the lender doesn't like. My latest was with GMAC, FWIW. For example, his friend may not have, by law, owned the houses, but may have transfered rights to his business. If the lender somehow knew this and didn't like it (not a "natural person), it may have triggered an "acceleration." Don't know his contract details, just a possible scenario.

capstone 16y ago

You will find the following read illuminating. I’ve been in contact for with attorneys involved in foreclosure defense. One thing they stress is that a significant number of their clients facing foreclosure has made every single mortgage payment. Read that again. Now how can that be? It’s actually very simple. http://www.nakedcapitalism.com/2010/11/servicer-driven-foreclosures-the-perfect-crime.html http://www.nakedcapitalism.com/2010/11/servicer-driven-forec... One number that stood out for me: Thompson estimates that servicer-driven foreclosures represented about 50% of the cases she handled.