Friday, January 7, 2011

foreclosure law


Per the order below (hat tip Matt Weidner) a judge in Broward County appears to have cancelled all foreclosure sales in one of the foreclosure division from December 20 to December 31:


Broward County Judicial Order Canceling Foreclosure Sales


One might think this has something to with the Fannie and Freddie foreclosure halts, with run from December 20 to January 3. But the GSEs have made similar suspensions before, indeed, sometimes from Thanksgiving to New Year, so this seems unlikely to be the trigger.


Moreover, this action, at least based on the account of Florida foreclosure procedures per Lisa Epstein of ForeclosureHamlet, could not impact evictions that were due to take place over the holidays. It turns out that there is usually a significant lapse between the foreclosure sale and the loss of possession. Via e-mail:


The sale doesn’t throw families out on the street, the certificate of title has to be issued (Palm Beach County is 4-6 weeks behind the sale dates at least) THEN a writ of possession must be obtained, then the sheriff has to execute the writ.


Even though the motivation for this order is not clear, it may nevertheless be significant. Many judges have taken the view that they have no latitude to act on behalf of defendants who do not contest their cases, and some have taken the unusual step of expressing concern that procedural abuses have risen to a level where they feel the need to take a more active role, yet are not certain whether they can do so. From the Palm Beach Post:


Palm Beach County Chief Judge Peter Blanc is trying to decide whether judges can take a more active role in examining foreclosure cases after a meltdown in Ally Financial’s foreclosure proceedings last week.


Blanc said Monday that there has been an increase in requests by lenders and loan servicers to cancel foreclosure sales and vacate judgments following the disclosure that Ally was freezing portions of its foreclosure operation in 23 states, including Florida.


While judges granted those requests, Blanc said he was concerned about cases in which defective foreclosure affidavits aren’t being brought to the court’s attention, possibly because the borrower has given up or walked away from the home.


Also, he’s unclear on whether the court should scrutinize past cases for flaws.


“It puts us in an untenable position because we can’t both investigate and decide,” Blanc said. “We are supposed to act on things brought to our attention, but if no one files anything, I’m not sure what will or should happen.”


Blanc said he was looking at case law regarding the duties and responsibilities of judges to see whether there is precedent for the current situation. But he said Florida’s foreclosure crisis has brought many unique challenges to the courts and there is likely little historical guidance.


In other words, judges are also struggling to figure out what to do with the mess created by rampant abuses in the securitization industry.









WASHINGTON -- The Federal Reserve has reversed its opposition to new rules reining in foreclosure abuses, and will support stronger regulations on the nation's largest banks, according to a source familiar with the matter.



The Wall Street reform legislation signed into law by President Obama in July 2010 required federal regulators to write new rules governing the broken market for mortgage bonds. Problems in the packaging and sale of mortgage bonds helped inflate the housing bubble and facilitated the sale of predatory loans nationwide. Since banks could push mortgages on borrowers and then sell them to investors, critics say that banks lacked serious incentives to ensure those loans could be repaid.



The FDIC has been pushing hard to ensure that new regulations on the mortgage bond market include clear instructions for how banks handle mortgages-- and under what circumstances they can evict delinquent borrowers. The bank divisions that collect payments from borrowers and implement the foreclosure process-- known as "mortgage servicers"-- have been plagued by rampant problems with fraudulent documentation. This fraud has resulted in everything from illegal fees charged to borrowers to improper evictions.



The Fed had opposed using the mortgage bond rules to crack down on foreclosure abuses, despite pressure from the FDIC. But FDIC General Counsel Michael Krimminger recently told the Fed his agency would not support any new mortgage bond regulations that do not include strong rules forbidding foreclosure abuses. Krimminger told HuffPost that other regulatory agencies are "moving in our direction on the issue."



Krimminger would not specify which agencies were coming around. But a separate source close to the discussions told HuffPost that the Fed has come on board, with systemic risk watchdogs at the central bank sympathetic to Krimminger's position.



Late last month, more than 50 economists, banking experts and financial reform advocates sent regulators a letter urging them to use the mortgage bond rules to create a gold standard for handling mortgages in a responsible fashion. Many of the rules proposed in the letter were very simple standards, like promptly crediting borrower accounts when they make payments on their loans. But mortgage servicers have had significant problems performing these tasks for years, and regulators have not checked them. The Office of the Comptroller of the Currency (OCC), which regulates the largest mortgage servicers, has never issued any public regulatory sanction against a servicer. Current OCC chief John Walsh also said in a recent Congressional hearing that his agency was unaware of foreclosure fraud problems until the media began reporting them.



A cadre of House Democrats lead by Rep. Brad Miller (D-N.C.) has also urged regulators to use the new mortgage bond rules to crack down on foreclosure abuses and encourage loan work-outs.




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