I was reminded of this issue when I read a post by a law professor that did a lot of work to expose what was going on. She dismisses the idea that the lender's lack of a claim to ownership means that borrowers could remain in the homes "for free"
As challenges to whether a "bank" (usually actually a securitized trust) has the right to foreclose because it owns the note and mortgage become more common, rumors swirl about the ability to use such tactics to get a "free house." There are a few instances of consumer getting a free house, see here and here, for examples, but these are extreme situations not premised on ownership, but on a more fundamental flaw with the mortgage. In general, the idea that even a successful ownership challenge will create a free house to the borrower is an urban myth.
Is the flaw in the mortgage not a question of ownership? How is the particular legal entity that would foreclose relevant? Before addressing these issues (to the extent that she does) she provides a rationale for accepting the implications of the technical argument that she is going to make in advance:
The myth of the free house drives policymakers to complain about the moral hazard risks of holding mortgage companies to the law and tries to set up homeowners who are paying their mortgages against those who are not. It serves the banks' political agenda to be able to point to the "free house" as an obviously unacceptable alternative of consumers winning legal challenges. It's key then to understand that the "free house" is largely a creature of consumers' and banks' over-active imaginations.
Notice how easily she shifted to referring to the entities in question as banks and endowed them with agency and political motives. Whoever is living in the house would not really be getting a "free house" in this sense because they would not own it. The idea that nobody has legal ownership to them is apparently unthinkable (or unspeakable). This issue is avoided by identifying those residing in the houses as "consumers" of commodities even if they aren't legally commodities.
Just because a party lacked standing or statutory authority does not mean that there is not some party out there that does have the authority to foreclosure. Nor does a win on standing mean that there cannot be action taken to give the initial foreclosing party the authority that they need, which might occur by transferring possession of the note or by executing a series of assignments, to foreclose at a later date. Unless other problems exist, there is still a valid note that obligates the homeowner to pay money due and there is still a mortgage encumbering the house.
The lack of these notes has actually been one of the biggest problems and she certainly knows this. The lack of a legal right is again dismissed by identifying the house as a commodity that, as a commodity, must be legally owned and secured with property rights.
The rest of the post follows the same logic: on the one hand, there is no legal right to foreclose and take ownership, and on the other, the house is a commodity and as a commodity must be legally owned. It seems as though we are caught between dismissing the Rule of Law and denying that the houses are commodities. How can these be reconciled to ensure the continued respect for property rights?
Edited by dm ()
dm posted:
The rest of the post follows the same logic: on the one hand, there is no legal right to foreclose and take ownership, and on the other, the house is a commodity and as a commodity must be legally owned. It seems as though we are caught between dismissing the Rule of Law and denying that the houses are commodities. How can these be reconciled to ensure the continued respect for property rights?
well, the logic of the post you quote is, I think, the logic of any liberal. it's not that that "there is no legal right to foreclose and take ownership," it that the party that does have that right is unaware of it. it's out there, somewhere. or, perhaps, that right has been split into many pieces that individually are ineffective but, like the tri-force, could be reconstituted for great reward by a hero with sufficient courage and tenacity. in either case the clock has gotta start ticking on adverse possession eventually, if it hasn't already, and if no one with standing ever shows up it'll serve to make sure _someone_ has it.
obama didn't have to defend the al-Awlaki killing in court b/c his dad didn't have standing
U JUST GOT FORECLOSED!
crowd goes wild
tpaine posted:
liberalism and impper foreclosures? what a weird way to call someone out.
Ten leading US lenders may have unlawfully foreclosed on the mortgages of nearly 5,000 active-duty members of the US military in recent years, according to data released by a federal regulator.
JPMorgan Chase and Bank of America this year reached legal settlements in which they agreed to pay damages to nearly 200 service members who claimed that their homes had been improperly seized.
Data released last week by the Treasury’s Office of the Comptroller of the Currency, which regulates national banks, shows that 10 lenders – including BofA, but not JPMorgan, which was not part of the study – are reviewing nearly 5,000 foreclosures of homes belonging to service members and their families to see if they complied with the law.
Under the Servicemembers Civil Relief Act of 2003, mortgage servicers have to follow special procedures when foreclosing on homes belonging to active-duty members of the armed forces and their families. For instance, there are restrictions on so-called default judgments, in which homes are seized after the borrower fails to appear in court.
In April, JPMorgan reached a multimillion-dollar settlement with members of the armed services. The bank admitted to 27 wrongful foreclosures in May. Jamie Dimon, JPMorgan chief executive, apologised for his bank’s errors, calling it a “painful aberration”.
BofA struck a deal this year with the Department of Justice to resolve a government lawsuit alleging about 160 unlawful foreclosures. This month, the company agreed to pay each service member whose mortgage was illegally foreclosed at least $116,785, plus compensation for lost equity.
The data released by the OCC are based on estimates prepared by lenders and their consultants. BofA said it is reviewing 2,400 foreclosures involving active-duty military families to see if they were conducted properly. Wells Fargo is reviewing 870 foreclosures and Citigroup is looking at 700 cases.
Also under review are 575 foreclosures at OneWest, formerly known as IndyMac; 87 at HSBC; 80 at US Bancorp; 56 at Aurora, formerly known as Lehman Brothers Bank; 25 at MetLife; six at Sovereign; and three at EverBank.
In response to demands by US regulators, the largest home loan companies have been reviewing foreclosures in 2009 and 2010 to ensure that borrowers of all kinds were not improperly evicted. The new data on military foreclosures could lead to a new round of lawsuits, experts said.
In May, the US Government Accountability Office said it had identified 50 cases in which military borrowers were illegally foreclosed. In February, John Walsh, the acting head of the OCC, said that only a “small number” of home seizures should not have occurred.
Sherrod Brown, a Democratic senator from Ohio, said last week: “I don’t know if big banks are foreclosing on military families out of carelessness or callousness, but neither is acceptable.”
Dan Frahm, BofA spokesman, said: “We work hard to ensure our military customers receive high-quality service that caters to their unique needs. When we find mistakes, we address them.” Citigroup and Wells Fargo declined to comment. The OCC declined to comment.
Samuel Wright, a retired member of the US Navy and director of the Service Members Law Center, said it was likely that the banks may be undercounting the number of possible evictions of US military members, adding that foreclosures on military families were “pretty prevalent” given the number of complaints he has fielded from active-duty military members.
The months-long reviews by the banks’ consultants could determine that the foreclosures were done in full accordance with the law, and that none of the military borrowers were harmed.
John Odom Jr, a Louisiana lawyer who represents members of the military in litigation against financial institutions, said he was doubtful banks would admit to unlawful foreclosures.
“You’ve got institutions that don’t understand what the law says doing self-investigations and self-policing,” Mr Odom said. “I have very, very, very low levels of confidence that they’re going to do this right.”
dm posted:Just because a party lacked standing or statutory authority does not mean that there is not some party out there that does have the authority to foreclosure. Nor does a win on standing mean that there cannot be action taken to give the initial foreclosing party the authority that they need, which might occur by transferring possession of the note or by executing a series of assignments, to foreclose at a later date. Unless other problems exist, there is still a valid note that obligates the homeowner to pay money due and there is still a mortgage encumbering the house.The lack of these notes has actually been one of the biggest problems and she certainly knows this. The lack of a legal right is again dismissed by identifying the house as a commodity that, as a commodity, must be legally owned and secured with property rights.
The appeals court ruling against MERS that caused the GSEs and the Department of Housing and Urban Development to reinitiate foreclosures on more than 1,600 Michigan properties was overturned by the state's highest court this week.
The Michigan Supreme Court issued a ruling saying that the Mortgage Electronic Registration System Inc. holds sufficient interest in the borrower's promissory note (debt) to initiate a nonjudicial foreclosure.
"We clarify, however, that MERS' status as an 'owner of an interest in the indebtedness' does not equate to an ownership interest in the note," the order reads. "Rather, as recordholder of the mortgage, MERS owned a security lien on the properties, the continued existence of which was contingent upon the satisfaction of the indebtedness…authorized MERS to foreclose by advertisement."
the actual notes were sliced into billions of pieces in the form of spreadsheet entries and (literally) spread across the four corners of the earth. there is no way to reconstruct them. however, All Debts Must Be Repaid so a theoretical note exists that has nothing to do with legal ownership.
that's kind of incredible that you can have an ownership interest in the indebtedness itself, without having ownership of the claim that is the basis of the indebtedness.
