Robo-signings and Fraudulent Forclosures
December 6th 2011 02:03
Given the glut of foreclosed homes on the market, you might be tempted to try to pick up a bargain or two. And with some abandoned houses going for prices like $10,000 they look like a steal. But if something sounds too good to be true, you want to take things a little slower.
Some houses have been purchased without clear title because practices like “robo-signing.” In robo-signing, the bank might perform the courtesy of having a real, live human being do the first couple of document signings. But when the signings required to foreclose on properties get up into the hundreds, and even the thousands, no one is closely perusing the paperwork with a critical eye. A computer has a copy of a real person’s signature and that is what is going on the documents. So there may be no assurance that a real person checked out the chain of ownership. If you are buying the house for yourself, there is the real danger that one day someone could come to the door with a deed insisting the house is theirs.
For most of us a good day is one in which we do not have to see a doctor, dentist or lawyer. Some who bought foreclosed homes are not having good days.
When a foreclosed home sales goes bad, there can be lots of lawsuits and finger-pointing but the person who in good faith thought he had bought a house may be left holding the bag. Such a “homeowner” might have to secure his own lawyer and try to sue banks, attorneys, loan processing companies, title companies and whomever else might have profited from a fraudulent scheme.
The frequency with which loan and refinancing contracts change hands has caused confusion as well. Some homeowners claim that though they paid someone for years, the “real” holder of the loan did not get a cent. When the real loan holders foreclose on the house, the homeowner gets the shock of his life. This kind of situation can cause numerous, almost never-ending problems the least of which may be a bad credit record.
Some of the shenanigans that have gone on in the fraudulent foreclosure market would be comic if they weren’t happening to real people. For instance, a couple lost a house they paid cash for when a bank foreclosed on the wrong address.
The foreclosure business has been a magnet for scammers. It is amazing that people who are underwater on their mortgage can still have enough money to be stolen; but thieves are creative that way. One lady lost over a thousand dollars to a company that claimed they would help her negotiate the payments she could no longer make on here house. The “negotiators” took the money and ran.
There is another story about a couple that lost a house for paying too early on one check and writing an incorrect routing number on another check. This is one of those gotchas that can bite many otherwise conscientious people. The fact that you made an extra or early payment does not absolve you of your regular monthly bill and you can still be financially punished for not paying it despite the early or extra payments. This is particularly true if your extra payments went strictly to principle. Knocking down the principle down is in general, a good thing. Doing so can cost you less interest in the long run. But you still owe that interest and escrow and the taxes and the PMI and God only knows what else.
With the foreclosure industry being in such turmoil, it would definitely behoove anyone who wanted to buy a foreclosed house to do extra due diligence and make sure that the house has a clear title, and certainly not to skimp on steps such as title insurance in case something goes wrong.
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