Texas Attorney General Asks Lenders to stop Foreclosures
Texas Attorney General Greg Abbott asked mortgage sets to stop foreclosures while they probe their foreclosure practices.
Many things combined to bring about the current crisis.
- The growth of the mortgage secondary market produced an ecosystem where mortgage loans were treated as a commodity and bought and sold multiple times.
- typically, when a loan is sold the buyer records an assignment of the lien, assigning the lien from the seller to the buyer.
- Lenders tried to save money by avoiding recording each and every assignment, instead creating MERS, an electronic registration system that exists for members only.
- Servicers manager billions of dollars in mortgage loans. This requires new policies and procedures, staffing, call centers, etc. This placed a large strain on servicers.
- enormous defaults additional to the servicer work load.
- Predatory loan alteration companies did nothing to solve borrower defaults and instead gave them a false sense of security that their default was taken care of.
The Texas foreclosure course of action, set forth in Section 51.002 of the Texas character Code is lender friendly and contains little resources for borrowers to contest foreclosure. Texas is a non-judicial foreclosure state which method that there is no supervision or oversight of the Texas foreclosure course of action. The only oversight happens after title is delivered, most of the time back to the lender, and the lender attempts to sell the character. At that time the lender usually provides a title policy and the title company becomes the defacto reviewer of how the foreclosure was conducted and if the lender satisfied the notice provisions of Section 51.002.
Keep in mind that contesting foreclosure in state district court is an expensive proposition and requires a bond. Some district judges will throw out applications for restraining orders on the basis that Bankruptcy Court is the proper forum for lenders seeking to protect their equity.
Lenders and servicers evidence their compliance with the notice provisions by signing affidavits. The affidavits require personal knowledge of the facts in the affidavit – that the notice was deposited in a mail receptacle; that the notice was posted at the courthouse. Now coming to light is the practice of “robosigning” – some one signing hundreds of affidavits put in front of them with out personal knowledge.
Texas courts are reluctant to take on the issue of lien ownership presented by MERS. Other state courts are beginning to challenge the practice and are allowing borrowers to present evidence that the servicer handling the foreclosure does not own the loan because there is no assignment to the lender. considerably, courts are starting to question the use of MERS and how it impacts title.
Some counties are already thinking about suing servicers for millions in dollars in lost recording fees.
Huge questions exist as to what the Attorney General Abbott will ask of lenders and servicers to similarities currently listed for foreclosure and those already foreclosed and whose former owners nevertheless occupy the character.
This is a huge issue that produces watching on multiple front as it has meaningful possible to alter the foreclosure course of action and impact the number of foreclosed similarities obtainable on the market.