Another shameful foreclosure mess
For the last few years, the news about foreclosures has been pretty much all bad: Millions of Americans have lost their homes, pushing down property values across entire neighborhoods and forcing many banks out of business. In August alone, 338,836 more properties went into foreclosure—that’s a 4% increase over July, according to RealtyTrac’s monthly foreclosure report.
Now, more bad news—but with a slight upside.
Reports emerged last week that major mortgage lenders may have acted illegally in foreclosing too quickly on many homes. In a rush to process the unprecedented number of foreclosures that took place after the housing crash about three years ago, some mortgage service firms stooped to having a single employee “robo-sign” thousands of documents a week that were supposed to be carefully reviewed.
Two lenders, GMAC and JPMorgan Chase, have admitted to possible legal mistakes and have temporarily suspended all foreclosures in the 23 states where foreclosures required the approval of a court. Bank of America has joined them in putting a halt to all foreclosures in those same states, and other lenders are expected to join, too. Attorneys general in several states are starting to investigate, and some lawmakers are calling for a temporary freeze on all foreclosures. It’s possible that this is only a fraction of the mortgage-lender malfeasance to be uncovered.
That’s the bad part, and it’s truly appalling: Serious misbehavior by lenders may have illegally forced families out of their homes.
The good news—and it’s minor, I admit—is that this misconduct is finally coming to light now, and experts expect evictions to slow down drastically going forward. That’s not a solution for people who have fallen drastically behind on their payments; their evictions may take longer, but they won’t be prevented completely. But this does buy them some extra time to get their finances in order.
In the meantime, it’s yet another reminder that our financial system could benefit from more oversight, which is coming to mortgage lenders under the new financial reform bill. If you think you’ve been unfairly foreclosed on, contact a housing counselor through the office listed for your state on HUD.gov. Oh, and one more lesson: Always keep your paperwork.