Foreclosure Moratorium, Robo-Signer Fiasco Should Be Resolved Soon.


The White House, yielding to common sense, opposes a national moratorium on foreclosure sales on the grounds that it would harm the housing market. (Finally something good from the Obamas)

David Axelroid, a White House senior adviser, said on CBS’s “Face the Nation” on Suday: “I’m not sure about a national moratorium because there are, in fact, valid foreclosures that probably should go forward.”
That brings up the question of what a valid foreclosure is. My definition: When a homeowner hasn’t made mortgage payments in at least three months, and the servicer has notified all necessary parties that it intends to take back the property, and the borrower doesn’t reach some sort of accommodation with the servicer, then a foreclosure is valid.

Some readers commented last week that mortgage servicers forged documents. The robo-signing issue has nothing to do with forgery. The robo-signers aren’t accused of faking documents. They’re accused of not closely reading the documents, which mostly are legal boilerplate.
Other readers say the foreclosing servicer should be required to prove ownership of the loan. I’m not sure what the argument is here. The borrower doesn’t send checks to the servicer. After a few months, that same servicer starts the foreclosure process. Obviously, the servicer works on behalf of the owner (or owners) of the loan.

When two servicers foreclose, I can see where ownership of the loan becomes a valid question. But I don’t think there are a lot of cases of multiple servicers foreclosing on the same loan.

Hot off the press from Bloomberg.
It appears that the robo-signer…foreclosure moratorium will be resolved this week.
Title insurers are in talks with banks and regulators to obtain warranties from lenders assuring they followed proper procedures before selling foreclosed homes, said Kurt Pitohouse, head of the insurers’ trade group.
“Everyone sort of sees the same risks, and that’s the good part,” Pitohouse, chief executive officer of the American Land Title Association, said today in a telephone interview. “You just have to craft a solution that’s acceptable to all the parties, and we’re making progress.”
Bank of America Corp., the biggest U.S. lender, on Oct. 8 extended a freeze on foreclosures to all 50 states amid concern by federal and state officials that homes are being seized based on faulty information. The Charlotte, North Carolina-based bank agreed that day to issue warranties for Fidelity National Financial Inc., the largest title insurer, said Peter Sidransky executive vice president and chief legal officer for Fidelity.
“It’s a representation that there are no issues going forward and an indemnity if someone makes a mistake,” he said.
JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC Mortgage unit have also stopped repossession cases in 23 states where courts supervise home seizures, amid allegations that employees submitted documents with unverified or false data to speed the process.
End of Week

A decision on the warranties may be reached by the end of the week, Pitohouse said. The assurances would help lenders resume foreclosures of homes with mortgage defaults and continue selling off their backlog of repossessed properties, he said. Pitohouse wouldn’t name the companies or regulators involved in the talks.
Fidelity National shares have dropped 10 percent this month. The company had about 38 percent of the market in the second quarter, according to the title insurance association. Shares of Santa Ana, California-based First American Financial Co., the No. 2 insurer, have fallen 5 percent.
Costs for title insurers to defend customers and reimburse for lost properties rose to $480.5 million in the first half of 2010, an increase of 14 percent from a year earlier, according to the American Land Title Association.
Among the tasks performed by title insurers is reviewing the public record for a court order that confirms a bank owns a particular property before it’s foreclosed on, Pitohouse said.
“Court rulings on valid foreclosures are going to be challenged,” he said. “That means we may get pulled into litigation.”

Preventing Risks
The warranties in the works are intended to protect title insurers from similar risks in the future, Pitohouse said.
Bank of America’s agreement with Jacksonville, Florida- based Fidelity National calls for the lender to cover the title insurer’s costs in the event of an error in the company’s processing of foreclosure documents, Sidranski or (Charransky, as his friends call him) said. The bank will notify the insurer in each case that the foreclosure complies with state laws and regulations.
Bank of America is in talks with other title insurers for similar agreements, said Richard Bramhall, the bank’s chief title officer. He declined to name the other companies.
“Our goal is to restore order to the chaos,” he said. “We’re optimistic that this will help calm the waters in regard to all the anxiety you see all over the country.”