Redux: Why Are We Still Paying Our Mortgages?
I spent the better part of 2008 and 2009 screaming from the rooftops this would happen. Now it is. It just took a couple of years for everyone to learn how to play their part in the game.
So again, just to remind you I said over and over and over…
1) If you bought a house from 2000 on (or buy one going forward from here), you may NEVER own it EVEN if you make ALL the payments or pay CASH for it.
2) If you walked away from a house or quit paying the mortgage as far back as 2008, you may STILL own it today even if you don’t live there.
3) If you don’t know about your situation under 1 or 2, you should. HOMEOWNERS are going to go to JAIL while the bankers are going free.
4) MOST IMPORTANTLY – I repeatedly said that TITLE INSURANCE would become USELESS due to the criminal bankers that built MERS.
And folks said I was crazy. Read, learn, and be prepared to be amazed at the truth. This is full-on insanity … and it’s just getting started:
They bought the house, but it’s still not theirs
(Reuters) – Brian and Holly Barnhart dreamed of turning an eyesore into a home for their growing family.
Their dream was destroyed by a zombie title – not theirs, but someone else’s. As their experience shows, buying a foreclosure can be risky.
It all started in November 2010, when the Barnharts forked over $153,000 in cash savings for a Spanish-revival house in Cape Coral, Florida – a Wells Fargo foreclosure that was in a sorry state. Rats poked around the patio. The water in the swimming pool was green. The yard was wild with weeds.
The couple plowed an additional $100,000 – the balance of their savings – into a gut renovation. Here they planned to raise their two small children and the baby that was on the way.
But in January 2011, not long after unpacking their boxes, the Barnharts found out from the Lee County property appraiser that when they purchased the house, the bank didn’t actually own it. So now, neither did they. The title insurance they were required to have when they closed on the house afforded no protection.
“It’s an absolute and utter nightmare,” says Brian Barnhart, a real estate agent. “It has pushed my wife to the breaking point.”
It turned out that in 2007, Wells Fargo, which is the trustee of the previous owner’s mortgage, and American Home Mortgage Servicing, which is the mortgage servicer, foreclosed on Richard Riccobono. Trustees act on behalf of the mortgage bond investors who own the loan, and foreclosure suits are usually brought in their name. Mortgage servicers actually manage the loans.
On December 30, 2008, Wells Fargo took ownership of the house. The following July, it had that move set aside and transferred the title back to Riccobono.
Riccobono says that he didn’t know the house was back in his name and that he is prevented from transferring the title to the Barnharts because of various liens on the property. “It’s the craziest thing I’ve ever seen,” says Riccobono, now living in Fort Myers.
The latest foreclosure horror: the zombie title
(Reuters) – Joseph Keller doesn’t expect he’ll live to see the end of 2013. He blames the house at 190 Avondale Avenue.
Five years ago, Keller, 10 months behind on his mortgage payments, received notice of a foreclosure judgment from JP Morgan Chase. In a few weeks, the bank said, his three-story house with gray vinyl siding in Columbus, Ohio, would be put up for auction at a sheriff’s sale.
The 58-year-old former social worker and his wife, Jennifer, packed up their home of 13 years and moved in with their daughter. Joseph thought he would never have anything to do with the house again. And for about a year, he didn’t.
Then it started to stalk him.
First, in 2010, the county sued Keller because the house, already picked clean by scavengers, was in a shambles, its hanging gutters and collapsed garage in violation of local housing code. Then the tax collector started sending Keller notices about mounting back taxes, sewer fees and bills for weed and waste removal. And last year, Chase’s debt collector began pressing Keller to pay his mortgage, which had swollen, with penalties and fees, from $62,100.27 to $84,194.69.
The worst news came last January, when the Social Security Administration rejected Keller’s application for disability benefits; the “asset” on Avondale Avenue rendered him ineligible. Keller’s medical problems include advanced liver disease, hepatitis C and inactive tuberculosis. Without disability coverage, he can’t get the liver transplant he needs to stay alive.
“I can’t make it end,” says Keller. “This house, I can’t get out.”
Keller continues to bear responsibility for the house because on December 23, 2008 – about two months after he received Chase’s notice of sale – the bank filed to dismiss the foreclosure judgment and the order of sale. Chase said it sent Keller a copy of its court filing on December 9, 2008. Keller says he never received any notification. Either way, his name remained on the property title.
The Kellers are caught up in a little-known horror of the U.S. housing bust: the zombie title. Six years in, thousands of homeowners are finding themselves legally liable for houses they didn’t know they still owned after banks decided it wasn’t worth their while to complete foreclosures on them. With impunity, banks have been walking away from foreclosures much the way some homeowners walked away from their mortgages when the housing market first crashed.
Since 2006, 10 million homes have fallen into foreclosure, according to RealtyTrac, a number that in earlier, more stable times would have taken nearly two decades to reach. Of those foreclosures, more than 2 million have never come out. Some may be occupied by owners who have been living gratis. Others have been caught up in what is now known as the robo-signing scandal, when banks spun out reams of fraudulent documents to foreclose quickly on as many homeowners as they could.
And then there are cases like the Kellers, in which homeowners moved out after receiving notice of a foreclosure sale, thinking they were leaving the house in bank hands. No national databases track zombie titles. But dozens of housing court judges, code enforcement officials, lawyers and other professionals involved in foreclosures across the country tell Reuters that these titles number in the many thousands, and that the problem is worsening.
“There are thousands of foreclosures in limbo, just hanging out there, just sitting, with nothing being done,” says Cleveland Housing Court Judge Raymond Pianka, whose pending court cases tied to derelict properties have doubled in the past two years, to 1,000. He says the surge is due largely to homes vacated by people who fled before an imminent foreclosure sale, only to learn later that they remain legally responsible for their house.
When people move out after receiving a notice of a planned foreclosure sale and the bank then cancels, municipalities are left to deal with the mess. Some spend public funds on securing, cleaning and stabilizing houses that generate no tax revenue. Others let the houses rot. In at least three states in recent months, houses abandoned by owners and banks alike have exploded because the gas was never shut off.
THREAT OF JAIL
Unsuspecting homeowners have had their wages garnished, their credit destroyed and their tax refunds seized. They’ve opened their mail to find bills for back taxes, graffiti-scrubbing services, demolition crews, trash removal, gutter repair, exterior cleaning and lawn clipping. At their front doors they’ve encountered bailiffs brandishing summonses to appear in court.
In some cities, people with zombie titles can be sentenced to probation - with the threat of jail if they don’t bring their houses into compliance.
“These people have become like indentured serfs, with all of the responsibilities for the properties but none of the rights,” says retired Cleveland-Marshall College of Law Professor Kermit Lind.
Banks used to almost always follow through with foreclosures, either repossessing a house outright — known in industry parlance as REO, for real estate owned — or putting it up for auction at a sheriff’s sale. The bank sent a letter notifying the homeowner of an impending foreclosure sale, the homeowner moved out, the house was sold, and the bank applied the proceeds toward the unpaid portion of the original mortgage.
That has changed since the housing crash. Financial institutions have realized that following through on sales of decaying houses in markets swamped with foreclosures may not yield anything close to what is owed on them.
By walking away, banks can at least reap the insurance, tax and accounting benefits from documenting the loss — without having to take on any of the costs and responsibilities of ownership, according to a 2010 Federal Reserve paper. A walk-away also enables them to “sell the unpaid debt to debt collectors, sometimes noting to the court that the loan has been charged off,” according to a Case Western Reserve University study released in 2011.
No regulations require that banks let homeowners know when they change their minds about a foreclosure. So they rarely do, according to housing court judges, homeowners’ lawyers and academics who study foreclosure problems. “The banks do not answer inquiries, they do not answer phone calls, they do not answer letters,” says Judge Patrick Carney of the Buffalo, New York, Housing Court. His zombie-title caseload has swollen in the past few years to well into the hundreds. “The whole situation is surreal,” he says.
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