Foreclosure auction 2007

In a recent court ruling regarding the right of mortgage lenders to file foreclosure, the court said that mortgage lenders are required to make sure that they have the authority foreclose.”What banks are going to have to do is make sure they’ve dotted their I’s and crossed their T’s before going through with a foreclosure,” said Stuart Rossman, director of litigation at the National Consumer Law Center. The center submitted a brief in the case, on behalf of the homeowners. “Expediency does not trump the practices and procedures that have been in effect for all these years,” Rossman said. “Because there is an emergency, it doesn’t permit the mortgage servicers to expedite or use self help to come up with a solution to the problem they’re finding themselves in,” referring to the high volume of troubled mortgages currently in the system. The controversy regarding the authority to file foreclosure stems from the recent explosion of foreclosures made in error because of a common policy of robo-signing.

Robo-signing involved foreclosure attorneys who simply signed off on large volumes of foreclosures without even checking to see if the bank had the authority to file foreclosure.  Because there are so many homes in foreclosure and only a limited amount of time to process them, many mortgage lenders used robo-signing as a shortcut. But since many of those foreclosures were made in error, there has been a very strong backlash against the mortgage lending industry and robo-signing practices. Now, mortgage lenders wishing to foreclose on properties will be faced with a more costly process as they attempt to adhere to stricter rules.  But the strict regulations on foreclosure may also cause some mortgage lenders to be more willing to attempt to resolve issues outside of foreclosure.  If homeowners get lucky we could see an uptick in the number of fair mortgage modifications being approved in an attempt to avoid foreclosure.