Robo-signer redux: first the house, now the money
Fannie Mae attempts collection on old bad debts, which were often associated with robo-signed foreclosures.
Many people borrowed money to buy a house and quit making payments. Lenders attempted to foreclose on these properties and found the volume overwhelming and their bubble-era paperwork lax. Many lenders contracted with firms that automated the foreclosure filing process — robo-signers — and these firms routinely created bogus paperwork to facilitate processing the foreclosure.
This fabrication of paperwork infuriated judges who didn’t want to see the public record inundated with forged documents. Nobody at the Robo-signing law firms was ever charged with or convicted of any crime, and the people who lost their homes in foreclosure were all guilty of failing to pay their mortgages according to their contractual obligations.
The falsification of paperwork was egregious, but the facts were unchanged: the borrowers took the money to buy a house, and they didn’t repay it. Are lenders supposed to give them free houses? Left-wing political activists say yes.
NOV. 15, 2014, By GRETCHEN MORGENSON
Remember the robo-signers, those mortgage loan automatons who authenticated thousands of foreclosure documents over the years without verifying the information they were swearing to?
Well, they’re back, in a manner of speaking, at least in Florida. Their dubious documents are being used to hound former borrowers years after their homes went into foreclosure.
Did you notice the emotionally laden language used to describe a routine debt collection procedure? The fact is these borrowers borrowed money they did not repay, and Fannie Mae — a proxy for the US taxpayer — is attempting to get their money back — your money back.
Robo-signer redux, as it might be called, has come about because of an aggressive pursuit of former borrowers by debt collectors hired by Fannie Mae, the mortgage finance giant. What Fannie is trying to recoup from these borrowers is the difference between what the borrowers owed on the mortgages when they were foreclosed and the amount Fannie received when it resold the properties.
These monetary amounts — and they can be significant — are known as deficiency judgments. It is legal in most states for lenders to pursue them. (California is one notable exception.) The time limit for debt collectors to go after former borrowers varies from state to state; Florida allows deficiencies to be pursued for 20 years, and borrowers must pay a compounded annual interest rate of 4.5 percent.
The problem, experts say, arises when robo-signed documents enabled banks to foreclose even when they didn’t have legal standing to do so.
If the banks didn’t have legal standing, the foreclosure would have been reversed. The fact that the foreclosure went forward clearly demonstrates the lender did have legal standing to foreclose, and the entire premise on which this story is built is bullshit.
“Sending these cases to debt collectors when the underlying foreclosures involved unlawful robo-signing is unfair and potentially even deceptive,” said Kathleen C. Engel, a research professor at Suffolk University Law School in Boston. “Fannie Mae is not entitled to collect on those debts when the foreclosure was unlawful.”
A Fannie Mae spokesman, Andrew J. Wilson, declined to comment on Ms. Engel’s contention. But he said Fannie filed deficiencies “in a minority of cases where there was a foreclosure.” He acknowledged, however, that Fannie was bringing several thousand cases in Florida because of a recent state law requiring that any such borrower suits be filed by July 1 of this year.
“We do so in instances where we determine the borrower had the ability to pay but chose not to,” Mr. Wilson said. …
Fannie Mae is certainly justified in going after deficiencies from former borrowers, especially those who can pay. And given that the company is taxpayer-owned, its attempts to recover this money are to the greater good. …
I’m glad someone noticed these collection efforts are for the greater good. Home occupants who pay neither rent nor mortgages are dead weight to a housing market — perhaps their spending stimulates the economy in other ways, but they are a drag on the housing sector. Renters provide value to landlords, and money renters paying their mortgages provide value to lenders. Delinquent mortgage squatters provide no income to benefit either landlords or lenders.
Each delinquent mortgage squatter who is evicted pays rent and adds value to the housing sector and contributes to the national economic recovery. We should celebrate foreclosures; the debtor is relieved of their mortgage burdens, and the economy improves overall.
While Fannie contends that it goes after only former borrowers with the resources to repay their debts, it’s not clear that the people being targeted for deficiencies can pay them back. Ed Lawrence, a commercial electrician in Queens, moved to Brevard County, Fla., to start a new business in 2007 but was not as successful as he had hoped. He fell behind on his mortgage, and his home went into foreclosure. Among the papers is an assignment of mortgage signed by Ms. Samons.
His deficiency judgment is $92,466. “It is beyond my comprehension how I am supposed to pay this,” Mr. Lawrence said in an interview last week. “I’m 60 and basically living hand-to-mouth.”
Mr. Lawrence is not an anomaly among Mr. Parker’s clients, the lawyer said. Most of the people he represents went into foreclosure as a result of divorce, illness or the shattered economy. …
“It’s bad enough that Fannie Mae and their collectors are pursuing consumers many years after they’ve lost their homes,” Mr. Parker said. “But the fact that these lawsuits may be built on a foundation of foreclosure fraud is galling.”
The fact that activists continue to claim the foreclosure was fraud is galling. These borrowers took money to buy homes and didn’t repay it.
Amazing, isn’t it, how the effects of the foreclosure crisis go on and on?
If the foreclosures would have been processed in a timely manner when the borrowers became delinquent, this wouldn’t be happening. And I don’t see many of these borrowers complaining about the several years of free housing many of them enjoyed while they were squatting and waiting for the foreclosure.
They deserve the free housing benefit, right?