How One Borrower Beat The Bank At The Foreclosure Game.

As any regular reader will know, I am not a fan of A. bailing out anyone that took on more mortgage than they can chew or B. letting people walk away from mortgages they cannot afford. Both A and B cost me money as a taxpayer, which I am not happy about. However, this story in the New York Times is quite different than both of these foreclosure scenarios, as these people were able to avoid foreclosure…because the bank could not prove ownership!

Upon first glance, it seems awfully unfair to those people who have regular mortgages that they took care of, as this woman got the following:

Last month she received a settlement from the Bank of New York, the trustee for a vast pool of mortgages that included hers. Under the terms of the deal, the bank reduced Ms. Palmer’s loan balance to $59,000 from about $100,000 and has agreed to accept the proceeds of a reverse mortgage in full satisfaction of her obligation. The settlement also eliminated about $12,000 in foreclosure fees added to her debt and called for the installation of central air-conditioning in Ms. Palmer’s home.

But then you see why she got the above deal:

“We believe that many of these companies can’t find the assignments,” said William J. Brennan Jr., director of the Home Defense Program of the Atlanta Legal Aid Society. “If they can never prove ownership, then they can never foreclose.” The problems associated with banks that begin foreclosure proceedings when they do not have proper legal standing are now looming larger in the mortgage meltdown. Loans were heaped into trusts with little documentation of ownership or proper loan assignments “” it was all about volume and the fees that came with it “” and now that sloppiness is hurting both lenders and borrowers.

OK in these type of cases, I do not think it is right for a bank to foreclose on a house if they cannot even find the paperwork proving that they own the property. The last 5-10 years of the mortgage industry sure created a giant mess! What do you guys think; in cases like these, do you think the bank should still be allowed to take away someone’s home? Let me know!

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Comments (8)

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  1. Nick says:

    If the bank can’t prove that they are entitled to the mortgage payments, they sure should not be able to foreclose on a house for missed mortgage payments! What if this bank is allowed to continue foreclosing and another bank claiming to own the mortgage comes along and tries to collect? If neither bank can prove it has possession of the paperwork and is legally entitled to the homeowners’ money, then neither should be allowed to take the home to a sheriff sale and have it sold to satisfy a mortgage it may not own.

    Having possession of the contract or the assignment of the contract is a pretty standard legal challenge to a party’s ability to sue in the first place for breach of contract. Homeowners should use the defense even if they are behind on payments — who’s to say they’ve been making the payments to the right bank all along?

    But I certainly agree with you in opposing taxpayer funded bailouts. Neither banks nor borrowers should have their poor financial decisions rewarded by all of us who aren’t struggling financially due to the conservative choices we made while everyone else was “getting drunk.”

  2. I don’t see how they can take away someone’s house without documents saying they can. Think about where that could lead. yikes. Those homeowners are just lucky fools! hehehe. I wish someone would lose my papers.

  3. David says:

    Dont we all Ashley! I read a story the other day about a bank making a call on a car they were financing, even though the person had never missed a payment. These banks are getting desperate!

  4. Kate says:

    Interesting. No, of course the bank should not be allowed to foreclose without presenting the proper documentation. It’s the bank’s responsibility to keep their paperwork in order. Paperwork is the lifeblood of lending institutions as much as money itself is. In this case, the borrower got very lucky. It doesn’t put defaulting borrowers in the right, but it sure let’s them off the hook. Sure would be nice if my bank lost the docs on our loan.

  5. Four Pillars says:

    Bizarre story – of course they can’t foreclose if they can’t prove they have the right house!


  6. Valances says:

    Even though we are told of instances of foreclosure in terms of statistics, to so many, it’s a story of a family member or friend that they know.

    I’m not sure who to blame – the owner who could’ve taken different actions to avoid foreclosure or the banks and government who do such a poor job of keeping homeowners informed with all their small-print info.

    It’s a spiral where everyone is chasing and blaming someone else. But one thing that we all can agree on in difficult times like this is that it’s a downward spiral that is collectively drowning us as a whole nation that once was prosperous and less wounded.

  7. David Carter says:

    I don’t think that lady should have gotten her mortgage reduced or free a/c etc. Just b/c an employee at a company makes a mistake, doesn’t mean the company should give the customer the item for free. I can see it w/ small amounts of money or something, but not w/ a house. If the lady was not paying, she should be foreclosed on. What if you payed some1 to shred the banks paperwork, should you then get your house for free?

  8. peggy says:

    I say hooray for the lucky homeowner. I beat several credit card cases in court against me because the debt?? had been sold several times and I demanded the original contract with my signature thus proving I was in default of the contract they were accusing me of defaulting on. They didn’t have it. I won !! Yeah.

    Most of the time they don’t have it. You cannot haul someone into court claiming they are in default of a contract IF you don’t have the contract. DUH !!