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Posted on October 15, 2010

According to CNN and RealtyTrac, foreclosures hit record numbers.  In the last quarter of 2010, there have been 930,437 foreclosure filings, a 4% increase from the previous quarter.  One in every 139 homeowners had received a foreclosure filing during those three months!    

 Two weeks ago, four major lenders halted foreclosures in 23 judicial foreclosure states.  Washington State was not affected by this directly.  However, last Friday, Bank of America announced that it was suspending the sale of its foreclosed home inventory in all 50 states.

 Wednesday, agent Rob McKenna announced in a press conference that his office has uncovered evidence that suggests foreclosure trustees are ignoring consumer protection laws in Washington.  He sent letters today to 52 trustees outlining his concerns and calling on them to suspend any questionable foreclosures in the state.  Washington is a "non-judicial foreclosure" state, which means that a lender can proceed directly to selling a home at public auction without first filing a lawsuit.  This lender-driven process was created by the state Legislature in better times.  Although lenders may foreclose in court in Washington, they almost always choose non-judicial foreclosure which is quicker and less costly. 

 From the McKenna Letter:  "I ask you to suspend all foreclosures in which you have not yet confirmed that all foreclosure-related documents were lawfully signed, that the chain of ownership is clear and has been revealed to you in full, and that state consumer protection requirements have been followed."

 As a third party trustee, they are responsible for conducting non-judicial foreclosures, they have a statutory duty to perform all foreclosures in good faith and owe that duty to both the homeowner and the lender. 

 Some of the issues raised in the AG's letter are:

  • "Robo-signers": who is actually signing the foreclosed documents and in what capacity?
  • Is there really a clear chain of title or have the lenders "reverse-engineered" that chain of title (back dated)?
  • Are default notices given out advising borrowers of their mediation rights (loans originated in 2003-2007) and with the actual loan owner and servicer identified (beginning July 26, 2009)?

 This was the topic of yesterday's radio show and I'll be back again next week for an in-depth review and update of this issue.

 Following the news this week, it seems like there have been announcements almost every day on this issue.  On October 13th, GMAC announced that it too was expanding its review of foreclosures to all 50 states.

 Attorneys general in all 50 states have pledged a coordinated investigation into chaotic foreclosure practices by some of the nation's largest banks.  The Department of Justice is also looking into what happened, while some lawmakers are now calling for a nationwide moratorium on all foreclosures until the legal questions are settled.  The Obama administration is insisting such a broad delay would hurt the economy.  And title companies are weighing in on what these all means to the buyers of REO's and purchasers at auctions. Read Dwight Bickel's Blog: New Uncertainty about Foreclosure Sales.
 What does this all really mean?  Stay tuned for next week's broadcast and any further developments. 

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