32 More Foreclosures Dismissed For Lack Of Documentation

In Ohio, judges have dismissed 32 more foreclosures due to insufficient documentation. This is no white-knight that’s going to save homeowners at risk for foreclosure. One law prof told us that whenever we go through a glut of foreclosures, judges start clamping down and begin requiring the plaintiffs to have all their papers in order. It’s all just a matter of getting the note from the loan originators, who usually hold on to all the proper paperwork.

32 More Foreclosures Dismissed for Lack of “Documentation” [LoanWorkout] (Thanks to Bill!)

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  1. CompletionBackwards says:

    Yeah, 32:a sh**pot full. that’s a great ratio. I’d take my chances!

  2. BigNutty says:

    The people that took out these loans new exactly what they were getting into. Where did they think they were going to get the money for these balloon payments when they came due? The loan fairy?

    The judge may make it easier to dodge a bullet once, but the next round the bullet will hit them right between the eyes.

  3. bostonmike says:

    Mortgage brokers told those folks that they’d never have to make the balloon payment because they could refinance before the balloon payment was due. Same with rate increases on ARMs. If you get a 2/28 and refi to another 2/28 every two years, you never have to pay the higher rate.

    The problem, of course, is that you can’t keep refinancing forever unless house prices never decrease, your income and credit rating never go down, and the lending standards never get stricter. And you never pay down any of your mortgage if you keep doing a new refi for as much as they’ll loan you — there’s always another 30 years of payments ahead. It becomes a financing shell game, and one which mortgage brokers profited from greatly at everyone else’s expense.

  4. poodlepoodle says:

    You know. My husband and I didn’t buy a house because we couldn’t afford one after people like these priced us out of the market. These homes need to go back on to the market so prices can normalize.

  5. If only it were so easy as to blame the people who got the loans (they’re freaking homeless now; is that punishment enough or do they have to apologize to you personally?) or simply punishing them further to “fix” the problem. This was caused by under-regulation in the banking industry and shady business practices, plain and simple, and until those things are addressed, it’s going to keep getting worse for all of us.

    @poodlepoodle: Your statement makes no sense. This is probably one of those cases where it’s better have a clue what you’re talking about *before* you decide who to blame…

  6. poodlepoodle says:

    I disagree. Last I checked no one forced anyone to buy a home. But many did because they wanted to live above their means. People got cheep loans from “cheep” money. If you bought in the last 5 years you had to bid against these people. People who had no intention of paying back the original terms of the loan.

    My hairdresser owned a 500k townhouse on a salary of 47k a year. He’s since had to sell for a loss.

    I have no pity for people like this because they priced out normal buyers. I say let them hang.

    The crazy thing to me is that the government spends millions on “affordable housing” meanwhile they’re trying to inflate housing prices.

  7. Skiffer says:

    @Mary Marsala with Fries: POODLEPOODLE’s comments actually make a lot of sense…

    I think the lendees are just as much to blame as the lenders. So they got suckered by some fast talking mortgage broker, that doesn’t absolve them of all responsibility.

    Ohio could be a bit different because of the rust-belt (actual external economic factors, e.g., layoff). But that areas been going downhill since I was a kid living up there – I don’t think the Ohio foreclosures are completely due to external factors.

    We can play the blame game, just like with gun control – Subprime loans don’t foreclose on people, subprime lenders foreclose on people, etc – but in reality both parties are at fault.

  8. headon says:

    @poodlepoodle: You have anger issues. May I suggest refinancing your house and purchasing some Zoloft. Your way off base here. People were lied to by the banking industry, told they could re-fi down the road. Now they can’t. It needs to be addressed so that borowers are given all the information to make a proper decision. Not the web of lies they were presented with.

  9. headon says:

    @Skiffer: Poodlepoodle will share some Zoloft with you. I think you just compared the sub-prime mortgage issue to gun control.
    Your Special!!!!

  10. Skiffer says:

    @headon: Should I have compared it to jelly donuts instead?

    Regardless, I’ll take that Zoloft if you got it…

  11. sporesdeezeez says:

    @headon:

    I think you just compared the sub-prime mortgage issue to gun control.
    Your Special!!!!

    Is that a .38 Special? “Hold on loosely…”

    No, really, it’s “you’re special,” contraction of “you are.” I normally repress my grammar fascist tendencies, but the opportunity presented itself to both let them loose and make a bad pun / southern rock reference. I could not resist.

    I don’t think Poodle*2′s comments are without merit. There is an air of irrationality to the whole housing bubble/mortgage crisis thing we’ve got going on. That irrational behavior can’t all be traced back to the bank’s lies. Somewhere along the line that $500,000 2-bedroom handyman special should have given the buyer a tingling on the back of their neck.

    Isn’t this just a more severe manifestation of the consumption addiction Americans (by and large) seem to have? I mean, is racking up a credit card bill you have no means/intention to pay back really all that different from getting a mortgage you have no means/intention to pay back? For that matter, is giving you a credit limit you could never pay back any different than giving you a mortgage you could never pay back?

    There’s a disease, a sociological disease out there. I don’t know who can cure it – maybe Barack Obama or somebody – but somebody’s got to reach out to Americans and say “stop being so stupid with your money; the free market depends on you being a rational consumer, thinking before you spend.”

    Fairness in lending is important, and the clean-up that’s coming along is long overdue. But it takes two to tango, and some attention to the borrower is appropriate as well, I think. Whether that lesson comes from the school of hard knocks – leaving them “hanging” as Poodle*2 would say – or perhaps a bailout followed by a serious wake-up call and maybe mandatory financial education for borrowers or something…I don’t know.

  12. ColoradoShark says:

    @headon: A previous comment from Poodlepoodle clearly stated she does not own a home because she and the husband could not afford it. She does not need to refi because she did not fall for the “greater fool” theory of investing.

    On the other hand, when you go to a mortgage company, the experts in a field you know little about, shouldn’t you be able to rely on their expert advice that you will be able to afford the house?

    I see both sides of the argument here but I do, overall, blame the buyers. Buyers got in over their heads because they relied on real estate brokers and mortgage brokers advice. Homeowners should have independent advice rather than relying on the advice of those who have a vested interest in getting the house sold.

    From now on, can we all treat the seller, real estate broker and mortgage broker the same way we treat the used car salesman and his finance manager? A whole lot less trust.

  13. hypebreaker says:

    @headon: Headon, you have a serious case of “I Know You are But What Am I”. How about an intelligent discussion without the insults?

    Poodlepoodle is right on the mark – people were throwing money they clearly didn’t have at homeowners and real estate speculators, driving the market to unrealistic, unaffordable and totally unsustainable highs. In many ways, it was the same kind of mad, knee-jerk buying frenzy that fueled the dotcom boom (and crash).

    “People were lied to by the banking industry”…so what else is new? Hundreds of thousands of students got lied to when they took out their school loans, saddling them with huge debt and credit issues (meaning they can’t buy a home, either!) for the rest of their lives and I don’t see Congress rushing to bail them out.

    But arguments about regulation, etc. aside – it doesn’t take a rocket scientist or an MBA to know that someone on a 50k salary had no business buying an 800,000 dollar home, no matter how a shady lender financed it.

  14. hypebreaker says:

    @sporesdeezeez: Touche.

  15. Waydownriver says:

    @Poodlepoodle, et al.: There is never going to be a “normal” buyer. That’s just living a fantasy. When you blame other people for your own financial situation, you’re doing exactly what many of these about-to-be-foreclosed-on people are doing. They are not going to be rescued, so don’t worry, they’ll “hang.” I guess they deserve it for denying you a home.

    We all need to accept responsibility for our bad financial decisions, but sometimes context is in order. We can say that overborrowers should have known what they were signing. But I defy anyone even with a standard fixed-rate 30-year mortgage to explain their note to me.

    Really. Get out those 50+ pages of legalese and tell me what it says, sentence by sentence. 99% percent of borrowers will not be able to. Since mortgage professionals and real estate lawyers are constantly making mistakes, why are borrowers suddenly expected to be perfect? So maybe have some sympathy for people who thought (like many of us) they knew what they were doing.

  16. Skiffer says:

    Definitely, the bubble couldn’t have existed without the buyers themselves.

    But it is hard to not cast blame on the lenders (which they rightfully deserve their share)…

    Especially after you almost get run off the road on the PA turnpike by a Hummer, hauling two jet skis, painted up with the Countrywide logo all over it, and “Joe Blow, Mortgage Officer, XXX-XXX-XXXX”….

    Ahhh, profiting from the sweet sweet tears of the soon-to-be-foreclosed…

  17. HRHKingFriday says:

    @poodlepoodle: Actually, you do make a lot of sense. It isn’t just poor people that defaulted on subprime loans. Its flippers who bought up whole neighborhoods, raised the price, and then couldn’t afford the payments because the market was oversaturated. There are quite a few tv shows about the phenomenon (“Flip that House” comes to mind). I have NO sympathy for those people, and their greed that crushed the housing market I was looking to buy in to.

  18. humphrmi says:

    @headon: Poodlepoodle is right on target. I had to compete against these morons when I bought my house. And now they want to blame their mortgage brokers? Hah. They outbid me, went over asking price, on three houses I looked at, because they knew damn well they could borrow a lot more than they could afford.

    Good riddance to them. Now that they’re back living in their apartments, the housing market will return to normal.

  19. Laffy Daffy says:

    Hey, my little sister and her hubby flipped 3 houses in 5 years and made enough to put down a HUGE chunk for a nice house that will be paid off before their toddler is in high school. He called it a once-in-a-lifetime opportunity and knew exactly what he was doing.

  20. HRHKingFriday says:

    @retzer: I really resent that. Because the people they flipped their inflated homes to are now saddled with the debt corresponding to your sister’s gain. I mean, I understand going in to bad neighborhoods and actually fixing up houses, but just flipping them for profit is a dick move. Oh well, I’m sure Karma will come due some day.

  21. SadSam says:

    Unless someone has a fiduciary duty with you, be very careful in following such expert advice. Ask your real estate agent, your banker, your mortgage broker, your title company, do you have a fiduciary duty to me, if the answer is yet, get it in writing, and then, only then, you are probably safe. Otherwise, any expert advice you are given should be researched, crossed check, etc. Think about hiring an attorney (a few hours time from a real estate attorney is probably worth it) to review your paperwork or come to the closing with you. No fiduciary duty to you, means no duty to you.

  22. samurailynn says:

    @Waydownriver: Sometimes the context is that there are areas of this country where you absolutely cannot find a house for less than $500,000. To me, that means you need to earn $200,000 per year to afford that house, and I know for a fact that there are a lot of people in those areas who do not make that much money.

    Also, I did read (and understand) every sentence in my mortgage agreement. It may have taken me a little longer to do the signing, but when there was something in the paperwork I didn’t like or agree with, I stopped right there and would not move till it was corrected. The language may have been a little on the hefty side, but I think anyone with a decent high school education could understand it if they tried.

    Then again, maybe I’m lucky enough to live in a state where the contracts are written in language that is understandable.

  23. Skiffer says:

    Just a good article I ran across yesterday, re: Cleveland/Ohio foreclosure:

    [money.cnn.com]

    Remember to strip the copper before you foreclose!

  24. stinerman says:

    @sporesdeezeez:
    I think that says more for the free market as a model than it does anything else. In theory, free markets work with some certain preconditions. Absent these preconditions, then the model breaks down and free market theory no longer “works”.

    Perhaps it’s time someone found a new model that doesn’t have consumer rationality at the core of it’s assumptions.

  25. kimdog says:

    I’m a little slow. Someone helb me. What happens to these folks who had their foreclosures thrown out? Who owns the house? Can the bank go back and try to find the correct documentation?

  26. humphrmi says:

    @samurailynn: I think some people’s point is, home ownership is not a right, it’s something that is earned through hard work. If you can’t buy a house at a reasonable rate on a fixed conventional loan at your income level, then you should live in an apartment (or a trialer, or your parents house, whatever…) until you can. That’s what everyone else did before 1999.

  27. DrGirlfriend says:

    I agree with Poodlepoodle as well. We’re in the same boat – we haven’t bought a home because the house prices have been artificially inflated by these kinds of home loans.

    We’ve already seen home prices start to come down in your area, and I’m sure it’s in no small part due to the issues caused by these kinds of loans. Now maybe we can be able to exercise fiscal responsibility *and* be homeowners, too.

  28. erratapage says:

    You know… people bought these subprime mortgages to free up cash and pay down debt. It was an easy solution and marketed in such a way that some people were really fooled. Some people do not have the intellectual ability to do the math on some of these complicated transactions, and if the mortgage companies aren’t going to be the gatekeepers, then I vote for government intervention and regulation.

  29. CumaeanSibyl says:

    @erratapage: Careful with that, or people will start demanding IQ tests for potential homebuyers. That guy who got straight Ds in high school math? Screw him, he doesn’t deserve a house. It’s not the professionals’ job to, you know, do their job!

  30. ionerox says:

    it’s a little more complicated than it seems- with these structured mortgage deals, the courts *should* force whoever is trying to forclose on the house to prove that they have the right to. The loan documentation (note & mortgage) has probably changed hands a few times since the origination, and is being held by a 3rd party Trustee/Document Custodian in warehouse with millions of other loans.
    DB can probably get a hold of that documentation, but if they didn’t do their work the documents might not show that they have the right to collect monies on the house. When all the companies involved in these deals don’t keep their shit in order, you can end up with more than one lender thinking that they hold the note on a house.