Increase In Contested Foreclosure Actions Costly For Lenders
The Financial Times reports:
- Borrowers whose properties are being foreclosed on are contesting those foreclosures in rising numbers, attorneys representing both mortgage servicers and homeowners told Debtwire. The trend could impact the performance of subprime-backed bonds, as foreclosures will take longer and be more costly, which could put downward pressure on recoveries. [...] As foreclosures in states such as Ohio, Florida and Nevada flood the courts, borrowers and their attorneys have begun finding ways to challenge foreclosures, and judges in several states have been sympathetic, said Alan Wolf, a partner with the Wolf Firm in Irvine, California, in comments made at a panel 27 February during the Mortgage Bankers Association National Mortgage Servicing Conference in New Orleans.
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- Challenges by borrowers are taking a variety of forms, said Edward Hyne, assistant vice president in the legal department for First Horizon Home Loans in Irving, Texas, speaking at the same 27 February panel. Some borrowers are making the case that forbearance agreements are required by law, and others that various notices servicers are required to send were not received, for example. But one defense that seems to be garnering a lot of attention from judges is the issue of standing, or whether plaintiffs may rightfully bring the foreclosure complaints to begin with, Hyne said.
- In order for trustees acting on behalf of investors in mortgage bonds – the ultimate owners of securitized loans - to have standing to file foreclosure complaints, they must demonstrate that the trust for the securitization has ownership of the loan backed by the property being foreclosed on. But with thousands of loans that have in many cases been sold and re-sold before ultimately landing in their securitizations, the paperwork showing ownership – the assignment of the loans – often has not kept up.
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- Defense attorneys are organizing seminars to teach other attorneys about strategies that can be used in contesting foreclosures.
For more, see Contested foreclosures rise, could increase RMBS losses.
For related posts on contesting foreclosures, see:
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