subject: Loan Modification Programs In Minnesota: Foreclosure Crisis And The Home Owner [print this page] When you buy a house on a home loan mortgage, this mortgage is the property of the lender until it is finally paid off by you. The lender sells this mortgage to other financial institutions as part of its investment strategy. It is typically pooled together with thousands of other mortgage bonds, then divided up into chunks which investors buy, reinvesting the income from those mortgages. The correct procedure, when a mortgage changes hands, is for both the seller and the buyer to sign an assignment note which is then attached to the mortgage documents, and which the new owner keeps. This small step is what has caused the Foreclosure Crisis.
The foreclosure crisis began during the property boom, when housing sales were being pumped through at such a rate that the property and legal system could hardly cope with the work flow.
This seemingly unimportant little step of attaching the assignment notes sometimes tended to be overlooked. It was usually just registered electronically. In most cases, the assignment notes do actually exist, but not where they should be, attached to the rest of the mortgage documents, and they are difficult to trace. To compound the confusion, in the current economic crisis, some of the original mortgage lenders and banks have gone bankrupt or merged with other banks and financial institutions. Now to try and trace these notes is a mammoth task indeed.
When the process of foreclosure is initiated, the exact current ownership of the mortgage documents has to be verified, and this is where the assignment note is most important. Strictly speaking, if the note is not produced, foreclosure cannot go ahead. What has been happening, is that the foreclosures have been going ahead, with or without the document, and this illegal practice is what is causing concern to the government.
Now home owners are becoming clued up about this and even people who are guilty of defaulting on their payments and should certainly be evicted are demanding to see the note and staying on for months in their houses free of charge, while the courts try and sort things out. Some believe that this may seem a clever thing to do, but for others it seems uncertain what effect it is going to have on their reputations and their credit reports in the future. I suppose it all depends on whether the document is found in the end or not.
Quite naturally, with this state of affairs, banks and other lenders are becoming wary of issuing mortgage housing loans until things are sorted out, and this is dealing the housing economy another serious blow.
The Bank of America declared a moratorium on foreclosures while they sort out the mess, and pressure has been put to bear in government to freeze foreclosures in other banks as well. To do this, the Federal Government would have to be given the power to veto rulings by the individual state courts, who currently deal with all foreclosure cases. So far, President Obama has refused to sign this into law. The saga continues.
