There has been quite a bit in the news lately about several banks engaging in what has been called "blind stamping" in an effort to deal with the flood of foreclosures in this bad economy. Ally Mortgage, JPMorgan Chase, and Bank of America have owned up to the fact that the people in their foreclosure processing departments have been blindly signing off on foreclosures without reviewing the underlying documents to see if there is just cause to proceed. This has led to foreclosures being halted by these banks in 23 states, including New Jersey, and Congress calling for a federal investigation.
What this means for homeowners, in the short run, is breathing room. Banks could use the time to look at possible loan modifications to slow the tide, while borrowers could try to get current. What should be stressed, though, is that both sides should make the best use of the time, since it won't last forever. The foreclosure train will get back onto the track and run you over if you aren't careful.
In a recent article in The Philadelphia Inquirer, economist Rick Sharga stated that "the snafus will probably delay foreclosures for the next 60 to 90 days. Servicers will review the documents in question and implement internal procedures to comply with regulators. 'Once that is done, we'll probably see an escalation of foreclosure activity.'" This "blind stamping" is merely another symptom of the bad economy, as banks struggle to keep up with the paperwork and regulation involved in the foreclosure process.
So what, ultimately, can you do?
These times, and troubles, however, have brought with them possible defenses for homeowners. For example, mortgage companies in New Jersey must bring a foreclosure lawsuit to take your home. To do that, they must establish that they own the debt, i.e. that it is owed to them. However, a large number of home loans were packaged together into investment securities during the real estate boom. Thus a particular mortgage may be owned by many different people and institutions, rather than the lender looking to foreclose. Some foreclosing banks have been stopped dead in their tracks when challenged on this, because they could not produce this proof.
If your home is facing sheriff sale, or has been sold at auction, you might also be able to challenge the foreclosure judgment or the sale if it was based on faulty paperwork. This, though, will only buy you time, as the paperwork may well be corrected, resubmitted, and result in a proper judgment upon which to base a sale. But if you need to file a chapter 13, and the sale has already taken place, voiding that sale may give you the opportunity to do that.
The bottom line here is that if you are a New Jersey homeowner facing the loss of your home to foreclosure, and you have one of these mortgage companies, you should do the following:
- Work to bring the mortgage current, as the bank may well accept partial payments during the stalled foreclosure.
- Talk to an attorney about a chapter 13 bankruptcy to save your home.
- Gather information about your mortgage to find out who the true owner of the loan is, so that you will have that ammunition should you need it.
If the foreclosure recommences, you should be proactive in asking for foreclosure mediation to try and reach an agreement with your lender. It may not be too late!