The tens of thousands of homeowners with foreclosure proceedings halted and probed by investigators may be facing home loan modification instead. If 50 state attorney generals find that major mortgage loan servicers have robo-signed the documents to sidestep submitting valid foreclosure papers, homeowners could catch a break on their mortgages and servicers could be in a whole heap of trouble.
Robo-Signing Under a Microscope
Major mortgage loan servicers like Bank of America, GMAC and JPMorgan have all been held under scrutiny for the past few months due to the discovery of illegally-signed documents used to file foreclosures against homeowners.
The companies are said to have sidestepped the lengthy foreclosure process that includes producing numerous sworn affidavits verifying that the trust owns the mortgage. Instead of producing valid documents verified by a notary public that showed they owned each mortgage loan, many robo-signed (automatically generated documents for submission that had not been validated) what may have been invalid foreclosures.
Some loans the servicers tried to foreclose were owned by other companies while others were rushed foreclosures that didn’t take the required number of steps. In any event, thousands of homeowners were about to find their belongings placed by the curb, some unfairly, because servicers wanted to move the stacks of foreclosure paperwork off of their desks.
Settlement Being Discussed
To stop the process from occurring, most foreclosures have been frozen in their tracks. This is good news for homeowners who were on the brink of being evicted, and the news may get even better.
Recent reports have stated that the state attorney generals involved in the investigations are working on preliminary settlement talks with the banks. Though any settlement could be months away, the result could be forced loan modifications, which would give all of the homeowners a second chance at living in their homes.
The reason the settlement could take some time is because lawmakers and regulators will have to find a way to appease mortgage investors who will lose money if the loan principal is reduced. An alternate route may be to lower interest rates or offer longer repayment periods.
The issues are likely to be discussed during a second congressional hearing this week regarding the nation’s foreclosure crisis. No matter the outcome, it seems that homeowners will catch a break–one that may be very necessary in this challenging economy.
