Arizona may require lender’s who are foreclosing on loans they did not originally make (a non-originating beneficiary) to document how the loan was transferred from the original lender to them.
Arizona Senate Bill 1259 is awaiting approval by the House after a 28 to 2 senate vote passing the matter about a week ago. The bill would require:
1. A non originating beneficiary on a deed of trust, to record a summary document that contains past names and addresses of prior beneficiaries, the date, recordation number and a description of the instrument that conveyed the interest of each beneficiary.
2. The summary document to be recorded at the same time and place that the notice of trustee’s sale is recorded and that a copy be attached to any notice of trustee’s sale that is required.
3. Failure to properly record the summary document that demonstrates evidence of title for the foreclosing beneficiary as of the date of the trustee’s sale will result in a voidable sale.
4. Any person with an interest in the trust property can file an action to void the trustee’s sale for failure to comply and would be entitled to an award of attorney fees and damages, to include an award of attorney fees for any injunction or other provisional remedy related to the claim.
In essence, if signed into law the bill will require lender’s that didn’t originate the loan to produce the full chain of assignments at the time the foreclosure is recorded to establish ownership, or risk the foreclosure sale being voided. An argument for a similar type requirement was recently shut down in a California court decision in which MERS came out the winner. Not surprisingly, MERS reportedly hired a lobbyist to contest this Arizona bill.
An interesting aside is that State Senator Michele Reagan, who sponsored SB 1259, has had her own battles with her lender over alleged predatory lending practices. In fact, Senator Regan’s lawyer in the litigation was quoted to say “It makes Michele mad that the bank servicers will not disclose to a borrower the true noteholders.” We’ve seen increasing anger over the actions taken by banks, and it should come as no surprise to see a backlash like this one.
The reality is that all too often our legislators, like Senator Regan, continue to pursue worthless stop-gap band aids rather than focusing on the real problem – negative equity. This bill may temporarily halt a few foreclosures, but what does it ultimately solve? The homeowner will still be underwater and the bank will still have a non-performing asset. Unless the goal is to provide homeowners free rent at taxpayer expense (don’t forget that the majority of home loans are now backed by the federal government), or perhaps dish banks a little well deserved pay-back (that ultimately we’ll pay for anyway in increased fees or further bailouts), what is it that Arizona legislators really expect to accomplish with this bill?
This is one time I whoeheartedly disagree with you. I applaud Arizona legislators. California needs to do the same. Equity negative is not an explanation, or excuse, for blatant disregard by lenders for real estate laws.
Disagreement by way of discussion is alway encouraged, Pamela. The Arizona bill will create a new law that will undoubtedly help some struggling homeowners temporarily by delaying the foreclosure while lenders deal with the additional paperwork requirement. The problem is that the homeowner is still in default, still underwater, and will still be foreclosed upon. So the Arizona bill doesn’t really fix anything.
A more permanent fix can come from meaningful loan principal reduction through loan modifications, shot sales or other programs that do away with negative equity, preferably in a way that doesn’t displace homeowners through foreclosure.
I agree with Pamela, and I appreciate Arizona’s efforts to protect property law. I hope more states do the same.
A servicer who claims to be the party with standing or who claims it represents a party with standing, but cannot prove the chain of title that gave it or the represented party the standing to foreclose, cannot legally modify a loan any more than it can foreclose on that note and mortgage it does not own.
Mass fraud in mortgages has destroyed the lives of MILLIONS of people, whom you and many others have decided are in default. They may or may not be in default of their own making. First, many of them are still current on payment, but they are losing equity every month, and there is no expected end in sight. Many others diligently tried for many months, sometimes years, to work out a payment with the servicers, to no avail. Because of the servicers’ “lost” paperwork and other unexplained servicer delays, some homeowners accrued arrears and fees that FORCED them underwater, or as you state, into negative equity. I am one of them.
My husband passed away and I paid every payment as agreed with the servicer. They lost my loan mod paperwork FOUR times, and LIED countless times. I had never missed a mortgage payment in my life. I’m almost 65 and will soon lose my house. I have no idea where I will live and I have no hope of ever recovering from the mortgage fraud in my lifetime.
My husband and I both had excellent credit, both with 800+ scores, and our loan was with full documentation.
Loan modification is NOT the answer to homeowners’ problem, as housing values are still falling and may soon be worth less than a principal reduction right now might provide. More important, a loan modification could well be the means by which a lender gains a new agreement with the homeowner, negating any legal right the homeowner would have for holding the bank responsible for what is done already. Homeowners, BEWARE.
I am not a lawyer and this is not an effort to give legal advice. SEEK A QUALIFIED LAWYER. And don’t believe one word the servicer says.
Ginger has hit the nail right on the head.
“Servicers” are usually precluded by the “pooling and servicing” agreements the operate under from making any modification that impacts any of the thousands of “investors” in a particular “pool” of loans. So good luck to anyone trying to get a straight answer out of any “servicer” let alone, a loan modifiction that actually reduces both the principal balance due and the monthly payment.
Arizona Senate Bill 1259 is right on the mark. Its not a band-aid, its will help put Arizona back on the road to recovery.
its is fact, MERS was created by the banks,
its also fact MERS and other beneficaries did not record 99% of their assignments at the local recorders office, infact because of MERS, up to 40% of mortgage notes have been destroyed.
So what does this mean.
If I copy the 100 (hundred) dollar bill that is in my money clip. Then I destroyed it in a BBQ. I should be able to go to my local bank and get a new 100 Dollars bill, right?
The point here is we have a problem created by mortgage-back secruites, aka Wall Street and the bank creation of MERS. Not to mention any action of MERS assigning anything creating the bifurcation of the Deed of Trust and the Mortgage Note. Thus by law, banking the two “NULL”.
So Arizona Senate Bill 1259 if passed, is telling MERS, Banks, and any beneficary they must record their assignments as it has been for over 100 years.
The benefit the real estate industry is SHORT SALES will get done.
I am very much uneasy concerning the upcoming election. When I consider what is happening in Iraq, Afghanistan, and the Middle East (not to mention the U.S. economy) we certainly should be looking for a strong leader. I’m not convinced that Barack Obama or any of the Republican candidates thus far have the experience or skills it takes to do the job the way it has to be accomplished. Being president of the United States is an powerfully hard job. Do you think there is any man or woman out there with the experience, skill, and moral courage to do the job?
I agree with all you say here. I take it further. We must let the market work by repricing these assets so they can be transferred to buyers who can afford them [foreclosure]. Further, and here we depart on our views, banks can not reduce my neighbor’s mortgage principal without offering me the same Why should I not benefit just because I can or chose [think about strategic defaults] to pay my mortgage. If banks are prejudicial in a principal reduction program then me and similarly situated folks will hire us a trial lawyer and commence with a class action. There is not enough capital in the banking system to manage a fair principal reduction program. Another point is that the “housing bottleneck” is harming our economy. The bottleneck occurs because bank capital is tied up in non-performing loans reducing the banks ability to make new productive loans. That is all for now. Thanks for letting be vent!
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I agree that SB 1259 is just a band-aid, but as one of the “distressed homeowners” in Arizona, I have to say I welcome any legislation that draws attention to the mortgage servicers’ lies and fraud.
The reality is, the bigger issues – like the scam known as HAMP and widespread fraud by the big banks – are going to have to be dealt with at the federal level. So far, there seems to be no interest there at all – the Obama administration, Treasury, Congress, the regulatory agencies all seem only to be able to wring their hands and whine that they have no way of forcing banks to do business in an ethical, professional or even grown-up manner. (“Losing” people’s paperwork over and over? Really?!)
As a homeowner trying to avoid foreclosure, my only hope is that perhaps the states can continue to raise awareness with this type of legislation and the ongoing investigation instigated by the state attorneys general until a tipping point is reached. Until federal resources are brought to bear against these banks, I doubt there is hope that the huge wrongs will be righted.
So, my thanks to Sen. Reagan for her efforts and I hope other state legislators will do what they can to help their constituents facing financial difficulties and foreclosure at the hands of the corrupt financial services industry.
Any one who is 25% or more upsided down, needs to take a serious look at her or his overall situation to decide if it is better for them to simply stop making payments, and walk away or not.
Reality about continuing declines in home prices, in most areas of the country should temper the answer to that question.
Rember, the “Hope for Homeowners act” passed in July 2008, which was the first in the “politcal theater”, that the congress and two presidents (Bush II and Obama) have engaged in to “respond” to the 16 million foreclosures that will have occurred by 12/31/13.
Don’t expect any help from anyone but yourself.
I’m confused by this post. On the one hand, you say that this bill doesn’t solve the problem, and that any well deserved payback on the banks is unjustified because “ultimately we’ll pay for anyway in increased fees or further bailouts”. And then on the other hand, you want the government to deal with the negative equity problem.
What do you suppose would happen should the government force lenders to write down principal? Think those banks would just throw their hands up and agree to go bankrupt? Or might they, I don’t know, raise fees or request further bailouts?
Seems to me that the AZ bill fits in well with the government’s role as an impartial referee. Fact is, robo-signing and related issues (like MERS) is a breakdown in process, up to and including fraud (already against the law). Laws should fix those process breakdowns. Negative equity is a market problem that the market will solve, one way or the other.
Unless you think the way things were back before Foreclosuregate was a wonderful situation of transparency and openness?
A lot of questions enters ones mind knowing most of this problem. I, like the Senator, wanted to know who owned my note. Thinking since I could not reach my servicer to an understanding I would reach the owner of my note. Just like the Senator I was denied, which was a good thing in a way. It made me investigate this entire situation with foreclosures. What amazes me is, that with all my screaming and filing complaints to deaf ears, from our attorney general to the federal government, it took something to happen to a Senator to get some sort of ball rolling. This should only be a start and not a band aid. These people need to be held accountable for their lies and fraud. It is nothing more then Racketeering to the extreme. From what I have found out and know, I have refused to pay Bank of America my mortgage and stating that I do not recognize them as my Servicer of my loan. I have not paid my mortgage in over 2 years and don’t intend to. I am not proud of this to the extent I am not paying on a loan I took out, but I am more then proud that I have stand my ground. Nothing recorded on my Deed of Trust. Countrywide never recorded anything and as far as I am concerned I should have never paid countrywide at all. My original lender has had their license pulled and some are awaiting trial for fraud.
This is a very confusing and discuraging time .Jobs are getting harder to find. what in the hell are we supose to do?
I just spoke to the bank today and found out that I didn’t Qualify for a loan modification and I said ok and what other wonderful news does thou bringeth and she replied your home goes up for sale april 13 you have 2 options they are as follows you can let us forclose or we can try to qualify you for a CO OP program wich is basicly give us your signiture and the keys and we will give you 2500.00 for relocation expences it sounds to me like a flip n scam what shoud a person do? LOOKS LIKE I’M GOING TO FINALY GET THE SCREWING FROM THE BANK THAT I HAVE BEEN ABLE TO AVIOD UNTIL NOW . HOWS THAT FOR MY AMERICAN DREEM
Banks will never write down your note to “market” value. Wouldn’t a reduction in your interest rate to 3% be better than writing down a note? Writing down note balances is short term thinking. What happens when the market turns around and values go up? Do the banks get to raise your loan amount?
Banks borrow money from the Fed at less than 1%, so why not write mortgages interest rates down to 3%? They still would make a spread that would let them stay in business and without any bailout money from the taxpayers.
Most homes in Az/Cal are worth less than they were last year, 2 years ago and even last month, so if you have a house that you live in and you plan on staying in why not continue to pay and make it a home instead of an investment?
Would this help the housing market? Would there still be distressed home owners? Maybe too many people bought a home thinking they could sell, make a ton of money and go to the next home and do the same?
There might be a better way to attach the problem in Az. and California but trying to find fault with another party or blaming someone else for an obligation that you signed in the beginning is no way to make lemonade out of lemons.
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