Federal Reserve Chairman Ben Bernanke recently announced the preliminary findings of a months-long review of the national foreclosure crisis by federal banking regulators: there is some evidence of lax procedural compliance by large lenders pursuing foreclosures. This investigation brought to light allegations that some of the nation’s largest financial institutions – Bank of America and GMAC Mortgage among them – didn’t actually investigate the circumstances of foreclosures before they were processed, potentially leading to wrongful evictions of some families and the illegal filing of countless affidavits certifying the propriety of foreclosure proceedings.
After a short suspension, most of the nation’s lenders have now reinstated foreclosure filings, though some – PNC Financial and JP Morgan – continue a self-imposed moratorium on new filings while internal practices are examined. Some financial experts and consumer advocates continue their support of a nationwide, federally organized, indefinite ban on foreclosures until their full impact on the economy can be determined. They argue that stopping foreclosures would increase consumer confidence and might help stimulate domestic spending. Opponents of that ban, however, claim that the country’s fragile financial situation will be worsened if all mortgage foreclosures stop cold-turkey.
When the Bubble Burst…
Many outspoken economic experts blame the so-called “housing bubble” for the current global economic downturn. That bubble was created when many thousands of buyers were enticed by hastily approved adjustable rate mortgages to buy far more home than they either needed or could afford. The laxity and relative ease of purchasing a home during that time meant that America boasted a record number of home owners – it seemed like the “American dream” was coming true for thousands.
Then, unfortunately, it came time for the interest rates on those loans to adjust upward. An uptick in foreclosures followed as monthly payments doubled or tripled in some cases, bursting the bubble back in 2007. A rapid decline in our country’s financial stability followed, and we are firmly in the midst of a recession the depths of which have not been seen since the Great Depression. A full economic recovery might not be possible for years to come, especially given our the national unemployment rate of nearly 10 percent and the fact that over 20 percent of homeowners are now “underwater” on their mortgages (meaning that they owe more than the current value of the home).
No Evidence of Systemic Misconduct?
While the federal investigation into mortgage foreclosure proceedings is ongoing, Department of Housing and Urban Development Secretary Shaun Donovan reports that there is, so far, no evidence of ingrained impropriety in the lending industry. Even though isolated instances have been uncovered where lending agents purposely or negligently failed to comply with state and federal foreclosure regulations, the problem does not seem to be widespread enough to draw the attention of federal banking regulators.
It has, however, caught the eye of state-level officials. Attorneys general in each of the 50 states as well as the District of Columbia are cooperatively investigating foreclosure practices and procedures to ensure that mortgage lenders are fairly evicting homeowners. The joint investigation is also trying to determine if banks have been improperly denying loan modifications to homeowners whose mortgages are backed by Federal Housing Administration (FHA) loans. Under federal law, lenders must offer mortgagees a chance to modify these loans before pursuing foreclosure.
If you are, like millions of other Americans (roughly 6 million homes have already been foreclosed upon, about 4.2 million more are now in the process, and an estimated 4 million more foreclosures are expected by the end of 2012), struggling to make your mortgage payments, there may be help available. Whether you have questions about a loan modification or want to learn more about possibly filing for Chapter 7 or 13 bankruptcy protection, contact an experienced attorney in your area for a frank discussion about your legal options.