As widely reported recently, close to 1.2 million borrowers (about 30% of the more than 3.9 million households that faced foreclosure proceedings by the 11 leading financial institutions in 2009 and 2010), had to battle purported wrongful seizures of these properties.
These battles were frequently waged despite the borrowers not having defaulted on their loans, being protected against foreclosure under federal law, or having been in good-standing under bank-approved plans to either restructure their mortgage loans or temporarily delay required payments.
More than 244,000 of those borrowers eventually lost their homes. Nearly 700 borrowers who faced foreclosure proceedings had never defaulted on their loans. More than 28,000 were protected under bankruptcy laws, while approximately 1,100 had been meeting the obligations under loan modification plans.
Perhaps most disturbingly, some 1,600 borrowers that were serving this notion and were protected by the Service Members Civil Relief Act of 2003, appear to have lost their homes at the hands of their mortgage loan servicers. A full breakdown of the statistics is attached here.
Yet, despite being enmeshed in multiple government and private litigation matters and governmental investigations for their alleged servicing, mortgage origination and secondary market misconduct, these same financial institutions brazenly continue to seek relief against correspondents and originators. We hope that over time we have helped originators realize that they should question the veracity of every single aspect of these financial institutions’ repurchase and indemnity claims; and for multiple reasons, originators might want to thoroughly investigate the banks’ servicing activities.
Aggregator/GSE’s do not Appear to be in a Hurry
From what we observe, originators are increasingly first being contacted by an aggregator or a GSE several years after the borrower’s alleged default, and often years after the underlying real property has been foreclosed on and/ or the loan has been modified. Yet, when originators request documentation regarding the servicing of the loan, many aggregators still refuse, claiming that servicing is not relevant or referring to “legal restrictions”. Are these aggregators correct? An originator won’t find out without doing some investigation on its own, as well as pushing this point with the aggregators.