Vermont foreclosure documentation problems surface; joins nationwide probe
Improper foreclosure documentation problems have surfaced in the state, resulting in one Vermont judge to order a hearing to determine the validity of the information.
Concerns about the prospect of improper affidavits filed in the state’s civil courts prompted the Vermont Attorney General’s office on Wednesday to join with the 49 other states and the District of Columbia to launch an investigation into widespread problems with foreclosure documentation.
In Burlington civil court, Judge Helen Toor this week ordered a hearing in the foreclosure case of GMAC Mortgage LLC vs. Cynthia K. Jones.
GMAC voluntarily filed an amended affidavit with the court of amounts owed by the borrower. But in her order Toor cited the amended affidavit, which acknowledged that the original document may not have been signed “on the personal knowledge of the affiant (Jeffrey Stephan) and may not have been executed in the physical presence of a notary public.”
The resubmitted affidavit drew the skepticism of Toor, who wrote that “the court is at a loss to understand how it can rely upon an affidavit from a party that has apparently filed a false affidavit with the court.”
Toor ordered a hearing for Nov. 30.
A similar case involves GMAC Mortgage vs. Julia E. McCarty. Toor delayed a hearing in that case while the foreclosure is in mediation.
GMAC is represented by South Burlington lawyer Joshua Lobe, who did not immediately return a phone call seeking comment. Toor in her order found no inappropriate conduct by Lobe.
Carmen Cote, Burlington civil court operations manager, said Wednesday there are approximately a half-dozen similar cases before the court.
Although unaware of the GMAC cases, the assistant attorney general, Elliot Burg said the improper signing of documents is the type of problem that is likely to be repeated.
“If the foreclosure affidavits have been signed by people without knowledge at the national level, we expect there would be a similar problem here,” Burg said.
Although Vermont has a low foreclosure rate, Burg said the documentation problems here could still be significant.
“The banks that have been identified as having issued affidavits that were robo-signed are banks that have been involved in foreclosures here in Vermont,” he said.
Robo-signing is the practice of signing documents without confirming they are accurate.
The problems with fraudulent foreclosure documentation by some of the nation’s mortgage giants have sent shock waves through the real estate markets in several states, including Florida, where a large number of foreclosed homes have been sold.
GMAC Mortgage has placed a freeze on evicting homeowners and selling foreclosed homes in 23 states, including Vermont, that require court approval. JPMorgan Chase has also taken steps to halt questionable foreclosures.
Faulty documentation could pose problems for someone who purchased a foreclosed home if the previous owner challenges the legality of the foreclosure and subsequent sale.
At the state Department of Banking, Insurance, Securities and Health Care Administration, Thomas Candon, the deputy banking commissioner, said only a few cases have been reported in Vermont and no complaints have been filed with his department. But Candon also said since the national problem is in its early stages, additional cases could come to light here.
Candon said several of the larger players tied to the foreclosure documentation problem conduct business in Vermont, including GMAC Mortgage, Bank of America and JPMorgan Chase.
Chris D’Elia of the Vermont Bankers Association said any problems would likely be confined to the national mortgage companies and not Vermont’s community banks.
“If a Vermont bank is holding a mortgage that’s moving toward foreclosure, you can be sure they have been working with that homeowner for a while,” D’Elia said.
Vermont continues to have one of the lowest foreclosure rates in the country. The Mortgage Bankers Association second-quarter report ranked Vermont 46th in mortgage delinquencies and 48th in new foreclosures.
According to the state Banking Division, 1,353 homeowners were in foreclosure through September — a 6.2 percent decline from the nine-month period a year ago.
Rutland County has the highest number of foreclosures in the state with 198 filed through September. Terry Corsones, Rutland civil court clerk, said she is not aware of similar problems with foreclosures filed in her court.
Bob Hill of the Vermont Association of Realtors said he hasn’t heard of any problems with foreclosed properties in the state.
Hill said because most mortgages are with local banks, “that’s a lot of why we we’re protected.”
Why Foreclosures in Vermont Are Up
By Kevin J. Kelley [03.13.13]
Even as the national foreclosure crisis appears to be easing, Vermont is experiencing a spike in legal filings by mortgage lenders seeking to take title to homes whose owners have fallen behind in their payments.
Vermont’s foreclosure rate has ranked as one of the lowest in the country in the years since the 2008 financial meltdown put millions of Americans in jeopardy of losing their homes. Today, the state is an outlier once again — for the opposite reason. Nationally, foreclosure filings fell by 28 percent last year; in Vermont, they increased 33 percent.
The number of foreclosure cases had fallen in Vermont in two consecutive years since peaking at 1924 in 2009. There were 1370 filings in 2011, but the total suddenly soared to 1824 in 2012.
What accounts for the sharp increase?
Vermonters familiar with the foreclosure process suggest it’s a product of a delay in filings by mortgage lenders who held off as lawsuits against some of their practices moved through the court system.
“The decline we saw was basically a false decline,” says Eric Avildsen, director of Vermont Legal Aid. “National banks engaged in settlement negotiations relating to their bad practices weren’t doing large numbers of new filings.”
Thomas Candon, the state’s deputy commissioner of banking, offers a similar explanation. “Filings that could have been done earlier are happening now, but I think it will start to wane as we go through this year,” he says.
Vermont’s current counter-cyclical trend could reflect a surge in new filings by the Big Five national mortgage lenders: Bank of America, Citigroup, GMAC/Ally, JPMorgan Chase and Wells Fargo. They may have moved earlier and more concertedly in states with much larger numbers of loan defaulters. It might thus be that the Big Five are playing catch-up in Vermont.
But officials aren’t sure. The Vermont Department of Financial Regulation doesn’t compile statistics on which entities are initiating foreclosures, Candon says.
He does observe, however, that Vermont lending institutions are much less likely to launch foreclosure actions than are the Big Five. “Vermont banks and credit unions are hand-holding, trying to help people who fall behind,” he says.
Avildsen also cites “a tremendous difference between Vermont bank mortgages and national bank mortgages.” In comparison to the loosey-goosey terms offered in the previous decade by subprime lenders, Vermont-based creditors “often required more of borrowers and had personal relationships with borrowers,” Avildsen notes. “At Legal Aid, we rarely get involved with cases involving Vermont banks.”
Some foreclosure cases in Vermont are “just heart-wrenching,” Candon says. Medical bills, job losses and marital issues are the leading causes of loan delinquencies leading to foreclosure proceedings, he says.
Take the case of one client of Jessica Radbord’s. The Vermont Legal Aid attorney tells of a Chittenden County homeowner who developed cancer and had to undergo surgery and chemotherapy, resulting in whopping bills and the loss of her job. The woman was threatened with foreclosure until Legal Aid helped her enter a federally sponsored mediation process that can reduce mortgage interest rates and stretch out payment periods. The woman was able to keep her home as a result, Radbord reports.
An unknown number of Vermonters have not been as fortunate. Candon says the state does not know how many of the 10,772 foreclosure filings since 2005 actually forced Vermonters into homelessness.
This is all so far from the truth. If you call the AG and report fraud, they will pawn you off to someone else.. and the someone else pawns you off to another, and do NOT go to the Governor or Senators or congressmen,. if they even answer they play the pawn game as well.
Judges in this state are uneducated in the area alot of these foreclosures fall under, SECURITIES, REITS, ROBO SIGNING ( according to one judge , that is not happening in VT..HUH??????)
Now , its not the big banks coming in, its private hedge funds, getting forged paperwork and the courts saying, oh, OK, this looks legal ( its not) take the home. These Judges know nothing about how this paperwork is processed, or that they need an analog attached to the mortgage and note to show the history of who had it and how it was passed on.. also assignments, not to mention land records not being recorded , but that's OK according to one Judge we can fix it.
VERMONT WAKE UP! THEIR ARE 70 FORECLOSURES ALONE IN THE TOWN I LIVE IN OF 2200 PEOPLE! 3 I KNOW OF WERE COUNTRYWIDE , AND MERS ATTACHED AND STRIPPED OF ITS COPPER AND FURNACES..NOT HAPPENING IN VERMONT? WERE UP TO OUR NECKS IN FORECLOSURES!
AS FOR THE IBANEZ RULING - DENYING THIS IN VT COURTS IS A TRAVESTY OF JUSTICE! THIS WAS ALSO UPHELD IN THE SUPERIOR COURT.. YOU VT JUDGES ARE ALLOWING OUR HOMES TO BE STOLEN, AND YOU DON'T CARE!
Breaking News: U.S. Bank v. Ibanez Foreclosure Ruling Upheld: An Indictment Of The Securitized Mortgage System
“[W]hat is surprising about these cases is … the utter carelessness with which the plaintiff banks documented the titles to their assets.” –Justice Robert Cordy, Massachusetts Supreme Judicial CourtToday, the Massachusetts Supreme Judicial Court (SJC) ruled against foreclosing lenders and those who purchased foreclosed properties in Massachusetts in the controversial U.S. Bank v. Ibanez case. Here is the link for the decision. I’ve posted the decision below, and I’ve done a video blog embedded below.
For those new to the case, the problem the Court dealt with in this case is the validity of foreclosures when the mortgages are part of securitized mortgage lending pools. When mortgages were bundled and packaged to Wall Street investors, the ownership of mortgage loans were divided and freely transferred numerous times on the lenders’ books. But the mortgage loan documentation actually on file at the Registry of Deeds often lagged far behind.
In the Ibanez case, the mortgage assignment, which was executed in blank, was not recorded until over a year after the foreclosure process had started. This was a fairly common practice in Massachusetts, and I suspect across the U.S. Mr. Ibanez, the distressed homeowner, challenged the validity of the foreclosure, arguing that U.S. Bank had no standing to foreclose because it lacked any evidence of ownership of the mortgage and the loan at the time it started the foreclosure.
Mr. Ibanez won his case in the lower court in 2009, and due to the importance of the issue, the Massachusetts Supreme Judicial Court took the case on direct appeal.
The SJC Ruling: Lenders Must Prove Ownership When They Foreclose
The SJC’s ruling can be summed up by Justice Cordy’s concurring opinion:
“The type of sophisticated transactions leading up to the accumulation of the notes and mortgages in question in these cases and their securitization, and, ultimately the sale of mortgaged-backed securities, are not barred nor even burdened by the requirements of Massachusetts law. The plaintiff banks, who brought these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the underlying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments. The court’s opinion clearly states that such assignments do not need to be in recordable form or recorded before the foreclosure, but they do have to have been effectuated.”The Court’s ruling appears rather elementary: you need to own the mortgage before you can foreclose. But it’s become much more complicated with the proliferation of mortgage backed securities (MBS’s) –which constitute 60% or more of the entire U.S. mortgage market. The Court has held unequivocally that the common industry practice of assigning a mortgage “in blank” — meaning without specifying to whom the mortgage would be assigned until after the fact — does not constitute a proper assignment, at least in Massachusetts.
- Winners: Distressed homeowners facing foreclosure
- Losers: Foreclosing lenders, people who purchased foreclosed homes with this type of title defect, foreclosure attorneys, and title insurance companies.
- Despite pleas from innocent buyers of foreclosed properties and my own predictions, the decision was applied retroactively, so this will hurt Massachusetts homeowners who bought defective foreclosure properties.
- If you own a foreclosed home with an “Ibanez” title issue, I’m afraid to say that you do not own your home anymore. The previous owner who was foreclosed upon owns it again. This is a mess.
- The opinion is a scathing indictment of the securitized mortgage lending system and its non-compliance with Massachusetts foreclosure law. Justice Cordy, a former big firm corporate lawyer, chastised lenders and their Wall Street lawyers for “the utter carelessness with which the plaintiff banks documented the titles to their assets.”
- If you purchased a foreclosure property with an “Ibanez” title defect, and you do not have title insurance, you are in trouble. You may not be able to sell or refinance your home for quite a long time, if ever. Recourse would be against the foreclosing banks, the foreclosing attorneys. Or you could attempt to get a deed from the previous owner. Re-doing the original foreclosure is also an option but with complications.
- If you purchased a foreclosure property and you have an owner’s title insurance policy, contact the title company right away.
- The decision carved out some room so that mortgages with compliant securitization documents may be able to survive the ruling. This will shake out in the months to come. A major problem with this case was that the lenders weren’t able to produce the schedules of the securitization documents showing that the two mortgages in question were part of the securitization pool. Why, I have no idea.
- The decision opens the door for foreclosing lenders to prove ownership with proper securitized documents. There will be further litigation on this. Furthermore, since the Land Court’s decision in 2009, many lenders have already re-done foreclosures and title insurance companies have taken other steps to cure the title defects.
- We don’t know how other state court’s will react to this ruling. The SJC is one of the most well respected state supreme courts in the country. This decision was well-reasoned and I believe correct given that the lenders couldn’t even produce any admissible evidence they held the mortgages. The ruling will certainly be followed in states (such as California) operating under a non-judicial foreclosure system such as Massachusetts.
- Watch for class actions against foreclosing lenders, the attorneys who drafted the securitization loan documents and foreclosing attorneys. Investors of mortgage backed securities (MBS) will also be exploring their legal options against the trusts and servicers of the mortgage pools.
- The banking sector has already dropped some 5% today (1.7.11), showing that this ruling has sufficiently spooked investors.