Houses from beyond the grave.

January 11, 2013 1:07 AM

The latest foreclosure horror: the zombie title

The Kellers are caught up in a little-known horror of the U.S. housing bust: the zombie title. Six years in, thousands of homeowners are finding themselves legally liable for houses they didn't know they still owned after banks decided it wasn't worth their while to complete foreclosures on them. With impunity, banks have been walking away from foreclosures much the way some homeowners walked away from their mortgages when the housing market first crashed.

via Naked Capitalism:Another Nightmare, “Zombie Title” Shows How Servicer Refusal to Foreclose Hurts Stressed Homeowners and Communities

Home Seizures Rise As Banks Adjust To Foreclosure Flow, especially since Bank Deal Ends Flawed Reviews of Foreclosures:

Federal banking regulators are trumpeting an $8.5 billion settlement this week with 10 banks as quick justice for aggrieved homeowners, but the deal is actually a way to quietly paper over a deeply flawed review of foreclosed loans across America, according to current and former regulators and consultants.

To avoid criticism as the review stalled and consultants collected more than $1 billion in fees, the regulators, led by the Office of the Comptroller of the Currency, abandoned the effort after examining a sliver of nearly four million loans in foreclosure, the regulators and consultants said.

Feds Replace Flawed Foreclosure Review With Vague $8.5 Billion Settlement

The Independent Foreclosure Review was supposed to be a full and fair investigation of the big banks’ foreclosure abuses, and it was trumpeted as the government’s largest effort to compensate victimized homeowners. Federal regulators, who designed the review, forced banks to spend billions to carry it out. Millions of homeowners were eligible and hundreds of thousands submitted claims. But Monday morning, the very regulators who launched the program 18 months ago announced that it had all been a massive mistake and shut it down.

Instead, 10 banks have agreed to pay a total of $3.3 billion in cash to the 3.8 million borrowers who had been eligible for the review. That’s an average of around $870 per borrower. But typical of a process that’s been characterized by confusion, delays and secrecy, regulators said the details of how the money will be doled out were not yet available.

NC, again:
$8.5 Billion Foreclosure Fraud Settlement: Yet Another Loss for Homeowners Touted as a Victory and
Yes, Virginia, the IRS Does Not Treat the Connected Like the Rest of Us (REMIC Edition)

The failing, as we’ve stressed again and again, was not in the law, the deal design, or the contracts, but that the sell side systematically refused to live up to the terms of its own agreements.

Letters To Bank Of America

Anyway, Detroit used to be a really nice place to live. And lots of people would like to buy homes in Detroit and fix them up and make them pretty again, but Bank of America and Countrywide probably wouldn’t stand to make too much money if houses sold cheaply and mortgages were fair and banks were more flexible when the unemployment rate in America is around 9% (here in Detroit, it’s more like 14%—that’s really high, in case you didn’t know).

With abandoned houses falling into disrepair, the target of thieves who strip appliances, copper, and bathroom fittings, blighting neighborhoods and posing fire hazards, there may be one solution: Inside the Radical Plan to Fight Foreclosures With Eminent Domain

posted by the man of twists and turns (35 comments total)

thanks for this post

i actually submitted my paperwork for that foreclosure review. like.. almost a year ago? and had heard almost nothing since. until like a week ago. I was waiting to pick up my coffee. glanced down at the NYT in the rack and saw the headline just above the fold. they broke the story before anyone else had, and without even reading the body of the article I knew exactly what it said. the govt caved, the entire process was fixed from the start, and the banks will write off the minor penalty and move on and no real help will come of it.

my home has been in foreclosure since 2008
posted by ninjew at 1:18 AM on January 11, 2013 [15 favorites]

So, once again, if you don't follow the rules, you get fined, and maybe even go to jail.

If the banks don't follow the rules, you still get fined, and maybe even go to jail.
posted by Malor at 1:19 AM on January 11, 2013 [58 favorites]

ninjew: have you seen the title? are they holding it? can they prove chain-of-title?
posted by the man of twists and turns at 1:33 AM on January 11, 2013

Even Galt must be turning in his grave.
posted by infini at 1:37 AM on January 11, 2013 [1 favorite]

I suppose by refusing to comment, banks were hoping they'd be able to frustrate Conlin (the Reuters journo) and prevent her finishing the piece. But now it's out there, with all those charming "declined to comment"s and "did not respond to multiple queries" documented, it makes the banks look about as transparent and law abiding as mafiosos. Which of course they are.
posted by Sonny Jim at 1:58 AM on January 11, 2013 [5 favorites]

Well, I'll never take out a mortgage. I've watched my parents struggling under them my entire life, and there's no way in hell I'll trust a bank to keep an agreement over a 15 or 30 year term.
posted by kaibutsu at 3:51 AM on January 11, 2013 [5 favorites]

consequences, funny how few people like them
posted by fistynuts at 4:15 AM on January 11, 2013 [1 favorite]

I think it should be NC not NK in the second quote.

So based purely one one line quote:

Homeowners legally own their properties until the day of sale. And it's not until that day, the banks point out, that a homeowner's name vanishes from the title.

It sounds like the owners could 'just' move back in and live there for free or rent it out.

Obviously that doesn't help if you're so under water financially that you can't afford to do the needed repairs but if you're closer to solvent that could be a huge asset.

The banks are still assholes for how they handle it of course. It seems like the advice for people with mortgages is don't trust anything the banks say and don't move out until someone with a badge makes you.
posted by Skorgu at 4:51 AM on January 11, 2013 [2 favorites]

Mod note: Fixed NK to NC
posted by taz (staff) at 4:59 AM on January 11, 2013

So the bank sends a notice that tells you to move out or the cops will roust your family because it's the banks' house now, then you leave, and start getting bills in the mail for failing to upkeep your property?

Corporations can now do anything they want to without penalty, is the charade finally over?

Why would anyone choose to live in a country without enforced laws? Are we living in this libertarian dream I keep hearing about?
posted by hobo gitano de queretaro at 5:06 AM on January 11, 2013 [17 favorites]

When will you little peons stop annoying our financial betters? They are more important and valuable than you and their heads are busy with complex financial wizardry and have no time for your petty complaints.
posted by Legomancer at 5:38 AM on January 11, 2013 [6 favorites]

The indeterminate state some houses seem to go through after foreclosure can be worrying. We've got a house next door that's been abandoned for almost a year now with no For Sale sign and online searches yield mixed results about its status. It's like taking care of a second house in order to keep it from looking totally abandoned and making sure it isn't being broken into.
posted by charred husk at 5:40 AM on January 11, 2013

A severe, comprehensive increase in penalties for party misconduct in litigation and regulatory proceedings is long overdue, and I can think of no better test case than unscrupulous mortgage lenders, note purchasers, and debt collectors.
posted by Inspector.Gadget at 5:50 AM on January 11, 2013 [5 favorites]

After reading literally years worth of horror stories regarding the sub-prime mortgage crisis in particular, and the overall mortgage crisis in general, I am so, so glad I went about buying my house the way I did. There were enough people trying to convince me to buy a mcmansion simply because I could get easily approved for the loan or worse, to buy and then try to flip, but I decided to buy what I originally wanted (colonial that was big enough for the family I was planning to have). I got a mortgage at a great rate because my credit was considered "top-tier" (another thing I'm glad I got cleaned up. I wasn't always the best payer of bills. Now I'm damn near regligious about it) and I didn't strap myself with unnecessary crap that I didn't need or speculate on what I thought it would be worth. I wanted my first house to be my last house, or at least the last house before the move to Shady Acres Retirement Community.

Propbably the biggest thing I did right was I shopped for a bank as hard as they were shopping for me. I went with a reputable, stable bank that didn't go through all the instability that happened when the crisis hit. Not because I'm so damn smart, but research does reduce the odds of winding up with a Wells Fargo, AIG, or Bank of America. Working for a lending division of AIG helped to since I got to see first hand how not to lend money.

Anyhoo, I read about, see news reports about, and talk to people who are going through 9 different kinds of hell because they are underwater, strapped with 2 houses because they can't sell one, etc. and for once I'm glad that I played it safe and didn't risk a damn thing.
posted by prepmonkey at 6:07 AM on January 11, 2013 [5 favorites]

Anyhoo, I read about, see news reports about, and talk to people who are going through 9 different kinds of hell because they are underwater, strapped with 2 houses because they can't sell one, etc. and for once I'm glad that I played it safe and didn't risk a damn thing.

Quoted for truth. When we were looking for a house a few years back, my spouse and I told our realtor first thing: "We are not looking for an investment. We are not looking for a 'starter' or an interim house. This will be the last house we will ever buy, and they will roll at least one of us out of it in a hearse. Think that over before you put together the list of what you want us to look at."
posted by Etrigan at 6:23 AM on January 11, 2013 [12 favorites]

"zombie titles" and the paper trails to nowhere around signatures and stuff was a tiny little news blip just over a year or little more ago... maybe in one of the mortgage crisis mega threads. Its odd that it has not been "news" till now
posted by infini at 6:23 AM on January 11, 2013 [1 favorite]

What's good for the goose is good for the gander
posted by Renoroc at 6:28 AM on January 11, 2013

Hogshead might want to re-pitch his Zombopoly game to Hasbro...
posted by Strange Interlude at 6:35 AM on January 11, 2013

Corporations can now do anything they want to without penalty, is the charade finally over?

Nope, it's not. Thanks for asking.
posted by Aizkolari at 6:35 AM on January 11, 2013 [1 favorite]

I say Zombie Title is the worst episode of The Walking Dead yet. Wait, what are you guys talking about?
posted by notme at 6:49 AM on January 11, 2013 [1 favorite]

I recently paid off our mortgage, and could not believe the shady situation with the paperwork chain I received. MERS was all over the place, to no surprise. Some "Victoria" person had notarized my paperwork electronically from another state, but when I tried to find any record of her notarization status it was unavailable. The one person I could find with a vaguely related name in the whole state said she'd never worked with mortgage paperwork before.

Take a look at your own paperwork sometime if you really want to see how fucked up this situation is. Just try and follow the chain. It's nearly impossible if the bank still owns it, and not much better when you own it.

For the past seventeen years, I've worked for law firms that represent banks in residential real estate closings. I've done closings for Big Conglomerate Banks and for small local banks, and can say that working with the latter is infinitely easier than the former.

With a Big Conglomerate Bank, you're bounced from person to person and trying to get the right person on the phone to ask a question is damned near impossible. With a small bank, I can pick up the phone, dial seven digits and speak to a human who's had the file from beginning to end and knows what I need pretty much before I even ask for it. They know the quirks of our county, they know how much it costs to record certain documents, if something gets delayed I can call that same person and say "hey why didn't this Discharge of Mortgage get recorded" and they'll take care of it, rather than having to fax a written request and cross my fingers that it gets looked at.

On the other side, as a mortgagor, I'm much happier taking my monthly payment check into a branch and have the teller say "hi, Lucinda, do you need a receipt for this mortgage payment?" than putting a check in an envelope and sending it to a PO Box eight or nine states away.

Of course, there's always the possibility that the small bank will be bought out, but so far we've been lucky.
posted by Lucinda at 6:56 AM on January 11, 2013 [3 favorites]

It sounds like the owners could 'just' move back in and live there for free or rent it out.

Obviously that doesn't help if you're so under water financially that you can't afford to do the needed repairs but if you're closer to solvent that could be a huge asset.

Yeah, except that it's really hard to sink money into a house that could get yanked out from under you at any moment. I suspect most people who are living in a limbo house forgo most maintenance for that reason.
posted by Ickster at 7:14 AM on January 11, 2013 [1 favorite]

Of course, there's always the possibility that the small bank will be bought out, but so far we've been lucky.--Lucinda

More likely, they might sell your loan.
posted by eye of newt at 8:14 AM on January 11, 2013

NYT: Surprise, Surprise: The Banks Win
posted by ninjew at 9:17 AM on January 11, 2013 [1 favorite]

The Independent Foreclosure Review was also a major new employer in several cities, and its shutdown on Monday put at least a thousand (thousands?) of people out of work. Of course it was all temporary and hiring was done through a variety of agencies, but that's still a lot of people with the same skill set all on the market at once. Boo.
posted by asperity at 10:20 AM on January 11, 2013

Whoever picks the right catalyst is going to be able to ride this pent up fury to Godhood because the shit that the banks, corporations, politicians and the whole festering lot of them are pulling is indefensible.

I just hope they're going to be good gods.
posted by fullerine at 10:49 AM on January 11, 2013 [1 favorite]

There is a house in this situation on my block. We have a very active, involved neighborhood association, and several of us have tried to get someone, anyone, to do something, anything to prevent the house from being ruined. It is a lovely historic wooden cottage, built in the 1800s, shotgun style, single story, with a big fenced in back yard. If you want to come live in it, we'll help you fix it up and promise to gang up on any HSBC bastard who shows up to try to put you out.
posted by tizzie at 12:04 PM on January 11, 2013 [3 favorites]

This is why I moved ly mortgage to a local credit union and I have it in writing they can't sell it. The big banks are simply too big to be run effectively. If they broke them into small regional corporations who operated autonomously there might be some hope of fixing this mess. But the centrally operated mega corporate model is clearly incapable of providing the needed oversight for heterogeneous ttransactions like buying houses. It's been shown over and over again.
posted by fshgrl at 12:34 PM on January 11, 2013 [2 favorites]

Who's going to buy these properties from the banks when nobody will write title insurance?
posted by one more dead town's last parade at 12:42 PM on January 11, 2013 [1 favorite]

The companies will start their own title insurance companies.

The fine print will be unreadable by human eyes, and the legalese so written as to be impenetrable to most human minds, and it will basically say: "If something goes wrong, you're fucked."

And when it goes wrong, they will smile and tell you that you're fucked, where's their money?

I expect them to start writing indentured servant clauses into things and then going 'well, they signed the contract'... and add in the 'you can't sue, you need to use our arbitration service to contest any of this' clause.
posted by mephron at 1:51 PM on January 11, 2013 [3 favorites]

I did many things right, but unfortunately I used a mortgage broker that sold our loan the first day. I cringe hard every time I start typing "www.wellsfar..." in my browser.
posted by letitrain at 9:14 PM on January 11, 2013 [2 favorites]

If the house is next to you could you just annex it? Just extend your fence completely around the house with a zombie title and just end up owning it eventually?
posted by Iax at 6:14 PM on January 12, 2013

lax: adverse posession, which, depending on where you live, would allow you to claim the title after using the land for a certain amount of time.
posted by the man of twists and turns at 12:24 AM on January 13, 2013

What’s Inside America’s Banks?

Accusations of illegal, clandestine bank activities are also proliferating. Large global banks have been accused by U.S. government officials of helping Mexican drug dealers launder money (HSBC), and of funneling cash to Iran (Standard Chartered). Prosecutors have charged American banks with falsifying mortgage records by “robo-signing” papers to rush the process along, and with improperly foreclosing on borrowers. Only after the financial crisis did people learn that banks routinely misled clients, sold them securities known to be garbage, and even, in some cases, secretly bet against them to profit from their ignorance.

posted by the man of twists and turns at 9:06 AM on January 14, 2013 [1 favorite]

This Is Housing Bubble 2.0: David Stockman

But David Stockman, former director of the Office of Management and Budget in the Reagan Administration sees little to get excited about.
He tells The Daily Ticker, “I would say we have a housing bubble...again.”
Stockman argues a combination of artificially low interest rates and speculation are to blame, not unlike the last boom and bust cycle in real estate.
“We don’t have a real organic sustainable recovery because in a world of medicated money by the central bank, things aren’t what they appear to be,” Stockman argues.
And according to Stockman, it’s this medicated, cheap money being put to work by investors that’s driving the apparent healing in some of the hardest hit real estate markets in the country.

posted by the man of twists and turns at 8:48 AM on February 10, 2013