Bank of America foreclosure fallout likely won't impact Minn.by Dan Olson, Minnesota Public Radio
St. Paul, Minn. — Foreclosure counselors predict very few if any Minnesotans who have lost their homes will get them back because of allegations of faulty foreclosure documents.
Bank of America, the nation's second-largest mortgage lender has suspended foreclosures including those in Minnesota as it reviews the accuracy of documents. Other lenders say they're also reviewing their paperwork. But those actions may not have much impact in Minnesota.
Cheryl Peterson manages the Twin Cities Habitat for Humanity foreclosure counseling service and said most people who've lost their homes to foreclosure don't have the money to challenge the result.
Bank of America is halting foreclosures for only a few weeks -- not long enough to help those still facing foreclosure dig their way out, she said.
"Especially in Minnesota, because we do actually have the postponement legislation that allows homeowners to postpone their sheriff sales on their own by five months anyways," she said.
More than 23,000 homes were foreclosed on in Minnesota last year, ranking in the middle of states. So far this year more than 13,000 homes have been foreclosed. That rate is on a pace to rival the peak of more than 29,000 foreclosures in 2008.
Among lenders, Bank of America ranks 4th in Minnesota with just over $2 billion in mortgage business, but said it doesn't know how many borrowers that includes.
Bank of America declined an interview request.
In an email statement responding to questions, the lender says it will, "continue the foreclosure process on delinquent borrowers, but will not proceed to judgment or with a foreclosure sale at this time."
Bank of America said it expects its review process will be complete in a few weeks, and it will begin rescheduling foreclosure sales by November 1 or even earlier.
Lenders allegedly signed off on documents for thousands of foreclosures without checking them for accuracy.
Jane Bowman, an attorney and foreclosure counselor at the Housing Preservation Project in St. Paul, said she's taken only a couple of calls from people asking about making a case to get their homes back.
She thinks lots of inaccuracies exist throughout the entire mortgage lending and foreclosure process, but worries that an investigation by the 50 state attorneys general into the foreclosure practices will end up with lenders paying only a fine -- a slap on the wrist compared to what lenders do when homeowners fall behind on payments.
"They can get away with it and move forward," she said. "Whereas homeowners aren't given that same regard, and if they mess up in any way shape or form they get the boot."
A better outcome would be that the investigation brings more order and accuracy to the process, Bowman said.
Some are wondering if people who purchased foreclosed properties have clear ownership, or whether their titles will be suspect because of concerns about the accuracy of documents.
The consensus of the foreclosure counselors is there won't be a problem, and so far no Minnesota title company has stopped issuing titles.
Chaos is how Prentiss Cox, a University of Minnesota law school professor, describes the ongoing mortgage foreclosure crisis in this country.
The questions about the accuracy of mortgage foreclosure documents go back to the loose lending practices that helped create the crisis years ago, Cox said. Before the crash, many loans were made without banks verifying applicants' incomes.
"Then these loans were securitized and the paperwork that was necessary to make that the ownership flowed along with the loans that were being sold was often not done properly.
"So this goes back to the same problems that led us into the foreclosure crisis in the first place," Cox said.
Cox and mortgage foreclosure counselors don't expect the crisis to end soon. Federal oversight that makes lender mortgage and foreclosure practices more transparent is still lacking, Cox said.
- Morning Edition, 10/18/2010, 6:20 a.m.