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Testimony Casts Doubt on Whether Countrywide Mortgages Are Eligible for Foreclosure

November 26, 2010

Our Banning foreclosure attorneys have been writing a lot lately about robo-signing -- the practice among lenders of having employees sign massive amounts of foreclosure documents without reading them or verifying their truth. This is a type of fraud that has stopped a few foreclosures, but lenders insist that most or all of the underlying foreclosures are proper. Before that scandal has even passed, another paperwork-related mortgage problem may be emerging, posing even more serious problems for one lender. As New Jersey Newsroom reported Nov. 24, testimony in a bankruptcy case suggests that Countrywide Financial made a policy of not sending mortgage documents to buyers when it securitized mortgages. This violates state laws and throws actual ownership of the mortgage into doubt, raising the possibility that foreclosures may be invalid on thousands o mortgages owned by Bank of America.

When a mortgage is sold, state laws in New Jersey and many other states, as well as a loan servicing agreement, require that the physical mortgage document and a helper document called an allonge be transferred to the new owner. The issue arose in testimony from a Camden, N.J. bankruptcy. Bank of America attempted to foreclose on a home involved in the bankruptcy, whose loan had originally been issued by Countrywide but was supposedly sold to the Bank of New York. Countrywide submitted a document claiming the original documents were lost, but also said it still had the note. When the court investigated, a Bank of America employee testified that Countrywide routinely kept these documents.

The bank has since backpedaled, but if the original testimony is true, it could throw ownership into doubt on as all of the Countrywide loans that were securitized -- many as 96 percent of all of its loans. In the New Jersey case, the bankruptcy judge ultimately denied the foreclosure because the documentation was not in order. Observers believe this could be repeated across the nation, as foreclosure attorneys demand to see notes that owners cannot produce. Furthermore, all of the mortgage-backed securities those loans formed could be improper, which would allow investors to demand that Bank of America buy back those securities. The lender's losses could number in the billions.

Our Rowland Heights foreclosure lawyers have heard this story before -- it's not dissimilar from stories dating back a year or more about foreclosure attorneys demanding to see the note. However, this time, those demands are supported by sworn testimony that a major lender failed to follow the law, as a matter of policy. Thus, it's not just speculation -- it's evidence of not only illegal behavior, but a policy of illegal behavior. Some judges may still allow the foreclosure to go through if the homeowner truly hasn't paid -- but others may penalize Bank of America for Countrywide's blatant violations, or put foreclosures on hold due to genuine confusion over who has the right to foreclose. Furthermore, all homeowners with Countrywide-issued loans now have a very good reason to challenge foreclosures. Under the circumstances, we hope judges give those challenges serious consideration.

Throughout the housing crisis, Howard Law PC has helped homeowners negotiate fair loan modifications, or enforce their rights through the courts when negotiations fall through. In our experience as Murrieta foreclosure attorneys, this is just another of the many areas in which mortgage lenders have been sloppy. Along with the robo-signing scandal, this new development suggests that even legal requirements have not been allowed to stand between lenders and their profits. Unfortunately, this sloppiness never seems to affect lenders ability to make a profit -- only the rights of borrowers. We help our clients fight back against mortgage lenders that are foreclosing unfairly or have failed to give a loan modification serious consideration. Whenever possible, we prefer to avoid taking lenders to court, but we can and will sue lenders to protect our clients' property and rights.

If you're tired of negotiating in good faith with your mortgage lender, only to be met with poor treatment or indifference, you should call Howard Law to see how we can help. For a free, confidential consultation, contact us through the Internet or call toll-free at 1-800-872-5925.