Feb 10

By Mark Fahey – CNN

Nearly one in four homes in foreclosure at the end of January were already abandoned by the owner before being repossessed, a recent RealtyTrac report found.

And while the number of zombie foreclosures has fallen 6% from the year before, 19 states have seen a resurgence, including New Jersey, New York and California.

The state of New Jersey, for example, saw a 109% increase in total zombie foreclosures, with surges in metro areas like Atlantic City and Trenton. Meanwhile, New York saw a 54% increase, with jumps in the Albany, Poughkeepsie and the New York City metro areas.

Other states, including North Carolina, Tennessee and Virginia, have also seen significant increases in zombie foreclosures over the last year.

Zombie homes often have uncut lawns, shuttered windows and other signs of neglect that can turn away buyers and drag down the value of nearby homes.

“These are the sore thumbs in any neighborhood,” said Daren Blomquist, vice president at RealtyTrac. “The very visible signs of distress are there with these properties.”

But an increase in zombie foreclosures isn’t always a bad thing, said Blomquist. He said more of those abandoned homes are finally making their way through the foreclosure process, and are now closer to being resold or demolished. [read more]

Feb 6

By Jessica Masulli Reyes and Beth Miller – Delaware Online

When word came that Chrysler was closing its Newark auto plant in 2009, it seemed plain to many employees that financial trouble could be on the horizon.

So Jeff and Robbin Brown went to their mortgage company – CitiMortgage – in early 2010 to see if they could make different arrangements until Jeff, a millwright, found new work.

They were turned away. The Browns said bank officers told them such a discussion was premature. A homeowner had to be 90 days in arrears before any changes could be discussed. But when that milestone arrived, the rug went out from under them.

A series of frustrating attempts to renegotiate terms went nowhere. The Browns paid one mortgage loan assistance company about $3,000 to help them work through the process, but they might as well have buried that money in the front yard. No assistance was rendered. The couple say they became victims of a scam when they needed assistance the most.

Soon they got notice they would have to leave the $325,000 five-bedroom dream house they built on Old Baltimore Pike – the one with Jeff’s hobby garage in the back and the almost-finished treehouse with siding that matched the main house. The one they had saved up for and loved for eight years.

They asked for more time, but the Browns say their request for a two-week extension – to allow them to recover from a setback with Robbin’s multiple sclerosis and find a place to store antiques and other valuable items that wouldn’t fit in the rental where they were moving – was denied. They left those items behind, and rushed to move out. [read more]

Feb 5

By Joe Tyrrell – NJ Spotlight

Four years after New Jersey courts required lenders to prove they are following the law in foreclosure cases, new procedures and technology have improved the process and provide greater assurance of accuracy, according to court officials.

That claim is being put to the test. At a time when foreclosures are receding across much of the country in the wake of the Great Recession, the number of cases in New Jersey is again rising rapidly. Last year, more than 54,000 foreclosures were filed here, the third-highest total since the state started keeping records.

In contrast to the situation at the start of the recession, though, electronic filings now allow prompt recording of documents, court staff has been added to the payroll, and new certifications spell out lenders’ claims more clearly, according to Kevin Wolfe, the assistant director of the civil practice division of state courts.

Defense attorneys caution that the changes may not materially improve the decisions that foreclosure defendants can expect. In particular, they said, additional paperwork from lenders and their attorneys may not withstand scrutiny — but only if homeowners are prepared to insist on it.

That’s a big “if” since, as Wolfe said, “Only a small fraction of total foreclosure cases ever get contested in court.”

Defense attorneys are more encouraged by two decisions in recent weeks that upend New Jersey courts’ handling of two common foreclosure issues.

In Jesinoski v. Countrywide, the U.S. Supreme Court unanimously held that the Truth in Lending Act allows borrowers to rescind a mortgage agreement within three years simply by notifying the lender. Courts here and elsewhere have been requiring the homeowners to file suit, or even hand over their homes, within that time.

Meanwhile, in Arias v. Elite Mortgage, a New Jersey appeals court ruled against homeowners on the facts. But it found that standard language in Bank of America’s trial mortgage modification program requires the banks to offer permanent deals to borrowers who fulfill its requirements. Banks have routinely dropped such borrowers without permanently modifying their mortgages. [read more]

Feb 3

By Catherine Curan – New York Post

Judge Robert Drain has a message for Wells Fargo: “Forged” foreclosure documents don’t cut it in New York’s federal courts.

In a stunning 30-page decision on January 28, Drain, a federal bankruptcy judge in New York’s Southern District, blasted Wells Fargo, America’s largest mortgage servicer, for false documents it used in trying to prove its right to foreclose on Westchester County resident Cynthia Carrsow Franklin’s home.

Drain shredded Wells Fargo’s arguments regarding two crucial documents needed to prove ownership of a loan: an indorsement (another term for endorsement) on a note and an assignment of mortgage.

These documents have to be created properly within a certain time frame, or they won’t hold up in court.

The issue lies at the heart of the foreclosure crisis, and continues to haunt hardworking New Yorkers like Franklin, a speech pathologist for autistic children, to this day. [read more]

Feb 2

By Patrick Lunsford – insideARM

A report released Thursday by the National Consumer Law Center (NCLC) urges the CFPB to prohibit debt collectors from attempting to seek payment on accounts that are beyond the statute of limitations. It’s a reiteration of recommendations the group made in response to the CFPB’s advance notice of proposed rulemaking (ANPR) for debt collection last year.

Underscoring exactly what the group is calling for, the report’s introduction includes the following passage, in bold and with the emphasis shown:

“…the CFPB should ban all efforts to collect out-of-statute debt—whether by litigation or other means.”

The report, “Zombie Debt: What the CFPB Should Do about Attempts to Collect Old Debt,” notes that statutes of limitations on debt vary widely state-to-state, leading to confusion among consumers. Two states, Mississippi and Wisconsin, even have laws that already extinguish the debt once the statute of limitations has run.

NCLC also calls out the prevalence of time-barred debt in the collection system, mostly due to the practices of debt buyers.

The report calls on the CFPB to use its authority under the Dodd-Frank Act to define time-barred debt collection as an unfair, deceptive, or abusive acts or practice (UDAAP), thus making it illegal. [read more]

Jan 30

By Chris Morran – Consumerist

What a lot of people don’t know — and what debt collectors rarely mention — is that most unpaid debt has an expiration date after which you can’t be sued for repayment. And even fewer consumers are aware that this dead debt can be sparked back to life by making a payment after it’s already passed on to the debt afterlife. A new report calls on federal regulators to make sure that debt doesn’t rise from the dead in zombie form.

A 2013 study from the Federal Trade Commission estimated that more than 30% of debts purchased by debt buyers — who generally pay pennies on the dollar for the right to collect on money owed to businesses — were at least six years old, putting them beyond or near the end of the statute of limitations in many states.

But a new report from the National Consumer Law Center believes that the percentage of zombie debt being purchased by collectors is even larger, as the FTC did not include information from the many smaller debt-buying operations that are the biggest purchasers of the oldest debts.

Additionally, the FTC study doesn’t look at the age of the debt when the debt-buyer makes its first attempt to actually collect.

“Regardless of the age at the time of purchase, debts continue to age throughout the course of the collection process,” reads the NCLC report, which cites the example of one debt-buyer that admittedly attempts to collect on debts for 10 years or more after the date that it purchases the debt, and that this same company has reported successfully collecting on debts that were at least 14 years old.

The people whose names are on these ancient debts likely had no idea that they could not have been sued for collection, and in some states — Wisconsin and Mississippi — out-of-statute debts are actually extinguished. [read more]