WRONG WAY: Virginia puts homeowners on fast track to foreclosure

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary


EDITOR’S NOTE: The sender is from Harvard University. Here is a clear example of Wall Street money at work on the state level getting legislators to trash their state in exchange for money, gifts and other promises. Virginia has now put itself on the fast track to corrupting its title recording system and hopelessly confusing commerce for years to come. Virginia residents should let their state representatives and officers know what they think in no uncertain terms.



By David S. Hilzenrath
Since the meltdown in the housing market began more than three years ago, Maryland and the District have changed their foreclosure laws to give borrowers greater protection. Virginia has moved in the opposite direction.

Last year, the state legislature overwhelmingly passed a law making it easier for lenders to defend themselves when accused of giving homeowners too little warning of impending foreclosures.

The process moves so quickly in Virginia – one of the fastest states in the nation – that homeowners can receive less than two weeks’ notice that their house is about to be sold on the courthouse steps.

That confronts homeowners with an almost impossible deadline. To get a court to stop the sale in that narrow window, they must gather evidence, file a lawsuit and potentially post a bond with the court that could total thousands of dollars. Instead of trying to find a lawyer and prepare a suit, many borrowers run out the clock trying to deal with their lender.

At a time when lenders have been cutting corners and using phony documents to seize huge numbers of houses, the hurdles can be insurmountable, according to lawyers, consumer advocates and borrowers who have tried to save their homes.

“There’s no question that people are losing their homes when they should not be,” said James W. “Jay” Speer, executive director of the Virginia Poverty Law Center, which is part of a legal-aid network.

In many states, homeowners facing foreclosure automatically get a day in court, a chance to tell a judge why they should keep their homes. The judicial process provides at least a modest check on error and abuse.

But in Virginia and 28 other states, as well as the District, according to the RealtyTrac foreclosure information service, borrowers have no such luck. They face “nonjudicial” foreclosure processes, meaning lenders can foreclose without going through the courts.

Maryland occupies a middle ground; it allows the process to play out with little if any substantive judicial review, but it sets a lower bar for homeowners asking a court to delay a sale.

In Virginia and many other nonjudicial states, homeowners’ fate is largely in the hands of private authorities known as “trustees” rather than judges.

The trustees are supposed to protect the rights of both borrowers and lenders, but they have a built-in conflict of interest: They are hired by lenders.

Virginia lawyer Suzanne Wade used to serve as a trustee but switched sides and now represents bankrupt consumers. Years ago, the trustee system “worked well,” Wade said. “Then you had the pressure from the larger lending institutions that made it more and more difficult to always do what you thought was the right thing.”

A homeowner’s best hope may be that a trustee will put the sale on hold, and lawyers say trustees sometimes back down when challenged.

Bruce T. Whitehurst, president of the Virginia Bankers Association, said judicial review would make a bad situation worse. As it is, he said, borrowers who have stopped making payments can stay in their homes for many months, and by the time they receive a foreclosure notice, they have had plenty of time to address the problem.

Slowing “a process that already has ample protections just adds costs” that would be absorbed by everyone involved, he said.

The Virginia approach offers advantages, Whitehurst said. By hastening the day when banks can move delinquent loans off their books, it can cut their losses.

Only when the necessary foreclosures run their course can real estate prices hit bottom and begin to climb again, he added.

When it recently came to light that foreclosure documents have been tainted by rampant “robo-signing,” economists and government officials fretted that a resulting slowdown in foreclosures could jeopardize the nation’s economic recovery. They feared it could paralyze an already crippled real estate market and send the banking system back into a tailspin.

But some state and local officials are concerned that the system does too little to protect homeowners’ rights.

In Maryland, judges have called for slowdowns in foreclosures to ensure documents are handled properly, and the state legislature passed a law that this year gave homeowners the option of trying to avert foreclosure through mediation.

The District also instituted a mediation option, and D.C. Attorney General Peter J. Nickles has pushed for careful review of paperwork to confirm that a lender has the standing to foreclose.

Virginia has taken a different approach.

In 2008, the Supreme Court of Virginia invalidated a foreclosure, saying a property owner was given insufficient warning. Then, last year, the state legislature overwhelmingly passed a law making it easier for lenders to win similar disputes.

Virginia homeowners may get less than two weeks’ notice that their house is scheduled to be auctioned. The notice must be sent 14 days in advance of the sale, but delivery time eats into that.

For homeowners expecting a loan modification, the 14-day notice may be the first warning that their application has gone off the tracks.

Unable to prevent the foreclosure, some homeowners fight the subsequent effort to evict them from their house. But by then, the grounds on which borrowers can build a defense have eroded; judges can refuse to consider arguments that the foreclosure was improper.

In Salem, Va., Army veteran Scott Neff and his family spent Thanksgiving packing their possessions and loading a U-Haul, staying up late in a painful rush to comply with an eviction order.

Their descent into foreclosure began when Neff’s wife lost a job. Like many borrowers, they applied for a modification – a deal to ease the payment terms on their loan – and they were awaiting an answer when the foreclosure notice arrived, Neff said.

They called their lender in a panic and were lulled into a false sense of security when – in keeping with Department of Veterans Affairs guidelines – loan servicer Chase Home Finance promised to postpone the foreclosure sale, Neff said.

But the Neffs discovered after the fact that the sale had gone through as scheduled. They missed their chance to challenge it in court.

“I think it’s definitely a broken system,” Neff said. “I don’t think it’s fair at all.”

When the Neffs asked a court to stop the eviction, a judge said his hands were tied, Neff said.

“The Neffs went to court thinking someone would listen to their story of what went wrong in the process but found their story was legally irrelevant to the question being decided,” said Thomas Domonoske, a lawyer with the Legal Aid Justice Center in Charlottesville who has studied their case.

Asked to explain what happened, Chase spokesman Tom Kelly looked into the matter and said Chase would contact the borrower to inquire further.

“Misunderstandings can occur. If it turns out we made a mistake, we will work with the customer and try and make it right,” Kelly said.

One Falls Church resident, an executive at a small defense research firm, said his effort to fight foreclosure has been an exercise in frustration. The court doesn’t take credit cards, so to withdraw enough cash to post the bond for a lawsuit, he had to visit three bank branches and nervously walk around carrying thousands of dollars.

He said his trouble began when his lender imposed more than $14,000 of baffling charges. He asked that he not be identified because his wife’s security clearance could be jeopardized.

His attorney, Christopher E. Brown, sued to reverse a foreclosure sale, arguing that the homeowner’s rights were violated.

The case revealed a Catch-22: To obtain evidence that might flesh out those suspicions, his lawyer needed to file a lawsuit and enter the court-supervised process known as discovery. To file the lawsuit, however, the lawyer needed evidence.

A judge in Fairfax County Circuit Court threw out the lawsuit and ordered Brown to pay almost $10,000 to cover the other side’s legal expenses. In an August ruling, Judge Jonathan C. Thacher said the lawyer was trying to turn Virginia’s foreclosure process into something it was not. He cited an earlier opinion:

“I don’t find that the Court should be creating a judicial foreclosure procedure when the legislature has mandated a nonjudicial procedure to be appropriate.”


23 Responses

  1. Bi-partisan group of state Virginia Delegates take a stand today.


  2. Senators Mark Warner (D) and Jim Webb (D) — you should be ashamed. Both Democrats!!! I am shocked!!

    What are you doing?? Sleeping on the job??.

  3. there you go Virginia, “a business friendly state”.
    to all businesses all around we are so friendly here that we will allow you to screw our citizens for the sake of your foreign corporation.

    O yes come to Virginia, where you lose your house with the same fake documents, fake notaries, fake accounting, fake evidence. Yes, the land of Jefferson has sold out to precisely the entities our founding father did not trust.

    the hell with the people.

  4. I have a hunch that, in the end, our nation is going to be grasping at straws on how to make it out of this recession. I thought to myself, why could the banks want all these homes? All this property? Obviously the servicers benefit but how are the rest of them gonna make a buck on this scheme?

    Natural gas. Haliburton.

    Will the states put into effect laws for swift foreclosure if there is natural gas on this land?

    Looks like Virginia has some natural gas. Lets see how this plays out and if the states with the most natural gas underneath it come through with swift foreclosure laws.

    Sorry to say, that is just how scummy our politicians are.

  5. Here is a little tid bit of food for thought. If you can show that the security agreement (the note) and the mortgage or Deed of Trust have become separated at any point, ie., Note is now in one name and the Deed of Trust is still registered in the original lenders name, the note is no longer a secured loan but an unsecured line of credit and all that is before the court now is a contract issue. When will we get them to see the issues for what they really are.

    The whole purpose of this grand conspiracy was to deprive people of their property from the beginning and it makes no difference how long ago all of this took place because until the racketeering activities of the conspiracy cease to exist the statute of limitations does not begin to run.

    Statutes of limitation are not a bar to most of the causes of action involved with the banking fraud that brought on this destructive national crisis.

    A man in a black robe upon the bench is not the law in this land but rather an unbiased referree to the litigation before him and judical recall votes may force some of these servents of the people to pull their heads out of their judicial arses and do their job.

    I can only hope.

  6. usedkarguy,

    Yes, and they have been doing for far more than 3 years — except the last 3 years have been MASSIVE in number.

    Maher is right – to an extent — FDIC is not in the business of foreclosure. It is the FDIC’s goal, along with other government arms- to SILENTLY dispose of non-performing loans. But, FDIC only has this control as to banks that have had control taken over by FDIC. The big banks have been playing the game for a long time — and it is NOT just for home loans — but for all asset securitizations including auto loans, credit card, student loans (next big ball to drop).

    Mr. Alan Greenspan (former Fed Chair) praised the distressed debt buyers after 9/11. He credited them with preventing much destruction to financial system — by their gobbling up of distressed debt – and — Mr. Greenspan did not tell us — they made a very nice profit.

    This has been the goal of the government to “justify” the TARP bail out — and so called “smooth” transition of disposal of those who ‘”bought too much house” to new home buyers (at 3% down – if you can believe it!!!) (absolutely absurd – but government LOVES those debt buyers and hedge funds — loves them — it is a clandestine love affair – and banks have also had this secret love affair — for years!!!).

    Yes, no one knows

  7. ANON, I think it illustrates that nobody knows WHO is foreclosing on the borrower in court. The third-party debt collector is who? The servicer is conducting the unauthorized practice of law for WHO? Maher says it’s the FDIC, because all these trusts have been disgorged of their assets and the bundles are being PPIP’ed. They’ve been selling off bundles for the last three years. But the bundles are never identified, as far as I can tell.

    All fraud from the highest levels of government.

  8. Maybe start with this — from a Google Ad — Copyright 2010 Mortgage lenders

    Buying Distressed and Discounted Mortgages From Banks

    The financial crisis has created some great investment opportunities buying distressed mortgages off banks. The glut of nonperforming loans and bank failures has caused numerous lenders to sell off mortgage assets at deep discounts. This article will provide an overview of the distressed debt industry and various investment opportunities.

    With the increase of foreclosures in recent years banks have an increasing need for liquidity. Most banks are not equipped to deal with non performing loans and do not have the staff or flexibility to work out loan modifications. Additionally, many failed banks and and mortgage back securities need to be liquidated creating more distressed mortgage pools for sale.

    Why buy distressed mortgages?

    Banks are selling these assets at deep discounts. An investor can typically purchase a non performing loan for less than 50 cents on the dollar. This provides a significant opportunity for an investor to make a profit by either foreclosing on the property or working out a loan modification with the homeowner.

    Where to find distressed/discounted mortgages

    Most of the large banks will sell large portfolios of distressed mortgages to hedge funds and large institutional investors. A number of banks will sell smaller packages of loans that individual investors and smaller investment funds can purchase portfolios as low as a few hundred thousand dollars.

    There are a number of intermediaries and hedge funds that will break up large packages of loans and sell individual mortgages. This allows regular investors to purchase assets for as little as a few thousand dollars.

    You can find information on available mortgage pools on various internet websites. Networking on LinkedIn and BiggerPockets internet forums is a great place to start your search for distressed mortgage opportunities.

    Andrew Fritz is a real estate and distressed mortgage investor and advisor
    Visit http://www.geminicapitaladvisors.com for educational resources and available distressed and discounted mortgage investment opportunities.

  9. Any Opinions on below??

    SOURCE RoundPoint Financial Group

    CHARLOTTE, N.C., Dec. 23, 2010 /PRNewswire/ — RoundPoint Financial Group officially announced today that that it has purchased a 40 percent stake of a $603 million mortgage loan portfolio from the Federal Deposit Insurance Corporation (“FDIC”) in conjunction with RBS Financial Products Inc.

    The FDIC retains a 60 percent equity interest in what is a newly created venture that will acquire the pool of mortgages. RoundPoint Capital Group and RoundPoint Mortgage Servicing Corporation will oversee the management and servicing of all loans in the portfolio.

    “Our participation in this transaction is another step in the execution of our strategy of being a fully integrated mortgage investment firm and demonstrates our commitment to the residential mortgage market,” said Kevin Brungardt, CEO of RoundPoint Financial Group.

    The transaction, which closed on November 30th, is one in a series of structured sales of residential loan pools offered by the FDIC and marks RoundPoint’s second FDIC loan acquisition for 2010. In April, RoundPoint purchased a $491 million FDIC structured transaction.

    “Our asset management and special servicing platforms were developed to address the needs of the current housing market and enable us to participate in FDIC structured loan sales,” said Shaun Ahmad, President of RoundPoint Capital Group.

    Founded in 2007, RoundPoint is a fully integrated mortgage investment firm that specializes in the acquisition, management, originations and servicing of mortgage loans.


    Headquartered in Charlotte, North Carolina, RoundPoint Financial Group, Inc. is a fully integrated mortgage firm with three distinct subsidiaries focused on special servicing, asset management and originations. RoundPoint Mortgage Servicing Corporation is a national mortgage servicer approved by HUD, Freddie Mac and Fannie Mae. RoundPoint Capital Group, Inc. is an asset management firm specializing in residential mortgage loans and structured transactions. RoundPoint Mortgage Company originates mortgages across the country and has created special programs to assist financial institutions in refinancing their distressed assets.

  10. It should be noted that our so-called lawmakers are in the pockets of the mega banks. It has been that way for a long time. You can tell very easily by the fact that the laws regarding banks, credit cards, mortgages, etc. are against the citizens of the US and in favor of the banks. You do not need to be a rocket scientiest. As for some of the Republicans in our Congress, to say that your only purpose is to take down the President and not represent the people of the US–that should be enough for you right there. They were not elected to try and screw up the workings of Congress. They were elected to represent us in the best manner possible. As for some of the Democrats, we know they are in the pockets of the banks, as well. Remember, that Chris Dodd was head of the banking committee during the debacle of economic failure. http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  11. swarm the banks:

    A little correction there – that doesn’t mean I can’t judge the performance of the individual by his actions rather than his party affiliation from time to time. If he has deserted the homeowners, then he needs to be called on that. He just dropped another notch down the poll of acceptability as far as I am concerned, but everyone deserves a second chance. Maybe he will do what I consider to be the right thing and get his act together on this issue. Thanks to Neil for reporting the story.

  12. To Swarm the Banks:

    I am sure that is close, but being the fair minded person that I try to be after visiting the mortgage industry for about 40 years, I thought the move on the part of Bill Clinton, David Summers and Robert Rubin, along with Phil Gramm did an excellent job of getting deregulation of banks in this country accomplished in the middle of the night. Let’s face it, both sides, Rep or Dems, they both do it and I am going to give credit where credit is due. In this case, Gov. McDonnell needs to rethink his priorties with respect to the homeowners and property owners of state of VA. and I don’t mind saying so. He failed to come through for them and evidently appears to continue to do so. Hope I am wrong. I am a republican and glad of it, but that doesn’t mean I can judge the individual’s performance when it comes to good faith and fair dealing.

  13. The article fails to mention that most circuit courts in Virginia require at least 2 weeks advance notice to schedule a hearing, usually on a Friday. Thus, the quickest you can be heard is if you happen to schedule your hearing on a Friday for another Friday to weeks out.

    As a specific example, a foreclosure trustee will mail you a notice of sale 14 days prior to the scheduled sale; you will receive the notice 11 days prior to the sale; even if it is a Friday, the soonest you can be heard by the court is still 14 days out, but you only have 11 days. And if it is a non-Friday, add a few more days to the 14.

    Admittedly, you can ask for an expedited consideration of your motion, but expedited consideration is not as of right, and is denied most of the time. One judge ruled that there is no harm to the homeowner because she cannot prove she’s not in default! — So the matter did not qualify for expedited treatment.

    It seems that the local court policy (2 week notice) and the statutory requirement of allowing a notice of sale to be mailed only 14 days in advance create a due process violation subject to facial challenge. The issue is going to be whether the opportunity to ask for an expedited consideration in less than 14 days satisfies due process for a homeowner faced with non-judicial foreclosure.

    BTW, the 2008 Supreme Court decision addressed in the article is probably this one:

  14. Is it ok to report that some Lawyers” who get it” , have indeed gotten it from the Bar in their state for screw people. If any goon asks for 1-2K up front – run!!

  15. Why are my posts continually moderated? Is there some kind of protocol that I’m unaware of ?

  16. Joyce Louise, didn’t you know that a republican politician never met a bankster that they did not like?

  17. Maryland foreclosed on a woman over a 300 dollar water bill even though her home was paid off!

    Just saying that if Maryland is moving in a proactive direction regarding protecting homeowners, they still have a ways to go.

  18. People, just read this:

    “A judge in Fairfax County Circuit Court threw out the lawsuit and ordered Brown to pay almost $10,000 to cover the other side’s legal expenses.”

    Brown is one of the attorney’s that “Get’s It”.

    This is hopelss, get ready to move.

  19. Keep in mind that Virginia includes Eric Cantor i.e. a Bankers Congressman! It really is a class war out there – we just need to admit that the less wealthy are getting killed out there, an important victory is kicking them out of their houses.

  20. What does political party have to do with it? McDonnell and Cuccinelli are two luddite conservatives who will execute people and throw them out of their houses and claim that it’s the appropriate moral process.
    These “republicans” are elected to go to work on the residents, slashing services and firing people – while big business does as they please. For some reason, vast swaths of Virginians seem to vote the way they cheer for football teams. Nothing against the folk, but that’s how the illusion of Democracy is spread throughout the land. But it’s not much different in MD, where the Governer has quietly aided banks in their seizures, much more subtle then Virginia, but the results are the same.

  21. All that McDonnell, gov of Virginia, states he has accomplished, yet not one effort did he make to help the homeowners who are in trouble in Virginia. At least I could not find any. I THINK THAT SAYS IT ALL.


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