Wednesday, May 15, 2013

Where You Can't "Bank" On A Foreclosure.......

A U.S. District Judge in Colorado is expected to make a ruling this week which could result in an additional challenge for certain banks to foreclose on homes.


But there is so much more to this story. As of now, this ruling appears to only impact Colorado, where the interpretation is that certain foreclosure regulations are different from other states. Even though the Bank involved also serves many other states.


The confusion doesn’t stop there. The home owner who brought it to the point of a Judge’s ruling may have found a loophole to prevent her home from being foreclosed upon.


Many of us know and understand that mortgages are often sold to other banks or investment groups, causing the home owner of that mortgage to need to make their ongoing payments to the “new” owner.


In the case that brought this to light, the home owner challenged the “new” Bank, which reportedly purchased her mortgage, to prove ownership. According to a Denver Post report, the service which handles the transfer of mortgage ownership does not have official documentation of their takeover, and therefore was not able to show proof of ownership of the mortgage. Yet, this Bank was attempting to foreclose upon the delinquent home owner.


The Judge has admitted that Colorado does not require such documentation. The home owner has not yet involved an attorney, even though the situation has already gotten to this point.


Of course, as those who are involved in this matter will recognize, if the home owner in question could afford the lawyer to fight this, chances are she could be making her payments and not be considered delinquent.


Even in real estate, two wrongs don’t make a right.


If you have been following this blog for a while, you are probably waiting for me to suggest that realty agents in Colorado make their current home owner clients aware of this situation. Perhaps, unless the current system in Colorado is changed, others could challenge the validity of their mortgages. However, I am not going to do that.


In reality, it is potential renters who need to be aware of this mess. The local publicity for this story has likely reached into the wrong hands already. A delinquent home owner who knows their mortgage was purchased by another entity now has reason to delay a foreclosure attempt.


During this delay, there would still be no public record of the bank (or entity) attempting the foreclosure actually having the ownership right to do so. Thus, the home owner could simply collect a security deposit and a month’s rent, turn over the keys, and be moved to another country. An unsuspecting renter could then face eviction and legal action because they have documentation showing they live at the property in question.


To me, the fact that there is a concern for a potential renter about renting a single family home at a time when it should be a more viable option is just as important as what becomes of the foreclosure regulations in Colorado.


Here’s hoping that enough people “move” on this one before it’s too late.






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