Sunday, February 8, 2009
Make a list and put it in a safe place
(Have read a couple articles about April Charney. Appears as if she has successfully kept some folks from getting pushed through a quick foreclosure.If this approach gains popularity it will provide more motivation for investors to allow mortgage principal reductions. The only way to get out of a debt crisis is through debt destruction.- AM)
Updated: 6:59 AM on Sunday, February 1, 2009
By RICHARD PRIOR
Homeowners who had mortgage problems in the past could go to the local bank, sit down with someone they knew and try to work out a fix.
That's not so common anymore, particularly not since the arrival of "securitized" home loans about 15 years ago.
When loans are securitized, they're put into a big pool -- maybe 10,000 loans at a time, said James Kowalski, an attorney who specializes in consumer fraud.
The pool is split into shares, which are offered to investors, providing "tax-free status to the trust and to the investors," Kowalski said.
A service company handles the day-to-day oversight of the loan -- which may be repackaged and resold several times.
The service company's lawyers step in when a mortgage goes sour. And they act quickly, said Kowalski.
"When I default and my money is no longer being sent to the pool of investors, the servicer has to send that check (to the investors)," he said. "So when I miss a payment, they start bleeding.
"And their lawyers are graded on a scale of how quickly they can move a foreclosure through."
But Kowalski and Jacksonville Area Legal Aid attorney April Charney have been slowing the process down by challenging ownership of mortgages.
The ownership link was easy to follow when the transactions passed from one hand to another without repackaging for multiple sales. Things got confusing when individual loans became drops in large pools. And without that proof of ownership, service companies don't have "standing" to foreclose.
Even if the companies are later able to provide the necessary proof, the delay may be all the homeowner needs to straighten out his financial problems.
"They have to prove they have the right to bring a suit," said Kowalski. "I've had people call it the Charney-Kowalski solution to this mess.
"I've had lawyers with banks ... tell me they are seeing the motions filed around the state. Bankruptcy judges have picked up on this and have dismissed some cases.
"I used to say all the documents are in the box next to the Ark of the Covenant at the end of 'Raiders of the Lost Ark.' They've just got to find them."