Q. Foreclosures fell in February and have been down for several months. Isn't this a sign that the real estate market is recovering?
A. No. Many states and lenders have slowed the foreclosure process because the paperwork is infested with errors, questions and outright misrepresentations. Bogus affidavits, which include unverified information, have been used in many jurisdictions to foreclose homeowners.
While the paperwork has frequently been wrong, the reality has not; people who have not made their payments will be foreclosed. The result is that what we now have is not especially "fewer" foreclosures but a growing number of delayed and deferred foreclosures, foreclosures that will occur when the paperwork is straightened out. This is necessary to assure that no one loses their home unfairly and that property titles are absolutely correct so that future owners can finance and sell their homes without ownership questions.
In the event that someone has already lost their home because of falsified foreclosure claims, you can bet that enormous damages will be sought, as well as disbarments and perhaps even indictments for criminal conduct.
Q. The last time I financed a property I was able to get a mortgage with a no-doc loan application. Now I can't find a lender who allows such loan applications. How come?
A. One of the major causes of the mortgage meltdown was the willingness of lenders to finance homes without fully-documented loan applications. Instead, borrowers were allowed to "state" or guess their income and get financing without supporting records and paperwork.
Those days are over. Under the Wall Street Reform Act passed last summer lenders may continue to offer no-doc loan applications, but they have enormous liability if they do. Instead, lenders can largely avoid such liability if they fully document every loan they originate.
This means borrowers will have to show they have the ability to repay the loan. They will have to verify income and employment. And lenders will want as much documentation as possible to protect themselves against future claims.
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