How Ya Like Us Now! – WSJ – Foreclosure? Not So Fast

“It’s a brand new world for foreclosure activists,” said Lisa Epstein, director of Caring for Americans in Foreclosure, a citizen advocacy group.


“I haven’t seen any widespread problems” Sasser said


Be sure to get your comments in over at the WSJ on this one…

WSJ – Foreclosure? Not So Fast


LOXAHATCHEE, Fla.—Israel Machado’s foreclosure started out as a routine affair. In the summer of 2008, as the economy began to soften, Mr. Machado’s pool-cleaning business suffered and like millions of other Americans, he fell behind on his $400,000 mortgage.


But Mr. Machado’s response was unlike most other Americans’. Instead of handing his home over to the lender, IndyMac Bank FSB, he hired Ice Legal LP in nearby Royal Palm Beach to fight the foreclosure. The law firm researched the history of Mr. Machado’s loan and found two interesting facts.

First, the affidavits IndyMac used to file the foreclosure were signed by a so-called robo-signer named Erica A. Johnson-Seck, who routinely signed 6,000 documents a week related to foreclosures and bankruptcy. That volume, the court decided, meant Ms. Johnson-Seck couldn’t possibly have thoroughly reviewed the facts of Mr. Machado’s case, as required by law.

Secondly, IndyMac (now called OneWest Bank) no longer owned the loan—a group of investors in a securitized trust managed by Deutsche Bank did. Determining that IndyMac didn’t really have standing to foreclose, a judge threw out the case and ordered IndyMac to pay Mr. Machado’s $30,000 legal bill.

Mr. Machado and his lawyer, Tom Ice, say they now want to convince the owners of the mortgage to cut Mr. Machado’s loan balance to between $150,000 and $200,000—the current selling price for comparable homes in his community near West Palm Beach. “The whole intent was to get them to come to the negotiating table, to get me in a fixed-rate mortgage that worked,” Mr. Machado said.


Not long ago, that seemed highly unlikely. Prodded by the Obama administration, lenders have been willing to reduce interest rates on troubled mortgages or lengthen the repayment time. moves that have reduced mortgage payments.But rarely have banks agreed to sharply reduce principal balances. Most preferred to foreclose instead.

But now that banks in Florida, Maine, Texas and elsewhere are withdrawing affidavits signed by robo-signers and dropping their cases against homeowners, some consumer activists say they have more power to keep theirsettlements that clients in their homes while negotiating for better mortgage terms.

“It’s a brand new world for foreclosure activists,” said Lisa Epstein, director of Caring for Americans in Foreclosure, a citizen advocacy group.

To be sure, no one expects lenders and investors to throw in the towel and systematically write-down millions of mortgages. For the small percentage of homes occupied by owners who fight foreclosure, the documents issue “will delay the foreclosure, but won’t change the outcome,” said Jay Brinkmann, chief economist with Mortgage Bankers Association.

The banks argue that the irregularities cited by judges and consumer advocates are technicalities and that the underlying paperwork on each loan is sound. But lawyers who defend borrowers say the problems are widespread and prove that homeowners are being illegally thrown out of their homes. They promise to bring more suits against mortgage servicing companies that rubberstamp foreclosure filings.


Still, in the past two weeks, GMAC Home Mortgage, Inc., a unit of Ally Financial Inc., J.P. Mortgage Chase & Co.’s home-loan unit and Bank of America Corp. have taken the unusual step of suspending tens of thousands of foreclosures in the 23 U.S. states that handle foreclosures through the court system, including New York, Florida, Illinois, New Jersey and Connecticut, pending a review of their paperwork practices. Both GMAC and Chase have employed reported robo-signers, who have admitted in sworn depositions to signing as many as 10,000 documents each month without properly reviewing and notarizing them.

In July, Florida defense attorney Gloria Einstein took a deposition from Bryan J. Bly, a document-signer for Citi Residential Mortgage, a unit of Citigroup Inc., who told a lawyer he signed between 2,000 and 5,000 mortgage documents a day, using an electronic “e-signature” stamp. A spokesman for Citigroup said the company regularly reviews its foreclosure document procedures and is not investigating its practices further.

Meanwhile, attorneys general in Illinois, Colorado, Texas, Iowa and several other states have launched inquiries into GMAC’s activities, to determine if there their activities constituted criminal fraud.

A GMAC spokeswoman responded to the investigations by reiterating an earlier position, that the errors in the paperwork are technical and did not result in any inappropriate foreclosure.

The most immediate effect of these legal battles and investigation is to prolong the foreclosure process, which could deepen the housing crisis entering its fourth year. “This growing mess in the foreclosure process just means that the day when the housing market recovers and economy returns to normal is farther away,” said Mark Zandi, chief economist at Moody’s Analytics. referring to to foreclosures like Mr. Machado’s that involve problematic documents. “It’s not a question of, ‘Will this be a weight on the housing market recovery?’ It’s a question of, ‘For how long’?”

In so-called judicial foreclosure states, a bank must file an action against a homeowner once they have missed a certain number of payments, and a judge will typically assign a date for the seizure and sale of property, unless the bank and borrower agree on a loan modification.

In Florida, which leads the nation in foreclosure filings, loans remain delinquent for an average of 573 days before going to foreclosure, according to LPS Applied Analytics, a research firm. A year ago it took 423 days, an indication that the foreclosure process is lengthening. Nationwide, the average foreclosure takes 478 days, up from 361 days a year ago. At the height of the housing boom in early 2006, the foreclosure delinquency average stood at 292 days nationwide and 305 days in Florida.

Meanwhile, Mr. Machado, 42, is trying to plan for the future, with the cloud of foreclosure hanging over his head. On a recent Monday, a pick up truck filled with pool-cleaning supplies was one of three cars in the driveway outside of his 1,800-square foot home, which sits in a grid of low-slung stucco ranch houses on large lots with palm trees and bougainvillea in the front yards.

Last weekend, he took his son, a high school senior, to visit colleges around Florida. But the Deutsche Bank trust that owns his mortgage could re-file a foreclosure action against him at any time.

“It’s like I’m in limbo, and it has been terrible,” he said in a recent interview at his home. “Everybody envisions owning your home and 20 or 25 years down the line cashing out and selling it. I’m living in this home, but is it really my home?”

Mr. Ice, who started Ice Legal four years ago, portrays his firm’s work as defending the integrity of the legal process surrounding foreclosures. Banks can’t repossess houses if they’re using sloppy, and in some cases fraudulent paperwork, or if they can’t prove that they own the loan He says his firm has between 300 and 500 similar cases pending.

Although banks and servicers may have been sloppy, Mr. Ice added, most of his clients made mistakes that led them to default on their loans.

“I’m not an innocent bystander,” said Mr. Machado. “I should have done my research.” The difference between himself and most foreclosed homeowners in Florida, he said, is that he hired a lawyer to defend his rights.

“Six or seven out of 10 people threatened with foreclosure crawl in a hole and don’t protect their rights.”

At the West Palm Beach County courthouse, the scene seems to support his case. On a recent Monday, a retired state judge named Roger B. Colton ruled on about 30 petitions for summary judgment in foreclosure cases.

Judge Colton dispatched with all the cases in about an hour and twenty minutes, setting foreclosure sale dates for each house for 120 days after the hearing. One by one, homeowners and their families took a podium in front of the judge, explained the basic facts of their foreclosure, told the judge what they hoped would happen (usually they are hoping a short sale of their property before the foreclosure goes through, or a loan modification from their bank) and received a quick explanation of the judgment from the judge: their home would be repossessed and sold by the bank in 120 days if they weren’t able to work out a deal first.

Only one defense lawyer was present; the remaining homeowners defended themselves.

Write to Robbie Whelan at

Now if you made it this far, get over to the WSJ and get involved in the comments…


8 Responses to “How Ya Like Us Now! – WSJ – Foreclosure? Not So Fast”
  1. housemanrob says:

    I tried to post over at WSJ too. I used to subscribe. NOW THAT RAG IS NOTHING BUT TOILET PAPER!!!

  2. housemanrob says:

    This is a “WAR” between two basic groups………on one side you have human beings that care about each other………..and on the other side are “REPTILES” who are addicted to excess and greed. How do you spot the difference between the two? Just look for the ones hollering “deadbeats”,the ones who lower taxes for the rich, the double ” talkers”, they are easy to spot…………and the republican tea party that would like to perpetuate. racism, separation of classes, etc……………………..what the lizards do not realize is that the annihilation of the MIDDLE CLASS spells DOOM for all of us………………. and them!!!!!

  3. KyleNYC says:

    Just wondering: what does this mean for folks who’ve gotten modifications? Hmmmm…

  4. Just posted my comment on the WSJ site:

    The land records across America have been corrupted beyond repair. Financial institutions who are strangers to any contractual relationship with American citizens are alleging secured debts and instituting foreclosures based on those allegations. These financial institutions are fabricating the necessary paperwork including promissory note endorsements, assignments of mortgage, affidavits, and other “evidence” of a debt which they can not prove and does not exist in relation to the foreclosing entity.

    When this truth is fully revealed the shock will be unimaginable.

    The execs of these financial institutions should be under federal indictment instead of being rewarded by kangaroo courts.

    Lisa Epstein

  5. It is definitely a great feeling having victory over foreclosure!
    Our legal system SHOULD be for the people.. made by the people. and not to burden the people.

    It is sad that even how hard to trying to perfect our legal system, there is just no such thing!

    Everything boils down to what the famous saying goes.. “Prevention is better than cure”

  6. Officer of the Law says:

    The WSJ web site doesn’t want to let me comment for some reason. Could they fear someone posting the transcript of Judge Colton’s “hearing” which started with him telling everyone that he was going to ignore the law and the facts to enter judgment for the banks?

    In case anyone is able to post anything at WSJ, here is the link to Judge Colton’s unethical, illegal and brazen display

    In case you don’t realize that announcing the outcomes before a hearing begins is wrong, there are a few cases on it that these rocket docket judges and foreclosure mill attorneys should know. Legal proceedings must be conducted before an impartial judge who affords the parties a full and fair hearing at which they have the opportunity to hear and present witnesses and evidence. See for example, Robbins v. Robbins, 429 So.2d 424, 426-431 (Fla. 3rd DCA 1983).

    “Due process requirements must be met.” Id. at 429 citing, Shillitani v. United States, 384 U.S. 364, 86 S.Ct. 1531, 16 L.Ed.2d 622 (1966). “A fundamental due process requirement is a hearing, one that may be neither sham nor pretense.” Id. citing, Palko v. Connecticut, 302 U.S. 319, 58 S.Ct. 149, 82 L.Ed. 288 (1937). “Due process mandates that “state action, whether through one agency or another, shall be consistent with the fundamental principles of liberty and justice which lie at the base of all our civil and political institutions….” Id. citing, Herbert v. Louisiana, 272 U.S. 312, 317, 47 S.Ct. 103, 104, 71 L.Ed. 270, 273 (1926).

    Violation of a right made specific by statutes, rules or settled interpretations of them which is a violation of 18 U.S.C. § 242 which provides criminal penalties for a deprivation of rights under color of law. U.S. v. Lanier, 520 U.S. 259, 267 (1997).

    Ignoring evidence and conducting shame hearings with pre-determined outcomes is a violation of due process, and even judges get prosecuted when enough people figure out that they are favoring one side and violating the law. By the way, Lanier is about a judge being prosecuted.

    Those rocket docket judges might want to start following the law since a large number of prosecutors, Congressmen, and legislators have started listening to the millions of Americans who have been ripped off by the banksters, and there are a large number of prosecutions in the works. Yes, the banksters were so stupid and greedy that they screwed members of law enforcement, too. By the way, violating rights under color of law gives rise to both criminal and civil liability, and judges who act without jurisdiction don’t even enjoy the unconstitutional protection of the judicially created doctrine of judicial immunity.

    I smell perp sweat, don’t you?

    • Officer of the Law says:

      Remember, don’t drink and drive especially if you are a judge or a foreclosure mill attorney. Stay off drugs, too!

  7. Regarding the borrowers negotiating position with the bank, please refer to my article on Scrib’d, “FROM THE TIP OF THE ICEBERG DOWN: THE CRISIS IN DOCUMENTS — USED FOR FORECLOSURE.” It list 15 types of defective documents used to foreclose a securitized mortgages. So far newspaper reports only identify authentication fraud where an affiant falsely swear that the amount of the borrower’s debt is true and correct. Wait till the other 14 are “discovered” Tom Ice is right. The time is ripe for extra judicial resolution of mortgage defaults through negotiation and compromise. Read the article and understand how why to “make ’em an offer they can’t refuse.”

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