First, anyone who was foreclosed on during the past three years has a chance that the bank that foreclosed on them did not cross the i's and dot the t's during the foreclosure process. According to one article:
Allegations of possible mortgage fraud against financial giants GMAC, JPMorgan Chase and Bank of America read like a corporate thriller: forged documents, faked Social Security numbers, phantom titles, disappearing paper trails, "robo-signers" and mortgages sliced and diced so many times that nobody really knows who owns them.In sum, some of the biggest banks foreclosed on people without really reviewing the cases thoroughly enough. This implies that some foreclosures could be overturned. Apparently, even if the home owner was in default on making his or her home loan payments, if the banks didn't do their due diligence, the foreclosure could be overturned. This is going to kill the housing market as all foreclosed properties will sit in limbo while the industry sorts this out. Unfortunately, the housing market put us into the 'great recession' (largely because of mortgage fraud) and housing is the biggest driver of the economy so this foreclosure fraud is putting the brakes on the economic recovery and the economy is likely to cool down fast. You may have thought it was cool already but if you can envision an iceberg then you'll have the right picture...
Why is that? Because anyone who bought a house that was foreclosed on in the past three years could be subject to a legal process to see if they really own the home. This will result in a court case and looking at documents, etc. to see if the foreclosure should have happened to begin with. In the end, this means a long, costly legal battle on some of the foreclosures. This means the banking industry will suffer tremendously since they won't be able to unload properties or get paid on their loans.
I read that approximately 40% of current real estate sales are foreclosures. Not only will people be hesitant to buy a foreclosed home, they may find it impossible to get title insurance even if they are willing to buy. This is because it's likely that the title insurance company will be paying something when the courts sort these fraudulent foreclosures out so this means title insurers may go out of business or suffer tremendously. They will think twice about touching any foreclosure sale.
Overall, this is horrible news for the economy, unless you're an attorney specializing in foreclosure litigation. (Why is it that the attorneys always make out in fraud cases?!...)
If you're like me and have bought a foreclosed property in the past three years, read this article about some advice on what to do next.
Like my wife said: It's amazing how much havoc fraud causes in the economy.