One of the major fallacies skillfully employed by the lending industry since the foreclosure crisis is that the meddling defense attorneys and pro se litigants were clogging the courts with their dilatory motions and challenges, unnecessarily prolonging the foreclosure process, creating neighborhood blight and costing homeowners billions in property values by preventing “market clearing.” This was presented to state lawmakers as a rationale to tighten the rules on foreclosure challenges and eliminate consumer protections, ensuring that lenders could bulldoze their way through the courts.
It never appeared to be true, however, given that plaintiff’s attorneys routinely allowed cases to rot, filed motions to delay, withdrew cases at the last minute and so on. Some of this was due to problems with documents and procedure, some of it was inscrutable, some of it maybe even based on squeezing more money from investors. But the main investor in mortgages, the GSEs, continue to play along, whether wittingly or not.
Last week, Fannie Mae and Freddie Mac, in successive days, extended their foreclosure timelines in a majority of the states where they own mortgages. The timeline is a guidance for how long a foreclosure is supposed to take, from the initial delinquency to the foreclosure sale. This includes the timeline for an uncontested foreclosure proceeding.
In theory, if servicers go beyond the timeframe they get fined a “compensatory fee,” which they pass on to the foreclosure mill law firms to get them to hurry up. But servicers can provide “reasonable explanations” to waive the fee, like bankruptcy, probate or an active trial modification. There’s also a compensatory fee moratorium for Washington D.C., Massachusetts, New York and New Jersey, which presumably is related to their more stringent foreclosure laws.
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