Foreclosure filings rose by almost 20% in Nassau County in July of 2012. This took place even though foreclosure rates fell in this same month by 43% as compared with July of 2011.

Financial institutions were busy in Nassau County in July. They filed to 469 foreclosure cases. Many of the new foreclosure cases filed in Nassau County involved homes that are recent defaults in mortgage payments. During this same time, there were only 216 filings for foreclosure proceedings in Suffolk County.

Barry Smolowitz, the founder of the Suffolk County Pro Bono Foreclosure Settlement Project, recently stated Suffolk County has “a more decentralized” way of processing foreclosure court cases than Nassau. There are a larger number of judges hearing cases in Suffolk County then there are in Nassau. This has had an impact on the administrative process involving foreclosure cases in Suffolk County.”

David Schwartzberg, the foreclosure counsel to the Huntington based Advantage Title, recently stated the foreclosure process is “much more onerous” for banks than it used to be because there are much stricter Federal and State oversight and then there has been in the past.

Early in 2012, the nation’s five largest mortgage lenders reached a $25 billion dollar settlement with both Federal and State agencies dealing with alleged foreclosure improprieties.

Fewer Foreclosed Homes Being Listed For Sale

Real Estate brokers who handle the sales of foreclosed homes have indicated there are fewer foreclosed homes being listed for sale on the market in Long Island. John Fitzgerald, the President of Realty Connect USA, located in Suffolk County stated “we’ve seen a lot less foreclosed homes enter the marketplace then they have in the past.”

On March 27, 2007, HSBC Bank brought a foreclosure proceeding on a mortgage on property located in Brooklyn. The mortgage on the property was given to “MORTGAGEIT.” The mortgage was an adjustable rate mortgage in the amount of $624,000. A note was also given to “MORTGAGEIT,” as lender.

The borrower on the note and the defendant on the case was named McKenna.  The note showed an undated endorsement on behalf of ” MORTGAGEIT” to HSBC. There was also an assignment of the mortgage on March 2, 2009. The assignment was from the Mortgage Electronic Registration System Incorporated designated the mortgagee as “the nominee for the lender and mortgagee of record” to HSBC.

HSBC had refused to agree to a short sale on the property which had been requested by McKenna. HSBC claimed that McKenna had never been a resident of the property subject to the foreclosure. Therefore, HSBC had no obligation to negotiate with him in good faith.

The court found that HSBC failed to negotiate in good faith. The court ruled that they could not recover the interest on the note and the mortgage from the date of the McKenna’s alleged default.

Conclusion

This court penalized the lender for refusing to act in good faith.  The courts in New York are becoming more aggressive in taking action against lenders who fail to act in good faith.

During the past calendar year, there has been a large increase in the sale of homes in the City of New York. During the third quarter of the 2011 calendar year, the average sale price for properties in the five boroughs increased from $780,000 to $786,000. There were approximately 11,000 properties exchanging hands during this period which is a 6% increase from 2010.

City Housing Market Improves

The price of homes in the City of New York, especially in the boroughs of Brooklyn and Queens, have reached the highest levels since 2007. This is according to Stephen Spinola, the president of the Real Estate Board. He also stated “the slow and steady consistent improvement in the market continues to provide strong evidence that New York City residential sales market has made it out of the woods and should only continue to improve.”

During the foreclosure crisis the average price for the sale of a single family home in the City of New York was approximately $669,000.

Manhattan Has the Highest Sales Prices

Manhattan once again was the borough with the highest average price for condo’s, co-op’s and apartments. The average price was $1.37 million. There has been a significant influx of foreign investors to the Manhattan real estate market according to Seth Hirschhorn, a senior managing director of the real estate group Citi Habitat. Foreign investment has been one of the driving forces in the real estate market in Manhattan.

Home prices in both Brooklyn and Queens are now above the 2007 recession levels. The average sale price of a home in Queen’s county was $411,000 while the average price home in Kings County in the third quarter was $619,000.

Foreclosure Rates Continued to Fall

During the month of September 2012, foreclosure rates on a nationwide basis fell to a five year low. There was a 7% decline in default notices, scheduled auctions and bank repossessions of foreclosed properties from August of 2012.

Manage the Flow of Foreclosures Coming to Market

There are still many homes in foreclosure today. However, the banks have taken the position that they do not wish to flood the market with foreclosed homes. Therefore, they are managing the flow of homes into the foreclosure process to keep it at a steady pace and not further upset the delicate housing market.

Home Affordable Mortgage Program (HAMP)

There are approximately a million mortgages modified by financial institutions under the Home Affordable Mortgage Program (HAMP). In each of these cases, a home was saved from going into foreclosure. Banks are taking a much more aggressive approach to prevent their borrowers from falling into foreclosure.  They are agreeing to short sales in many situations because they actually lose less money through a short sale than through a foreclosure.

Record Low Mortgage Rates

The record low mortgage rates have also had an impact on the housing market. Homeowners with good credit have been able to refinance their mortgages to lower rates. This has kept them out of foreclosure situations.

Conclusion

As the economy in the United States seems to be limping along, so is the housing market. Although foreclosure rates are down and home sales are up, supply and demand are still not at equilibrium. There are still too many homes on the market. In areas such as Nassau and Suffolk County on Long Island, the flood of homes on the market still acts to depress the real estate market for single family homes.

The United States government sued Wells Fargo under the False Claims Act for mortgage fraud. The False Claims Act provides a penalty for fraud against the government and its financial institutions. The government’s pleadings claimed damages and civil penalties from Wells Fargo. The pleadings specifically alleged for a 10 year period, Wells Fargo engaged in reckless deficient training, deficient underwriting and deficient disclosure while having the Federal Housing Administration paid hundreds of millions of dollars on insurance claims for thousands of defaulted mortgages as a result of false certifications by Wells Fargo. Wells Fargo is currently the fourth largest bank in the United States.

Wells Fargo Is Not the First Bank Sued by the Government

The United States government has previously brought lawsuits against Citigroup Incorporated’s unit, CitiMortgage Inc. This lawsuit was settled by Citigroup for $158 million dollars. In a lawsuit brought by the United States governments and against Deutsche Bank, Deutsche Bank paid $200 million dollars. In the largest case brought by the Federal Government, the U.S. Attorney’s Office in Brooklyn took action against Bank of America Corporation’s Country Wide unit. Bank of America settled this suit for 1 billion dollars earlier this year.

The lawsuit brought against Wells Fargo was pursuant to a program that allows banks to originate, underwrite and certify mortgages for FHA Insurance purposes. The lawsuit claims that Wells Fargo did not follow the FHA rules in underwriting their mortgages. Wells Fargo has stated they plan on vigorously defending themselves against this lawsuit.

Conclusion

It is most likely Wells Fargo will seek a monetary settlement related to this lawsuit. This was the road taken by Bank of America, Citigroup and Deutsche Bank when similar lawsuits were brought against them.

Individuals facing financial difficulties have been utilizing their credit cards to make mortgage payments. Is this a good idea? At the end of the month, when the homeowner does not have sufficient funds in their bank account to make the mortgage payment, it is very easy today to make those payments with credit cards.

There is divided opinion among financial experts whether making mortgage payments with credit cards is a good idea. On one hand this can have a negative impact on the financial situation of the individuals involved. Since mortgage payments generally involve large sums of money, this creates a significant amount of credit card debt. The high dollar amounts of mortgage payments can cause credit card holders to max out the lines of credit on their credit cards. This causes increases in their minimum payments every month. This can also have a negative impact on the individual’s credit rating.

When there is insufficient cash flow to make mortgage payments, making more than one payment on a credit card is generally a bad idea. Should a family not have sufficient funds to pay all of their monthly expenses, the first payment they should make should be their mortgage payment.

Credit Card Interest Rates

Credit card interest rates are substantially higher than interest rates on mortgages. Mortgage interest rates have reached all-time lows of approximately 2 1/2% in recent months. However, credit card interest rates generally run between 12 and 24%. From an interest rate perspective, the long-term costs of the mounting credit card debt are much greater than the expenses related to falling behind on one’s mortgage.

Financial Emergencies

Credit cards are a valuable tool to deal with financial emergencies. Possibly the best solution to the question as to whether to make mortgage payments on credit cards would be to consider the family’s overall financial situation and how much making a mortgage payment on a credit card will increase the monthly credit card payment.

About The Author

Elliot S. Schlissel, Esq. is an attorney practicing law in the metropolitan New York area for more than 34 years. He assists his clients with regard to bankruptcy matters, mortgage modifications and foreclosure defense.

There are a variety of issues an attorney must look into when analyzing the defense of a foreclosure action. One of the first issues that should be investigated is whether the institution initiating the foreclosure action has standing to bring the lawsuit.

Standing To Sue In Foreclosure

The plaintiff, the financial institution, must be the appropriate party to bring the foreclosure lawsuit. The attorney should look into whether the financial institution is the original financial institution and whether assignments from the original financial institution have been made. Have these assignments been filed with the County Clerk or the Registrar of Deeds in the county?

The financial institution must establish it has standing by establishing it is either the holder or the assignee of the mortgage it is foreclosing on.

Ownership Of The Note

Even if the financial institution has possession or ownership of the note, it is still not sufficient to establish they are the holder of the mortgage.  The assignment of the mortgage must take place prior to the initiation of the lawsuit. Assignments cannot be made on a retroactive basis regarding a mortgage.

Real Estate Mortgage Investment Conduit (REMIC) Trust

Many mortgages are maintained by the Real Estate Mortgage Investment Conduit Trust. The assignment of these mortgages must comply with REMIC rules and regulations as set out by the Internal Revenue Service as well as the rules provided in the Pooling and Service Agreement (PSA) which acts as a servicing agent governing the agreements for the trust.

The PSA creates rules concerning how the trust operates. It specifically controls “the exact steps necessary for a trust to be created, bundled, mortgages to be transferred into the trust, issuance of securities by the trust to the depositor on the open market, generally to institutional investors and maintenance of the trust to achieve a favorable [REMIC] tax status. This document exists for each specific trust and it is in the public record available through the Securities and Exchange Commission (SEC) website.  The transfers within the trust require a very specific language. The language is called “recital of the transfer”. This outlines the steps necessary to transfer the mortgage to the trustee.

PSA requires the financial institution to show an unbroken chain of transfers. It also must show deliveries and acceptances of the mortgage note from the original institution to the sponsoring organization that established a securitization of the mortgage and finally to the designated trustee.

Mortgage Electronic Registration System

The Mortgage Electronic Registration System (MERS) acts as a nominee and does not own the mortgage. It therefore lacks authority to assign a mortgage. If there is an assignment of the mortgage to the trust with MERS acting as the assignor this is invalid as it violates the chain of title requirements set up by the PSA.

Time Frame Of Transfers

Besides establishing proper chain of title, the financial institution and its lawyers must show that the note and mortgage were transferred to the trust between the time of the origination and closing dates.  This is usually a period of approximately 90 days. Only during that period can the trust accept the mortgage transfer. If the mortgage transfer takes place outside that 90 day window it is invalid.

About The Author

Elliot S. Schlissel, Esq. has been representing individuals in foreclosure and real estate related problems and mortgage issues in the metropolitan New York area for more than two decades