Solving the Foreclosure Crisis – How can we fix the process?
As discussed previously, the pooling and servicing agreement requires the servicer to forward payment to the securitized trust regardless of whether the borrower is making the mortgage payment. This must continue until the loan is removed from the trust, and that can only happen by foreclosure. This seemed like a great idea when these securities were created at the height of the subprime-lending craze, but with homeowners unable to pay the exploding adjustable payments, servicers are hemorrhaging cash and going under.
Because there is an incentive to default the homeowner and get the home through the foreclosure process as quickly as possible, servicers and default servicers hire law firms that promise speed as their top priority, even at the expense of truth and justice. Literally, law firms receive a score from Fidelity National Default Solutions, known as an Attorney Performance Report (APR), for the speed with which they dispatch homeowners from their homes. The top performers receive the prestigious Summit Award, bestowed annually at Fidelity’s annual meeting, but those firms who do not meet an acceptable foreclosure rate are terminated.
These foreclosure mills are under a tremendous pressure to perform. Predictably, they have systematically degraded the judicial process as a byproduct of their fast but sloppy practice and procedure. Below I have outlined the common wrongdoing seen in the state courts throughout Northeast Florida where I routinely appear and my personal suggestions for strengthening justice. I suspect many of these same problems occur in courthouses throughout the United States: