Here’s some cheery news for your Sunday open house visiting!  This might make you think twice about offering anything on a short sale, REO, or previous foreclosure.

Audit Uncovers Extensive Flaws in Foreclosures

By GRETCHEN MORGENSON, Published: February 15, 2012

An audit by San Francisco county officials of about 400 recent foreclosures there determined that almost all involved either legal violations or suspicious documentation, according to a report released Wednesday.

Photo, right: Phil Ting, Phil Ting, the San Francisco assessor-recorder, found widespread violations or irregularities in files of properties subject to foreclosure sales.  Annie Tritt for The New York Times

Phil Ting, the San Francisco assessor-recorder, found widespread violations or irregularities in files of properties subject to foreclosure sales.

Anecdotal evidence indicating foreclosure abuse has been plentiful since the mortgage boom turned to bust in 2008. But the detailed and comprehensive nature of the San Francisco findings suggest how pervasive foreclosure irregularities may be across the nation.

The improprieties range from the basic — a failure to warn borrowers that they were in default on their loans as required by law — to the arcane. For example, transfers of many loans in the foreclosure files were made by entities that had no right to assign them and institutions took back properties in auctions even though they had not proved ownership.

Well, that’s San Francisco for you.  That doesn’t mean foreclosures in the nation’s other 3140 counties and county-equivalents should have any problems at all.  You see, bankers in San Francisco were so terrified of the terrible impact Prop 8 had on gay marriage and real estate values, they didn’t want to look at what they were signing.  For three whole years!

Good thing the $26 billion foreclosure settlement between five huge banks and 49 state attorneys general is already signed!  Who knows what kind of trouble there would be if this sort of report had been released beforehand.  Why, San Francisco homeowners wouldn’t be getting their share of the $147 million (provided they managed to hold onto the house while the banks were doing everything possible to claw it away, in which case $2,000 each ought to cover it).

This is an Open Thread.  Are you more or less likely to buy in San Francisco after reading this story?

Here’s some more cheery good news for your weekend!

Robo-signed mortgage docs date back to late 1990s

Widespread robo-signing of mortgage documents found as far back as 1998 could haunt owners

Pallavi Gogoi, AP Business Writer, On Thursday September 1, 2011, 8:50 pm EDT

In this July 18, 2011 file photo, Salem, Mass. Registrar of Deeds John O’Brien stands near copies of robo-signed signatures at his office, in Salem, Monday, July 18, 2011. O’Brien said an investigation of more than 710,000 documents in his office found that 25,187 homeowners in the county, or about 3.5 percent, have paperwork on file with signatures he believes are fraudulent. (AP Photo/Steven Senne, File)

NEW YORK (AP) — Counties across the United States are discovering that illegal or questionable mortgage paperwork is far more widespread than thought, tainting the deeds of tens of thousands of homes dating to the late 1990s.

The suspect documents could create legal trouble for homeowners for years.

Already, mortgage papers are being invalidated by courts, insurers are hesitant to write policies, and judges are blocking banks from foreclosing on homes. The findings by various county registers of deeds have also hindered a settlement between the 50 state attorneys general who are investigating big banks and other mortgage lenders over controversial mortgage practices.

The problem of shoddy mortgage paperwork, which comprises several shortcuts known collectively as "robo-signing," led the nation’s largest banks, including Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and other lenders to temporarily halt foreclosures nationwide last fall.

I especially like the quote from a deeds registrar in North Carolina who found 74 percent of a sample of 6100 mortgages filed since 2006 had questionable signatures, and another 450 that didn’t pass the smell test in the last nine months.  But we already knew the banks were lying, cheating, fraudulent scumbags now.  What’s exciting is finding out that they were lying, cheating, fraudulent scumbags for more than a dozen years!

How about tying up your earnings for the next 30 years by signing a contract with a bunch of dishonest thieves so you can buy a house? Yeah, you might have some trouble selling it in the future, but maybe by then all the bankers will be excused from this dreariness about who owns which house and who didn’t pay their mortgage and how many times the same loan was sold into a bunch of synthetic CDOs without any paperwork.

This is an Open Thread.

Here’s another example of your tax dollars at play.

Rep. Waters: $20 Billion Settlement Would Be Too Low

By Nick Timiraos, The Wall St Journal, February 25, 2011, 10:56 AM ET

A top Democrat on the House Financial Services Committee signaled that the broad outlines of a settlement to resolve mortgage-servicer abuses should push for penalties higher than the reported $20 billion figure.

On Thursday, the Journal reported that the Obama administration, federal regulators, and state attorneys general were ironing out broad outlines of a settlement to resolve abuses that first surfaced when foreclosure processes broke down last fall. The settlement could push for banks to write down loan balances for troubled borrowers, and several stakeholders in the talks have pushed for a settlement of more than $20 billion.

Here’s the quote that caught my eye in this piece on spanking bankers for taking away peoples’ homes by forging documents:

The banking industry has knocked the Obama administration’s nascent proposal, saying that the settlement is too large relative to the size of their abuses and that it is also too small to have any meaningful impact on the housing market.

So what would have meaningful impact on the housing market?  I’m sure you all have some excellent ideas what would work.  Shakespeare said in Henry VI, “The first thing we do, let’s kill all the lawyers.”  So what should we do to the bankers?

After reading about the truly depressing tale of the Foreclosure Express Courtroom (the Rocket Docket) in Florida, here’s some good news provided you aren’t a bank or a bank shareholder.  Thanks to Burbed guest editor DreamT for passing this news item along.

Two Banks Lose in Foreclosure Cases

By ROBBIE WHELAN, ALAN ZIBEL and VICTORIA MCGRANE, The Wall Street Journal

The highest court in Massachusetts ruled against Wells Fargo & Co. and U.S. Bancorp in two foreclosure cases that cast doubt over whether some home loans were properly handled when packaged into securitizations.

Justices in the state’s Supreme Judicial Court upheld a lower court’s decision to void foreclosure sales of two homes in Springfield, because owners of the loans couldn’t prove that the mortgages had been assigned to them. Both loans were assembled into mortgage-backed securities sold to investors.

Photo, above right: A Wells Fargo branch in San Francisco. Shares of the bank fell 2% on the ruling, and other banks saw share-price losses as well.  — Getty Images

Bank stocks fell on worries that Friday’s ruling could make it harder for financial firms to foreclose on mortgages that wound up in securities. The defeat also might provide ammunition to mortgage-bond investors who have accused and even sued servicers for what the investors claim is systematically shoddy loan documentation.

….

The Massachusetts case is a closely watched example of what some mortgage experts describe as “show-me-the-paper” cases over widely used procedures for transferring loans after they are made. Individual loans often are sold to an investor, with the new owner’s name left blank in loan documents to minimize paperwork hassles as the loan subsequently changes hands before being combined with other loans into mortgage-backed securities.

These cases only apply to Massachusetts, though.  Banks in California and nonrelevant parts of the country can continue to foreclose on homeowners without proving they actually own the mortgages in question.

So, now that another Christmas has come and gone, it’s time to take stock and count our blessings.  Here’s a blessing you didn’t know you had: Be thankful a bank isn’t foreclosing on you for a house you don’t even own.  Because if they were, good luck proving it isn’t yours.  Or maybe it is your house, but another bank who doesn’t even own the note is foreclosing despite your perfect payment record? Or even better yet, how about a bank foreclosing on your house when you paid cash for it?  Welcome to another episode of Bankers Do the Darndest Things! 

Thanks to Burbed reader nomadic for this cup of Christmas cheer!

Caught by mistake in foreclosure web

By MICHELLE CONLIN, AP Real Estate Writer – Wed Dec 8, 6:28 pm ET

Christopher Marconi (photo, right) was in the shower when he heard a loud banging on his door. By the time he grabbed a towel and hustled to his front step, a U.S. marshal’s sedan was peeling out of his driveway. Nailed to Marconi’s front door was a foreclosure summons from Wells Fargo, naming him as a defendant. But the notice was for a house Marconi had never seen — on a mortgage he never had.

Tom Williams was in his kitchen thumbing through the mail when he opened a letter from GMAC. It informed him that the bank would confiscate his house unless he immediately paid off his mortgage balance of $276,000. But Williams had never missed a mortgage payment. And his loan wasn’t due to mature until 2032.

Warren Nyerges opened his front door in Naples, Fla., to find a scraggly-haired summons server standing on his stoop. He plopped a foreclosure notice from Bank of America in Nyerges’ hands. But Nyerges had paid for his house in cash. And he’d never had a checking account, much less a mortgage, with Bank of America.

By now, you may have heard the stories of bank robo-signers powering through hundreds of foreclosure affidavits a day without verifying a single fact. But most of those involved homeowners who had stopped paying their mortgage. They were genuine defaulters. Now a new species of homeowner is getting pushed into foreclosure hell.

Several US Senators noted problems reported to them of people doing everything right and getting notices of default, with no way to reverse the foreclosure express without hiring lawyers.

One woman in the article said Bank of America not only picked through her personal property but cut off her utilities, poured antifreeze down her drains, padlocked her doors and confiscated her pet parrot.  Angela Iannelli said it took her 6 weeks to get B of A to clean her house.  She was current on her loan payments.

Jose and Maria Perez  of Seguin, Texas are suing B of A for scheduling their house for a foreclosure sale, despite the fact that their loan is current, with a different bank.  Former employees at banks have testified they knowingly foreclosed on the wrong people, or masqueraded as bank VPs when they had no experience whatsoever… because bank officials told them to do so.

So why is this happening?  Is it just sloppiness, or, as this AP article suggests, is it because the banks have a financial incentive to foreclose and then slap on a bunch of fees, which are the first debts paid when the house is sold?  Ya think?  Does a banker charge interest?

There’s plenty more, so get out your boxing gloves, head down to the boxing ring, find the nearest banker and enjoy Boxing Day.