Wednesday, May 4, 2011

Foreclosures Trapped by a Lack of Lawyers

Moves by banks to ditch law firms snared in the "robo-signing" mess are spreading delays and confusion to borrowers, while angering judges grappling with thousands of foreclosure cases now trapped in limbo, the Wall Street Journal reported today. The trouble began when U.S. banks and government-owned mortgage giants lost confidence in some law firms that handled a huge volume of foreclosures. After controversy erupted last fall over the shoddy review of loan documents known as robo-signing, banks dropped some law firms. Finding replacement lawyers who can pick up the slack quickly has been a struggle. While the resulting slowdown means that fewer houses are being seized, late fees are piling up for homeowners seeking a loan modifications. Investors who own bonds backed by those mortgages could face higher costs from the snags.

Fannie has approved 16 law firms to handle its cases in the state, up from nine firms last year. Freddie uses 14 law firms in Florida, up from four. At one point David Stern's office handled 20% of all foreclosures in Florida.

The bottom line they will still lose the house because they aren't paying the mortgage.