Bank of America forecloses on a man who has no mortgage

Jason Grodensky, a Fort Lauderdale man who bought his house with cash last December was surprised to discover that Bank of America had foreclosed on him, though he has no mortgage. Florida's foreclosure mills being what they are, the checks and balances against erroneous foreclosure have eroded to the point where banks can seize and sell homes they have no interest in.

Grodensky's story and other tales of foreclosure mistakes started popping up recently across South Florida. This week, GMAC Mortgage -- one of the nation's largest mortgage servicers and a major mortgage lender -- told real estate agents to stop evicting residents and suspend sales of properties that had been taken from homeowners in foreclosure. The company said it might have to "correct" some of its foreclosures, but was not halting those in process.
In Florida courts, which have been swamped with foreclosure cases for several years, mistakes "happen all the time," said foreclosure defense attorney Matt Weidner in St. Petersburg. "It's just not getting reported."
And the legal efforts required to resolve a foreclosure mistake are complicated. "Unwrapping it is like unwrapping Fort Knox," said Carol Asbury, a Fort Lauderdale foreclosure attorney. "It's very difficult."

Man's home sold out from under him in foreclosure mistake

(Thanks, Barry, via Submitterator)

(Image: Thumbnail from larger photo by Robert Duyos, Sun Sentinel)

I write books. My latest is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie Stross); With a Little Help (short stories); and The Great Big Beautiful Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.

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DJBudSonic

Hmm.. this thread kind of degraded but anyway..

I came home last week to find my neighbor’s garage and house being picked over by a yard service company who had a service request from the foreclosing bank to mow the lawn. The problem was this property is still occupied, quite obviously, and the while the owner is in foreclosure he has not yet completed the process and still lives there, he has not received the required notice to vacate (his eviction), yet they had issued all these work requests on the address.

A quick chat with the startled perps and I concluded this was business as usual for them and the banks. Don’t forget that even in foreclosure one has rights!
Anonymous

To all you smart guys. Those of us that are “upside down” know we screwed up. But most of us were not looking for a free ride. But to see our property values go from 270 to 100 is beyond what some people can stand (me) (along with loss of income etc) I did not want a pity party I wanted a modification from Suntrust who got more than 5 billion in Tarp. I just asked those idiots for an interest only for a three year lock. I did this while I was current. They give you the yes, yes, yes for a year- than foff. There are 12 other suntrust loans in this complex and they did not modify a single one. Another 40 or so from other banks- same story. The lack of co-operation drove the values into the toilet. Guess what Suntrust? I am shoving it right back into the Mers nightmare you idiots created. Have fun with it. Of course, it will take you 18 months to get it from me. To you lucky guys that so brilliantly dodged the bullet, I am happy for you. For you judgemental idiots- well you know what you can do.
barryfandango

You know what offends me the most about this? The simile “Harder to unwrap than Fort Knox.”
Unfair Robot

It seems to me that in order for any one part of a system to fail so spectacularly, you would, aside from that one part of the system being really broken, need the entire system to be really broken in order to support the complete brokenness of that one part.

Did that make sense?

To summarise: everything is broken.
Anonymous

“Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens.”

No kidding!!!

Why should Jason have to pay for the idiotic mistakes of Bank of America. After this fiasco, it appears Jason should be receiving not only an apology from Bank of America, but also a cash settlement.
Childe Roland

As far as being upside down, the buyers signs a contract that says they are going to either 1) make payments on a home or 2)let the bank have it back.

The banks have convinced us that number 2 is some type of moral failing, but it’s not. It’s a business decision, based on a contract agreed to by both parties.

Banks and businesses screw consumers every day for money, to the point of the original post, but let a consumer turn the tables and suddenly it’s AN OUTRAGE!!

My sister walked away from a house in Florida and it was a very good decision. Why should she pay for a house that’s worth 30% less than what she paid, when she signed a legal contract that gave her another option?
chgoliz

The tax deduction in the US is merely your tax % rate times the interest (not principal) paid on your mortgage – saving only a small percentage of the total outlay – and it’s more than offset by repairs, upkeep, and local RE taxes, as well as the full interest costs themselves. Plus, real estate equity is economically illiquid in a way that affects other aspects of life (such as being able to move to a better job). Even in the height of the housing bubble, renting often made more economic sense, depending on individual circumstances.

The modern innovation of putting down “only” 20% was introduced by the GI Bill, which underwrote the mortgages of WWII veterans so banks would be willing to give them mortgages for such a large % of the total cost. Prior to that, a down payment usually had to be 80-90% of the purchase cost.

During this most recent housing bubble, down payments were often as low as 5-10%. That leaves almost no room for market fluctuation.

And once the dominoes started to fall, it made it harder for everyone still standing to withstand the damage to their equity.
mmechanic

As Mother Jones revealed in this takedown of a troubled industry, the law firm of Florida foreclosure baron David Stern (http://mojo.ly/9jGopt) was fudging “assignments of mortgage,” the legal doc that certifies who owns the property. Even so, it’s unclear how one could do that in a case where no bank has any ownership of the property. Can you clarify, Cory?
Anonymous

So, as a generally operating procedure, anyone being foreclosed on should simply stay in the house until the banks can prove they are legally entitled to evict.
Anonymous

It only lends credence to this masterpiece by David DeGraw.

http://ampedstatus.com/the-road-to-world-war-iii-the-global-banking-cartel-has-one-card-left-to-play

It’s but the first in a series and sourced to the moon, so maybe people would want to give it at least a hard skim and click a few of the many links.

love, 99
Rider

Amazing how easy it is for someone to offer advice and judge others when he just admited the area where he lives was unaffected by the recession.

Buying a house in 1998 for $94,000 and having that has be currently worth $79,000 because speculators in your state went nuts is not very fair.

Not sure why someone in this forum would lump homeowners who have been in their homes for decades with “speculators”. It’s easy to judge others when you avoided the problem by simple dumb luck.
- perchecreek
  
  It was fairly clear to me that purchase of a house at a price that wildly exceeded what any reasonable person could pay was not a smart thing to do. So I didn’t. Golly, didn’t you see the exponential shape of housing prices in the 2000-2008 period? Who in their right minds would have bought in that kind of market?
  
  In a similar vein, I stopped investing in the US stock market when Glass-Steagall was repealed. With me, it’s as much a moral thing as much as a financial one: I don’t gamble. Just as I think Las Vegas is stupid, so to do I think automobile suburbs are a colossally stupid thing to do; they’re just bad investments. But that’s a personal quirk of my own, I suppose.
  
  What boggles me is that so many people were so stupid. Cities invested hundreds of millions in mortgage backed securities, retirement funds did, too. Millions of people bought homes that they could barely afford in good times, let alone bad. Hell, millions of these people actually think that they’ll be able to spend thousands of dollars on automobiles just to get to work. I just don’t get it. How could so many people be so ignorant?
  
  But I digress. Anyhow, to reply to another poster: you really think this is all happening because the evil 1% became, momentarily, evil-er? As I recall, just about everyone in this fast food joint of a nation was in on the grift.
Francesco Fondi

Isn’t this what happens in communist countries?!
Chuck

“Damn! They caught us in the act again!”

“Don’t worry. Just keep doing it until it doesn’t make the news.”
MB

And then I was like “Dude, you *have* no mortgage!”
I Like Cake

Yes, I too am not in financial trouble. Therefore, I assume if anyone else is, it’s probably their own fault, due to their many personality defects.
Frank W

“It’s called the American Dream because you have to be asleep to believe it”

— George Carlin
Anonymous

The thing to remember about being upside down is that Florida is a “full recourse” state. This means if the bank forecloses, you’re STILL liable for the difference between what they sell your house for and what you owe them.

In this particular case, it looks like the left hand wasn’t talking to the right hand. The bank agreed to a short sale* by the previous owner after they had initiated the foreclosure process and faild to stop it when the house changed hands.

*A short sale is where the bank voluntarily agrees to release the borrower from their debt in exchange for the (insufficient) proceeds of a sale of the property.
LanceThruster

When you make some sort of bank error (late payment, overdraft, clerical error, early withdrawal, use of non-member ATM, etc.), you are fined, penalized, have your interest rate raised and/or credit canceled or reduced, and/or assessed a charge meant to defray the cost your lack of competence or integrity has cost the bank and therefore the other customers. The bank justifies this arguing the bank’s need to pass those costs along.

When the bank makes a similar error, it makes you jump through hoops to get it corrected, and even if the bank’s error was particularly egregious, you will probably not be entitled to any compensation for your time and trouble, nor will you receive any.

This mortgage foreclosure nonsense just shows how much they can err, and still not be liable in any meaningful fashion. Predatory lending practices and bail-outs for those creating the problem in the first place is bad enough, but this is unconscionable and a direct result of the bundling phenomenon. The deck is clearly stacked against the consumer
a_user

tsk! taking and selling something you don’t own should be illegal
Rider

The amount of foreclosure happening in Florida is truly insane. I know at least 5 people who have been waiting for foreclosure for 2 years now. That why I scratch my head and wonder how the hell the recession is over. We still haven’t even really started yet. I”m upside down on my house now and my mortgage will increase in a few years, not sure how anything has changed.
- sporkinum
  
  The concept of being upside down doesn’t make any sense. You paid what you thought was a fair price for your house and somehow, you believed you had enough money to may the mortgage. The house hasn’t changed, you just think the value for having a roof over your head has somehow changed. If you got a variable rate mortgage with a balloon payment, more fool you. You shouldn’t be bailed out because you bought something you couldn’t afford.
  
  Basically, you buy a house to live in. Any other reason is speculation, and as such, you bear the burden if your speculation doesn’t pan out.
  - Rider
    
    When the valus of your house drops 120K to a value lower then it was 15 years ago you end up upside down. Not sure what about this concept you have trouble understanding.
    
    House prices in Florida are currently 20-30% below what they were before the boom even started.
    - sporkinum
      
      I understand what upside down means, but the house was worth what you paid for it, or you would not have bought it. You agreed to pay X dollars for X years. They are assuming that you will pay the full term of the loan. It sucks that your house is not worth the loan you signed for, but thems the breaks. If you can’t afford your loan, then you borrowed too much money.
      
      I bought what I could afford. I was worried about the economy prior to the implosion, so I doubled my payments and paid my house off early (a few months before the crash). I have no idea what my house is worth other than what taxes say. I really don’t care either, as I plan on living in it, not selling it and buying another.
      - Rider
        
        Oh I see you are just dumb blind moralizing jackass.
      - Pantograph
        
        Let it be known that I fully support the position of the dumb blind moralizing jackass.
      - Anonymous
        
        It’s true a bunch of people bought more house than they could really afford, but most people don’t understand finance.
        
        Now, explain to me how it’s the peoples fault for losing their house to forclosure because they got laid off in this crap economy and haven’t been able to find a job that pays anywhere near what they were being paid? If you could easily afford a house before that cost you $1,000 a month becuase you cleared $100,000 a year, how are you going to afford it now that the only you’ve could get is managing a pizza joint? There are people who have been out of their jobs for YEARS now. This far and away exceeds the limits of most people ability to save for.
      - sporkinum
        
        “It’s true a bunch of people bought more house than they could really afford, but most people don’t understand finance.
        
        Now, explain to me how it’s the peoples fault for losing their house to forclosure because they got laid off in this crap economy and haven’t been able to find a job that pays anywhere near what they were being paid? If you could easily afford a house before that cost you $1,000 a month becuase you cleared $100,000 a year, how are you going to afford it now that the only you’ve could get is managing a pizza joint? There are people who have been out of their jobs for YEARS now. This far and away exceeds the limits of most people ability to save for.”
        
        No, it’s not their fault and they have my sympathy. That is exactly the reason we accelerated payments and paid the house off. It was difficult to do though. We quit going out to eat, buying stuff, etc. The economy was looking sketchy and I wanted to make sure I was in a good position to weather it. With a paid off house, I can flip burgers and still get by.
      - Rob
        
        Things are not static in value. Just because something was worth it then does not make it worth it now.
      - sporkinum
        
        Yes, in monetary value. It still has just as much value as a roof over your head. The point I was trying to make is that you paid for something that you thought was worth a certain amount. That amount is now different. It’s no different than buying something at a store and then finding out it is now on sale for less. You may have buyer’s remorse, but you still have what you paid for. I don’t see why the government or the loan company should pay you an after the fact rebate on your home. What are they going to do, give me free money ’cause I own my house? That’s no different than writing down the principal on someone’s current mortgage. Refinancing at a lower rate is cool. If they can do that, they should.
        
        Another way to look at it.. Buy a car, it loses $5000 when you drive it off the lot. Now go to the bank and say you want to refinance your car at its current value. I don’t think they would be too accommodating.
      - squidfood
        
        For tens or hundreds of years, real estate has not just been a roof-over-your-head, but as a (relatively) stable investment. It is many peoples’ nest eggs. You put interest into the loan (instead of just paying rent) because the principle you paid was a good investment, better than mutual funds or bonds or whatever.
        
        Now the issue is that due to the speculation of some (a small percentage), and the outright fraud of mortgage-backed securities, turned the basic stable investment (the house), that was one of the safest types of investments around, into speculation, sometimes long after the people who invested in the house made the decisions to do so.
        
        This has nothing to do with “I thought I paid a fair price” and everything to do with “the bad behavior of some has devalued the investments of all of us”.
      - Todd Knarr
        
        Because, squidfood, being upside-down has nothing to do with the house’s value to you. It has to do with it’s value as a salable asset vs. the amount of debt it’s securing. Say you bought a house for $500,000. You financed it, and currently you owe $400,000 on the mortgage. But the house’s sale value has declined to $300,000. You’re now upside-down: the house isn’t worth enough on the market to cover the amount of debt it’s securing and that you need to pay off when selling it. This makes banks nervous: if you default on your mortgage, they won’t be able to sell the house for enough to cover what they’re owed. And it should make you nervous too: if circumstances force you to sell (say a new job forces you to relocate) you won’t be able to get enough for your house to pay off the mortgage. You’ll have to cover the shortfall out of your savings, just at a time when you need those savings to help make the down-payment on a new house.
        
        If everything goes right, being upside-down isn’t a problem. But things don’t always go right, and Murphy is out there waiting.
      - squidfood
        
        I think I was actually agreeing with everything you said just then…
      - sporkinum
        
        “Even though sporkinum may have been fortunate enough to pay off his loan early at this point his property is worth less than he paid for it so any future costs in upkeep would have to recouped above and beyond what he paid for it and what its worth. Good luck with that it could take awhile.”
        
        That’s not really a problem in my area. There was a small dip in 2008 that has since more than recovered. The long term is still trending up.
        
        http://www.trulia.com/real_estate/Cedar_Rapids-Iowa/market-trends/
      - StAlfongzo
        
        I was going to say the same as you Todd.
        
        “It has to do with it’s value as a salable asset vs. the amount of debt it’s securing”
        
        Taking the depreciation in value in account and any losses one may have had from their down payment in their investment (for me it was almost 200k). Compound that with yearly upkeep in an investment that is worth in my case 50% less than what I paid for it. Well lets just say every dime or dollar going into the property at this point is a waste. Might as well just throw the money away because the current costs of ownership will be all losses. Even though sporkinum may have been fortunate enough to pay off his loan early at this point his property is worth less than he paid for it so any future costs in upkeep would have to recouped above and beyond what he paid for it and what its worth. Good luck with that it could take awhile.
      - shannigans
        
        You assume that situations don’t arise that require people to move. Suddenly having 100k in realized debt is financially ruining for most.
  - AGC
    
    Perhaps you should also have a choice of what currency you use daily; Yen, Dollar, Euro, Peso. After all some currencies are more speculative than others, why should you be stuck having to use just the USD, when buying groceries.
    
    sporkinum – Not everything is morally black/white sometimes you get stuck in a clusterfk that is not of your own making.
Neural Kernel

I still don’t understand why any sane person would willingly enter into a mortgage… how is it an “investment” when you can potentially pay twice the value of the house (even assuming a stable market) because of interest? Now people are upset because their house is worth less than the original loan they paid with… well, you were going to pay (significantly) more than the value anyway, so now you’re just a little EXTRA screwed, its not like it was a sweet deal beforehand!
- Antinous / Moderator
  
  Well, for starters, mortgage costs are tax deductible, which means that your real payment is much less than your nominal payment. And without mortgages, virtually nobody would ever be able to buy a house. Even in the current recession, the median home price in California is $380K.
  - Neural Kernel
    
    So the price of housing is completely beyond what the market will bear? But we have developed and entrenched a system of specialized loans rather than just let market forces adjust the prices to a level within reach of the average consumer…
    I hadn’t considered the tax deductions, but it still seems nuts to me.
    - EvilSpirit
      
      Typically, people who get mortgages also get to live in a house, thus not having to rent. You kind of have to add that in too (minus the property tax and maintenance cost that renters don’t have). It’s not a small factor.
      - codesuidae
        
        Renters pay property tax and maintenance costs. They just pay it as part of their rent.
        
        Before I bought my current house (300k, zero down 2/6 ARM) I lived in a rental that was owned free-and-clear by the landlord. My payments went to the maintenance costs for the house, property taxes, and to income for the landlord (probably paying for part of the mortgage on his house).
        
        Pretty sweet deal for the landlord, makes me want to move to a small town and become a semi-benevolent slum lord.
- codesuidae
  
  In addition to the other advantages, a mortgage allows you to spend your money now rather than hoping you can invest it well enough to keep up with inflation over a couple of decades so you can spend it on a house later.
  
  Even with interest, it’s possible that a 1990 dollar spent on a mortgage in 1990 had more buying power then than it would have now had it been put into, say, government bonds.
AGC

Maybe if 40 or 50k more people were hired on by banks and governments to properly do the paper work there would be a) more jobs, b) less of a mess.
Digilante

Can someone explain this to me please? If the gent bought the house cash, he is in physical possession of the original title deed. No sale can be made without that original then being handed over to the attorneys handling the sale. That is a fundamental requirement for the attorney to assert. So how did the bank make the sale then?
- Anonymous
  
  I agree with you. Having been in banking previously, i can’t imagine how the bank even initiated foreclosure procedures, nevermind actually accomplish it. If i was that guy, i would sue that bank into obscurity.
- Anonymous
  
  You’re making the assumption that anybody actually READS all the paperwork in the loan file. I’d guess that the bank actually had a bad loan that they were trying to foreclose on and somwehere in the paperworks a couple of number on the address were transposed. There are SO MANY delinquent loans going into foreclosure that NOBODY reads all the paperwork. There was a case a couple of years ago where it became obvious that the servicer NEVER botherd to look for the original notes, they simply appended Lost Note Affidafits to all their foreclosure actions. In the vast majority of cases, nobody bothers to contest forclosure actions for the simple fact that the borrowers KNOW that they’re delinquent, and don’t deny that in that case the bank has the right to seize the pledged collateral.
- chgoliz
  
  Looks like no one has answered you yet:
  
  Can someone explain this to me please? If the gent bought the house cash, he is in physical possession of the original title deed. No sale can be made without that original then being handed over to the attorneys handling the sale. That is a fundamental requirement for the attorney to assert. So how did the bank make the sale then?
  
  The problem is that the title company doesn’t hand over the title at the closing, just the paperwork to file the title. The actual title takes a long time to be issued. Meanwhile, there was a foreclosure case in court, which was canceled as a result of the sale but then re-opened the following day (apparently unbeknownst to either the Grodensky family or the Appraiser’s office).
  
  From the article:
  
  The following year, Grodensky and his father Steven bought the house for cash as an investment property....They negotiated a short sale, which means the lender agreed to accept less than the mortgage amount. Documents show the sale proceeds were wired to Bank of America. The sale was recorded in December 2009 at the Broward County Property Appraiser’s Office.
  
  But in court, the foreclosure case continued, the records show. There was a motion to dismiss the case in July, followed the next day by a motion to re-open it. A court-ordered foreclosure sale took place July 15. The property appraiser’s office recorded the transfer of the title to the Federal National Mortgage Association (Fannie Mae) the same day.
  
  Two bureaucratic offices were each doing their own job and not sharing necessary info with each other. Clear?
  - Digilante
    
    Got it, thanks for explaining. Recently bought a house in Luxembourg – it’s ridiculous how many checks are made by all parties involved before anything moves forward here. The deal takes months as all parties (seller’s lawyer, buyer’s lawyer, bank’s lawyer, municipality’s lawyer) check, check and recheck. On the other hand, it does make one feel that the process is solid.
Anonymous

Now THIS is freedom!
For the Banksters
Anonymous

“So how did the bank make the sale then?”

Fraudulently, I imagine.
loraksus

“Florida’s foreclosure mills being what they are, the checks and balances against erroneous foreclosure have eroded to the point where banks can seize and sell homes they have no interest in.”

You seem to think that the whole system is there for our benefit. How cute.
Anonymous

@Digilante #4: Silly! Rules and due process are only for the little people.
Brad

Ok, this one gets more interesting. It turns out that one guy has been approving (by signing affidavits) tens of thousands of foreclosures without reading the files. Because of this Ally (formerly GMAC which is 53% owned by US government as part of bailout) has suspended foreclosures in 23 states and this may end up affecting 100s of other companies that use Ally to service their loans including Fannie Mae and Freddie Mac: http://www.washingtonpost.com/wp-dyn/content/article/2010/09/21/AR2010092105872.html?hpid=topnews

In addition to this scandal, there is an additional storm of foreclosures that could be contested due to legality because of the “MERS” system used to track chain of title. Apparently in order to turn mortgages into mortgage backed securities a system was developed to track ownership of the mortgages as they were passed back and forth from investor to investor while avoiding the transfer taxes normally associated with a title transfer. In this process, the chain of title was often lost and the banks that ended up owning the mortgage could not prove that they actually owned it but were foreclosing on the houses anyways: http://seekingalpha.com/article/221344-homeowners-rebellion-could-62-million-homes-be-foreclosure-proof
loraksus

The banks know how fucked the USA truly is and are just grabbing whatever cash they can on the way down – and your average american is happy to just sit back and let it happen.

I know, I know, that’s all doom and gloom. /shrug.
- turn_self_off
  
  The sad thing is that money on its own is worthless. The only thing that is worth something is the objects and services that it can be used to pay for. As such, its a bookkeeping counter to balance out work performed and work received.
semiotix

I actually kind of prefer it when they’re just out-and-out balls-to-the-wall evil.

“Sir, we have a court order to foreclose on your house.”
“But I don’t have a mortgage!”
“We know. If you could just initial here. Also, we have another court order to kick any puppies you might own.”
Zan

Unfortunately, this seems to happen all the time with Bank of America:

http://consumerist.com/2010/04/bank-of-america-forecloses-on-then-auctions-off-home-with-paid-up-mortgage.html

http://consumerist.com/2010/01/not-having-a-mortgage-doesnt-stop-bank-of-america-from-foreclosing.html

http://consumerist.com/2010/01/bank-of-america-seizes-wrong-house-causes-big-stink-no-really.html

http://consumerist.com/2010/03/bank-of-america-seizes-wrong-house-holds-parrot-hostage.html
Anonymous

If you want to dive into the home foreclosure mess, I have a blog that tracks several dozen home foreclosure blog articles. http://www.swarmthebanks.com
dculberson

Welcome to the Land of the Free(tm)!
- Anonymous
  
  That should read, “Land of the Fee”.
  The “R” is a typo.
bat21

In Florida, it is legal to shoot anyone who trepasses on your property.
Anonymous

Was this the “Bank of Evil” from Despicable Me? :-p
MustWarnOthers

When you follow these types of stories back to their origin (IE Loan Origination) you get to see how absolutely disgusting the whole Securities trade can be for Mortgage Backed Securities.

Why is this shit still legal again?

Why are high level investor shitbags allowed to lump up big pieces of debt together, ten chop it up and sell it?

Once you start reading up on Mortgage Backed Securities, within 10 minutes your brain will start to melt from all the murkey, convoluted terms.