Stop Payment: A homeowner’s revolt against the banks (2012)
harpers.org
harpers.org
I owned a house along with someone else, an okay house, bought it for $115,000, held onto it for 5 years, until it appreciated to $350,000 in those hurly-burly days.
At some point, and I forgot why it came up, we needed to figure out who owned the loan. And we never did. It the morass of paper work and nearly fraudulent claims by various people who claimed to own the loan, we stopped paying on the loan. We literally had more than one company claim to own it at one point. What was weird is it was kind of a slow burn, even after we stopped paying. No one really seemed to care as much as you'd think $900 a month would make you care.
In the end, we sold the house, never paid off the remaining debt, and split the cash. I told my lawyer I'd hold onto savings to cover the debt if they ever came back and could legally claim it.. It's been 11 years. Nothing yet.
Source: I was IT support (among other hats I wore) for the band debt team at a hedge fund for 7 years at a previous job. We held about $20B in notional debt running up to the 2008 crash. Was not a fun time to be in the industry.
I actually called the title insurance company at one point to ask what the heck something was, and was connected to an experienced person who was very happy to fully explain what they'd found.
My guess is that because the history of our house was pretty complicated, the title searcher was relieved to have something out of the ordinary to work on.
The upshot? That title search is really important, particularly if you're buying a property that predates electronic property systems.
It was hell on earth trying to sort it out, and the sale almost fell through because of it. The real kicker was that our lawyer basically told me he wished I hadn't noticed it because the sale would have just gone through and nobody would have cared... but since I did, we were legally obligated to fix it.
Perhaps this is why 'nobody noticed'?
An ethical breach by a title insurance company likely violates its bylaws, and at the very least opens them up to liability.
It seems like this is a title error so the insurance company would be responsible. I don't see why a lawyer wouldn't report the error to the insurance company. It's billable time that the insurance company would need to pay for and they'd be working to keep their industry with clear deeds instead of faulty ones.
Also, as in any client relationship, a lawyer’s first priority is the person paying his bills, not necessarily the industry. Even if it would be better in the long run and more ethical, when someone pays you there is a natural obligation attached to the relationship.
I used to be idealistic, but experience has shown me that people do what is expedient.
How did the bank lien from the mortgage get handled in the sale?
Pretty funny you mentioned the interest. In the 11 years it's been like $50.00, since I keep it in just a regular account (instead of CDs or whatever).
Which country was this in? Banks don't typically hand people hundreds of thousands of dollars without making sure that they'll get their pound of flesh when things go south. Not having any kind of collateral is a pretty big mistake on the bank's side.
The debt could also be subject to a state of limitations, and you could potentially be clear. If its been 11 years, I would ask a lawyer about it. You may be able to safely use the money you've left set aside.
I'll be 100% honest here, and I don't know the finest of the details. I worked through a local realtor I've used for everything I've ever done, a local financial advisor, and my lawyer. User user5994461 is expressing the same fear I had in that I was afraid of doing something illegal. I've always kept a chunk of cash on hand equal to what I would owe just in case someone came after me.
At some point the service provider got confusing. I actually paid two different providers in one month in a panic about missing a payment. You cannot believe the paperwork I got. One of them was like "Uh, we don't know what to do with this," and the other took the money, but then that's when the issue of who owned the loan came up.
So as we were starting to sort out actually who to pay, and who actually was getting the money, that's when I stopped paying. At the time it didn't seem so much like stopping payment but instead of just not paying until we sorted it out.
The actual sale of the house was to a Korean family who wanted to house for their children who were going to go to college in our town. The realtor handled the sale, the lawyer checked everything out, and the only loose end was I accidentally left the gas in my name and bought the students a years worth of gas ($1000).
I do know that after they sale we were still trying to resolve what I owed and to who on the original mortgage. I guess technically that is still going on.
My subject take away from this was, "this is an avalanche of paperwork." We wanted to sell the house. Under the circumstance, we did whatever it took to sell it even if we didn't know who I owed the money to.
Also, up until this event, I didn't have a lawyer, or a realtor, or a financial advisor. When there is six figures, it's a big boys game, and you pay to play.
Edit for typo.
It seems like one of the mortgage owners probably removed the lien when they sold the mortgage and the buyer never put their own lien on.
I don't know the machinations involved with mortgages, but it seems to me like I'd like that to have been the case.
https://en.wikipedia.org/wiki/Mortgage-backed_security
A lot of mortgages changed hands several times, the original bank who setup the mortgage would have no longer been involved at that point.
That doesn't explain how OP was able to get the lien on the land title removed when they sold the house.
Unless they don't notify you on purpose to continue to receive the monthly payment, while cashing out on the resale, in which case that's fraud.
I can also imagine that the next buyer would try to pull the same trick. That obviously causes a problem. It seems to be what happened in the US, in which case everyone should check their mortgage to make sure who owns it.
Until midway through the Obama administration, nobody had any obligation to notify you if your mortgage was bought or sold. Payment servicers had no obligation to tell you who they were forwarding your checks to. Your mortgage could be bought and sold multiple times, but as long as the same servicer was used, you'd never know (there were/are only a few big servicers). If the mortgage buyer used a different servicer, you'd get a letter from your current servicer about the new servicer you should send your checks to, but no info about who now owned your mortgage.
The servicers existed to serve as a smoke screen for mortgage securitization shenanigans. The servicers sent the payments to trusts that had dubious possession of the mortgages.
Trusts and banks passed ownership of mortgages amongst themselves, though tax law was supposed to prevent them from doing so. Ultimately the servicers had no more idea of who actually owned the mortgages than the homeowners.
If there are court proceedings attached to the sale of the house, the corrections might be done there.
This statement is truly mind-boggling. Took me a minute or two to understand what was going on (or what I think was going on)...
But, I also have no moral qualms with “strategic defaults”. The bank also knew what they were signing.
> Some people might scoff at the ideas in the article. You took out a loan, only a deadbeat leech would default on that loan and expect to keep their house. Sounds about right, but that assumes we live in the world we all imagine. The "right" world, where business still resembles interpersonal relationships. It doesn't, and we don't live there.
We know that at the end of the day, a loan, insurance, utilities, etc. are all business contracts. Each party signs something, and each party expects what they signed for. The problem is that contracts (especially when buying a home) can be absurdly long full of unintelligible language. So we as ordinary people want to believe that we aren't going to get screwed over. We know that these major companies have the manpower and funds to ruin us, but we hope it doesn't come to that. From that same user[0]:
> You've paid your insurance bill diligently for years, but as soon as they are needed, they start looking for ways to get out of paying the claim. They will happily screw you over the tiniest technicality. The insurance industry certainly isn't the only offender in that regard.
It's a business transaction. Some of the time, we don't even have a choice with who we do business. But as an ordinary person, I don't want to get fucked over by these forced contracts.
I know about all of the non conforming and other crazy loans taken out back during the real estate bubble pre-2008. I took advantage of most of them as a real estate investor and did many of the shady things myself that help cause the real estate bust and did a few “strategic defaults”.
While there is a lot of paperwork, for the traditional fixed rate mortgage that most people should be doing, it’s not that complicated- you pay your mortgage every month, the escrow amount may fluctuate but besides that it’s fixed, to whoever owns your loan this month, you keep your house.
Most people had no business doing the adjustable rate/ negative equity/no doc type of loans. I agree that mortgage lenders, especially those working with builders, pushed people into them.
You're right, but I'm not just talking about the subprime issue. It's bigger than that with numerous companies providing different goods and services. We're beholden to a number of service contracts that are stacked against us. For example, I was stuck with a terrible ISP. Daily outages, constant resets, and times in off-peak ours where my throughput was absurdly low. No matter how much I called and complained, there was nothing I had in my favor, because the speeds "may fluctuate from time-to-time due to the nature of the service". My choices? Pay double for ADSL or put up with it.
According to the contract, they're not obligated to give me 100% uptime with 100% of the bandwidth as advertised. That's understandable. But there was clearly an underlying issue with the infrastructure that was not being addressed. So contractually speaking, they can give me hand-wavy answers about why they can't give me complete uptime and throughput with no repercussions, but as the customer, I must pay my bill in full by the due date.
[1] I’ve got to give a shout out to AT&T and BackBlaze, I just changed my Plex Server over to a new computer and my entire 1.7TB collection was uploaded in less than 3 days. I was getting speeds between 500GB per day and 1Tb+ a day.
wow so you're a real piece of shit.
7 So when they continued asking him, he lifted up himself, and said unto them, He that is without sin among you, let him first cast a stone at her.
Looked at through this light, there's a strong ethical argument that no agreement was made, as very few single humans are informed enough to have the capacity to genuinely consent to an agreement as complex as a modern mortgage.
Maybe you have a better chance at getting the idea of it because you are more techie, and you know some legal jargon.
But to most people, an EULA is complete and utter gibberish. To some people, a 30-year fixed mortgage is utterly meaningless gibberish.
Yeah, you can sign on the line, but it's not any more informed consent than what most people do when they click okay before they log in.
I have read them. There are a lot of pages, but it's pretty straightforward. (The escrow agent just sat there impatiently twirling her pencil and sighing, but she never said a word.)
If you can't read them, or can't understand them, hire a lawyer to do it for you, check for any hanky-panky, and explain it to you. It's worth a couple hundred bucks to protect your 6 figure investment.
That's because you're probably 1 out of 100 that actually bothers to read and understand all of those documents. Your own realtor doesn't understand those documents and the vast majority of home buyers do not hire their own lawyer to check all of the documents and contracts they sign when buying a home. Whether it's worth it or not to actually read all of those documents and have a lawyer review them before signing or not, that's not what happens in the vast majority of cases. It's not an understatement that the majority of home buyers do not understand all of the obligations of their mortgage.
>One of the papers you sign when getting a mortgage is one that says simply "I have read and understood all these documents."
And I'm sure the EULA that everyone always skips says the same thing. That doesn't change the fact that almost no one actually has read and understood all of the documents.
BTW, I didn't have a lawyer review them. But they are not hard to understand. Probably a century of lawsuits have shaped their contents, and they are shaped by judgments against the authors of them when they are ambiguous or confusing. In fact, they're fairly standardized.
I've never had trouble with mortgage documents, but I have had trouble with car loans, repeatedly. The terms we verbally agreed on were altered in the final document, always significantly in the lender's favor. I always make them fix it, and they'll lie and say those were the terms we agreed, or those terms are their policy, or those changes are immaterial, or they don't have the time to fix the documents, all kinds of crap.
I.e. it's not that the documents are hard to understand, it's that they slip altered terms in them.
I’ve also never had an attorney sitting by me for an hour explaining each paragraph before I signed the EULA.
I remember one of the most explicitly explain parts of the home was the title.
“Injury liability”? You are required to have homeowners insurance and if it’s not good enough to satisfy the loan, they will make sure you know it. While pre-2008, I had loans without an escrow that paid the insurance. They are a lot stricter about it now.
If you're fine with someone using the technicalities of the contract to strategically default then you should equally be fine with someone using the weird system of title transfers that the banks use to their benefit in one's own favor.
One of the pieces of paper I signed with a very clear explanation that the mortgage company I was using sells “100%” of mortgages within 90 days to other banks. You don’t just sign mortgage papers blindly. The closing attorney describes every piece of paper you sign.
I think, from a consumer perspective, the answer here is the originating bank of the loan should be responsible for the lifetime of the loan for servicing it, even if they sell the debt itself to another party. This simple act would simplify immensely the process for the consumer and probably put a bit more pressure on the banks to get the paperwork right.
The first letter you get is from your current bank.
How many have automatic payments setup that would just stop when the loan is sold?
I think I would notice if my largest bill wasn’t deducted from my bank account.
But at the end of the day, the bank doesn’t want your house. They don’t want to go through the trouble of foreclosure, for being responsible for maintenance while it’s being sold. They don’t want to go through the hassle of selling your house.
You will get letters, phone calls, notices, court dates, etc before your house goes into foreclosure. I doubt that people are sending thier payments to the wrong place long enough to go into foreclose.
Where in that letter can I say "I object to this transaction"?
Where in that letter can I say "I will be emotionally and/or financially damaged by this transaction"?
Where in that letter can I tell the bank that the new bank does not personally know me and I do not believe it can fulfill the obligations to Know Your Customer?
If the chain of trust is violated then all breasts are off. There is no harm in ensuring that you are the one who benefits as opposed to being hosed if that happens.
What do you do when it's literally not possible to determine who owns your debt. That can be an enormous risk for you to take on though no fault of your own. A perfectly valid legal remedy for a court is to force the entities who messed up their record keeping to open the mistake interest of you.
I don't have much sympathy for people who borrow money to then find some loophole to swindle their way out of their debt. They succeeded? Good for them! Proud to be dishonest. Let the other borrowers pay for you through higher margins.
There's a lot of mechanics that go into paying my debt, is it automatic withdrawal? If so how do I change the account? Is it someone I can barely hear in a noisy call center I get to talk to after an hour? Or is it someone at the bank around the corner where I first opened my account when I was 14?
I've got a mortgage, they've got a fine UI for logging in and making a bonus payment, printing out amortization schedules, etc. etc. If they sold my debt to someone who would only talk to me via fax I'd be pissed off.
That’s the thing. You don’t own the debt, the bank does.
There's a lot of mechanics that go into paying my debt, is it automatic withdrawal? If so how do I change the account? Is it someone I can barely hear in a noisy call center I get to talk to after an hour? Or is it someone at the bank around the corner where I first opened my account when I was 14?
I don’t let any company have direct access to my bank account. I pay my mortgage and all of my other bills using bill pay from my bank. When the letter comes saying the mortgage has been changed, I log into my account at my bank and change the bill pay. A mortgage is one of the easiest transactions.
In any case, I strongly favor discarding deeds, title search fussery, in favor of a national title registry - the decentralized approach seems, today, to be pointless. Maybe MERS should be nationalized and turned into the Standard Property Registry. It should be as simple as checking the database view to see the title, liens, claims, etc.
edit: I read each and every single document I signed for the 30 year conventional mortgage, both in the run-up and in the grand finale. Law is like code, but executed by courts and lawyers with a "virtual machine" of the great Anglo-American legal tradition governing it. Anyone competent to write code and read manuals should be able to read their mortgage documents.
You seem to be saying that MERS's interpretation should be correct, that MERS's database should be the law of the land and investors should be able to buy and sell the title to mortgages without states and counties being involved.
The current system has homeowners getting windfalls because MERS screwed up, and I suspect that screw-ups in your version would have the opposite effect, where homeowners get robbed by computers and nobody can be held accountable.
So that seems bad. And what would the benefit be? Sure, it would make mortgage-backed securities more efficient, but -- why is that good?
If you've ever dealt a little bit with funky titles, you'd know that having a central authority managing all claims to title would be a big deal and massively improve life for property buyers. Title searches are not exhaustive. That is why title insurance exists.
If MERS is a title registry and it also manages bundling of debts, I genuinely don't care. The issue isn't debt bundling, it was granting high risk mortgages and other high risk behavior.
Simple: that's not what the law says. At least not in Idaho.
According to the court's opinion, what the law says is that a trustee who forecloses must meet four specific requirements. None of those requirements equate to proving that you have "standing" (which was what Trotter alleged was required) to foreclose.
However, the first of the four requirements (p. 5 of the court's opinion) is: "The trust deed, any assignments of the trust deed by the trustee or the beneficiary and any appointment of a successor trustee are recorded in mortgage records in the counties in which the property described in the deed is situated". Since the main concern given in the article is that MERS and similar arrangements are circumventing the recording of who owns or has claims on real property in the local jurisdictions, it would appear that in the Trotter case, that concern was not present, since the relevant claim information was recorded in the local jurisdiction; the trustee who forecloses has to be the one whose trust deed is filed with the county for that property.
http://archive.sltrib.com/article.php?id=54163714&itype=CMSI...
> In accusing Keane of negligence, the Sedgwicks, their lender and title insurance company pointed in court documents to a recent article in Harper's magazine that quotes remarks from Keane at a dinner with the writer during which he made outrageous and sexually explicit remarks about his role in the case.
Now, I'm not hatin' on anyone mentioned in the article. Overall, I'm about as neutral as I would be watching two people I have no interest in have a fist fight, because I have no great love for banks, either. And if they succeed, good for them. But the state of ID, as pointed out by another commentor, seems to put this in the "don't pay income tax" bucket as well.
It was never generally held to be, and the US had (though not permanently) income taxes prior to the 16th Amendment.
> The 16th amendment had to be passed to make it constitutional.
No, it had to be passed to make income tax on revenues from certain forms of interest, dividends, and rents to be Constitutional under the (quite controversial) holding in Pollock v. Farmers Loan Trust Co. Income taxes moe generally were held by the Supreme Court to be excises rather than direct taxes and therefore Constitutional even prior to the 16th.
[0] https://en.m.wikipedia.org/wiki/Pollock_v._Farmers%27_Loan_%....
The banks also had an obligation: to follow all local and state rules regarding liens on property. Should the mortgage be sold the local county clerk would need to be informed, forms would need to be filled out, possibly a fee need to be paid. But they didn't. Instead they used MERS to make transferring mortgages webscale.
Who owns a debt seems like something that should be quickly and easily determined. This helps avoid problems like "I've been paying bank A for years, bank B just showed up and said I should have been paying since last year!" (and if you're reading student loan horror stories, that's a common refrain). For mortgages (a secured debt) it seems like the county clerk office should hold the canonical answer. But that stopped being true.
Maybe the homeowners here shouldn't get off scott free, but maybe the banks shouldn't either.
However...it does remind me of my chief disappointment with the Obama administration's approach to rebuilding after the Fiscal Crisis, and that is that we did not really change the financial system very much. I have the very strong impression that it will all happen again.
http://business.time.com/2011/06/06/homeowner-forecloses-on-...
Americans are used to getting pushed around by "the machine". Bills come from various places (utilities, hospitals, banks, the government) and we pay them without thinking. Why think that much about it? You have to pay or your precious credit rating will suffer.
But the mistakes are so common it's likely that everyone has a personal example from some point in their lives. Credit card fraud, billing errors, mistaken identity, hidden charges on a phone bill, and on and on, and on again. The companies are faceless, emotionless, and completely without loyalty to their customers. It's rather insane that we grant them fidelity in return.
You've paid your insurance bill diligently for years, but as soon as they are needed, they start looking for ways to get out of paying the claim. They will happily screw you over the tiniest technicality. The insurance industry certainly isn't the only offender in that regard.
Some people might scoff at the ideas in the article. You took out a loan, only a deadbeat leech would default on that loan and expect to keep their house. Sounds about right, but that assumes we live in the world we all imagine. The "right" world, where business still resembles interpersonal relationships. It doesn't, and we don't live there.
It shouldn't just be about fighting Wall Street greed, or getting out of an eviction. Everyone should be on top of any business from which they have purchased a service. Be informed. Force them to deliver the service they promised. Force them to make you whole when you've been screwed. Force them to prove that they have accurately managed your account and they they truly do own your debt. Above all, make them actually compete again.
It would be nice if everyone did that, but I don't actually believe that they will. Oh well...
Yes this could be done but it's a never ending battle and it drains all your productivity when fighting. And when you have your small victory after hours of being on hold, they might give you back what they owe you, but they do this en-masse and some people don't have the energy to fight back, people tire. That's why we should ALL fight back this systematic scamming so that it doesn't happen in the first place. Individual fighting back doesn't beat a machine set on a bad behavior.
I can't seem to find it at the moment, but it was linked in an article yesterday that was about clouded titles and how the mortgage crisis continues to have effects on the ownership of homes long after people thought it was over.
This article was cited by "A million-dollar brownstone that no one owned" which was on HN yesterday [1].
> MERS is an entity that was created by the banks but has governmental power. This is both true and hard to believe, so here is a 7,000-word Harper’s piece that both explains it and doesn’t make this article any longer. The piece details MERS’s rise to power and also suggests that it is the single most-guilty party in the whole mortgage crisis.
...
> THE BEHAVIORS THAT RESULTED IN THE $25B 'NATIONAL MORTGAGE SETTLEMENT' IN 2013 HAVE CONTINUED UNABATED TO THIS DAY. IN FACT, THEY'VE GOTTEN WORSE.
It would be nice if everyone had the wherewithal to. It would be nice if they did that it would have a lasting impact. There are a few problems though.
"The Machine" is set up so that we don't have the time or money to actually fight these claims. I certainly can't miss time from work to deal with much of this. Maybe if it'll bankrupt me either way, but for every little error I've come across, the lost time and wages aren't worth it financially. Am I going to go into debt to sue someone just to prove a point? No. That would be a terrible use of my resources.
Also, these agreements we enter into are written with technicalities built in. To expose them would take an intricate knowledge of contract law. Companies rely on this imbalance of knowledge and power to take advantage of us. Even if there is a successful claim it's not like it would automatically set a precedent or retroactively void existing contracts or prevent new loopholes to be written into new contracts.
Action from private citizens is a band-aid here. Something needs to come from a higher power. It would be great to have a government that works for us in this regard, but they side with big business here. It sucks, but it's a reality of the machine.
https://www.consumer.ftc.gov/articles/0258-fake-debt-collect...
That presupposes that billing errors are common enough that it's actually worth your time to ferret them out. I don't think you can take that as a given. In a country of 300 million people, with instant communication on the web, you can easily find thousands of instances of billing errors and other abuses. But what are the odds, statistically, of you actually being on the receiving end of one? Because that's what drives the equation of whether it's worthwhile to push back.
Makes me wonder how many people simply accept these fraudulent charges, because they don't have the time, the energy, or the resources to fight "the machine". Over 73 million people are served by Anthem and its affiliated companies, so that can't be a small number.
Totally not fraud.
If there is an absence of those, it's not benign.
still refers to www.TitleTrail.com but that's up for sale
Looks like he might have some connection to this group still doing some of the work http://certifiedforensicloanauditors.com/
There are benefits to the ancient system of physically recording everything in the locale, and potentially good reasons to move to a more modern system. While I don't have enough info to form a final opinion, I do know that if they are going to centralize it, they should certainly be held to a standard of doing it right.
Reading about the crisis still pisses me off but I also am grateful there still is a system. Conservatives flirted with stupid in a big way in 2008 & 2009 and it could've been a lot worse.
I'm guessing that these lawsuits were not, ultimately successful?
Trotter's case ultimately failed: https://law.justia.com/cases/idaho/supreme-court-civil/2012/...
[1] https://theoutline.com/post/5807/the-million-dollar-brownsto...
https://www.mers-servicerid.org/sis/
I’m actually somewhat surprised that my 6 yo mortgage is still owned by the same local credit union that originated it.
https://www.carltonfields.com/files/uploads/Documents/realpr...
TLDR: he lost.
This article reads like a Marxist manifesto. Which is fine if these people vote Communist next election.