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I-Team: Mortgage Foreclosure Nightmare

I-Team: Mortgage Foreclosure Nightmare 143 Screen shot 2010 10 06 at 12

A CBS4 I-Team investigation into your money is now following ripples throughout the nation’s home mortgage industry and experts say every homeowner could be affected before it’s over.

On Friday the nation’s largest mortgage holder, Bank of America joined GMAC and JP Morgan Chase in stopping or suspending foreclosure proceeding in 23 states, including Florida, because of questions about forged, false and possible fraudulent documents used to foreclose against homeowners. Also on Friday a major home title insurance company signaled it would not provide title insurance on homes foreclosed on by GMAC mortgage. While it later backed away from that statement, several title companies were gathering to discuss whether to quit backing questionable foreclosure proceedings.

Earlier, CBS 4 I-Team investigator Stephen Stock uncovered forged and fraudulent documents that may have been used in thousands of foreclosure cases in Florida. And now the entire real estate industry could be impacted—even those who did not have a direct hand in the foreclosure document mess.

“I felt as if like everything was coming down,” said Bradenton homeowner Xavier Bracco.

Bracco has battled his mortgage lender for nearly a year ever since a cut in pay at work forced him to miss one payment by thirty days.

“I came in and starting seeing my doors opened (after being gone on business for several weeks),” said Bracco.

It turns out that on seven different occasions, workers sent by the bank broke into Bracco’s home, signing a log on his kitchen counter and changing the locks in an apparent attempt to take possession and foreclose.

“This is a system that is run amok,” said Bracco’s attorney Roy Oppenheim. “Institutions (such as the banks) think they are higher than the law.” It’s a system that now threatens to descend into chaos after officials with mortgage lenders G-M-A-C and J-P Morgan Chase admitted that they can’t verify the authenticity of thousands of documents used in court. The unverified documents were used to foreclose against homeowners such as Xavier Bracco.

Now title insurance companies are backing away from the entire process because of the uncertainty.

“The title companies are going to have to stand up and bat for those homeowners and investors that bought foreclosed properties that were illegally and improperly foreclosed. And they’re going to have huge claims,” said Oppenheim, who is one of the foremost foreclosure defense attorneys in the country.

Oppenheim said he has witnessed firsthand forged and fraudulent documents used by banks to try to foreclose against his clients.

Oppenheim regularly gives live lectures on the web and writes his own blog.

Click Here to read Oppenheim’s blog. “We anticipate that as much as 10% of all foreclosures in the state of Florida will be infected (with questionable documents),” said Oppenheim.

That uncertainty will impact special foreclosure courts around the state of Florida such as the one in Broward County where the I-Team found attorneys for banks and homeowners in a line stretching out the door. In the Broward County special foreclosure court, in August judges cleared as many as sixty cases an hour and as many as 600 to 700 a week.

“In South Florida and the rest of Florida that’s going to lead to serious significant problems,” said another foreclosure defense attorney Robert Puzio.

Attorney Robert “Bob” Puzio also represents dozens of homeowners facing foreclosure in front of these special courts, what’s become known and the “Rocket Docket”

“It (the process) absolutely has to slow down,” said Puzio. “The court has to have the proper documentation in front of it. The court has to look at every document that is submitted pre-foreclosure.”

So why should you care? Experts’ answer to that is this: because this could top up the entire home buying system through legal uncertainty. Experts say it could create a crisis in confidence in the home mortgage system and thus keep you from buying or selling a house for years even if you have nothing to do with this foreclosure crisis. This problem on unverified documents is so bad that Florida’s Attorney General is now investigating.

And foreclosure proceedings involving both GMAC and JP Morgan Chase have been suspended or halted in 23 different states including Florida.

And late Friday afternoon, the Associated Press reported that a Bank of America—the nation’s largest mortgage holder—joined it was joining the group and halting foreclosure proceedings in 23 states including Florida. This came after a Bank of America official admitted in a legal proceeding that she signed up to 8,000 foreclosure documents a month and typically did not read them.

Defense attorneys Roy Oppenheim and Robert Puzio say that from the documents they’ve seen in court, as many as a half dozen mortgage banks could also be involved.

Oppenheim will give a lecture on the web on Wednesday, October 6, 2010, on the topic of faulty documents and problems with title insurance.