Why Isn’t My Bank Foreclosing?
Homeowners are sometimes behind on their mortgages for extended periods of time. This often is not all the homeowner’s fault, as banks often refuse to accept payments after a certain period of time. What happens in many cases it that no payments are made for many months, or, in some cases, even years. Why and how does this happen, and why isn’t the bank foreclosing?
There can be many reasons that a bank does not foreclose. One of the major reasons is that the bank does not have all its paperwork in order. To foreclose in Massachusetts, a bank must have the mortgage, all assignments of the mortgage, the promissory note, and any indorsements to or allonges to the note. This is called “unity of title.”
In the paperwork shuffling that went on during the mortgage crisis, however, it is difficult for many banks to provide unity of title. They might have the mortgage, but not the note, or they might have the note, but not the indorsements of it. Without all of these, the bank cannot foreclose.
It can take weeks or months to get all this paperwork together. Mortgage servicers often employ a “custodian of records,” which is essentially a warehouse where all the documents are saved. If they can’t be easily found, the bank has to wait to foreclose. Sometimes, these are destroyed or lost forever.
The foreclosure law firms have to contact multiple parties to try to piece together the mortgage and note. As many consumers know, getting a straight answer from the banks is hard, and the banks’ attorneys have these same issues.
Another reason is that most banks have stopped “dual tracking.” Dual tracking is where a bank is simultaneously foreclosing while also evaluating for loss mitigation (like a loan modification or a short sale.) If, for example, there is a loan modification application under review under the Home Affordable Modification Program (HAMP), the banks are not supposed to foreclose. Because homeowners often have to submit multiple loan modification applications – the banks tend to lose documents and require that they be resubmitted – this can drastically increase the length of the foreclosure process.
There could also be other reasons, such as purchase of the loan by a new investor, or transfer of the servicing of the loan to a new mortgage servicer.
If your mortgage is “in foreclosure” but the foreclosure sale has not happened yet, it’s a good time to be proactive and try to save your home. Our office has experience handling mortgages in all stages of foreclosure, and we would be glad to provide a no-cost consultation to see if we can help you.