Rise of Foreclosures Leading to Collection Mistakes

Posted on November 28th, 2008 by saman

If you haven’t heard about the mortgage crisis yet, then you must have your head in the clouds. The mid to late 2000’s mortgage crisis is affecting everyone including those who don’t even own a home. The number of foreclosures has risen in recent months thus sending states; the federal government and other entities to discover which actions will work to fix the mortgage crisis before it all falls apart. However, there are still problems that need to be addressed including problems with collection agencies and lawyers collecting on defaulted home loans.

Example of Foreclosure Crisis and Collection Agencies

One such problem that is upsetting judges across the country is the mistakes and/or irregularities that are occurring at the taxpayers’ expense. For instance, a woman living in Florida had received one foreclosure lawsuit notice from one entity and then received another foreclosure lawsuit notice from another entity. Like most people, homes in her area nose-dived including her own. However, these two entities claimed they both own the rights to her promissory note and that the widowed woman owed them almost $300,000 a piece. The problem… no two entities can own the same deed and collect more than the home was sold for. What happened that this sort of problem occurred?

Foreclosure Crisis – Lawsuit One

For the widow, one lawsuit that was filed did make sense. The plaintiff that was suing her for payments were a guardian or trustee entity for investors on many mortgage backed securities including hers. These folks would try and collect on home loans including the widow’s.

Foreclosure Crisis – Lawsuit Two

According to the second lawsuit that was filed on the widow’s estate, a mortgage-servicing company was attempting to collect on the debt for the investors. However, according to procedures, servicers don’t usually own home loans that have defaulted. What happened that this lawsuit came about?

Foreclosure Crisis – Widow’s Lawsuit Outcome

Now you may or may not know that two entities cannot own the same mortgage nor can two entities collect payments, whether present or defaulted, on the same mortgage. As it turned out, the widow’s mortgage had been transferred from one law firm to another law firm. The first law firm had already filed for a judgment against the widow. However, when it was moved, they were still in the process of getting the notice to her. When the second law firm took over, they also filed a lawsuit. When the matter was transferred, the first law firm had been told to remove the first lawsuit but hadn’t done so yet. However, the first law firm alleges they never received this notice.

Foreclosure Crisis – Is This An Isolated Case

This is certainly not an isolated case. In fact, with the rise of foreclosures for sale each month, cases such as these may get more and more common. Judges are certainly not happy with the mortgage companies and law firms that are doubling up caseloads against people at the taxpayers’ expense. There are supposed to be safeguards from these happening. Are there two entities trying to collect on the same mortgage? This is a question that will be answered as judges look through dockets for cases.