Monday, October 11, 2010


I have eluded to Robogate in my last couple of posts but haven't written much more.  If you haven't heard, Robogate is a scandal where bank foreclosure processors have been processing foreclosure documents on properties that they have not validated the ownership of the property and have not confirmed that they even have all the documents in legal order to proceed to court.  What is worse is that in some jurisdictions, banks must actually present the real documents in court to prove that they have legal rights to move forward. 

The term ROBO is a reference to the fact that in many states, processors must have the actual loan documents and paperwork in hand to foreclose, yet the processors were signing, notarizing, and verifying hundreds and thousands of properties a day.  I'm sure certifying all the documents is a pains-taking process and plowing through the hundreds if not thousands of document packets a day is impossible.  The fraud was then compounded as bank officers would then sign a affidavit stating that they had legal ownership to the property and were taking to steps to obtain the properties.

Here is the problem.  In many cases, the banks that were foreclosing did not have good loan documents, didn't actually have legal title to the property, or actually had no claim at all on the home!  In other cases three or four banks were claiming they owned the property.  Finally, many properties that were rolled up into MBS or mortgage backed securities didn't have any paperwork at all.  There have been instances of banks breaking into homes and changing the locks only to determine that it was the wrong address, that the home owners actually owned their home outright!

If you thought that the housing market was going to be fixed soon and we were clearing this inventory out (since 67% of all sales in the last several months have been foreclosure sales to investors) you would be absolutely wrong!  In response to the concern for the actual legal right to foreclose on any property many state's Attorney Generals have asked for a moratorium on all foreclosures.  Ally, B of A, and others have voluntarily complied.  Title insurers are not going to underwrite title insurance on any foreclosure - and would you blame them?  So, this means that there will only be cash buying of any previously foreclosed on property.  If an investor buys the property, he is crazy not to have title insurance!  The trust of all of this is that the housing market for all of this inventory is going to grind to a halt.

What is worse now is that if you own a home in an area with lots of foreclosures, you will see a big drop in the values of those surrounding properties, which means further declines in your own values.  Prices last month were already beginning to fall, now this should accelerate this problem.

Last, one of my favorite things about Youtube is the funny interpretation that folks put on these war videos.  Hitler couldn't be more frustrated if he was in charge of Robogate!  Whoever wrote this one has inserted poor language.  Please don't watch if you are offended by strong language (text).

This is a total mess and this issue will not go away.  This will simply foul up so much with the banks, real estate industry, and Main Street.  Look for a new RTC (which should have been done a year ago) to be created to deal with this all out fraud.