Challenging Foreclosures Could Become Large, Lucrative Area Of Practice, Say Some Attorneys; Lenders May Be Fumbling Ball On Proving Debt Ownership

In New Jersey, The Star Ledger reports:

• Most home foreclosures being processed in New Jersey are illegal, a growing group of attorneys contends, because lending institutions cannot prove they own the debt they are trying to collect.

• Judges in at least four New Jersey counties already have halted foreclosures, using a federal court ruling in Ohio as precedent. And with 48,000 foreclosures expected to be filed this year -- twice the number filed in 2006 -- some attorneys believe challenging foreclosures can become a large and potentially lucrative area of practice.

• "This is starting to creep up all over the state and all over the country as people start to realize these banks don't really know who owns the (promissory) note," said Peggy Jurow, a senior attorney at Legal Services of New Jersey, which is teaching lawyers how to represent pro bono clients in these cases. "It's scary to think how many people are losing their homes who shouldn't be."

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• There were 34,457 foreclosures filed in New Jersey in 2007. The vast majority, 96 percent, were processed by the State Office of Foreclosure with no answer from the defendants, resulting in the loss of their homes. Lawyers say 75 percent or more of those cases could have been successfully challenged.

• "The rules have been there all along," said Rob Napolitano of Community Financial Services in Keyport, which provides information to attorneys on how to help clients avoid foreclosure. "What's changed is that people are finally making the banks follow the rules, and they can't do it."

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• Lawyers say in the midst of all that packaging and slicing, banks got careless with their paperwork. In some cases, they lost track of who owned the original promissory note or couldn't prove how they came to possess it. In other cases, lawyers say, the formation of the mortgage-backed security created a situation in which the banks failed to maintain ownership of the promissory notes.

• "These transactions have become so complex, the banks can't even keep track of what they own and don't own," said Linda Fisher, director of the Center for Social Justice at Seton Hall Law School, which succeeded in getting a foreclosure dismissed in Essex County last month.

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• The State Office of Foreclosure has attempted to provide some guidance, informing attorneys for lending institutions that as of May 1, it no longer would process foreclosures unless the attorneys could prove their clients were the owners of the loan and had the right to collect on the debt at the time the foreclosure was filed.

For the story, see New tactic slows rate of forfeited houses in NJ.

For other posts that reference the failure of some mortgage lenders and their attorneys to file the required loan documents when starting foreclosures, Go Here, Go Here, Go Here and Go Here. missing mortgage foreclosure docs beta