How the New Foreclosure Scandal Impacts LGBT Borrowers

Taking away someone’s home is serious business, and throughout most of United States history the court system has ensured that borrowers cannot be forced from their homes without a powerful legal reason and an abundance of supporting evidence. But during the past 2-3 years foreclosure courts have been allowing hundreds of thousands of evictions to go ahead based on apparently inadequate documentation which includes such things as fraudulent paperwork and forged signatures.

In the offices of some lawyers hired by mortgage companies, for example, a single individual might sign as many as 1,000 foreclosure documents per day. That’s an average of about one every 20 or 30 seconds, meaning that they cannot possibly read or scrutinize for accuracy the papers they are signing. The phenomenon has given rise to the moniker “robo-signing” – a term that has become synonymous with this latest chapter in the ongoing foreclosure crisis.

The disturbing lack of legal protocol has tens of thousands of LGBT borrowers wondering what it means to them. The biggest question on everyone’s mind is whether or not foreclosures that were allowed under questionable circumstances will now be overturned. As might be expected, it all depends on each individual situation. Many people, including those in high government offices, believe that there is no excuse for sloppy documentation.

“These people think they can play by a different set of rules," said Ohio Attorney General Richard Cordray in an interview with Bloomberg Television, referring to big banks and other major mortgage lenders who cannot produce the required paperwork to validate foreclosure actions. He called the use of flawed affidavits – which have justified hundreds of thousands of foreclosures – a “business model for fraud.”

But it still may be quite difficult for LGBT homeowners to get their foreclosures reversed in court. When there is compelling evidence, for example, that the borrower missed the monthly payments on a verifiable mortgage a judge will be reluctant to overturn the foreclosure. It is highly unlikely in those circumstances that the court will throw out a mortgage company’s claim to repossess property in favor of the borrower simply because there are some supporting documents or authorized signatures missing. Required mortgage payments that are obviously unaccounted for will normally carry more legal weight than a few missing loan documents – shifting the burden of proof to the borrower.

In some ways, in fact, that legal territory has already been tested. Courts have, for instance, accepted thousands of affidavits that attest to the fact that banks cannot find all the paperwork required. These affidavits, signed by the banks themselves, basically say that although some documents are missing the bank still testifies that it does have the authority to proceed with the foreclosure – and that it did at one time have all the proper paperwork. Many judges have ruled that such affidavits are valid, and it is hard to believe that the court system will now do an abrupt about-face at the risk of causing economic chaos and legal pandemonium.

There may be some exceptions, of course, and it is worth it for LGBT borrowers to fight to get their property back if they feel they have been treated unfairly.

Those with the best chance of winning a reversal are borrowers who qualify in two significant ways. First they need to show that the mortgage lender failed to follow standard protocol during the foreclosure process. But it is also just as important to demonstrate that they were never delinquent on their payments.

If those two things are true then the mortgage company was clearly at fault and a foreclosure judge may decide to unwind the foreclosure and give the borrower back their property – even if it has subsequently been sold to somebody else. Since most people who have been foreclosed on have already moved into another residence and may not be interested in getting their old house back, the majority of these cases are resolved through a cash settlement paid by the lender to appropriately compensate the borrower.

But those LGBT homeowners who are facing imminent foreclosure and have not yet lost their homes may be in the most encouraging position in the midst of all this drama. Before going forward with new foreclosure cases the courts will be much more cautious and strict, and many mortgage companies have already instituted temporary moratoriums on foreclosures until these new allegations are resolved.

The Sheriff of Cook County, Illinois, for example – who has jurisdiction over the entire city of Chicago – stopped serving eviction notices on approximately 1,500 loans managed by companies including J.P. Morgan Chase, Bank of America, and Ally Financial. The sheriff explained his drastic action to reporters by saying, “I can’t possibly be expected to evict people from their homes when the banks themselves can’t say for sure everything was done properly.” He said he will only resume foreclosure evictions when he is assured that the foreclosures are 100 percent legal.

To find real estate and mortgage professionals dedicated to active support of the LGBT community, visit www.GayMortgageLoans.com and www.GayRealEstate.com, or call toll free 1-888-420-MOVE (6683).