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Florida lawyer warns of deepening foreclosuremess
ByKevin GrayROYAL PALMBEACH, Florida (Reuters) - AFlorida lawyer at theforefront of legal challenges against foreclosure practices bymortgage lenders says the U.S. housing morass will drag on due todifficultyin determining who owns home loans.Questions over practices in foreclosure procedures across the UnitedStates have forced atleast three banks to temporarilyhalt theirproceedings and prompted a growing chorus of calls bylawmakersand regulators for an industry-wide moratorium until problems areresolved.However,Tom Ice, whose law firm Ice Legal P.A. was among the firstto get banking executives to acknowledge shoddyforeclosurepractices, said it will be difficult for banks to fixall of the paperwork errors."This isn't just a procedural technicality, it's exposed the veryproblem at the heart of the securitization fiasco, which is noone knows who owns what," he said in an interview on Tuesday.Arecord 1.2 million U.S. homes are expected to be taken over bybanks this year, up from 1 million last year and100,000 in 2005, real estate data companyRealtyTrac Inc. says.Faced with a rising tide offoreclosures, lenders employed so-called "robo-signers" -- middle-ranking bankingexecutives who signed thousands of affidavits a month claiming theywere knowledgeable of the cases.However,some lenders, prodded bylegal challenges, now sayofficials were not aware of details in all of the cases andvow to resubmit them. It is unclear how manycases are involved but it is believed to be in the tens of thousands.But Ice said a broader problem was damaging the process of resolving the foreclosures. He said manybanks wereinitiating proceedings withoutknowing if theyin fact own the loans and often failed to produce requested documents.The securitization of home loans meant manyhave been sold off to other investors. Banks still own some, but frequentlyserve as loan servicers on behalfof the actual owner, whether it is another bank or an investor pool.Some mortgages can be tracked in an electronic system known as MERS, or the Mortgage Electronic RegistrationSystems,thattraces transfers among member banks. But the mechanism is not fullyreliable, Ice said.Arecent sample among some 400 foreclosure cases Ice's law firm is handling revealed 71 percentwith possiblediscrepancies in detailing the owners of clients' loans."Few of these processes followed the rules, shortcuts were used at everystep," he said. "The industryitself doesn'tknow who owns what."BANKS WARYOF BAD LOAN STIGMASome banks maybe reluctant to step forward,worried about how itmight reflect the amount of bad loans on theirbalance sheets, Ice added.Lenders,including JPMorgan Chase and Co., Bank of America Corp and AllyFinancial Inc, are now scrambling todefend and improve their foreclosure procedures.At least sixstates are investigating the foreclosure procedures at Ally, JPMorgan Chase, or both.Ice said without a verifiable wayto identifythe loan's owner, it mayleave cases open to more claims byhomeowners'lawyers of faultyforeclosure procedures since some lenders will not be able to justifytheyindeed own a home loan.
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