LoanSafe reports that the Washington state attorney general, Rob McKenna, has uncovered a likely widespread violation of state law, that foreclosure trustees lack a physical presence as required and a means for borrowers to contact or visit them to submit last minute payments or present documentation. McKenna’s interest appears to result from the fact as with servicers, the foreclosure trustees are not accessible to borrowers and not responsive when there may be legitimate reasons to halt or delay a foreclosure. Note that Washington is a deed of trust state, and the foreclosure trustee handles certain tasks relative to the actual foreclosure. This is a different role than that of the securitization trustee, who is the agent of the securitization trust, the legal entity that holds the loans in the securitization.
From LoanSafe:
Six months into its investigation into unlawful business practices by foreclosure trustees, the Washington Attorney General’s Office announced that it has uncovered an additional widespread problem that jeopardizes homeowners’ chances of stopping a foreclosure….
“Washington law requires that foreclosure trustees maintain actual offices in our state and local phone numbers for this reason,” he [McKenna] continued. “But our investigation shows that some of the largest trustees are not in compliance and borrowers who have a legitimate reason to stop a foreclosure are having trouble reaching trustees.”….
Washington is a “non-judicial foreclosure” state, which means that a lender can proceed directly to selling a home at public auction without first filing a lawsuit. This process was created by the state Legislature. Although lenders may foreclose in court in Washington, they almost always choose non-judicial foreclosures.
If a trustee is unwilling to stop a foreclosure, then the homeowner must file a lawsuit under the Deed of Trust Act and obtain a court order before the sale.
McKenna’s office sent a letter to 52 trustees yesterday. If you are a Washington state resident and would like to file a complaint about your inability to reach a trustee, an online form is here.
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“Washington is a “non-judicial foreclosure” state, which means that a lender can proceed directly to selling a home at public auction without first filing a lawsuit. This process was created by the state Legislature.”
WHY WOULD THEY DO THAT?
Because it’s cheaper for the state, and as we saw in yesterday’s article about Florida, judicial foreclosure is frequently a rubber-stamp process anyhow.
The root problem isn’t the foreclosure procedures, it’s that the politicians and judges default to believing “the financial industry is honest, and borrowers are crooks” as a general rule despite the accumulating evidence to the contrary.
That is the side the bread is buttered on.
McKenna is a Republican. He is lining up to run for Governor next year. He is getting calls on this issue and needs to do something that makes him look active on the issue and visible, and that also makes it look like he is ‘getting tough’. Something that puts a good taste in the mouth of middling liberals whose votes he’ll need to attract next November. Washington is a blue state so he needs some of them. Nothing will come of it. He’ll try to see to that. It will be one of many PR exercises he will attempt over the next year and a half on this order. He needs to overcome the stupid mistake he made by signing onto the tea party inspired Florida lawsuit over Obamacare. He won’t offend the banking sector with anything with real teeth. I see this as merely a notice to banks to get some local offices set up, masquerading as a ‘getting tough’ action that gets him the good PR.