Investing In Residential Real Estate: What the media or the gurus won’t tell you

I’ve been repeatedly asked by people how to invest in residential real estate now; they all want to take advantage of the historical foreclosure casualties of the current real estate crisis. People often asks me how to get a list of foreclosure homes in the area where they live. Unfortunately these people are not throughly researching their plans and, if not properly advised, they will be just another victim of the real estate crisis; thus losing their hard-earned savings.

I still haven’t figured out why is that many people believe that investing is a common sense type of activity. People believe that in order to make money in real estate, the stock market, and other type of investments, all they have to do is buy low and sell high and no further formal education is needed. So you see college educated individuals and professionals with great academic credentials discussing the latest fashionable investment of the week, and some of them go beyond talking and actually invest money in trendy investment vehicles that are poised to boom and bust. A large number of these educated individuals fail to recognize that money is not made only by buying low and selling high. In my view, any professional and sophisticated investor, beyond knowing that he/she needs to buy low and sell high, must know when to buy, how to buy and when to sell and how to sell.

I’ve been a residential real estate investor full time since 2003, and I have been involved indirectly in a few commercial transactions; I will concentrate this discussion in residential real estate investing. I’ve read many books, I have listened to tapes/CDs, I have read many online forums/posts, and I have attended several investing seminars. My advice to you: Be very,very, very careful about the creative real estate “gurus” and specially their get-rich-quick seminars. There are dozens of artful salesmen who preach fancy financing, “no money down,” flipping properties quickly and numerous other strategies to get rich buying and selling real estate. My conclusion: Most of the information sold in seminars, home study courses, etc is absolutely usefulness! Unfortunately it costed me about $15,000 to come to this conclusion because nobody told me about it, and I didn’t to a comprehensive research on the topic. Please don’t let this happen to you.

There’s an excellent article about this topic titled “Nothing quick about getting rich with real estate” Read also the informative report titled “Dreams Foreclosed: The Rampant Theft of American’s Homes Through Equity-Stripping Foreclosure “Rescue” Scams” by the Consumer Law Center and learn how some of these “gurus” and their students despicably operate. The only professional and truly educational courses that I highly recommend are the ones provided by the CCIM Institute and the Urban Land Institute; both highly respected institutions in the professional real estate investment community/industry. I’m sure there are other reputable institutions in the investment real estate education industry, however my research indicates that the two mentioned above are probably the best in the US. I have attended two courses from the CCIM Institute and they were superb.

The worst about the mass media, the get- rich-quick seminar industry, and best seller books from extraordinary salesmen like Robert Kiyosaki, is that they give people who desperately want an easy solution to their financial troubles the illusion that such easy solutions exist, and in the process they suggests what most financial and investment experts would consider bad advice. Financial education is not taught in most US schools; it’s not taught in college or in universities either. Any financial education you may have usually comes from your family and friends, and unfortunately these individuals are not necessarily the best, most skillful and professional financial advisors. Based on the general population’s lack of solid investment education, I can see how the get-rich-quick seminars and books have so much appeal to the general public and there’s immense amount of money in the self-help personal financial industry. But what most of these seminars and books such as Kiyosaki’s Rich Dad, Poor Dad will not teach you is the critical thinking skills that you need in order to become financially successful.

As author T. Harv Eker, in my opinion, author of one of the best material in financial education says, “If you’re going to work hard anyway, you might as well get rich…and the quicker the better!” I highly advise you to educate yourself well and read T. Harv Eker’s book titled “Secrets of the Millionaire Mind” and attend one of T. Harv Eker’s introductory educational FREE tele-seminars; his teachings can easily change your financial life for the better. T. Harv Eker is one of the few little known educators who teaches personal finances and business building from an emotional, spiritual, mental, and physical approach.

Investing in Pre-Foreclosures:

One of the most common questions that I see is in regards to how to find a list of homes in pre-foreclosure stage so that one can buy them from the homeowners and get a great deal. If you’d like to obtain a list of homeowners facing a foreclosure lawsuit in your area (pre-foreclosures or also called Lis Pendens), all you have to do is go to your local county court house (Clerk of Courts – Circuit Civil division usually) and as a matter of public records accessible to everyone, you can ask for all the mortgage foreclosure cases filed within a certain time period. Be aware that there won’t be a list of foreclosures readily available that you can just pick up and leave; you will have to go manually through all foreclosure cases filed within an specified time period and get the information that you need from each individual case. There are local companies that do this work for you and sell you a subscription service that provide you with foreclosure lists; the small local ones have employees who go on a regular basis to local county court houses across a region or throughout a specific state or states and compile these foreclosure lists for you. One of these local companies is IRSFL in Florida. You should be able to find these local companies by asking someone at your local real estate investment club (http://www.reiclub.com/).

There are nationwide companies such as Foreclosure.com that buy data from local, regional, and nationwide list providers and provide a very user friendly online interface to the foreclosure list user most of the time providing MS Excel export capabilities so that you can conveniently create your direct mailing pieces. According to http://www.all-foreclosure.com/scams.htm, there’s a huge variety in the types of list services offered, so let’s look at common threads. A company charging a large up-front or sign-up fee with low monthly payments is going to have a greater interest in signing you up than keeping you as a customer. If all they charge is a one-time fee, it’s fairly obvious they make more money the sooner you go away. Companies charging a reasonable monthly fee with a low or no sign-up fee will have a greater interest in keeping you as a satisfied customer. Current monthly rates for compiled lists of bank REOs (Real Estate Owned – homes that banks have gotten back at foreclosure auction and are now in their books to sell) seem to average right around $40.00. This will provide you with older information than many of the pre-foreclosure information companies, but it is significantly cheaper. Companies providing information at a cost lower than this are most likely pulling information from the free REO websites. When you’re thinking about subscribing to a company, ask for some samples of complete property information first. Note when the company entered the property into their system, then go to your County Recorders office or your Property Appraiser’s office and look up the date when the bank took the property back. You’ll get an idea as to the freshness of the data and if you request samples from different companies, you’ll get an idea about completeness of the information from each. If a company is unwilling to provide 5-10 samples, you be the judge as to whether you want to be a customer of theirs. Pre-foreclosure data providers are usually pretty reliable. You can obtain very current REO properties from many of them, but the monthly fees start around $80.00 per county and can be significantly higher. The biggest concern here is completeness and timeliness of data. Again, ask for samples, compare the data from different companies and against the data at your local court house; and balance price vs speed and accuracy. Most of these companies want you as an ongoing customer and provide service accordingly.

Once you have created your own list or have obtained the list from a subscription service, you then have to contact the homeowners/defendants in every mortgage foreclosure case by direct mail, telephone, etc and see if you can buy their homes at a discount. Be aware that getting the list of foreclosures in your county is the easy and inexpensive part of the whole process. Once you have this list, you have to invest a considerable amount of time and money sending letters to the homeowners facing foreclosure lawsuits and/or call them and/or knock on their doors to make them sell their homes to you at a favorable price to you. Do you have the time, money and disposition to do all this? Do you know that real estate investing is just like any other business in which you have to invest capital, time, etc? You could also engage a Realtor to help you locate pre-foreclosure properties in MLS (Multiple Listing Service). In most listings, the selling agent will specify that the home is a “pre-foreclosure.” In my experience, MLS is not the source to find great residential real estate deals. Sending letters, calling and/or knocking on doors don’t guarantee a good deal either; it requires persistent effort, money, dedication, and great negotiating skills to find a decent property to buy. You will probably have to analyze 20-30 properties before you find a decent candidate home to purchase. Keep in mind also that what is a good deal to me, doesn’t necesarily mean that it’s a good deal to you; we all have different criteria to judge deals based on our risk profile, personality, financial position and financial goals.

Building a business purchasing residential real estate is where the journey begins…not where it ends. The overwhelming majority of businesses fail and a real estate investing business is no exception – and of those that endure, the overwhelming majority of those are nothing better than a glorified job for the owner. Almost all small businesses don’t reach the potential that they could. It doesn’t matter whose statistics you look at. Some statisticians say that 80% of business go out of business in the next five years. Some statistics leave only 4% of all businesses surviving, meaning 96% will go out of business. Let’s also not forget that out of the “lucky” one that stay in business, most of them will be nothing more than glorified jobs for the owners. When you look at statistics like that, it becomes increasingly clear that the choice is between being a slave to your business (if you’re lucky enough to survive) or actually growing your business, which certainly requires uncommon sense. I highly recommend the teachings of Mr. Rich Schefren at Strategic Profits, and I highly advise you to read his material on the Internet Business Manifesto, available for free. Also watch this free video of Rich Schefren speaking brilliantly about building a business.

According to the U.S. Small Business Administration two-thirds of new business survive at least two years, and 44 percent survive at least four years. Dun & Bradstreet also released a study that revealed that of the small business that fail, 90% do so because of lack of skills and knowledge on the part of the owner.

Buying Short Sales:

What about buying a home facing foreclosure through a short sale? From BusinessWeek in an article titled “The New Exit Strategy: A short sale:” “For all the homeowners who are upside down and can no longer make their mortgage payment (because of either a job loss, divorce, or an option ARM that’s resetting higher), up to now the only option was, well, letting the bank foreclose. That’s not a good option since a foreclosure sticks on your credit record for at least 10 years. But some experts are now advocating a “short sale.” This is a case of a distinction with a difference: If your bank agrees to a short sale, you then hire an agent to find a buyer for the house, you sell the house for a loss, and with the bank’s blessing, they agree to eat the loss (although they could still demand the homeowner make some kind of payment or share the loss).”

I don’t really see how a short sale will guarantee you a super great deal. I’ve done about a large number of short sales in my investing career and in my experience it’s extremely unlikely that you get a super deal; most of the lenders discount at around 95% or so of the fair market value of a home. I have had some great super deals with short sales, but they are the exception to the rule, and in order to get those super deals, the property must be in need of extreme repairs, I had to make friends with the real estate agent doing the BPO (Broker Price Opinion) and had to do play the lender’s game to a great extend.

If you find someone who claims to be a specialist who deals with short sales, that doesn’t guarantee that you will get a great deal because if it’s a great deal, he/she would probably keep it for him/herself. If you go to your local real estate investment club (http://www.reiclub.com/), you should be able to find a wholesaler; these so called investor “wholesalers” target beginner investors to sell their properties to. Be very careful! There are some very sneaky and deceptive “wholesalers” out there. Most of them will perhaps make you believe you’re getting a super great deal. Do comprehensive research before buying. Be an educated buyer; compile all the facts and seek expert advice before making a decision.

Buying REO (Real Estate Owned by banks):

This includes government agency foreclosed homes, including property owned by HUD, VA, Fannie Mae and Freddie Mac; asset managers, who will usually have foreclosed homes listed from different lenders; and listings provided directly by the banks or institutions owning the property. In my experience, it’s very unlikely that you will find a super great deal buying this type of homes. The above mentioned institutions make the process very user unfriendly with complex and you-lose-I-win contracts; furthermore, they price their homes at fair market value or close to it. Most of these homes are listed with a real estate agent and you can find them in MLS or at Realtor.com. These institutions have gotten these properties back after foreclosing on them and it makes business sense for them to sell them at the highest price the market can bear so that they can recoup their investments (loans to homeowners) plus legal fees, carrying costs, etc. Most of the time, the employees at these institutions handling the sale of these homes are compensated with bonuses based on how high they sell them. There is a sub-industry in this category; some of the above mentioned institutions package their most undesirable homes (usually in very bad areas) and sell them to bulk/wholesale buyers who most of the time are individuals or companies with access to large amounts of capital, who in turn with little investment on the homes, sell them to minority buyers with easy and sometimes deceptive terms involving seller financing.

When to Buy and When to Sell:

You also have to take into consideration the timing of your real estate purchase. Here’s where the knowing when to buy and when to sell come into play. It’s not advisable to purchase any asset that is deteriorating in value as (residential and commercial) real estate is at this moment. As stated by the prominent economic research H.S. Dent Foundation in its Special Update dated October 30, 2006: …“deflation is the worst environment for most assets, especially stocks and real estate! From 2010 onward, stocks and real estate will enter a major, long-term decline into around 2022 or so”… “Real estate is likely to lag the stock market by a year or so; hence home prices are likely to start weakening seriously from late 2010 onward, specially from late 2012 into early 2015 when unemployment levels and bank failures are likely to be the highest (like early 1932 to 1934 in the Great Depression)…”The crash that follows will be similar to the long-term bear market in Japan from 1990 to 2003, and the American Great Depression of the 1930s. So, as bullish as we have been in recent decades, our fundamental indicators suggest an extended slowdown in the US and most Western economies that will last from around late 2009 into 2022 or so.”

H.S. Dent is not the only prominent economist predicting an upcoming Great American Depression; there is even a documentary that touches on this topic (http://www.whatawaytogomovie.com/). You can also check a sample of Amazon.com’s selection of recent books by respectable economist and researchers that talk about the upcoming Greater American Depression and its depressing repercussion on real estate.

Please don’t believe a word of what I say in this article. I don’t know everything that needs to be known in real estate or investing. Do your own research and make an educated decision. I sincerely hope this article inspired you to think twice about taking residential real estate investing as a hobby. Real estate investing is most of the time a business in which you have to throughly research information, dedicate large amounts of time and effort, and require capital investment in marketing, operations, inventory, etc.

To your success,

Julio Martinez-Clark

www.JulioMartinezClark.com

www.Beat-Debt-Collectors.com 

Many Homeowners in Foreclosure Believe in Magic

Foreclosure is a financial and legal issue. If you attack the issue from a financial standpoint, you must to have cash to pay your mortgage. If you attack it from a legal standpoint, you must be able to find a flaw in the foreclosure lawsuit to dismiss it. I don’t see any other way of stopping foreclosure.

If you are facing foreclosure at this moment, you are inundated by letters from foreclosure assistance companies that charge outrageous amounts of money to negotiate with your lender; the majority of these companies are a scam.

You also get creative letters from so-called “investors” offering free advice and with the intention to make you sell your home to them at a deep discount using deceptive kitchen table closings in which they make you sign mysterious paperwork (land trusts, etc) that basically transfer the title/deed of your home to them sometime taking over your mortgage payments and leaving the loan liability on your name. Some of this “investors” also offer very deceptive “lease-back” arrangements in which they let you stay in your home as a tenant, and they pray that you stop paying rent so that they can evict you so that they can take possession of your house. You also get letters from Realtors® who are trying to make you list your home for sale and paint a rosy picture of the real estate market and the value of your home (Read National Consumer Law Center’s report “Dreams Foreclosed;” one of the best studies recently written about the rampant theft of American’s homes through equity-stripping foreclosure rescue scams).

Last but not least dangerous, you get letters from nice attorneys offering free consultations to make you file Chapter 13 bankruptcy; what these attorneys don’t tell you is that based on research (see studies: The Realities of U.S. Personal Bankruptcy under Chapter 13, and Chapter 13 Bankruptcy: Successful Versus Unsuccessful Debtors) the overwhelming majority of Chapter 13 filers do not complete their payment plans and are not discharged.

You will also find on the internet a proliferation of eBooks that promise to stop foreclosure magically with names such as “Foreclosure Free Zone,” “The Fight Of Your Life: How To Beat The Foreclosure Demons Smart Solutions For Saving Your Home,” “Avoid Foreclosure And Fix Credit Problems,” ”Foreclosure Help – Don’t Let The Bank Take Your Home!“ In my research, I’ve even bought some of these type of eBooks just to see what’s so magical about them, and found that they don’t have any information that isn’t common sense and readily available for free online. All the advice in these books fall into these categories: 1) Talk to your lender, 2) Sell your home, 3) File for Chapter 13 bankruptcy protection, and 4) Refinance/Get a loan. None of these books, nor the Chapter 13 attorney, nor the Realtors®, nor the “investors” in their white horses tell you about your legal rights and how you can defend yourself from the abuse of the debt collector attorneys.

Foreclosure is a financial and legal issue. If you attack the issue from a financial standpoint, you must to have cash to pay your mortgage regardless of negotiating a payment plan with your lender yourself or through a foreclosure assistance/consulting company. Bear in mind that when negotiating a payment plan with your lender (sometimes called Forbearance Agreement) , you may be required to come up with a lump sum (usually half of your past-due payments) and proof of income. It’s very simple; if you have sufficient cash and/or income to pay your monthly mortgage obligation, it’s very likely you can negotiate something with your lender to stop foreclosure. If you don’t have the cash and/or the income, you will have to attack the issue from a legal standpoint.

If you attack the issue from a legal standpoint, you must learn about your legal rights and, preferably with the help of a consumer protection attorney (www.naca.net), find a technical or legal flaw in the lawsuit to have it dismissed. These flaws could be hidden in the lender’s debt collection attorney not following your state’s rules of civil procedures (for instance: You were served improperly) or by digging into the foreclosure complaint and court docket to see if there is an actual plaintiff’s proof of ownership of the promissory note, or if the original promissory note has been filed in the court records, or any of the other twenty-something reasons that that could render a judgment void or invalid.

There is no magic in foreclosure. If a homeowner doesn’t pay his or her mortgage, the lender will foreclose on their homes. There is no magical negotiation with a lender that can be done without cash at hand and/or ability to pay supported by proof of income. There is a lot of literature on the internet and in bookstores about the debt collection industry, on how to stop foreclosure negotiating with the mortgage lenders, about how debt collections works, about what to expect from debt collectors, etc, etc. However there is little information about how to navigate the legal system, on how to file pleadings and motions and on how to execute the steps necessary to win the debt collection/foreclosure battle in court. Almost nobody explains to homeowners in simple terms how the legal system works and how they can use it to your advantage to win debt collection lawsuits.

Homeowners’ Dilemma: To be or not to be in Foreclosure

According to several experts, the residential real estate market is poisoned to deflate at around 40%-50% in many areas of the country, specially in high speculative areas such as in California, Florida, Arizona, etc. Furthermore, foreclosures will greatly increase in the country according to several statistics and projections. It doesn’t take more than to look at the work of the prominent economist H.S. Dent (http://www.hsdent.com) or doing a quick search in a bookstore for a myriad of recent economic books that talk about the upcoming Greater American Depression.

Many homeowners have a very difficult decision to make in these historical economic times. Their properties are in a position now that it’ll be extremely difficult to make them cash flow positive as rentals, and/or to sell them for more than what their underlining mortgages are. It’s overwhelming to see the amount of new investors created during the 2001-2005 residential real estate boom. These investors where speculators with little investment education who wanted to jump on the train of quick real estate appreciation; in many occasions renting their properties out and getting negative cash flow in exchange for hopes of future appreciation. They ignored well known facts in the professional investment world: In order to get positive cash flow, most of the time you need to buy in the rare market where high cap rates are the norm (annual net operating income divided by property price. For example, a $1,000,000 property with $60,000 of net operating income per year has a cap rate of $60,000 ÷ $1,000,000 = 6%.). Such markets are usually severely depressed like Anchorage or Oklahoma City in the late 80’s. The reason tenants are willing to pay more to rent than they would have to pay to own in such markets is that they believe property values are falling or level, in which case not owning is a good idea in spite of the high rent.

Even then, the positive-cash-flow situation is typically a brief window that lasts only six months to a year. Positive cash flow is so rare and so desirable that it attracts out-of-area investors. Their coming into Anchorage or Oklahoma City or wherever drives the prices up so that high cap rates are no longer available.

The other way to achieve positive cash flow is to make a bargain purchase like at a foreclosure auction or out of probate. In that case, you have a low loan-to-value ratio, even though your loan-to-purchase-price ratio may not be low. When you achieve a positive cash flow through a bargain purchase, you generally should sell out soon because your extraordinary amount of equity will result in your return on equity being low.

Return on your investment is interesting to look at initially, but after purchase, you should switch to looking at your return on current equity. Dividing current net operating income by past purchase price is a misleading apples-and-oranges comparison. Return on investment (down payment and closing costs) will be high initially and climb higher if you bought right; but return on current equity (current market value of property less current mortgage balances), which is the correct denominator, will show a low and falling rate of return. That tells you to redeploy your money to where it can earn a higher return.

Basic financial education suggests that It doesn’t make sense to continue investing in an asset that is rapidly deteriorating in value to the point where a property will perhaps be worth about 40%-50% less than what it was bought for. What perhaps started as an asset with some equity when the homeowners purchased the property, is now a draining financial liability.

The most recommended approach now for property owners trapped with negative cash flow rental properties or trapped in a personal residence they can’t sell with or without equity, would be to speak with the mortgage lenders about possible options; banks should be nowadays more willing to negotiate financial loan terms in order to avoid foreclosure (be aware that most banks don’t offer much assistance unless a homeowner is already behind in his/her payments and has been sued with a foreclosure complaint).

If the homeowner decides to stop paying the monthly mortgage obligation, after 3-4 months of no mortgage payments, the lenders will start legal foreclosure proceedings, and in about 6 months or so (depending on the state laws where the property is and how busy is for a trustee or the county court house to schedule a sale due to the present high volume of homes in foreclosure), his/her property(ies) will be sold at public auction. At the public auction, is very common nowadays that no private/individual buyer bids and purchases the property(ies), thus forcing the lender to take the property(ies) back and try to sell them in the open market with a real estate agent (which doesn’t guarantee that the properties will be sold anytime soon). After the homeowner is sued and before the property(ies) are sold at the foreclosure auction, the homeowner can have a local real estate agent list them for sale in the MLS (Multiple Listing Service), and if the agent is lucky enough to find a buyer before the foreclosure auction takes place, the lender could accept what is called a “short-sale” in which the lender accept a lesser payoff amount than what the homeowner owes as a payoff in his/her mortgage, so that the lender can avoid more loses in the future. Homeowners must contact their lenders directly to request a short-sale package to be sent by fax and/or mail. Roughly, the steps for a short-sale are the following:

- Request a short-sale package from both lien holders.
- Get a buyer for the property; preferably at a price close to the fair market value of the home
- Submit to lien holders short-sale packages with requested information (preliminary HUD-1, hardship letter, W2’s, bank statements, income tax returns, purchase and sale agreement with a new buyer, etc)
- Obtain approval by both lien holders individually in the form of a payoff letter. Make sure that in the payoff letter the lenders waive their rights to a mortgage deficiency judgment
- Submit payoff letter(s) to closing agent.
- Close on the purchase.

Many homeowners across the country are faced with this dilemma: They either keep their high credit scores and get stressed and financially drained with a depreciating asset that will probably be worth 40%-50% less than when purchased, or get rid of the assets in foreclosure, get rid of the stress, and keep their hard-earned cash to buy more properties in 2012-2014 or so when the market is perhaps expected to hit bottom and they will be able to create massive wealth in the upturn of the new real estate cycle that will probably peak in 2022-2023 or so.

Bankruptcy is another option, however, an attorney should be sought for it. If you are considering filing for Chapter 13 bankruptcy protection, be aware of something that your attorney will perhaps not tell you: Based on research papers, the overwhelming majority of Chapter 13 filers do not complete their payment plans and are not discharged (see The Realities of U.S. Personal Bankruptcy under Chapter 13, Hülya Eraslan Wenli Li and Pierre-Daniel Sarte, February 14, 2007 and Chapter 13 Bankruptcy: Successful Versus Unsuccessful Debtors, David A. Evans, Utah State University and Jean M. Lown, Utah State University, 2003)

Since, I’m neither a financial advisor, nor a legal advisor, I’m not legally suitable to recommend a course of action and this is a very intimate and personal decision based on the homeowner’s personal priorities in life. They have to arrive at their own conclusions based on the facts that I’m providing and other facts that they accumulate in their research.

Debt Collection Attorneys Beware: Debtors Are Learning The Law To Fight For Their Rights

As record numbers of homeowners default on their mortgages, questionable practices among lenders are coming to light in courts, leading some legal specialists to contend that companies instigating foreclosures may be taking advantage of imperiled borrowers. In the last past weeks there have been important events unknown by many homeowners and individuals facing debt collection lawsuits. In a study of foreclosures, Katherine Porter of the University of Iowa found questionable fees on almost half of the loans and discovered that though bankruptcy laws require documentation that a creditor has a claim on the property, 4 out of 10 claims in Ms. Porter’s study did not attach such a promissory note. The second event is a court ruling on October 31, 2007 in which a federal judge in Ohio has ruled against a longstanding foreclosure practice, potentially creating an obstacle for lenders trying to reclaim properties from troubled borrowers and raising questions about the legal standing of investors in mortgage securities pools. The third event is another ruling on November 15, 2007 by a federal judge in Ohio who has given lenders 30 days to prove that they own the promissory notes on the properties they intend to seize from troubled homeowners in 27 other cases. In a fourth event according to the New York Times article dated November 28, 2007 and titled “Foreclosures by Lender Investigated,” the federal agency monitoring the bankruptcy courts has subpoenaed Countrywide Financial, the nation’s largest mortgage lender and loan servicer, to determine whether the company’s conduct in two foreclosures in southern Florida represented abuses of the bankruptcy system.

The sighting of a robin does not make a spring, nor do the actions of four judges constitute a trend. Nevertheless, the fact that some courts are taking a harder look at foreclosure practices may foretell a shift in attitudes. In the fourth event involving Countrywide, there is every indication that Countrywide was not alone in the practices at issue. So what makes this story interesting is that it is another example of a subtle shift in power in the judicial system. The plaintiffs have considerably more resources than the mortgage holders (the homeowners), most of whom cannot mount a fight; but judges may be starting to recognize that that power imbalance has led many banks to be sloppy, presumptuous, and at times extortionate, and at least a few jurists are holding their feet to the fire. In this case, the issue was charges Countrywide added to mortgage balance in two bankruptcy filings. When the borrowers objected, Countrywide did not appear at the hearing, leading the judge to remove those costs. Countrywide’s failure to respond piqued the interest of the bankruptcy trustee, leading to the investigation. Note the judge ruled against Countrywide’s objections to trustee’s subpoenas.

The media needs to bring to the public eye that It has long been a common practice for lenders to bring foreclosure proceedings without attaching proof of ownership of the underlying note. Tracking down such documentation may be more challenging because of securitization, the pooling of mortgages into trusts that are subsequently sold to investors. The proliferation of legal education books and events such as the ones named above are a waking call for the lending and legal industries; thus making the job of a debt collector attorney more difficult after enjoying decades of easy judgments against individuals who don’t know their rights. As Ms Porter’s study suggests, if one were to carefully analyze debt collection cases, one would probably discover that many of them lack legal standing due to insufficient proof of claims. The amount of debt collection void judgments in our courthouses is perhaps so vast, that it’s almost impossible to estimate how many there are. If every void judgment were vacated with damages, the whole financial and legal system would crumble perhaps representing an unprecedented shift in wealth.