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10-29-10
00 City of Lakeville Community and Economic Development Memorandum To: Economic Development Commission From: David L. Olson, Community and Economic Development Director Copy: Steve Mielke, City Administrator Adam Kienberger, Economic Development Specialist Date: October 29, 2010 Subject: October Director's Report The following is the Director's Report for October, 2010. Joint Meeting with City Council A joint meeting with the City Council was held on Monday, October 25 All but one of the EDC members was in attendance. The joint meeting consisted of a review of the recommended draft 2011 -2013 Strategic Plan for Economic Development. There was a good discussion of the various elements of the recommended draft plan including the four major goals for the coming three years. The City Council did not have any recommended changes to the draft plan. The EDC will be considering the final draft plan at the November 23 meeting with final approval from the City Council to take place in December. 2010 Manufacturers Week Event The City has hosted our 17 Annual Manufacturers Appreciation event on Tuesday, October 26 from 4:30 p.m. to 6:30 p.m. at the Holiday Inn and Suites. This year there were approximately 85 people representing 40 businesses. This is up considerably from last year's event. I want to thank EDC members that made calls to businesses encouraging them to attend. We received positive feedback during and after the event from attendees. The City was fortunate to receive sponsorships for the event this year from Dakota Electric, Frontier Communications, Minnesota Energy Resources and Xcel Energy. Based the attendance at this year's event as well as the positive feedback, we will plan to host this type of event again next year and attempt to continue to increase attendance by more businesses. Building Permit Report The City issued building permits with a total valuation of $41,552,020 through the end of September. This compares to a total valuation of $52,703,991 during the same period last year. The City total valuation of commercial and industrial permits through September was $2,930,000 which compares to $6,086,500 through September of last year. The City also issued permits for 98 single family homes through September with a total valuation of $26,908,000. This compares to permits for 91 single family homes with a total valuation of $25,271,000 through September of last year. Development Updates The City has recently received two different Sketch Plan applications for Senior Housing Projects. The first application was submitted by Charthouse Senior Living LLC for a site adjacent to the Charthouse Restaurant. The property on which this project would be developed is owned by Frank Schoeben and he will also have an ownership interest in the project. This proposed project consists of 31 independent living units, 38 assisted living units, and 32 memory care units for a total of 101 units. This development will require a number of planning actions including a Comprehensive Plan Amendment, Rezoning to PUD, Conditional Use Permit for a Planned Shoreland Development, and Preliminary Plat. The Developer of this project is making a number of requested changes to the Sketch Plan. After these changes are reviewed by staff, a neighborhood meeting willing be scheduled. The second senior project to submit an application is the Hosanna! / Ebenezer Senior Living Project. This project is proposed to be constructed just west of and connected to the existing Hosanna! Church building. This project proposes 20 independent units, and 71 assisted and memory care units. This project will also require a Comprehensive Plan Amendment, Rezoning to PUD, and Preliminary and Final Plat. Comments have also recently been provided to the Developer of this project and once the comments have been incorporated into their Sketch Plan and reviewed by staff, a neighborhood meeting for this project will be scheduled. Both projects are seeking Housing Revenue Bond financing from the Dakota County CDA. Foreclosure Update There were 35 Sheriff Sales in the month of September which is the highest for any month this year. There have been a total of 257 Sheriff's Sales in Lakeville through September of this year. This number is equal to the total number of Sheriff's Sales through all of 2009. 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O O O Cn O C O LA O 0 0 0 0 0 0 0 N � LA �c � C O O C O O O O O O C O O O O LA N A O O N N w U O 000 0000 O O O C O O O C O O O O C O 0 0 O O O N W 00 N A C 9 O O O C 0 CDA Dakota County Community Development Agency O • • • • • • • • • • • 000 • • • • • • • To: Dakota County Cities From: Dan Rogness, Director of Community Revitalization Date: October 12, 2010 Re: Foreclosure Update Bank of America Freezes Foreclosure Sales Bank of America announced on Friday, October 8, that it is stopping foreclosures in all 50 states while a review of foreclosure documents is conducted. The announcement comes a few weeks after GMAC Mortgage and JP Morgan Chase imposed a moratorium on many of their foreclosures to review paperwork and procedures. The initial moratorium included 23 states that use a judicial foreclosure process (where the foreclosure must be approved by a court). Minnesota is a non - judicial foreclosure state. Bank of America released the following press release on their website: "Bank of America has extended our review of foreclosure documents to all fifty states. We will stop foreclosure sales until our assessment has been satisfactorily completed. Our ongoing assessment shows the basis for our past foreclosure decisions is accurate. We continue to serve the interests of our customers, investors and communities. Providing solutions for distressed homeowners remains our primary focus." http:// mediaroom. bankofamerica .com /phoenix.zhtmI ?c= 234503 &p =irol- newsArticle &ID= 1480657 &highlight Bank of America will continue to pursue foreclosure and collection efforts during the foreclosure freeze, but will not conduct sheriff sales. The news articles included in this month's update illustrate some experts' opinions that the foreclosure moratoriums may aid in the housing recovery or prolong it. With the missteps in handling documentation, the housing crisis could last longer than expected as more borrowers file lawsuits and investigations are conducted. In addition to Bank of America, PNC and Litton Loan Servicing also announced a moratorium on foreclosures, although not a nation -wide freeze. So far, Bank of America's moratorium is the only that will affect Minnesota homeowners. ddb HUMS CDA Dakota County OWNERSHIPIL Community Development Agency cowte&im *006040060006609009666 Dakota County Stats — September 2010 • # of Sheriff Sales in September — 216 (compared to 157 in September 2009) • Total Sheriff Sales for 2010 — 1,685 (compared to 1,349 in Jan.- September, 2009) • # of Notices of Pendency Filed in September — 356 • Total Notices of Pendency Filed for 2010 — 2,949 A Notice of Pendency is filed by a mortgage company's attorney as official notification that the foreclosure process has begun. Not all of these result in Sheriff Sales. Pages 3 and 4 of this PDF file have Sheriff Sale and Notice of Pendency statistics for each city. Mapping Using Dakota County GIS http: / /,eis.co.dakota .mn.us /website /dakotanetgis/ The Dakota County Office of GIS is updating the 2010 Foreclosures and Notice of Pendency layers on a monthly basis. If you need assistance using this Web page, please call Randy Knippel or Mary Hagerman with the Office of GIS at (952) 891 -7081. In The News Provided in this PDF file are a few notable foreclosure articles that were published in the last month. Among the points of interest: • Foreclosure sales are expected to slow down as lenders scrutinize their foreclosure methods and proceedings. • The foreclosure crisis may last even longer than expected as lenders and loan servicers are bombarded with more lawsuits and investigations on claims of falsified mortgage documents. • In the near -term, the foreclosure freeze may benefit homeowners as they're able to stay in their homes payment -free for longer. However, the freeze may have grave consequences on the housing market since all of the foreclosed properties have to be reexamined by the banks and then sold. • Bank of America's decision to freeze foreclosures will have a significant impact on thousands of borrowers in Minnesota. If you have any concerns, please call me at (651) 675 -4464 or send me an e-mail at drogness O.dakotacda.state.mn.us �. 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Ln s .D N d C Ln .o O G) E u 2 o N bA Q Cd U u v � o a.+ � O fd C O .4 _N C W C m 0 E L- 0 U- Foreclosures Slow as Document Flaws Emerge - NYTimes.com Page 1 of 3 a-:he,NCW 0..t_ L rs • Reprints This copy is for your personal, noncommercial use only You can order presentation -ready copies for distribution to your colleagues, clients or customers here or use the 'Reprints" tool that appears next to any article Visit www nytrepnnts.com for samples and additional information Order a reprint of this article now September 30. 2010 Foreclosures Slow as Document Flaws Emerge By DAVID STREITFELD The foreclosure machinery that has forced millions of Americans out of their homes is beginning to seize up as some lenders and their lawyers are accused of cutting corners in their pursuit of rapid home repossessions. Evictions are expected to slow sharply, housing analysts said, as state and national law enforcement officials shine a light on questionable foreclosure methods revealed by two of the country's biggest home lenders in the last two weeks. Even lenders with no known problems are expected to approach defaulting homeowners more cautiously and look more aggressively for resolutions short of outright eviction. Despite the turmoil, some economists said the breakdown could ultimately lay the groundwork for a real estate recovery. Stricken neighborhoods across the country, for example, could benefit. One big factor undermining home sales is fear of a large number of foreclosed homes coming to the market. If the foreclosures are delayed or never happen, housing prices might find a floor. "Maybe this is like shock therapy," said the economist Karl E. Case. "Maybe this will actually get the lenders to the table and encourage them to work out deals that are to the benefit of everybody." While such a happy ending is possible, the near term is more likely to produce paralysis and confusion. As more defaulting homeowners become aware of the lenders' problems, they are expected to hire lawyers and challenge the proceedings against them. And if completed foreclosures were not properly done, families who bought the troubled homes could be vulnerable to claims by the former owners. Apparently alarmed about such a possibility, one of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that "until further notice" it would not insure title to properties foreclosed upon by GMAC Mortgage, the country's fourth- largest home lender and one of the two big lenders at the center of the current controversy. GMAC declined to comment, and Old Republic representatives did not return calls. http: / /www.nytimes.coml20l Ol10 /O 1 /business /O l mortgage.html ?_r=1 &th= &emc =th &page... 10/1/2010 Foreclosures Slow as Document Flaws Emerge - NYTimes.com Page 2 of 3 GMAC has acknowledged legal missteps in processing mortgages, and JPMorgan Chase has acknowledged the possibility of missteps, and both have suspended all foreclosures in the 23 states where they need a court's approval. That's 56,000 in the case of Chase alone; GMAC declined to provide a number. Attorneys general in half a dozen states are demanding action or opening investigations. The Treasury Department said Thursday it was asking regulators to look into "these troubling developments." "We're seeing a fundamental breakdown in the system, because no one cared that much about getting things right," said Representative Alan Grayson, a Democrat of Florida, who unsuccessfully asked the Florida Supreme Court to halt all foreclosures in that state. Wall Street was examining the impact the disclosures could have on the lenders. Moody's Investors Service has placed the servicer ratings of GMAC and Chase on review for possible downgrade. The federal government has been the majority owner of GMAC since supplying $17 billion to prevent the lender's failure during the financial crisis. Other lenders said Thursday that their foreclosure filings, including the crucial affidavits, had been properly done. A Citigroup spokesman said the lender required "annual training for our foreclosure employees on the proper execution of affidavits, including having personal knowledge of the information in the affidavit." A Wells Fargo spokeswoman said "the affidavits we sign are accurate." A spokesman for Bank of America, Rick Simon, said, "We do not have anything to tell you at this time." GMAC and Chase are in trouble because, overwhelmed with foreclosures, they tried to process them as quickly and cheaply as possible, defense lawyers say. The companies say they are reviewing their procedures to take care of any violations. The missteps stemmed from the affidavits the lenders file as they seek a quick or summary judgment in thousands of foreclosure cases. The affidavits state certain facts about the case, including the amount owed, which the signer indicates he has personal knowledge of. Without the affidavit, the lender would have to prove the facts at trial. In depositions taken by lawyers for homeowners, executives at GMAC and Chase said they or their teams signed io,000 or more affidavits and related documents a month. That did not give them time to review the cases. Defense lawyers say the disclosures are symptomatic of the carelessness, if not outright fraud, that lenders have been exhibiting for years in their rush to file cases. Many necessary documents have disappeared, with defense lawyers saying the lenders often do not even have standing to foreclose. http: / /www.nytimes.coml 2010/ 10 /O 1 /business /O l mortgage.html ?_r=1 &th= &emc =th &page... 10/1/2010 Foreclosures Slow as Document Flaws Emerge - NYTimes.com Page 3 of 3 In a number of pending cases in Florida, defense lawyers there said, GMAC has already withdrawn affidavits. The lawyers said they would try to have the cases thrown out for possible fraud, although they acknowledged that might be difficult. GMAC said it would refile the affidavits. Chase said it had not withdrawn any affidavits. "The way the plaintiffs' lawyers have handled this has corrupted our legal system," said Thomas Cox, a Maine lawyer whose deposition of a GMAC executive in June helped prompt the current disclosures. "They tried to manufacture foreclosures the way you'd manufacture cars, on an assembly line. It can't be done that way." Mr. Cox is representing pro bono a rural woman who is in foreclosure on a $82,000 mortgage. The plaintiff in the case is Fannie Mae, the mortgage holding company that failed during the financial crisis and is now under government conservatorship. GMAC serviced the loan for Fannie Mae. This week, the judge in the case set aside his summary judgment in favor of Fannie when he read Mr. Cox's deposition of a GMAC executive, Jeffrey Stephan, who said he never reviewed the file he had signed. The case will now go to trial. "I don't think they are going to give up easily," said Mr. Cox. As the foreclosure crisis has deepened, the length of time borrowers spend waiting for the end has lengthened. In January 2009 the time between the owner's first missed payment and eviction was 319 days, according to LPS Applied Analytics. By August it was 478 days. Since spring, the data firm says, the lenders have been trying to clear their backlog. They have stepped up the rate at which they put defaulting owners into the formal foreclosure process. In August, they started 283,000 foreclosures, up from 220,000 in April. Now, as the lenders are pressed to examine more closely their filings, those foreclosure starts are likely to fall, prolonging the owner's time in limbo. Many borrowers use this period, when they are living in their home but not paying for it, to try and get their financial house back in order. http: / /www.nytimes.coml2010/ 10 /O 1 /business /O 1 mortgage.html ?_r=1 &th= &emc =th &page... 10/1/2010 http: / /www.msnbc.msn.com/id/ 39562824 /ns/business - real Page 1 of 4 its msnbc.com Why the foreclosure mess could last for years Paperwork problems will generate a wave of lawsuits and investigations By Margaret Cronin Fisk and Kathleen M Howley B Ott g updated 2 hours 10 minutes ago The dimensions of the foreclosure crisis keep expanding. Lenders and loan servicers including JPMorgan Chase and Ally Financial are facing an explosion in homeowner lawsuits and state attorney general investigations of claims of falsified mortgage documents. Lawmakers in both houses of Congress have called for investigations. And procedural mistakes in the handling of mortgage documents have clouded titles establishing ownership of the homes, a problem that could plague both buyers and sellers for years. "This is going to become a hydra," says Peter J. Henning, a professor at Wayne State University Law School in Detroit. "You've got so many potential avenues of liability. You don't even know the parameters of this yet." Index Last Change ' BAC 13.18 -098% JPM 39.31 :053% Quotes delayed 15+ n JPMorgan and Ally's GMAC Mortgage unit have delayed foreclosures in 23 states where courts have jurisdiction over home seizures. Bank of America suspended foreclosures as Print . . -, r MICS http:// www. msnbc. msn. com /cleanprint /CleanPrintProxy.aspx? 1286571408816 10/8/2010 There are questions not only about whether foreclosures were proper, but also if people who bought foreclosures actually, legally, own their homes http://www.msnbc.msn.com/id/39562824/ns/business-real Page 2 of 4 msnbc.G01"'r1 well, pending a review of documents. In December 2009, a GMAC employee said in a deposition that his team of 13 people signed about 10,000 documents a month without verifying their accuracy. "My suspicion is that this will wind up being an industrywide issue," says Patrick Madigan, Iowa assistant attorney general. "Many companies were using robo- signers." Homeowners in class actions and individual lawsuits across the U.S. claim lenders and servicers have used falsified documents to foreclose on homes, sometimes when the banks didn't hold titles to the properties. Attorneys general in at least seven states are investigating foreclosure practices, and the number of these probes may grow. "You're going to see a tremendous amount of activity with all the AGs in the U.S.," says Ohio Attorney General Richard Cordray, who has sued Ally over foreclosures. "We have a high degree of skepticism that the corners that were cut are truly legal." homeowners, says Christopher L. Peterson, a law professor at the University of Utah in Salt Lake City. Homeowners who were in default and lost their homes may not be able to prove losses, despite faulty documentation. "The attorneys general can just sue over deceptive sales practices and get penalties," he says. Story: Mortgage rates drop to lowest on record The Mortgage Electronic Registration Systems is facing its own legal challenges. MERS, based in Reston, Va., was created by the mortgage banking industry to handle mortgage transfers between member banks. A lawsuit filed on Sept. 28 in federal court in Louisville on behalf of all Kentucky homeowners claims that MERS was part of a conspiracy to create false promissory notes, affidavits, and mortgage assignments to be used in mortgage foreclosures. Similar class actions have been filed on behalf of homeowners in Florida and "We don't believe the procedural errors in these affidavits led to inappropriate foreclosures," Gina Proia, a spokeswoman for Ally, says. "We believe the accuracy of the factual loan information contained in the affidavits was not affected by whether or not the signer had personal knowledge of the precise details," JPMorgan says in a statement. For lenders and loan servicers, civil lawsuits claiming deceptive sales practices or violations of consumer protection laws may be more troubling than claims brought by PrintPoweredBy http: / /www. msnbc. msn. com /cleanprint /CleanPrintProxy.aspx? 1286571408816 10/8/2010 http://www.msnbc.msn.com/id/39562824/ns/business-real Page 3 of 4 msnbrc,com New York. Karmela Lejarde, a MERS spokeswoman, declined to comment on any pending litigation. Story: Obaina won't sign foreclosure challenge bill Title insurers will also be in court bringing and defending lawsuits, says Henning: "They'll be on the hook if foreclosures are reopened. The title insurers will be going after the banks or whoever assured them there was a clear title." The costs for title insurers to defend customers and reimburse for lost properties rose 14 percent, to $480.5 million, in 2010's first half from the previous year, according to American Land Title Assn., a Washington - based industry group. "Questionable foreclosures will ultimately have little adverse impact" on new owners of properties or title insurance claims, the association said in an Oct. 1 press release. Story: Holder says Justice Dept. studying foreclosures for and moved into a house may not be the legal owner. "This is the most important issue of the whole mortgage mess," says Glenn Russell, a Fall River (Mass.) real estate attorney who won a case last year that reversed a foreclosure because of faulty paperwork. "Families are being thrown out of their homes by people who may not have the right to do that." Almost one -fourth of U.S. home sales in the second quarter involved properties in some stage of mortgage distress, according to data firm RealtyTrac. Ownership questions may not arise until a home is under contract and the potential purchaser applies for title insurance or even decades later as one deed researcher catches errors overlooked by another. "It's a nightmare scenario," says John Vogel, a professor at the Tuck School of Business at Dartmouth College in Hanover, N.H. "There are lots of land mines related to title issues that may come to light long after we think we've People who bought homes in foreclosure face their own worries, as paperwork errors raise questions about the validity of the titles needed to prove ownership. "Defective documentation has created millions of blighted titles that will plague the nation for the next decade," says Richard Kessler, an attorney in Sarasota, Fla., who conducted a study that found errors in about three - fourths of court filings related to home repossessions. A defective title means the person who paid Print Powered By ®Lrt'tics i http:// www. msnbc. msn. com/ cleanprint /CleanPrintProxy.aspx? 1286571408816 10/8/2010 http: / /www.msnbc.msn.com/id/ 39562824 /ns/business - real Page 4 of 4 1'Y1snbc.Com solved the housing problem." The bottom line: Faulty foreclosures will lead to a flood of lawsuits that may haunt lenders, title insurers, and home buyers for years to come. Coptiright C 2010 Bloomberg L RAII rights reserved Tweet Powered Print By e.►: http:// www. msnbc. msn. com /cleanprint /CleanPrintProxy.aspx? 1286571408816 10/8/2010 Associated Press: Foreclosure freeze could undermine housing market w Gmnnnn nomrrwin- Citips October 11, 2010 Foreclosure freeze could undermine housing market By MICHELLE CONLIN AP Real Estate Writer Page 1 of 5 Karl Case, the co- creator of a widely watched housing market index, was upbeat three weeks ago. Mulling the economy while at a meeting at a resort near the Berkshires, Case thought the makings of a recovery were finally falling into place. "I'm a 60 -40 optimist," he said at the time. Today, Case's mood is far more subdued. In scarcely two weeks, he and other housing analysts have watched as the once -staid world of back -office bank procedures has spawned a scandal that threatens to further unhinge the housing market. Allegations of possible mortgage fraud against financial giants GMAC, JPMorgan Chase and Bank of America read like a corporate thriller: forged documents, faked Social Security numbers, phantom titles, disappearing paper trails, "robo- signers" and mortgages sliced and diced so many times that nobody really knows who owns them. On Friday, PNC and mortgage servicer Litton Loan Servicing joined those three financial institutions in suspending some foreclosures while they review how documents were handled. Bank of America, which had already announced a halt for 23 states, expanded the suspension to cover the whole nation. If other banks follow suit, it raises the specter of a national foreclosure moratorium. In all, the banks will have to review the paperwork for hundreds of thousands of mortgages. On top of that, class action lawyers and state attorneys general have filed lawsuits and called for foreclosure moratoriums. In the near term, the freezes could actually benefit both homeowners and the housing market. Homeowners would have time to live rent -free and chip away at their debt. Prices might stabilize because so many homes are penned up. But the long -term implications are grave. Only a month ago, housing watcher Mark Zandi, chief economist at Moody's Analytics, predicted that a housing recovery would be under way by the third quarter of next year. Now he believes the foreclosure scandal could prolong the housing depression for at least another few years. The alleged document fraud could open up the entire chain of foreclosure proceedings to legal challenge. http: // license. icopyright.net /user /viewFreeUse .act ?fuid= MTAzMDIzNTA %3D 10/12/2010 Associated Press: Foreclosure freeze could undermine housing market Page 2 of 5 Some foreclosures could be overturned, others deemed outright fraudulent. Before a housing recovery can occur, all those foreclosed properties have to be re- scrutinized by the banks and then sold. With any foreclosure - related deal open to legal challenge, that inventory could be taken off the market while the legal challenges make their way through the courts. That's not to mention the questions being raised about missing paper trails on mortgages owned by people who have never missed a payment. What started as simple paperwork bungling in a Pennsylvania office park now threatens to bring to a standstill the nation's entire foreclosure machinery. The development is especially troubling given how large the foreclosure market is. Before the scandal erupted, forecasters at John Burns Real Estate Consulting predicted that 41 percent of residential sales this year would be on distressed properties. Typically, distressed properties account for 7 percent. Since housing is the engine that in the past seven recessions has pulled the economy out of recession, any further damage couldn't come at a worse time. "As far as I'm concerned, anything that slows the foreclosure process is a bad thing," Case said this week. The debacle injects yet more uncertainty into a frail recovery that is still trying to find its strength. "This is definitely one of the last things anyone needed to have to deal with," says Diane Pendley, managing director of Fitch Ratings. The news that GMAC, recently renamed Ally Financial, and JPMorgan Chase and Bank of America were stopping foreclosure proceedings in 23 states was merely the beginning. Federal lawmakers are calling for a federal investigation, saying the excuses from the industry are not credible, and on Wednesday the Ohio attorney general filed a fraud suit against GMAC, calling it "the tip of an iceberg of industrywide abuse." GMAC denies the allegations. In at least six states, attorneys general are calling for foreclosure moratoriums and launching their own investigations. And this week, the attorneys general of up to 40 states are expected to announce a joint investigation into banks' use of flawed foreclosure paperwork. A person briefed on the investigation said over the weekend that an announcement of the 40 -state investigation could come as early as Tuesday. The person spoke on condition of anonymity because the investigation was not yet public. Iowa Attorney General Tom Miller will lead the investigation. The Obama administration is studying the situation. Problems with foreclosure procedures were discussed during two recent conference calls involving officials of the Treasury Department, Department of Housing and Urban development, White House and other agencies, an administration official said on condition of anonymity. A top White House adviser questioned the need Sunday for a blanket stoppage of all home foreclosures, even as pressure grows on the Obama administration to do something about mounting evidence that banks have used inaccurate documents to evict homeowners. "It is a serious problem," said David Axelrod, who contended that the flawed paperwork is hurting the nation's housing market as well as lending institutions. But he added, "I'm not sure about a national moratorium because there are in fact valid foreclosures that probably should go forward" because their documents are accurate. Axelrod said the administration is pressing lenders to accelerate their reviews of foreclosures to determine http: // license. icopyright.net /user /viewFreeUse .act ?fuid= MTAzMDIzNTA %3D 10/12/2010 Associated Press: Foreclosure freeze could undermine housing market Page 3 of 5 which ones have flawed documentation. "Our hope is this moves rapidly and that this gets unwound very, very quickly," he said. Lawyers who have already filed class action lawsuits in Maine and Kentucky are now signing up entire neighborhoods as new clients. They're hiring private eyes to track down former industry employees and holding marathon conference calls to strategize on how to get every speck of dirt on the banks that they can. The low -level bank employees in question were supposed to have reviewed mortgage documents in detail. Instead, they say they never so much as glanced at the papers. Nor did they even know where the papers were. "They were just so haphazard and so gloriously incompetent to save a few pennies here and there," says Barry Ritholtz, director of equity research at Fusion IQ. "But a few pennies times millions of documents is a billion dollars." The banks insist that most of the people involved in the foreclosure deals were legitimately behind on their payments. But even so, if the procedures that put them into foreclosure are deemed fraudulent, it will nullify the deals and require that the entire process start all over again. The financial institutions insist that, in most if not all cases, there was no fraud, the borrowed missed their payments and the foreclosures are justified. Delays may occur, they say, but the outcomes will be the same. Moreover, they insist they are strengthening their procedures. They are chalking up much of the controversy to possible shoddy paperwork. But the pronouncements have done little to assuage those connected to the mortgage industry, and the uncertainty is spreading fast. On Sept. 23, Standard and Poor's warned of a possible downgrade on GMAC. The next day, Moody's Investors Service also placed GMAC on a watch. On Sept. 29, Fitch Ratings said it was reviewing the mortgage servicers' practices. Perhaps most worrisome was the news on Oct. 1 that title insurer Old Republic National - which provides protection to the homebuyer and mortgage provider in case any unpaid taxes, questionable ownership or other problems turn up - had ordered its agents to cease offering policies on foreclosed properties owned by GMAC or JPMorgan Chase. On Oct. 7, another title insurer, Stewart Title, issued an internal memo making it incredibly difficult - if not impossible - for an agent to write a policy for any foreclosure property connected to any of the now - tainted banks. "Right now everyone in the industry is trying to understand the scope and breadth of the problem, and is looking to lenders to get their paperwork in order so that sales can resume," says Kurt Pfotenhauer, chief executive of the trade group American Land Title Association. Meanwhile, real estate agents who specialize in selling bank -owned properties say the market is locking up. Dorothy Buse, a Coldwell Banker agent in the Orlando, Fla., area, said that out of the 200 foreclosures she has listed for sale, 40 are now in the foreclosure freeze. Of the 40, 12 that were already under contract are now on hold. "There's nothing within my power — or my staffs power — that we can do, except try to reassure them that we're working on this," Buse says. In addition, legal challenges are mounting. On Sept. 24, a district court judge in Maine threw out a ruling in favor of GMAC to foreclose on a house owned by an unemployed mother of two. Now that case will go to a http: // license. icopyright.net /user /viewFreeUse .act ?fuid= MTAzMDIzNTA %3D 10/12/2010 Associated Press: Foreclosure freeze could undermine housing market Page 4 of 5 bench trial in Portland. The court also sanctioned GMAC about its paperwork process, noting that "this case is not the first time that GMAC's high - volume and careless approach to affidavit signing has been exposed." Michael Holmes is one of the thousands of mortgage holders whose house was put into foreclosure by the now infamous "robo- signer," the GMAC employee who signed 10,000 foreclosure affidavits a month. On Oct. 1, GMAC informed Holmes that the foreclosure on his Belfast, Maine, home had been put on hold. The bank didn't say for how long. The temporary halt has done little to subdue Holmes' stress. He spent the past year and a half fighting to get a loan modification from GMAC, a process he says yielded a file the size of a Manhattan phone book and virtually no response from the bank. He also claims he received no written notice of a foreclosure. Now Holmes, a former hospitality executive at such Boston hotels as the Ritz - Carlton and the Copley Plaza, says he wants to fight to keep the Victorian he grew up in. But from one day to the next, he doesn't know what will happen. "The one safe place you have is your home," Holmes says. "It's your comfort zone, and to have that in limbo, it feels like the wolves are on my porch." AP Business writers Alan Zibel in Washington and David Pitt in Des Moines, Iowa, contributed to this report. in this Sept, 14, 2010 photo, a house in Homestead, Fla. sits empty, for sale as a foreclosure home in a neighborhood where half of the houses were empty and up for foreclosure. A flurry of developments the past few weeks have sketched an alarming scenario: that major U.S. banks rammed through foreclosure after foreclosure without giving many borrowers a fair shot at keeping their homes. (AP Photo /J Pat Carter) http: / /Iicense.icopyright.net /user /viewFreeUse .act ?fuid= MTAzMDIzNTA %3D 10/12/2010 Sta r T ri bune .com Bank of America foreclosure freeze gives Minnesota borrowers hope Mark Rissmiller felt a surge of relief Friday morning when he saw the headline on a co- worker's computer screen: "Bank of America halts all foreclosure sales." In late July, Rissmiller received a written ultimatum from Bank of America. Either he would need to pay $29,000 by Aug. 22 or he would face foreclosure proceedings on his Richfield home. The letter came as a shock to Rissmiller, a retail support specialist and father of two, because he hadn't missed a single payment under a mortgage modification plan. "I hope this means they are finally pressing the pause button and taking a closer look at these foreclosures," he said. "It appears these big banks have totally lost control over the process." Rissmiller is one of many struggling Minnesota homeowners relieved by news that Bank of America was suspending foreclosure sales in all 50 states, expanding a 23 -state suspension it made last week that did not include Minnesota. Bank of America's decision follows allegations that some of the nation's largest mortgage lenders, including Minneapolis - based GMAC Mortgage, were using false documents and signatures to justify hundreds of thousands of foreclosures. A number of federal and state regulators, including Minnesota Attorney General Lori Swanson, have called on lenders to freeze foreclosures until they can demonstrate they are being done properly. Bank of America is the first U.S. bank to impose a nationwide moratorium, and its decision could affect thousands of borrowers across Minnesota. Though it doesn't have retail bank branches in Minnesota, Bank of America gained a large share of the state's mortgage market when it acquired Countrywide in 2008. At the time of the deal, Countrywide was the state's fourth- largest mortgage lender. Countrywide had a reputation for making large home loans to people with shaky credit histories. Poorly underwritten, many of these loans are now falling into foreclosure. Bank of America's move may result in only a short reprieve for borrowers. In its brief announcement, the Charlotte, N.C. -based bank said only that it was halting foreclosure sales until it completes an assessment of its process in 50 states. The bank will continue to pursue delinquent borrowers and initiate foreclosure proceedings, though it will stop short of selling foreclosed properties. Move questioned To many real estate experts, the bank is simply delaying evictions it might end up pursuing several months from now anyway. Many houses that might have been sold at sheriffs auctions this year may not hit the market until next spring, putting further downward pressure on housing prices over the next Print Powered By µ �� .' M-3 rC7ynamics i - 1 - f V;T �w si year, some argue. "I understand why they're doing this, but it's prolonging the recovery," said Ryan O'Neill, a team leader with RE /MAX Advantage Plus in Lakeville. "Eventually, these are going to need to hit the market and a lot of people were depending on that business now or the next few months, not a year from now." But some borrowers are hopeful that a foreclosure moratorium might give them time to work out problems and mistakes with Bank of America. Shelly Sinn said she has been living in fear of losing her house in Ham Lake ever since Bank of America sent her a letter in August that said she did not qualify for a home loan modification plan. The letter said that Sinn must sell the house through a short sale or basically return it to Bank of America through a deed in lieu. Sinn was baffled by the note. Two years ago, she fell behind on her mortgage payments after she fell ill and her son died. However, she dipped into her 401 (k) retirement plan to make up for the missed payments and was certain she was current on the loan. Problems ahead? Carl Christensen, a Minneapolis attorney who specializes in real estate and consumer law litigation, expects more problems to surface as consumers and attorneys scrutinize lender practices more carefully. In Minnesota, he's come across foreclosure cases in which firms have failed to transfer title to mortgages correctly and lenders that have no right to foreclose are taking people's homes. He recently sued on behalf of a St. Paul woman whose apartment complex was demolished by an excavator. The mortgage trust that owned the loan on the complex had failed to inform the woman that the building was slated for demolition at the time of purchase, Christensen said. Christensen said Bank of America is "among the hardest banks to work with," when it comes to stopping foreclosures. "I look forward to them examining their systems to see how they can help homeowners, because they haven't done much." Real estate agents who buy and sell foreclosed properties were scrambling Friday to determine whether their deals would be put on hold. The letter left Sinn wondering if the bank was about to take her house. "I'm scared to death every day that I'm going to discover this house is in foreclosure," she said. "I'm very happy they're reevaluating things, but I still don't trust them. You think you've paid your bill, and everything is OK, and then this happens." Mark Hebert, an Edina -based Re/Max Associates agent who sells foreclosed property for Bank of America, was waiting for more information from the bank. If it stops foreclosures for long, he said, "it's not going to be good for me and my dog in eating and it overall is not going to be good for the market because it will just increase the backlog." P P L -2-