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By SAM SCOTT
THE PRESS DEMOCRAT
John Knott had reason to celebrate Thursday.
Not only did he turn 65, but he walked out of Sonoma County Superior Court with new hope of avoiding the foreclosure that has dogged him for more than year.
Knott is the first participant in a court program aimed at settling the rash of lawsuits filed by people who are suing to fight foreclosure.
Instead of costly litigation, the court is trying to set the stage for a solution by calling both sides to an informal settlement conference prior to trial.
Elaine Rushing
Superior Court Judge Elaine Rushing, who led development of the program in her role as supervising civil court judge, said judges were not erecting roadblocks to legitimate foreclosures. Rather, she said, banks are often as eager as homeowners to avoid a property seizure.
“If we can find a way that lenders’ needs are satisfied and borrowers can stay in their homes, that is what we’d like to see,” she said.
How well the program works remains to be seen.
Attorney Richard Abbey, a longtime representative of local banks, said it was a noble idea that faced long odds of success.
Many mortgages have been aggregated and sold to investors, making it virtually impossible to get permission to modify loans, he said.
And the fundamental question of taking a house someone can’t afford and making it into one they can afford doesn’t have a simple remedy, especially so deep into the foreclosure process.
“It just ain’t that easy to solve the substantial issues,” Abbey said.
But on Thursday, Knott left the program’s first such conference, held before Superior Court Judge Mark Tansil, feeling he was on the road to a solution, even if it still remained out of grasp.
JPMorgan Chase did not modify the terms of the defaulted loan. But the bank’s attorney did agree to a framework for subsequent discussions, a big difference from the way things have been, Knott said.
“It’s exactly what I expected and hoped for,” he said.
For over a year, Knott said he has gotten nowhere in efforts to modify the $1 million loan that his mother took out against the house in 2007, a year before her death.
About $700,000 of the loan was used to pay a previous mortgage. Much of the balance was used for home care for his infirm mother in her final days, he said.
Knott and his brother struggled first to get the bank to recognize they had assumed responsibility for the loan after she died. The communication problems got worse as they looked for a modification to reduce the interest rate, which is over 7 percent.
JPMorgan Chase, which took over the loan when Washington Mutual went bankrupt, repeatedly lost the mountains of paperwork Knott sent over, he said.
“They have got more documentation than were needed for the Louisiana Purchase,” Knott said.
While Knott tried to negotiate with the bank, the threat of foreclosure never stopped. Since July 2009, the home that Knott helped build as a teenager was scheduled for auction nine times, only to have the sale averted at the last minute each time.
In July, he and his brother sued Chase and filed for a temporary restraining order to prevent the last of the scheduled auctions. That put them on the path to Thursday’s conference.
A spokesman for JPMorgan Chase in San Francisco declined comment on the case, as did the bank’s attorney as he left the courtroom.
But the conference apparently resulted in new interest in negotiating.
David Bush, Knott’s attorney, said the judge’s presence Thursday was a crucial change from earlier attempts at resolving the issue. The bank said it would come back with firm answers on modification by the next court date on Oct. 26, Bush said.
“The presence of a third party with authority really made the difference,” he said.
The next foreclosure settlement conference is scheduled for today. It also involves JPMorgan Chase.
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The bailouts for the banks hasn’t done anything to arrest the hemorraging real estate market. Record foreclosures continue. At this point, it would be good if people would try to come up with a plan that would help people stay in their homes. The idea I had about giving tax credits to those who stay current on their mortgages instead of walking away from their homes may not be entirely fair to everyone. But does anyone out there have any better ideas?
Obama is not helping. He is spending massive amounts of our money though, giving it to banks and new homebuyers. The mortgage market pump and dump scam is resulting in a massive transfer of wealth from the middle class to the wealthy. Who do you think is snapping up most of those bargain foreclosed homes? The wealthy. I don’t really see much difference between Bush and Obama, they both are overseeing the transfer of wealth up to those at the top.
If even a fraction of the stimulus money would go to help struggling homeowners where one or more breadwinners may have lost their job due to the downturn, maybe we could arrest the downward spiral that is devastating our people. If giving a tax credit would help people stay in their homes instead of going into foreclosure, why would that be bad? Even if some of those people acted irresponsibly, isn’t solving the overarching problem the most important thing? Didn’t the banks act irresponsibly? They got bailout money, why? The strong prey on the weak, that’s how it’s always been. Rewarding the strong and the rich for their bad behavior while at the same time turning your back on the common people is not the way to get the economy back on track.
Rushings job is to apply the law! And at least attempt to follow the Constitution for once! Better yet, she should try reading it and then have someone explain what it means to her! She obviously doesnt get it!
@ Kay Tokerud, I agree with your assessment to the degree of fraud and do accept the fact that this whole mess was entirely provoked. However, I do believe that there is plenty of blame to go around and alot of it lands at the feet of the consumer.
How are homeowners the victims, you ask? First, the homebuyers didn’t know that mortgages were being bundled and sold as derivitives with a healthy dose of fraud involved. Because the bankers were enabled by our government who looked the other way while this was going on, the demand for mortgages went way up and lenders greatly relaxed their mortgage standards. The feds themselves adopted policies such as the Community Reinvestment Act that basically required lenders to finance homes in low income neighborhoods. These people, who didn’t know anything about borrowing money or buying a home were offered sub-prime mortgages. They didn’t know any better.
Acorn’s main gig was getting low income buyers into homes, they acted like mortgage brokers. They screwed the people they were supposed to be helping. These were the first people to lose their homes. The wild overlending practices fueled by the greed of those who gave A ratings to loans they knew would go bad and then sold them off to investors all over the world. They made big money on originating these loans as well as when they bundles them and sold them as high grade investments.
How many homeowners knew about any of this? I didn’t, and I’m fairly experienced with the real estate market. They gamed the system and they broke the market. This was a massive fraud against Americans and I still haven’t seen any heads roll. In fact, the perpetrators, many of them were paid by taxpayer dollars so that they could be bailed out.
Blaming the victims of this massive scam is just plain wrong. Why are people so against helping people stay in their homes by offering tax credits to those who qualify? That option is not on the table however, and never will be because our government forgot who they are working for. The destruction of the housing market is a very serious problem that has spilled over to the entire economy. Why not come up with some real solutions instead of giving more money to the bank?
@ Kay Tokerud, About the tax break. I don’t like your idea since thats rewarding someone for a bad investment. How about this, give that tax break to the people who purchased their home wisely and within their means?
@ Kay Tokerud, how in the heck are the homeowners the victims? People were buying house that they never,ever could have afforded hoping that they could hang on for a few years at a sub-prime loan and then sell the house or refinance. People were actually lying on their applications as to their incomes because there was no verification. People bought way above their ability to pay back and they knew it. It was a total gamble and most of them lost. And most of these were credit challenged buyers in the first place who would never have been approved for a traditional 30 year mortgage. Now that they’ve lost or losing the house it’s “the big mean bank.” They were happy the day they closed escrow and signed on the dotted line. Now it’s effecting the “Grade A credit” homeowners. Since most everybody’s house is upside down we’re seeing them walk away from their homes because they don’t see any reason for paying on a $500,000 mortgage on a house now worth $350,000. Are they victims too. Don’t get me wrong, I think the banks are at fault for even creating these loans, but thats what you get when goverment dictates loans.
http://www.bigwowo.com/2010/05/thieves-who-cheat-the-mortgage-banks/
http://patriotword.blogspot.com/2010/04/did-bill-clinton-cause-subprime.html
wait a sec, in 2007 they took out 1 Million dollar loan. i don’t feel sorry for them one bit! meanwhile people with 200k homes are losing them. Seems like it’s help the rich, and screw the poor.
Why hasn’t there been any meaningful assistance to help people stay in their homes? Banks received assistance, first time homebuyers got help in buying the homes other people lost, but the real victims that didn’t know that mortgage fraud was occurring and that the market would crash like a stone, got not help. As a person who bought property during the bubble, I was pressured and even shamed if I didn’t apply for an adjustable mortgage. I went for the safer 30 year fixed loan against my broker’s advice. People are gullible and believed the advice they were given. Why wouldn’t people buy homes when money was being offered to them and prices were going up?
Let’s be clear, the homeowners are the victims here, not the lenders. The Obama administration could assist homeowners in the form of tax credits against income tax.
How about this?
For homeowners who purchased after 2003 whose first mortgage loan amount is higher than their assessed value, they can get a tax credit for that percentage of their mortgage payment that’s above the assessed value. For this to work, there would be no need for an appraisal, just show your loan balance, monthly payments and assessed value. The end of the year refund could be enough to help people decide to stay in their homes instead of giving up their home to foreclosure. Stemming the tide of foreclosures is the best first step to stabilizing and regenerating the housing market.
Caveat Emptor might not be the exact phrase, but no one forced people to buy a house, and no one forced them to sign any loan contract.
The fact is that they DID and both sides should have to live with the consequences.
Unless the lenders have not lived up to their end of the bargain or it can be shown that there was material misrepsentation by the lender, then there is no place for Judge Rushing or any other judge to proactively jump into the middle of a legal contract and take away the lenders’ right to mitigate and recover their losses.
Incidentally, for those of you that are in favor of interupting the legal right of the lenders – ask yourself if your 401k, 457, 403b,pension, IRA etc hold any of the stock of these vendors that you wish to damage.
Bravo to Judge Rushing for trying give homeowners a fighing chance to save their homes. The last thing a struggling homeowner needs is to hire an attorney with money they don’t have to engage in a costly trial that will clog the already overloaded courts. Homeowners don’t have a snowball’s chance in heck against big banks without an objective someone giving them a fair shake. Whether this program works or not, I’m glad someone recognizes there is need to level the playing field.
Rushing has always had a problem following the law and the Constitution!
No one is entitled to a loan revision! Yet Rushing seems to have no problem with changing interest rates, terms, conditions etc when SHE thinks it will help a friend or supporter!
Try following the law once in a while Elaine!
What planet is Judge Elaine Rushing
on? As long as the taxpayers pick up the tab for the difference of the outstanding loan amount and the actual amount received from the sale of the foreclosed home, the banks have no motivation to help distressed home owners. Wake up people.