Foreclosure probe gives hope to Calif. homeowners

October 13, 2010 12:00:00 AM PDT
An investigation by all 50 states could force mortgage companies to settle allegations they improperly foreclosed on hundreds of thousands of homeowners. The attorney general of Iowa is leading the probe, which could result in steep financial penalties for financial institutions.

The nationwide probe into foreclosures could be good news for many Californians who have either already lost their home or are close to losing it.

Sacramento homeowner Steve Monroe thinks foreclosure is imminent after unsuccessfully applying for several loan modifications. But he believes the investigation buys him more time with companies like Ally Financial's GMAC Mortgage, Bank of America and Chase halting foreclosures.

"We're lost in this limbo of whether or not we're going to be able to keep our house, whether we're going to have to move, relocate," Monroe said. "Maybe with more time, we can look for more programs, look for more help."

The Bolanos of Escondido are not waiting for the investigation that could reverse their foreclosure to be complete. They say their foreclosure was illegal and hired a locksmith and an attorney to move back into their home.

"I think the burden is on the other parties to prove that we have done something wrong," the Bolanos' attorney Michael Pines said.

Allegations against some banks include the use of so-called robo-signers, who failed to read the foreclosure documents and have them properly notarized.

While the probe into foreclosures may be good in one sense, some fear the move causes uncertainty and threatens the recovery of the housing market.

Realtors report potential buyers are nervous about buying bank-owned homes that could later be questioned.

"Lenders have had concerns that perhaps they didn't foreclose on those properties properly and that there may be a little flaw in the chain of title," John Asdourian said.

RealtyTrac says more than 2.5 million homes have been lost to foreclosure nationwide since the recession started in Dec. 2007 with California one of the hardest hit states.


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