In the popular game Monopoly, a bank error in your favor usually works to your advantage. In real life, that's unfortunately not the case.
In a disturbing trend, a growing number of homeowners are finding themselves in foreclosure after a bank mistakenly marked their mortgage as delinquent. As a result, borrowers who have never missed a payment - and, in some cases, have paid off their homes in full - are ending up with tarnished credit and in lengthy and expensive court battles to save their homes.
Much of the problem stems from improper recordkeeping during the real estate boom times of the early-to-mid-2000s, when Wall Street pushed lenders to process mortgages quickly and sloppily so they could be broken up and sold to investors all over the globe.
Crucial legal procedures were often overlooked. Later, these same companies began forging documents and faking titles so they could foreclose on properties despite a lack of proper mortgage documentation.
Tennessee bankruptcy lawyers are aware of several cases in which a homeowner applied for a loan modification, only to be turned down because the bank couldn't locate who held the actual mortgage note.
Without clean records of home loans, banks are making mistake after mistake. It's currently estimated that nearly 13 percent of homes in the United States are either in foreclosure or at least 30 days delinquent. Since there are no statistics on wrongful foreclosures, it's impossible to gauge how many of those homeowners may be falsely accused.
In a recent Reuters article, one family refinanced their home to take advantage of a lower rate, only to learn later that the bank had never closed out the original loan. Even though the homeowners had been making their payments on time, they ended up in foreclosure.
In another scenario, a bank's computer system mistakenly marked a Utah woman delinquent on a mortgage for a house she sold years earlier. By the time the woman's accountant got wind of the problem, it had already been reported to credit bureaus and damaged the woman's credit score.
The majority of foreclosures still occur because homeowners can't afford to make payments, whether it's due to an unexpected expense, a surprise job loss, or a mountain of credit card debt. But now it appears that even following the rules may not get you off the hook.
No matter how it happens, foreclosure has the ability to ruin your credit, prevent you from qualifying for affordable rates or new loans, and, of course, strip you of assets like your home. On top of your original missed payments, you may also owe fees and expenses from your delinquency.
In many cases, Tennessee bankruptcy may be a saving grace.
Filing for Chapter 13 bankruptcy can legally halt foreclosure while you get the kinks worked out. Meanwhile, a bankruptcy court can establish a repayment plan for unsecured debts like credit card bills, which can relieve some of the financial pressure for homeowners previously struggling to make loan payments.
Everyone's financial situation is a little different. The best way to learn if bankruptcy is right for your situation is to talk with a professional.
More Blog Entries:
Old Mortgages Rise From the Dead, Haunt Homeowners, by Michelle Conlin, Reuters