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Foreclosures and Zombie Properties – The Ripoff of Taxpayers Continues

mattweidnerlaw.com | June 11, 2014

By Matthew D. Weidner, Esq

More and more, our communities are being bombarded with foreclosures then left with the consequences of those foreclosures:

Bombed out houses and properties that banks do not want and cannot dispose of!

In communities all across this country, neighborhoods suffer because of bombed out, neglected and abandoned homes.

Zombie homes.

One fact that so many people have trouble wrapping their heads around is the fact that these Zombie homes are paid for (dearly) by taxpayers.  The criminal banking institutions that committed fraud in originating, servicing and then foreclosing on homes complete the crime spree by filing False Claims for federal insurance benefits on the Federal Housing Administration:

The Federal Housing Administration (FHA), which is part of HUD, insures
both single-family and multifamily mortgage loans made by approved lenders.

If a buyer defaults on an FHA-insured loan, the lender acquires the title to the property by foreclosure, a deed in lieu of foreclosure, or other acquisition method.

The lender then files a claim for insurance benefits and conveys the
property to the Secretary of HUD.

Now, because taxpayers ultimately pay for these bombed out homes and fraudulent foreclosures, you would think that more effort would be placed on helping to reduce those losses…both at the front end and throughout the process…right?

Rather than just jam through foreclosures, wouldn’t it make more sense to keep the family in the home?

(Particularly when that home will likely end up abandoned and destroyed…loved only by the bulldozer that will be plowing through it?)

Except…nope.  That’s not what is happening.  In Florida in particular, we have made a policy decision that it makes more sense to throw families out into the street and grant foreclosures to banks….who will then submit false insurance claims to the taxpayer that was just thrown into the street.  Why do I say false insurance claims?  Let me (begin) to count the ways:

FHA-approved lenders must report the status of all delinquent loans to HUD
each month until final resolution.

In the event of foreclosure, which results in
FHA-insured properties entering HUD’s REO inventory, the final resolution
is the insurance claim paid after the foreclosure auction is completed and the marketable title is transferred to HUD.

FHA’s Quarterly Report to Congress on the Financial Status of the Mutual Mortgage Insurance Fund provides information on serious delinquency trends and numbers of REO dispositions and associated loss rates.4 The average loss rate on REO properties for the quarter ending September 30, 2012, was 62.1 percent.5 Of the 741,384 active 90-day delinquent loans as of September 30, 2012, 219,699 were in foreclosure.

Download May 2013 Housing IGs Report (PDF)

More…much more…detail comes from another report, this one from the Office of Inspector General. Two of my favorite quotes from the report:

From the beginning of our review in October 2010, Bank of America limited our access to employees and information and Bank of America may have conveyed flawed or improper titles to HUD.


Back to June 2014 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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