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Owners of expensive homes are much less likely to be evicted from their properties compared to owners of more modest properties. Those uncomfortable findings come from a new analysis by the Wall Street Journal.

The analysis which was published last week, found that across the country, borrowers who have home loans worth at least $1 million, are in default for a period of 790 days on average, before their homes are repossessed. In comparison, property owners with mortgages of less than $250,000 are evicted from their properties about 6 months earlier.

According to the Wall Street Journal analysis, there could be several reasons why there is this gulf in property eviction and foreclosure rates depending on the value of the property. Banks find it more convenient to retain large loans on their books, and may find it less expensive to package and sell smaller loans into securities.

In addition, banks also see people who were once wealthy as more important for future business and for the financial recovery of the community. Moreover, expensive homes are not just more difficult to maintain, but also take a longer time to sell. One other important reason why wealthier homeowners in California are more likely to delay foreclosure for a longer time, is that they're more likely to hire skilled California foreclosure attorneys to postpone the foreclosure process as long as possible.

California foreclosure lawyers have also noted that owners of luxury properties now account for a larger share of foreclosures across the country. From high-end properties in Silicon Valley to fashionable mansions in Beverly Hills, a larger share of foreclosures across the country now involve properties that are above $2 million in value. The market for these homes is also increasing, even as home prices across California are on the decline.

Since the housing bubble burst, California personal bankruptcy attorneys have found irregularities, including legal violations in many foreclosure procedures. Now, an audit out of San Francisco County confirms these irregularities.

According to the audit report by San Francisco County officials, out of approximately 400 foreclosures, almost all were linked to improper documentation, or legal violations. The audit was commissioned by Phil Ting, the assessor -recorder in San Francisco. The audit included files of properties that were submitted for foreclosures, or included in foreclosure sales across San Francisco County between January 2009 and November 2011.

The report found more than 80% of the foreclosures were clearly linked to violations of the law. Further, approximately 2/3rd of the foreclosures were involved in at least 4 violations of the law. For instance, the law requires that borrowers be informed that they are in default before their properties are foreclosed on. However, the audit report found that there were several cases where borrowers were not given this information before the foreclosure process was begun.

In fact, so damning is the audit report that California personal bankruptcy lawyers agree that it lays to rest any doubts that people may have had that these improprieties were isolated.

The report comes just a few days after California and other states settled with 5 major banks in a billion-dollar foreclosure settlement. The controversial settlement requires the 5 banks to reduce mortgage amounts that are currently outstanding on several loans. The agreement also requires banks to provide $1.5 billion in reparations to property owners who were improperly evicted from their homes.

California Attorney General Kamala Harris continues to hold out against participation in a proposed foreclosure settlement between lenders and states. Harris has long held that the proposed settlement is inadequate and unfair, and has balked at a settlement that would block any investigation into mortgage loans. Harris had also objected to an earlier version of the settlement that had been proposed in September.

With California's objection to the deal, the value of the settlement would stand at about $17 million. The settlement could benefit as many as 750,000 Americans who could receive checks for as much as $1,800 under the settlement. That number is just 50% of the population that might actually be eligible for assistance under the terms of the settlement.

Since the housing crisis hit, it has been estimated that about 8 million Americans have been affected by foreclosure. California has some of the worst foreclosure problems in the country. But that doesn't mean that state authorities are in a hurry to rush into any kind of settlement.

According to Attorney General Harris, any acceptance of the terms of the settlement would mean that she will not be able to file civil charges against the mortgage lenders who were responsible for the housing crisis in the first place. Many of these mortgage lenders wrongfully foreclosed on properties using a procedure known widely as robo-signing.

In many cases, California foreclosure attorneys have found that companies used robo-signing to foreclose on properties. Under this process, employees used fake signatures to sign foreclosure paperwork. As part of the settlement, many families who had their properties foreclosed on because of robo-signing would receive compensation from the banks.

Speculative real estate investors in states like California, who already owned residential properties and took out mortgages to purchase new properties, were responsible in no small measure for the housing bubble and the consequent foreclosure crisis. New research by the Federal Reserve Bank of New York points to the underappreciated role of real estate investors who took advantage of easily available credit to buy residential properties. The role of these speculative real estate investors had not been probed adequately until now.

In states like California, these investors formed a substantial portion of lending activity, and their actions helped push residential property prices up. At one point, the number of these investors was as high as 45%. Between 2004 and 2006, these real estate investors formed a large chunk of mortgage purchases, inflating prices for those who wished to buy homes to live in with their families. As a result, owner-occupants ended up having to spend more to buy residential properties. However, investors were able to benefit from the availability of low and no-down payment mortgages to pick up houses even with these inflated prices.

When house prices began to drop in 2006, many of those speculative investors were also the first to default. Every California foreclosure lawyer knows that owner-occupants are less likely to walk away from a house and apply for a foreclosure, compared to real estate investors who don't live on the property.

The large number of investor mortgage defaults contributed to plummeting housing prices, and vast numbers of foreclosures in California. Many owner occupants found that their homes were worth less than the purchase price, and when the economy tanked, many were unable to meet mortgage payments. This at least partly contributed to the massive foreclosure crisis that affected states like California, Arizona and Nevada the most.

In a victory for California homeowners facing foreclosure, California Attorney General Kamala Harris walked away from settlement talks in September 2011, with Bank of America, JPMorgan Chase, Wells Fargo, and Ally Financial, five of the largest mortgage servicers in the country. “After much consideration, I have concluded that this is not the deal California homeowners have been waiting for,” Harris wrote in a letter to the Associate U.S. Attorney General. “(The) relief contemplated would allow too few California homeowners to stay in their homes.

The talks began following the robo-signing scandal that plagued the mortgage industry with accusations of rubber-stamping when it came to foreclosure paperwork. Over the past 11 months, states have been trying to negotiate a $25 billion settlement that could be passed on to homeowners who have suffered wrongful foreclosures. Some homeowners in California lost their homes despite the promise of loan modifications by lenders who then continued the foreclosure process, often behind the scenes. In other cases, lenders could not prove they had the right to foreclose on a property, yet still evicted the owners.

California carried a lot of clout in these settlement talks because of the sheer numbers of foreclosures hitting homeowners here. New York, another state hit hard by the mortgage meltdown, withdrew from the talks earlier. A big sticking point in the negotiations was the extent to which banks should be released from liability for additional legal claims related to the mortgage crisis if they agreed to the settlement. "It became clear to me that California was being asked for a broader release of claims than we can accept and to excuse conduct that has not been adequately investigated," said Attorney General Harris.

What does the breakdown of these talks mean to California homeowners? In the short term, there will be no quick relief from improper foreclosure. Longer term, Harris indicated California will act independently towards relief for California homeowners by moving forward with investigations into abusive mortgage practices that fueled the housing crisis. While one avenue of foreclosure relief for California homeowners may have changed, it’s not the end of the road.

If you are a homeowner facing foreclosure or other financial problems, contact us to discuss a solution.

Analyzing the results of a new study conducted by the University of Iowa may seem to Los Angeles bankruptcy lawyers like locking the barn doors after the horses have bolted. The study finds that up to 25% of Americans who filed for bankruptcy in 2007 might have been able to avoid bankruptcy if credit limits were still at the levels they were in the 1970s.

The study was conducted by a University of Iowa sociology professor. According to the study, when you look at the number of people who filed for bankruptcy since the housing crisis hit in 2007, and look back at numbers from the 1970s, it is apparent that many of these people would not have been in this position if credit limits were still at 1970s levels.

Back in the ‘70s, a person could not get a mortgage of more than 30% of his or her income. Car buyers could not take out a car loan that required monthly installment payments of more than 10% of their income. In other words, people were loaned money based on their capacity to pay back.

As any Los Angeles bankruptcy attorney knows, things changed dramatically over the next couple of decades. Banks began lending money indiscriminately to people who could not afford to pay back these loans. Banks then immediately started selling off those loans in order to protect themselves.

Many of the people who took loans in 2007, when the housing bubble was at its peak, were high-risk borrowers whose chances of paying back the loans were slim. This has resulted in thousands of foreclosures over the past three years.

The Occupy Wall Street movement, which began as a small gathering in a New York Park, has spread across the country. In California too, demonstrators have been expressing their loud protest against the fickle Wall Street policies that have resulted in the subprime mortgage crisis and the economic recession.

In California, protests have occurred in Los Angeles, San Francisco, Berkeley, Richmond, Walnut Creek, Oakland and San Ramon. The protests have included participation by students, community groups, and consumer advocates as well as hundreds of homeowners who have been victims of foreclosure.

These demonstrations have broadly targeted the role of the financial services sector in the current economic downturn. However, there has been a special focus on the contribution of the housing crisis. Across the country, California bankruptcy lawyers have noted that many of the people participating in the demonstrations are those who have lost their homes to foreclosure. Foreclosure rates in California and in other states of the country have been declining, but California continues to remain the foreclosure capital of the country.

Much of the protesters’ ire has been targeted at companies that promoted mortgages toward low-income groups. These people were provided easy loans in spite of the fact that they were high-risk borrowers. Many could not afford to repay their mortgages, with the result that many of these homes went into foreclosure. Millions of homes have been foreclosed on over the past three years, and neighborhoods in which these homes were located quickly went to decline because of the large number of neglected and unkempt empty properties.

One of the demands of the protesters is that the federal administration enforce laws governing the mortgage industry. The protesters are also demanding that homeowners and consumers be afforded better protections against manipulations by Wall Street.

The California Department of Justice and other agencies have shut down a massive foreclosure prevention scam, involving lawyers and associates. According to prosecutors, these people took millions of dollars from homeowners, promising to get them out of their foreclosure troubles.

The announcement was made by California Atty. Gen. Pamela Harris. According to her, the California Department of Justice and the State Bar of California have sued at least three California-based law firms for being part of the scam. Several other lawyers and 14 other non-lawyers were also allegedly involved in the scam.

The Department of Justice claims that these people attempted to defraud homeowners around the country out of millions of dollars by marketing what they called “mass joinder” lawsuits. Homeowners who joined these lawsuits were led to believe that lawyers would get them out of their foreclosure troubles for a fee. Instead, they lost thousands of dollars.

It's not surprising to California foreclosure lawyers that the homeowners were pushed to sign up soon after they learned about the impending foreclosures of their homes. The victims were stressed and vulnerable, and rushed to sign on the dotted line. They paid the lawyers between $2,000 and $10,000 to get their homes off foreclosure. The lawyers made many promises, including that they would get the homes off foreclosure, and also get compensation from the bank for unfair practices. According to the attorney general, the homeowners never saw a cent of the bank's money.
 
According to Atty. Gen. Harris, at least 2,500 people were impacted by this fraud in California. There are believed to be more victims in at least 16 other states. The State Bar of California has said that it will make an assessment of the situation, and refer homeowners who were impacted by the fraud to other lawyers.

Delays in processing home loan defaults are likely to push more than 1 million U.S. foreclosures from 2011 to 2012, or even later.  According to RealtyTrac Inc., there's been a 29 percent drop in the number of properties that received a notice of default, repossessions or auction during the first six months of 2011, compared to the same period of time last year. About 1.17 million homeowners received a filing.  That is approximately one out of every 111 households.

The delays in the processing of home loan defaults are contributing to a backlog of distressed properties.  The delays in processing seem to have been due to an investigation into bankruptcy documentation errors.  Investigations are specifically focused on the practice of “robo signing,” in which documents are simply processed without being investigated or verified thoroughly. 

In January, RealtyTrac forecast that there would be as many as 3.2 million foreclosure filings in 2011.  However, the numbers are likely to be far below those estimates.  Considering the current pace of filings, the total foreclosure filings for 2011 are likely to be only around 2 million.  In 2010, there had been 2.9 million foreclosure filings.

The delay in foreclosure filings is also impacting the housing market and any hopes of a financial recovery.  No recovery is expected to happen until the backlog of distressed properties can be reduced to a manageable number.

California foreclosure alternative lawyers have noted that the state had the most filings, with 263,500 properties filing during the first half of 2011.  That was a decrease of 13% from the same period of time last year, and almost 23% from the same time in 2009.  Additionally, California foreclosure alternative attorneys also noted an increase in the length of time that homes are remaining in the foreclosure process.  During the second quarter of 2011, properties spent about an average of 318 days in foreclosure, an increase from 277 days the previous year.