Attorneys Are Challenging Foreclosure Standing.(Special Report)

Byline: Jennifer Harmon

West Palm Beach, FL-MFI-Miami, a mortgage fraud investigation and forensic auditing firm, said it is launching an investigation against several banks, including Deutsche Bank and LaSalle Bank, for what it alleges to be illegal foreclosures in six states.

Steve Dibert, chief executive officer, said the investigation will encompass homeowners in Florida, Maryland, Massachusetts, Michigan, New York, Virginia and will be covering foreclosure actions that were filed between 2005 and 2008.

"Every day I get calls from homeowners in foreclosure and in nearly 80% of the cases, the lender cannot prove they have the legal standing to execute the foreclosure. It boils down to simple Real Estate 101," Mr. Dibert told Mortgage Servicing News. "If you don't own the note, you can't sell it, modify it, enforce it or collect payments on it."

Most of the cases are exotic loans or subprime loans that have been transferred from servicer to servicer and from note holder to note holder.

Mr. Dibert said the problem was created by Wall Street firms who traded mortgage-backed securities with each other.

"They would package mortgages in pools and sell them, repackage them and sell them again and again. Through this maze of trades and counter trades, the mortgage and the note are moved upstream but in no case are all of the transfers of ownership recorded in the local property records," he said.