MR. KOJO NNAMDIFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your neighborhood with the world. Here's a question that used to be easy to answer. Who owns your mortgage? It's not that easy to answer anymore. Banks have sliced, diced and repackaged our loans to the point that it's often no longer clear who they belong to. And that's a big problem. Now, the banks are facing scrutiny over their foreclosure practices.

MR. KOJO NNAMDIOn Friday, the nation's largest bank, Bank of America, announced it's halting all foreclosure proceedings due to concerns over improperly prepared documents. That's good news for people at risk of losing their homes, but bad news for others trying to buy a foreclosed house. In this hour, we'd like to hear your stories of foreclosure and the real estate market, as well as your thoughts on how this turmoil could affect the larger economy. Joining us in studio is Peter Tatian. He is senior research associate with the Urban Institute's Metropolitan Housing and Communities Policy Center. Peter, good to see you again.

MR. PETER TATIANThank you, Kojo, nice to be back.

NNAMDIAlso joining us in studio is Cliff Rossi. He is Tyser Teaching Fellow and Executive in-Residence at the Robert H. Smith School of Business at the University of Maryland. He served, until recently, as chief risk officer for consumer lending at Citigroup and also has held senior positions with Fannie Mae and Freddie Mac. Cliff Rossi, thank you very much for joining us.

MR. CLIFF ROSSIThank you.

NNAMDIJoining us from studios at the Washington Post is Ariana Cha, who is a reporter with the Washington Post, who's been reporting on the foreclosures. Ariana, thank you for joining us.

MS. ARIANA EUNJUNG CHAIt's great to be here.

NNAMDILet me start with you. There's been growing pressure on the nation's big banks to halt all foreclosures until these concerns are sorted out. Where do we stand as of today, as of this moment, 'cause things seem to be changing by the moment?

CHAWell, as of today, there is no nationwide moratorium on foreclosures. And the Obama administration, you know, this weekend, has expressed their opposition to such a drastic measure because they're very concerned about the affect for the economy.

NNAMDISo that's where we stand right now.

CHAYeah.

NNAMDIThe White House is voicing concern about how a total halt could affect the overhaul economy. For people who may not be fully up to speed on this controversy, Cliff, talk a bit about why there are concerns about the way these foreclosures were processed. And, Ariana, feel free to jump in whenever you want to and, for that matter, you too, Peter. But, Cliff, you can start.

ROSSISure. Thank you. Actually, this goes way back to during the boom time, actually, when lenders had taken their default and servicing shops and basically emasculated them over time, to the point where the -- by the time the crash occurred, there wasn't much in the way of capacity as well as expertise -- long standing expertise to really understand all of the documentation. And people really didn't understand basically how much in the way of foreclosure was going to take place. So lots of foreclosures taking place, documents that aren't being scrutinized as much as possible. This whole issue of so-called robo-signing kicked into high gear with Allied from GMAC and other lenders poses real concerns for people that are facing foreclosure and looking potentially to be put out.

NNAMDICare to add to that, Peter?

TATIANWell, I think that the issue has to be looked at from two perspectives and that, you know, as the Obama administration has cautioned, putting a big halt to foreclosures can be a good thing. And we certainly need to make sure that people are being treated fairly and the foreclosure process is transparent and being done properly. But on the other hand, there's a risk that having people stuck in foreclosure limbo is not really good for them, it's not really good for the housing market going forward.

NNAMDIAriana, could you talk a little bit about the issue of robo-signing of foreclosure documents? Exactly what is this and why is it so much of concern?

CHAWell, the term robo-signing refers to a small number of employees at some of these loan servicing companies signing off on tens of thousands of documents, perhaps hundreds of thousands during their careers, without really reading them. And that happens because there are so many foreclosures moving through the system and they don't have time to review the files. A lot of these things are done by computer. They're automated and then -- but somebody actually needs to sign the documents to go to court to claim the home back for the banks.

NNAMDIRobo-signing hundreds of thousands of documents that are not actually being seen by anybody, but are being signed, that leaves a certain level of uncertainty, but does it pass the smell test for possible fraud?

ROSSIMy standpoint, it really -- there are a couple things. One is that the issue comes down to a number of technical errors as opposed to factual errors. And so, I think, today, what's really the uncertainty is just how much of this is going to turn into real overturns of foreclosures for people, as opposed to just delaying the process for a great number of people.

NNAMDIPeter Tatian, is it possible that despite the White House's concern about a total halt to foreclosures, is it nevertheless possible that we may see a complete nationwide freeze on foreclosures? And if so, what would that mean for the nation's economy?

TATIANWell, I think there's definitely a risk there that even if there's no official moratorium, it seems that many of the large banks, as you pointed out, Bank of America, J.P. Morgan, GMAC and Allied are now putting a halt to their foreclosure proceedings while they take stock of what the situation is. I think we're going to see more challenges of these kinds of actions from folks who are facing foreclosure.

TATIANAnd I think what we really need to be looking at, is this going to be an opportunity where we can think through some better solutions for folks so that we get homeowners' actual solutions to their problems? Whether that is allowing them to stay in their home with a new mortgage that's affordable to them or maybe staying in their home as a renter, if they can't afford to be a homeowner anymore, or moving them to a new situation. But that should be the emphasis. Whatever the slowdown that might occur, we need to be focused on solutions because there are too many people in foreclosure right now and we need to start reducing that number.

NNAMDICliff Rossi, if indeed there is a nationwide freeze, what would be the implications for the nation's economy?

ROSSIThe housing market, first and foremost, is the way out, I think, of longer term sustainability of economic growth here. And so, from that standpoint, I think we face a great deal of uncertainty should there be a nationwide foreclosure moratorium. That will have implications for, you know, dampening demand for housing going forward. We already know the title insurance companies are starting to step back a little bit before they insure foreclosed homes.

ROSSIBorrowers that actually have already put down money to go into a foreclosed property face the uncertainty that now they've left the property and don't know where they're going to be. And it's just going to have everybody step back away from the whole thing for a while and question where is this all heading.

NNAMDICliff Rossi is a Teaching Fellow and the Executive in-Residence at the School of Business at the University of Maryland. He served, until recently, as chief risk officer for consumer lending at Citigroup. He's also held senior positions with Fannie Mae and Freddie Mac. He joins us in studio along with Peter Tatian. He's a senior research associate with the Urban Institute's Metropolitan Housing and Communities Policy Center. Joining us from studios at the Washington Post is Ariana Cha. She's a reporter for the Post who's been covering the foreclosure issue.

NNAMDIYou can join the conversation at 800-433-8850. Are you or someone you know trying to buy a house that's been foreclosed on? Has the turmoil in the mortgage industry affected your plans or how do you think this partial freeze in foreclosures will affect the housing market and the broader economy? You can go to our website kojoshow.org, ask a question or make a comment there, or just call us at 800-433-8850. Here's Matthew in Owings Mills, Md. Hi, Matthew.

MATTHEWHi. The reason I'm calling, I've actually -- I blog and I've actually been following this for over a year, though initially, I was looking at issues involving MERS, the electronic mortgage database. And there are a couple of things here that I think are concerning. One of them is, you said when you look at just how tremendously awful the documentation is -- and I will say this is something I've heard around as a conclusion, 'cause I am not a finance expert, is that there are a number of people who have concluded the reason the documentation is so bad is because the people who are creating the mortgage backed securities didn't want a paper trail showing just how bad the stuff they were putting in there that was getting rated triple A.

MATTHEWAnd the other thing is, is I think that people are missing the elephant in the room, which is -- at this point, I think that there is a fairly good chance that any property which had a mortgage or a second mortgage put on it since about 2004 does not have clear title right now. But as you can buy a house, even a non-foreclosed one and someone could come back to you and say there's still a mortgage outstanding on it. So I...

NNAMDILet me start -- let me start -- let me just...

MATTHEW...I...

NNAMDI...let me start with the first part of your question for Ariana Cha. And that is, the company based in Reston known as Mortgage Electronic Registration System (sic) or MERS, what role does this company play in this story, Ariana?

CHAMERS was set up by Wall Street back in 1997, actually, to facilitate the creation of these mortgage backed securities so that they could package and sell and repackage these loans very, very quickly. And they didn't have to record every single transaction at the local county office, which is something that's been required for centuries. Normally, when you buy a property, you would go to, you know, Montgomery County Recorder Deeds and you would say, I have purchased this property and it is now mine. But when you do that for 1,000 loans for one trust, you don't have time to do that in 1,000 county offices. And now the question is, I guess, you know, did MERS -- was it legally able to transfer everything around the way that it did so many times?

NNAMDIWas it legally able to transfer everything that it did so many times? What's your take on that, Cliff Rossi?

ROSSIWell, you know, in the case of MERS, MERS can act as agent and has acted as agent on behalf of the issuing institution or the lender itself. And from that standpoint, they do have legitimacy in the claim of ownership of the deed as they go forward with the foreclosure process. So that's the one thing with it. I'll also say that to the first gentleman's question, I think that this is not perhaps as sinister an indictment on Wall Street -- and I'm not apologizing for Wall Street in any shape or form, but I will say that I think this really comes down to very poor processing, very poor efficiency and very poor capacity on the part of these things that probably never expected the onslaught of foreclosures that they saw.

NNAMDIAnd for you, Peter Tatiana, the elephant-in-the-room question that Matthew has, and that is from since, I guess, 2004, there's no clear title to a lot of these mortgages that people will be taking over or buying.

TATIANWell, that's been a clear issue, I think, from the beginning of this crisis, that many of the folks that I talk to in the mortgage -- or foreclosure counseling groups in the Washington area and elsewhere, has said that it often is very hard to know who it is you're supposed to be dealing with regarding a particular mortgage. And sometimes, a homeowner may feel like they've been dealing with the right person, then it turns out it should be someone else. So this has been something that's been ongoing and it's been, again, a product of this complicated process that we've been talking about of buying and selling mortgages and packaging them into different securities.

NNAMDIMatthew, thank you for your call. Cliff, as someone with an insider's perspective on the way mortgages and foreclosures are handled, should we have seen this problem coming?

ROSSIWe could go back and say should we have seen the housing bubble in general coming and I get that question a lot these days. And I think once you live in the bubble, it's hard to actually see it. But I will say that there were a number of folks that have been on deck, both within institutions as well as outside, that knew that there were a lot of mortgage servicing problems coming down the pike.

NNAMDI800-433-8850 is the number to call. We're going to take a short break. When we come back, we will continue this conversation on Turmoil in Foreclosures. But you can still call us, 800-433-8850 or you can go to our website kojoshow.org and join the conversation there. I'm Kojo Nnamdi.

NNAMDIWe're discussing the turmoil in foreclosures with Peter Tatian, senior research associate at the Urban Institute's Metropolitan Housing and Communities Policy Center. Ariana Cha is a reporter with the Washington Post and Cliff Rossi is a teaching fellow and executive and resident-in-residence of the School of Business at the University of Maryland. Taking your calls at 800-433-8850. Who are the winners and who are the losers in this partial freeze on foreclosures? First you, Peter Tatian.

TATIANWell, I think that's a very complicated thing to sort out. There have been a lot of people who have lost out in this whole crisis from the beginning. I think that, again, if people can take advantage of the hiatus in the foreclosure sales to be able to work out a better solution for their loans, then they'll be able to emerge as winners. And I think that to do that, I would recommend people get in touch with housing counseling organizations locally because they are the ones who are going to really be able to help them negotiate with their lenders through this period.

NNAMDISame question to you, Cliff Rossi.

ROSSIIn general, I think that we're all losers to the extent that if we go down this path for too long, I think it imperils the performance of the housing market in general. But I will say that, in addition to that, I think far worse, we'll get an extension of time, perhaps as Peter was saying, just to buy more time to try to work their way out of foreclosure. I think the banks are just in a world of hurt right now as they try to figure out what to do. And then, finally, I think there is -- the issues for investors that, I think, that are waiting to get paid from all of this and that imperils some of them as well.

NNAMDIAriana, have you been looking at what kind of impact this turmoil and foreclosure is having on Washington area residents, residents in the DMV?

CHAWashington's a little bit different from a lot of the states that are affected by the freeze, by the original freeze of 23 states, because they don't have -- they don't require a court order to foreclose. Therefore, it's mostly an administrative procedure. However, I know I've heard from a lot of homeowners that are still using this to try to contest their cases to try to get more time, and there have also been some sales of foreclosures pulled back here. Not just by Bank of America, but we've also heard PNC, which only said that they have a moratorium in 23 states, not including the ones in our area. But for some reason, they're still pulling back foreclosure sales in our area.

NNAMDIPeter Tatian?

TATIANYes, I think, you know, definitely, folks in this region are involved in this. We have some data on D.C. that shows that since 2007, Bank of America has issued 1,300 foreclosure notices to homeowners in the District of Columbia and MERS another 1,100 and JP Morgan Chase, 1,000. So, as I was saying, even though they may not have officially declared a, you know, a freeze, all these lenders to foreclose in D.C., it may still be possible that they are, you know, holding up the process a bit just to make sure that their paperwork is in order now.

NNAMDIThe administrative process in Virginia and the District is different to the process in Maryland. Is it not?

TATIANYes. Well, they all have their own distinctions. I mean, Virginia has, I think, what most would describe as a fairly easy process from a lender's point of view. There's not a lot oversight or extra requirements for processing a foreclosure. D.C. also has an administrative process so there's not normally any court involvement. I think Maryland -- I'm not as familiar with their process, but I think there are a few more requirements, especially since the crisis started, that have been put in place. There's new mediation law in Maryland, for example, where homeowners can get mediation with their lender in the case of a foreclosure.

NNAMDIRealistically, Ariana and Cliff, do you think that we are likely to see a lot of people who claim their foreclosure documents were fraudulent, even if they were not, given the mess that we're in?

CHAI think it's really hard to tell. I think that if you want to contest your foreclosure, that's probably the easiest way to get a delay and get a little more time to, I guess, get your financial health in order and get enough money to continue payments.

NNAMDICliff?

ROSSIAs I think I said earlier, I think we'll find that there are a number of technical errors with all of the documents as we're starting to see unfold in the media today. Whether or not that will constitute overturning, you know, the factual representation that maybe these borrowers were already insignificant to stress -- to begin with, I think. You know, the verdict's out, but my son says that we will not see a high percentage of these that will actually be turned over because these borrowers are probably, by and large, were in trouble to begin with.

NNAMDIWe've got this from Dan, posted at our website kojoshow.org. "Why are the banks in such a rush to foreclose on properties instead of working with homeowners? It seems counterproductive for a bank to foreclose on a property and leave it empty and unmaintained. Wouldn't it usually be in the best interest of a bank to keep the resident in the house, even as a renter, if possible? After all, foreclosed homes are not selling very well and now there seems to be a problem of foreclosed homes having a clouded title when sold by the bank."

TATIANWell, you would think so, but it's certainly to the bank's advantage to try to move those properties along. Granted, in places that I've been before, the idea was that we would triage those loans in such a way so that those that we thought had the capacity to come back from serious delinquency, we would try to work with those to the extent that we felt that or had evidence that we thought that they could. But by and large, institutions -- and I do feel that the material cost, and they can be significant of having to deal with marketing, legal, maintenance expenses associated with homes, it can be significant. And for that reason, they need to take action.

NNAMDIJoining us now to offer the perspective of an attorney who handles foreclosures is Jennifer Schiffer, an attorney with the firm Pels Anderson in Bethesda. Jennifer Schiffer, thank you for joining us.

MS. JENNIFER SCHIFFERYou're welcome. I'm happy to.

NNAMDIIt's my understanding that you have been getting a lot of calls from homeowners lately. What kinds of questions are they asking you?

SCHIFFERWe've been getting a ton of calls. They've ranged from my home went to foreclosure last week, how does all of the stops and foreclosures now, affect that. And also, we've had a lot of calls just saying what can I do. My home's going to foreclosure in the next week or two weeks. I've been trying to work with the bank and the bank refused. What can I do?

NNAMDIAre you seeing a lot of people, who are in the situation that we have been describing, where documents were allegedly fraudulent -- put together fraudulently, put together to move a foreclosure forward?

SCHIFFERWe are. We started to see that a lot more recently, I guess. It's hard to track exactly all the documents and that's part of the problem. When someone comes back and says, I think my documents are fraudulent, sometimes they are and sometimes they aren't. And you just need to dig a little bit deeper. But we have been seeing a lot of questionable documents. And recently, we had a client come in whose home went to foreclosure. I guess it was back in '08 and he's still been trying to track where all the documents went. And we're trying to help him with that and we still can't get to the bottom of it.

NNAMDIHave you had people coming to you claiming that their documents were fraudulent when actually they were not?

SCHIFFERYeah. We've only seen one where we were able to track down where that happened. Sort of what we do is, you know, it'd be great if people came to us sooner in the process, but we have a lot of people that come to us whose foreclosure sale is in 24 or 48 hours. And what we do is we file a chapter 13 bankruptcy to stop the foreclosure sale and then we buy them some time to figure out what's going on. We haven't had the opportunity to go through and dig through the documents as much as we would like, at that point, because I have seen a couple where the documents are missing.

NNAMDIIn case you're just joining us, we're talking with Jennifer Schiffer. She's an attorney with Pels Anderson, a law firm that handles bankruptcies and foreclosures. In terms of this Washington region, Jennifer, is the freeze in some foreclosures particularly good news for residents of any one area? Which places are the easiest for banks to initiate a foreclosure process?

SCHIFFERVirginia and D.C. are the easiest to initiate foreclosures. There really is not much that has to be done before they can start a foreclosure so it definitely helps there. Maryland, the process already was a little bit slower. But obviously, it will help Maryland residents as well, but certainly in Virginia and D.C.

NNAMDIWhat does this turmoil in foreclosures mean for your firm and its business?

SCHIFFERThat's a good question. We have been debating that, and particularly since Bank of America announced that were stopping foreclosures in all 50 states, I think, obviously, we won't be filing as much bankruptcy, but we will be having people come to us who have had foreclosure sales within the past 30 days or who've been so far behind on their mortgages that they know it's coming, coming to us to see what we can try and figure out with them.

NNAMDIJennifer, thank you very much for joining us.

SCHIFFERYou're welcome.

NNAMDIJennifer Schiffer is an attorney with Pels Anderson, LLC. It's a law firm that handles bankruptcies and foreclosures. If you'd like to join this conversation on turmoil in foreclosures, call us at 800-433-8850. Here's Emmanuel in Bowie, Md. Emmanuel, you are on the air. Go ahead, please.

EMMANUELHey, Kojo, how you doing today?

NNAMDII'm well.

EMMANUELGood. Hey, I'm a realtor in Maryland, St. George's County area. And the flipside of this, there's another issue that it brings about and that is potential buyers or buyers such as the one that I had was -- been in the market for a long time. First, she was buying a short sale that took her five months. And she couldn't purchase because it wasn't, you know, a good deal. And then we put a contract on a foreclosure. We waited some 30 days. She bought a home inspection, she paid for an appraisal. She was going to rent her house out. It's going to be harder to do that in the winter months.

EMMANUELAnd now, you know, they stopped the sale or should I say stopped the sale of foreclosures, it affects her. This is another way that it's clogging up the market all across the region, and I'm pretty sure across the country. And I don't know if they've taken that in consideration when they, you know, put this moratorium in. It should have been a little bit more, you know, with some nuances here and there in relation to the people who are looking to purchase these. And last point, by the way, this is a foreclosure that's been empty and vacant for the last year. And so, that's the issue that I'd like to bring up to your panelists.

NNAMDIEmmanuel, you described a situation that a friend of mine claims that that is exactly what's going on with her right now. Peter Tatian, I guess you've been hearing a lot of that kind of story.

TATIANWell, yes. I'm sure there's a number of those. And again, I think it speaks to the problem here of trying to balance that we want the foreclosure process to be done fairly and correctly for the homeowners who are involved. But at the same time, we need homes to move out of the foreclosure process at some point so that they can be put back in productive use and be bought by the kinds of people that the caller represents. So, you know, there's about two million homes nationally that are in foreclosure today, and another two million that are 90 days or more delinquent on their loans. That number has been stuck there for some time now. And, again, we need to be looking at policies that are going to help us move to good solutions for people, but also start bringing that number down.

NNAMDIThank you very much for your call. We move on to Elizabeth in Alexandria, Va. Elizabeth, your turn. Go ahead, please.

ELIZABETHYes, hi. Thank you very much for taking my call.

NNAMDIYou're welcome.

ELIZABETHI have a question, not so much about the foreclosure crisis because, frankly, I see it as a delayed symptom of the core problem, which is the origination and -- particularly during the bubble days. And although I don't disagree with the idea of a MERS system to facilitate the mortgage-backed security industry, I do have a problem with it being corrupted. And I'm wondering what your panelists can say about, number one, is this brouhaha about the foreclosure crisis obscuring a serious investigation into the origination issue, number one.

ELIZABETHAnd number two, when this all comes to a head, hopefully, you know, in the new year and Fannie and Freddie are liquidated, wound down, restructured, whatever, what impact is this going to have on the remaining responsible borrowers who are still paying on loans they think are fraudulently originated and the bond holders? That's the end.

NNAMDIThank you very much. First, Ariana, I know that politicians in Washington are beginning to push for a federal investigation into the matter. How far back do they think that investigation should go? Should it simply go to the matter of foreclosures or as far back as Elizabeth seems to think it should go?

CHAI think it should go -- I think that they are looking at it -- not as far back as the originations, but what happened after you find you closed your house. Because that is the real question, what happened between that time and when the foreclosure happened. Because a lot of times, there's a lot of confusion with homeowners being foreclosed upon because let's say you took out your loan with, you know, a company down the street called Pinnacle and then suddenly you got foreclosure papers from Deutsche Bank.

CHAAnd it's not just Deutsche Bank, it's Deutsche Bank as trustee for a Goldman Sachs Trust, which is very confusing because you never took out your original loan for them. So what happened in between when you took out your loan to when it became foreclosed upon, is sort of the real question for investigators.

NNAMDIBut I guess it is understandable, Peter Tatian, that people like Elizabeth feel that they've been confused about this long before the foreclosure mess began happening and they'd like to go even farther back.

TATIANWell, I think I would agree with that. And I think that policymakers, researchers and others are starting to ask those questions and look back. There was just a report from the Harvard Joint Center and Housing Policy this past week about how we got into this mess to begin with. I'm sure there's going to be a lot more discussion about that. But it has important ramifications for how we move forward from this to make sure that this type of crisis doesn't happen again and to answer the question what does the future of homeownership and mortgage look like in the United States.

NNAMDIA look at the role of the federal government -- and, Elizabeth, thank you very much for your call. Cliff Rossi, a look at the role of the federal government, what mechanisms are in place to deal with this problem with the foreclosure system?

ROSSIIt's fascinating actually. And I think few people actually realize just how fragmented our housing policy is in this country. We do not have one single regulator that looks at the elephant from all sides. For example, all of the safety and soundness regulators, the Office of the Comptroller of the Currency that regulates the national bank, the FDIC for some of the state chartered banks and other banks, the Fed, they have safety and soundness regulators that live, particularly with the largest institutions, 24/7 with these firms and so they're periodically conducting exams. HUD for FHA and also for the two GSEs, Fannie and Freddie, they're there, but again, as we knew with -- in the case of the Federal Housing Finance Agency, they really weren't there all the time and really doing the job they should have been doing to recover Fannie and Freddie.

NNAMDIWell, Ariana, we've got this new Consumer Financial Protection Agency that's taking shape. What role could that agency potentially play?

CHAOnce that actually comes into existence, it will consolidate a lot of the oversight for the banks. For instance, you know, one West Bank is overseen by the Office of Thrift Supervision, but then Bank of America is overseen by the Office of the Comptroller of the Currency, which is very confusing. And they can't coordinate policy and each of the different offices had different responses to this particular foreclosure issue. And when the new consumer protection bureau goes into effect, all of that will be consolidated under that one bureau.

NNAMDIOkay. Thank you very much. We're going to take a short break. But before we do, allow me to share this e-mail we got from Jonathan in Washington, Cliff. It says, "Basically, it sounds as though what banks needed to do was a considerable amount of hiring and training to handle all the potential foreclosures. Instead, they simply rubber-stamp potential tens of thousands of people. Perhaps, many of those people deserved to be foreclosed on. Still, as someone with a bank that hasn't yet deducted this month's payment from our account, I pity those people who played by the rules and still lost. Explain to me how consumers aren't supposed to think the whole entire system is rigged against us.

ROSSIIt's a great question and I will go back to what I said earlier as well, is that institutions simply did not have the foresight that they would actually need to have sufficient capacity to deal with the mess that we find ourselves in today. It's a monumental comedy of errors, if you think about it, in terms of senior management's inability to actually put together the right talent. I can't believe, for example, that there's just one individual that was assigned to writing ten thousand loans a month and that was the way it was supposed to work. It's ludicrous in my mind and it suggests that significant reform needs to happen on that side.

NNAMDIIt may be ludicrous to Cliff Rossi, but for people who are looking at the bottom line and trying to figure how we save money on the labor force, at the time, it seemed to make complete sense, Peter Titian.

TATIANWell, yes, I think, you know, the incentives that banks and mortgages services have are very complicated and so sometimes they may seem to be operating in ways that don't make sense to the rest of us, but in fact, they make sense given the rules that were set up for how they should operate, which were for a market where you don't have all these people going into foreclosure at this volume. So I think that the adjustment to the old way of doing business to now this new reality has been a hard one for a lot of people to make.

NNAMDIGot to take a short break. If you have calls, stay on the line. We'll try our best to get to your call when we come back. If the lines are filled, go to our website kojoshow.org and ask your question or make your comment there. We're talking about the turmoil in foreclosures and what can be about it. I'm Kojo Nnamdi.

NNAMDIWe're talking about foreclosures with Peter Tatian, senior research associate with the Urban Institute's Metropolitan Housing and Communities Policy Center. Ariana Cha is a reporter with the Washington Post, who's been covering this issue and Cliff Rossi is a teaching fellow and executive in residence at the School of Business at the University of Maryland, who served, until recently, as chief risk officer for Consumer Lending at City Group. Onto the telephones, here is Timothy in Baltimore, Md. Timothy, you're on the air. Go ahead, please.

TIMOTHYHi, Kojo, I just wanted to share a quick story. It's not always a bad ending. My brother and I had bought a house -- let me rephrase that. My brother bought a house. And it wasn't until a few years later when we starting hearing the stories of the predatory lending. And one of the companies mentioned that was infamous for doing that was the company that gave my brother his mortgage. And once we learned about that, we realized that, at the time, my brother should not have been able to get his loan for his home.

TIMOTHYHe wasn't making enough money. He had no credit, et cetera. What those people didn't realize is that I was in the equation, as far as helping to pay all the bills. So my point -- well, I guess the joke was on the bank because they -- there was no way they were expecting him to be able to pay for that mortgage, but they gave the loan out anyway, which is wrong. But in that particular case, at least, you know, someone was able to get a house and, you know, it all ended up working out for everyone.

NNAMDIWas this a subprime mortgage?

TIMOTHYThis was -- you know, I want to say it was. I want to say it was. I just remember we didn't think about any of this at the time because in our minds, it was always he and I together as a team, making all the payments. But all the paperwork was done strictly as my brother as the house owner. And it wasn't until we heard about the, you know, the predatory lending scam that we realized that he just -- he shouldn't have been able to get any of this. I mean, since then, you know, his credit's gotten better. He's gotten a better job so have I and I ended up buying the house from him. So instead of paying half of a small mortgage, I'm paying all of a much larger mortgage since he -- you know, I gave him a nice chunk of cash for that place. But it's still just not fair that they're doing that to people.

NNAMDISo does...

TIMOTHYBecause if he was by himself, he would've lost his...

NNAMDI...does your brother have to will his first-born to you as a servant for the rest of your life?

TIMOTHYNo, but I know that going through buying a home myself, it's a horrible experience and I hope to never do it again, even though I know I’m going to have to, at some point. And I’ll enjoy the rest of your show off the air.

NNAMDITimothy, thank you very much for sharing that story with us. We move on to Ekilu, in Lorint, Va. Ekilu, you're on the air. Go ahead, please.

EKILUThank you, Kojo, for taking my call. You know, I bought this house in 2005 when the, you know, booming house and then they lended me -- 'cause I’m a first buyer, they lended me 80/20 and the second mortgage is 10 percent, the other one. And this time, you know, I was making a bit of money that time. I was -- I had a part-time work then -- I mean, I was overtime and I paid. After 2008, I asked them to, you know, for about two years, I asked them to modify, to do something, but they couldn't do anything. You know, they're telling me, I'm paying total, the total payment is 51 percent of my salary, my gross salary.

EKILUBut they're telling me that 51 percent is only that (word?) and they are considering only the first mortgage. Now I am stuck, I cannot do anything. Now, you know, after that, for about two, three, they put me trial for about two times and then they are not willing to, you know, to do something so I'm not sure what we're going to end up. My servicer, at this time, is Bank of America and I'm not sure what we're going to end up. So we're just stuck. But I am affording, -- if they put me -- if they do something for me, if they put me as (unintelligible) as interest only or something. I'm affording my payment. But that (unintelligible)

NNAMDIPeter, is there any advice you can give to Ekilu?

TATIANWell, Ekilu, are you working with any housing counselor or somebody to help with this process?

EKILUI had an agent who tried to help me, you know, I just paid him and it didn't work out.

TATIANYeah, well, I think that my advice, first of all, would be -- there's a number of very qualified, free housing counseling services available to folks like yourself because this is -- these situations are very complicated. I mean, even as you're just describing it, we call hear that. And these people are very experienced with knowing what the different options might be for someone in your situation. So you can call, for example, 1-888-995-HOPE or there's also the capital area foreclosure network, now which is a group of housing counselors in the Washington area. And so I would advise you to get in touch with somebody who can help and they won't take your money and they'll do everything they can for you.

NNAMDIThank you very much for your call, Ekilu, and good luck to you. Cliff Rossi, we got, well, two e-mails. One from dead runner says, "what precisely are the poorly or wrongfully executed documents that could be called into question in the presumed incorrect foreclosures? The saying in the industry had always been, if you pay, you stay. If you don't, you won't. The proceedings would not have been initiated if the borrowers were not in arrears. Banks don't want to own real estate, but even forestalling foreclosures will have no effect if the lenders do not apply more effective and urgent mortgage workouts in advance of the foreclosure."

ROSSIGreat question. Let me start with last part first. In terms of modifications, I think one of the things we've learned, generally, about the modification program is that, you know, one size does not fit all. And so from that standpoint, it's no question that we've seen the modification impact from the federal program be as limited as it is in scope because there are just so many circumstances that are -- that differ from people to people.

ROSSIThe other thing -- the other question about the documentation, I mean, it ranges from a wide variety of different things that we've seen. So, for example, it's a matter of maybe not having clear title. And you can imagine during the boom period that we saw lots of churning, lots of people refinancing when interest rates were very low, trying to find clear title at the county courthouse when an individual has refi-ed multiple times, even including this MERS registry system, very difficult. So tracking down clear title is very difficult.

ROSSIOn top of that, you just have just poor notaries. A lot of the servicing centers are in central areas. The loans may actually be in a completely different state across the country from where this individual was actually scrutinizing the documentation and so some of the claims are that they're being notarized ahead of actually the documents being seen by the individual. And then, on top of that with the robo-signing, you have individuals that are simply signing for the agent that should have been signing in the first place.

NNAMDIAriana, to what extent in your reporting on this have you seen significant incidents -- a significant incidence of bank error? Allow me to read this e-mail from Stephanie in Silver Spring. "I started to receive foreclosure notices a few months ago from Bank of America, but dismissed them because I always paid more than my mortgage amount and I pay on time. I thought it was a scam or possibly a case of identity theft. When I did call Bank of America to find out what was going on, after a lot of research, they determined that there was a problem with their computer system that should have been caught and corrected sooner.

NNAMDIIn the meantime, this is a big hit on my credit rating. It even affects how much I pay for car insurance. Is there any way to get Bank of America to admit fault and at least go through the lengthy process of correcting my credit record? Is there anything else I can do to do repair the damage?" Rather than answering Stephanie's questions, I'm wondering the extent to which, Ariana, you have being seeing complaints like this during the course of your reporting?

CHAIt's really difficult to tell. I've heard stories from homeowners who said that, you know, they couldn't get a loan modification because the documentation showed that they mixed up their debts with their incomes and so it showed that they had no income and they had huge amount debt. And, you know, the foreclosure process, at that point, was too far along and they couldn't fight foreclosure, even though they were making a significant amount of money and had no debts. I've seen cases where two banks tried to foreclose on one house, each claiming that they owned that house. There's a case in Florida where the man paid all cash for the house and they foreclosed on him because of a computer error where they thought he was the previous owner who hadn't paid.

NNAMDIWhoa. Here is Teresa. And I'll ask of Rossi to answer Stephanie's specific question in a second, but I have another Bank of America story here from Teresa. Teresa, you're on the air. Go ahead, please.

TERESAYes. I had a question about -- same thing with Bank of America. I had a place in Florida and I had a cash deal where someone was going to buy -- they were going to pay off the first mortgage and then they were going to pay majority of the second. And we're trying to get a short sell, but we could never get Bank of America to respond because at that time, they were buying Countrywide. And so we would talk to Countrywide and then Countrywide were trying to talk to Bank of America and so I wound up losing the buyer. So that was one. And then the next thing was, they said they were going to give me a modification, but then when they gave me the modification, they foreclosed on it the same day. So I was just wondering is there anything I can do? 'Cause I mean, I put 20 percent down on that property and -- so I’ve had a lot of money invested in it."

NNAMDIFor Stephanie in Silver Spring and Teresa in Washington D.C., Cliff Rossi anything they can do?

ROSSIWell, at this time, it's very troublesome to hear that story because it shows, again, some of the issues that go on behind the scenes with the institutions and just how much time it takes and not having a definitive clear path to what they want to do. I think, at this point, what I would suggest, in addition to what Peter said, is counseling, if you can pursue it. I’d also, you know, go back and talk to the lender, if possible, and re-engage them to the extent possible. I know that's very difficult. They're distracted. But I think that's your best bet, at this point.

NNAMDITeresa, thank you very much for your call. Peter Tatian, do you think we need more regulation of the mortgage industry in response to this controversy over foreclosures? If so, what steps could be taken to prevent this from happening again?

TATIANWell, I think there's a number of things that we can look at. First of all, what kinds of mortgage products are put out there in the market for the average homebuyer. You know, nobody walks into a mortgage lender's office and says, please give me the most complicated, dangerous mortgage instrument that you have. But in effect, that's what happened during this crisis, that people were being given all kinds of products that were really never intended for the average homebuyer and certainly not someone who had never bought a home before. So some people feel we should just out-and-out ban certain types of products on the market.

TATIANOthers favor maybe a more oversight and regulation, but I think that's something we need to look at. The other side of it is on the financial education. There's clearly a need to improve the education that people have about finances and about incurring this kind of debt for buying a home. Some people have gone as far to say maybe you should have to pass a test before you're allowed to buy a home to show that you're knowledgeable. I doubt that we'll go that far. But again, I think those are a number of things that we need to think about as next steps.

NNAMDICliff, if you were still at Citi Bank right now, how would you be advising the response to this controversy?

ROSSIWell, when I left, one of the things that we were doing, and this was about June of 2009, was to work with our default and servicing area, our partners there, to staff up, knowing that we show the clouds forming and, in fact, they were already upon us and probably, at that point, it was even too late. But we would have to do everything possible, I think, to get very talented people on deck, enough people to be able to deal with this. And in processes and infrastructure, you know, I always used to say, and this is going back to my days when I was regulator, is that you have to grow your infrastructure ahead of your growth. It's very clear these institutions did not do that, either on the way up or on the way down.

NNAMDIIt's my understanding, Ariana, that there are about 4 million homes currently under foreclosure in the U.S. Could you give us an indication of the trajectory? Should we expect that number to be higher or lower a year from now?

CHAThat's a really good question. (laugh) Hopefully, it should be lower because the, you know, the U.S. government is basically asking all these servicers to go back and do what they should of done before, which is loan modifications or try to work something else out with the families that are in foreclosure right now.

NNAMDISo we'll have to see because that's all the time we have. Ariana Cha is a reporter with the Washington Post. Ariana, thank you for joining us.

CHAThank you.

NNAMDIPeter Tatian is senior research associate with the Urban Institute's Metropolitan Housing and Communities Policy Center. Peter, thank you for joining us.

TATIANThank you, Kojo.

NNAMDIAnd Cliff Rossi is a teaching fellow and executive in residence at the School of Business at the University of Maryland. Cliff Rossi, Thank you for joining us.

ROSSIThanks for having me on.

NNAMDIThe Kojo Nnamdi Show is produced by Diane Vogel, Brendan Sweeney, Tara Boyle, Michael Martinez and Ingalisa Schrobsdorff. With the help of Kathy Goldgeier and Elizabeth Weinstein. Diane Vogel is a managing producer. The engineer today is Timmy Olmstead. Dorie Anisman is on the phones. Podcasts of all shows, audio archives and CDs are all available at our website, kojoshow.org. Free transcripts are also available at our website. Thank you for listening. I'm Kojo Nnamdi.