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All 50 state attorneys general, including Montana's Steve Bullock, announced last month that they are investigating rampant mortgage fraud, what's been dubbed “Foreclosure-gate.” The allegations include missing documents and the use of “robo-signers,” people signing hundreds of legal documents each day without verifying whether the information is true.

And Wall Street's practice of “securitizing” mortgages, or bundling them together, slicing them up and creating a security or note that can be sold to investors, has vastly complicated what used to be a simple local lending process.

Some U.S. courts have rejected foreclosures because the transfers of the mortgages weren't recorded locally. And some borrowers facing foreclosure are demanding that lenders “show me the note,” proving they own the mortgage, according to RealtyTrac.

Twenty-three states require a judge's signature to foreclose. Montana and 26 other states use an administrative process instead of judicial review.

In the 23 states that use judicial foreclosure, delinquent homeowners can stay in their home longer, generally 12 to 15 months. But they can lose their home in foreclosure and still have the lender come after them to pay their mortgage through a deficiency judgment.

Generally speaking, in Montana, homeowners can lose their homes in as little as four months, but they are protected from deficiency claims.

The foreclosure process is increasingly becoming a regional and national business, instead of generating work for local attorneys and title companies.

“Now most of the foreclosure process is done through regional foreclosure mills, if you will,” said Ted Lovec, owner of American Title and Escrow in Billings. “It's been a pretty significant cut into our sales.”

To reduce costs, Lovec said, some of the big lenders have streamlined the process by using abbreviated title reports and starting their own companies to handle the business.

The Mackoff Kellogg Law firm in Dickinson, N.D., is one of the companies handling the most foreclosures in Montana, Lovec said.

Generally speaking, lenders aren't legally obligated to renegotiate mortgages, which means they don't legally have to communicate with a homeowner.

Troubled borrowers also need to understand they are dealing with big companies with multiple departments, said Pam Adams, a broker/owner of Guardian Mortgage in Billings.

“They are talking to Joe in modification, but Joe isn't talking to the foreclosure department,” Adams said.

Adams offered three rules for troubled homeowners:

Don't let embarrassment prevent you from calling your lender as soon as you realize you cannot make full mortgage payments on time.

If someone asks for upfront money to modify your mortgage, run away from what is undoubtedly a scam.

And, keep a log of all the names, titles and telephone numbers of people you talk to.

“In the end, it's he with the paperwork that rules,” Adams said.

Contact Jan Falstad at or 657-1306.

Contact Jan Falstad at or 657-1306.