Foreclosure Past or Future? Here’s Help

stop foreclosure fraud

Federal Bank Regulators Wake Up

By now, most of us have heard about the shenanigans of Big Banks around foreclosures–robo-signing, sloppy record-keeping, fradulent foreclosures of all kinds.  Federal regulators, 4 years into this, appear to have finally woken up.  This week, regulators required 14 mortgage servicers to mail out 4.3 million letters to possible victims of wrongful foreclosure practices. It’s about time.

What’s In The Letters?

These letters will invite the borrowers to submit their cases for a free review by independent consultants that are funded by the lenders but vetted by regulators. In other words, the banks must pay for the reviews and the salaries of the reviewers, but all are under the scrutiny of the regulators.  If it is determined that borrowers were harmed financially by negligent or fraudulent foreclosure proceedings, then banks must compensate the borrowers.

The regulators under the Comptroller of the Currency have apparently determined that wrongdoing did take place. That’s why these letters are going out.  These regulations are also enforced by the Federal Reserve which, as you may remember, coughed up the TARP payments to these same Big Banks, BofA, Chase, Citi and Wells Fargo as well as a host of smaller banks.

foreclosure-fraud-cartoon

What Are Some Tricky  Bank Practices?

Banks have seemingly engaged in many activities ranging from merely negligent to downright nefarious in order to foreclose on non-paying borrowers or, even in some cases, on people who actually were paying or who even owned their homes outright. That’s right. The massive money and power of these Big Banks allowed them to foreclose on people who had no mortgages at all in a few isolated cases.  Most of these misdeeds have come to light in the so-called judicial states where each foreclosure must go before a judge and where borrowers can contest the action if they so choose.  California, by the way, is a non-judicial state where foreclosure proceedings do not involve the courts or judges.

Some judges and attorneys in these judicial states have noticed peculiar signatures, for instance, with the same signatory appearing multiple times on legal documents but clearly in different handwriting. Multiple personality disorder? It appears not–robo-signing was the name of that game. And, it is fraud. This is what some banks were doing when they couldn’t locate the original paperwork. Our system of real estate has demanded that the original paperwork be present to back any claim to foreclose for over 200 years. But, banks had instituted their own electronic system, called MERS, which made it easier to change the ownership of mortgages but more difficult to maintain the paperwork. Solution? Make it up…just do anything to kick those people out of their houses.

What Are Regulators Offering As Compensation?

Well, that’s the rub, isn’t it? The whole Wall Street fiasco has been marked by absent or weak regulators. Already more than 10 million homes have been foreclosed upon and regulators are just now making any noises about calling the banks to account. So far, the regulators have not established any guidelines for compensating borrowers found to have been  fraudulently deprived of their homes, though compensation of some sort is promised.

Plus, banks may want to be “held harmless” against further lawsuits if they pay even token compensation. Will the regulators agree to that?  Given the terrible track record of these regulators, there is every reason to suspect the real purpose of these letters rather than aiding consumers aims really to calm the situation for the servicers who are now facing massive potential litigation.   If it seems paranoid to suspect federal regulators of favoring the banks over consumers, call me guilty because I do suspect that very thing.

How Do Borrowers Sign Up?

Borrowers who want to learn more about the federal claims process can visit IndependentForeclosureReview.com or call (888) 952-9105.

Borrowers must request reviews by April 30, and the foreclosures must have been on primary residences to be eligible.

Kamala Harris Comes Through: CA Out Of Big Banks Deal!

kamala harris, attorney general of california

Kamala Harris Is My Hero, Too

This is terrific news: Kamala Harris, California’s Attorney General, has heard the people of this state, suffering under the worst mortgage and real estate crisis since the Great Depression. She has opted out of the proposed settlement of the 50 states Attorneys General with the Big Banks. That settlement, rumored to be about $25 billion, is really small potatoes and would have been a disastrous conclusion of their investigation.  $25 billion would barely settle the monetary issues for California alone, not to mention the other 49 states. In addition, the banks are seeking to limit all their legal liability in return for the meager settlement. Despite the support of the Obama administration,hoping to end financial uncertainty with this settlement, Harris has decided that California will pursue a separate investigation and, if possible, make a separate settlement with the Big Banks.

Other States Are Reluctant To Sign

Harris follows in the footsteps of Eric Schneiderman of New York who has launched a wide-ranging investigation of the activities of the Big Banks which include Bank of America, Chase, Wells Fargo, Citigroup and Ally Financial.  Other states have also signaled their displeasure with the proposed deal which, if rumors are correct, allots a huge windfall to the Big Banks and a meager settlement to the states. Besides New  York and California, Delaware Massachusetts, Kentucky and Minnesota, along with our hard-hit neighbor, Nevada have all signaled intense dislike of the proposed deal.

California, already one of the worst foreclosure states in the nation, recently made headlines again when foreclosures jumped 55% in one month as BofA, a prime supplier of SoCal mortgages during the “bubble years” via Countrywide, prepared to “dump” more seized homes on an already-bloated real estate market. Stockton, CA is especially at risk for there, it is estimated, 1 in every 7 homes could be foreclosed in the near future. Likewise,  Nevada’s Las Vegas is suffering from an especially difficult and long-lasting crisis  as estimates say that 75% of Las Vegas homes are underwater and could potentially be foreclosed.

Fraudulent Mortgage Practices

As indicated in a previous post, some of the most notorious fraudulent practices of the Big Banks, such as robo-signing, continue despite their public exposure. Since California is a non-judicial state, meaning foreclosures do not have to be approved by a judge or, indeed, by anyone, fraudulent foreclosures are harder to spot. Judicial states, in general, are the ones which have brought such practices to light. Given the huge number of foreclosures in California, though, it stands to reason that large numbers of these were not legitimate.  Victims of such practices should have the help of the state’s top lawyer, the attorney general, to help them seek redress. Except in rare cases, it is prohibitively expensive for individuals to launch suits against Big Banks. That should not give the Big Banks carte blanche to commit wholesale fraud against California mortgagees.

What Does This Mean For Distressed Homeowners?

The most likely scenario now with both New York and California posing uncomfortable questions to the Big Banks while launching probing investigations into mortgage abuse is that the 50-state deal will collapse. The Big Banks will have to live with  uncertainty. Will they be brought to the bar for their crimes? How much will it cost them? Will heads roll? And the Big Question for Big Banks: will profits suffer? will stock prices dive? Few have much sympathy left for the banks, so, aside from Timothy Geitner and Henry Paulson, few will really care.

big banks bailout cartoon

The outcome for the distressed and already-foreclosed-upon homeowner, though is a different story. With multiple ongoing investigations, quick relief in the form of monetary settlements is not in the cards.  It is really, though, to everyone’s advantage to dig deeper into this morass of abuse. If the fraud is papered over, then, equally obviously, it will happen again. If the banks made trillions by fraud and nobody cares to demonstrate the modus operandi, then they will continue to  behave in the same way. Showing the crime and punishing the criminal:  That is the basis of our judicial system and it is a vital necessity in this case.

Some of the more flagrant practices are already known, publicized, and yet continuing. Big Banks could regulate themselves in order to regain public confidence. This is, apparently, what was expected of them after the 2008 bailout which seems to have been offered with no strings whatsoever.  Did they regulate themselves?  For those imprisoned in Siberian ice caves for the past 4 years, the Big Banks went right back to business as usual. Congress needs to regulate our messed-up financial sector. The sooner, the better if we are ever to get out of this nightmare.