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.
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.