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CROOK ALERT! FORECLOSURE FACTORY: Mortgage Lender and Servicer Vultures Are Cheating Borrowers in Foreclosures

Updated on March 29, 2011

The Mortgage Racket Moves on to Foreclosure Fees

Some of the same unethical mortgage lenders and servicers whose questionable and, in many cases, dishonest practices are now feasting on the misfortune of homeowners who are facing foreclosure and/or bankruptcy. The largest mortgage servicer, Countrywide, has been accused of losing or destroying $500,000 in checks paid by homeowners in foreclosure from December 2005 to April 2007. The U.S. trustee said in court filings that even as Countrywide misplaced or destroyed the checks, it levied charges on the borrowers, including late fees and legal costs and stated that "The integrity of the bankruptcy process is threatened when a single creditor dishonors its obligation to provide a truthful and accurate account of the funds it has received."

Mortgage loan servicers typically generate profit margins of about 20 percent. A borrower's default can present a servicer with an an opportunity for additional profit.

The amounts can be significant. Late fees accounted for 11.5 percent of servicing revenues in 2006 at Ocwen Financial, a big servicing company. At Countrywide, $285 million came from late fees last year, up 20 percent from 2005.

"We're talking about millions and millions of dollars that mortgage servicers are extracting from debtors that I think are totally illegal."

A class action lawsuit filed in Stptember in Federal District Court in Delaware accused the Mortgage Electronic Registration System (MERS), a home loan registration system owned by Fannie Mae, Countrywide Financial and other large lenders of overcharging borrowers for legal services in foreclosures....Although MERS pays a flat rate of $400 or $500 to its lawyers during a foreclosure, the legal fees it demands from borrowers are three or four times that....A spokeswoman for MERS declined to comment.

Although bankruptcy laws require documentation that a creditor has a claim on the property, 4 out of 10 claims in a foreclosure study by Katherine Porter of the University of Iowa did not attach such a promissory note. And one in six claims was not supported by the itemization of charges required by law.

Ms. Porter's study of 1,733 bankruptcy filings also showed that some creditors ask for fees, like tax charges and payoff fees that would probably be considered "unreasonable" by the courts.

In 96 percent of the claims Ms. Porter studied, the borrower and the lender disagreed on the amount of the mortgage debt. In 70 percent of the claims the creditors asserted that the debt woed was greater than the amounts specified by borrowers.

The median difference between the amounts the creditor and the borrower submitted was $1366; the average was $3533 or more than $6 million than the loan debts listed by borrowers. [Steal a few dollars from a lot of people and it adds up!]

In April, Elizabeth W. Magner, a federal bankruptcy judge in Louisiana, ruled that Wells Fargo overcharged Michael Jones in bankruptcy $24,450.65 more than he actually owed. The court attributed some of that amount to arithmetic errors but found that Wells Fargo had improperly added charges, including $6741.67 in commissions to the sheriff's office that were not owed, almost $13,000 in additional interest and fees for 16 unnecessary inspections of the borrower's property in the 29 months the case was pending.

"INCREDIBLY, WELLS FARGO ALSO ARGUES THT IT WAS DEBTOR'S BURDEN TO VERIFY THAT ITS ACCOUNTING WAS CORRECT," the judge wrote, "EVEN THOUGH WELLS FARGO FAILED TO DISCLOSE THE DETAILS OF THAT ACCOUNTING UNTIL IT WAS SUED."

In Texas, A United States trustee has asked for sanctions against Barrett Burke Wilson Castle Daffin & Frappier, a Houston law firm that sues borrowers on behalf of lenders, for providing innacurate information to the court about mortgage payments made by homeowners who sought refuge in Chapter 13.

The above was excerpted from another excellent article in the NYT 11-6-07 by financial writer, Gretchen Morgenson who deserves another Pulitzer for exposing the conflicts, dishonesty and downright corruption in our banking and financial system. Her article is linked below along with a previous Hub on the mortgage servicing racket.

[NOTE: Those of you who may be inclined to jump to the conclusion that Ms. Morgenson is a fuzzy-minded, NYT socialist should be advised that she was a broker for several years with Dean Witter Reynolds, a writer for a number of financial publications and worked on Steve Forbes presidential campaign.. She is dedicated to making sure the free market system honest as well as free and delivers on its promises. Her wikibio is linked below.]

Gretchen Morgenson

 

THE FORECLOSURE MACHINE by Gretchen Morgenson and Jonathan D. Glater NY Times 3-30-08

http://www.nytimes.com/2008/03/30/business/30mills.html?_r=1&scp=3&sq=Gretchen+Morgenson&st=nyt&oref=slogin

Watered Down Mortgage Reform

Meanwhile, according to a NYT editorial today, our public servants in the U.S. House of Representatives are in the process of watering down the mortgage reform bill at the behest of WALL STREET.

Surprisingly, Barney Frank is about to offer an amendment which would make an already weak bill even weaker. It would undercut borrowers' ability to pursue legal remedies against Wall Street under federal law. In addition, it would prevent borrowers from seeking redress in state courts.

Here's a link to the NYT editorial.

Countrywide Stockholders Sue CEO Mozilo and other officers

Countrywide stockholders are suing CEO Mozillo and 19 other officers for dumping their Countrywide stock while allegedly making misleading statements about the company's outlook. Mozillo and other officers dumped $842 million in Countrywide stock as the the shares plummeted 62 percent. Moreover, the lawsuit claims the company used $4 million of company cash to buy the stock back from Mozilo and other officers at inflated prices, leaving other shareholders holding the bag.

 

THE FORECLOSURE MACHINE by Gretchen Morgenson and Jonathan D. Glater NY Times 3-30-07


http://www.nytimes.com/2008/03/30/business/30mills.html?_r=1&scp=3&sq=Gretchen+Morgenson&st=nyt&oref=slogin


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    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      7 years ago from Birmingham, Michigan

      Tony, thanks for your comment. However, I couldn't get the link to work.

    • profile image

      tonylopez1981 

      7 years ago

      I have always wondered if there is a reliable source to stop foreclosure . We are living in an era where our natives are facing the worst ever economic downfall in American history. I am glad you made some really valuable points about foreclosures.

      http://www.righttocancel.com/stop foreclosure

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      7 years ago from Birmingham, Michigan

      How a Whistle-Blower Conquered Countrywide

      By GRETCHEN MORGENSON

      Published: February 19, 22011

      WHAT does it take to hold your powerful bosses accountable if they try to bully you out the door?

      “It is the littlest of Davids beating the biggest of Goliaths,” Michael Winston said of his court victory against Countrywide.

      Documents, e-mails, a former deputy district attorney as your lawyer — and a never-say-die approach.

      Such was the lesson learned by Michael G. Winston, a former executive at the Countrywide Financial Corporation. Mr. Winston spent three years in a legal battle against Countrywide, the once-mighty mortgage giant, and its current owner, Bank of America, contending that he was punished and pushed out for not toeing the company line. On Feb. 4, he won: a jury in California awarded him $3.8 million in damages.

      “It is the littlest of Davids beating the biggest of Goliaths and taking two of them on at once,” Mr. Winston said. “This is the story of somebody who tried to set a company right. But it was frightening to them for me to shine the light from the inside out.”

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      8 years ago from Birmingham, Michigan

      Good question! Because the banksters contribute millions to elect sympathetic Congressmen?? Thanks for your comment.

    • profile image

      lucious63 

      8 years ago

      why does the goverment allow these people to do business,there is 1 in brookly,that all he does give u loans under hand he adds fees that u dont even know is there u think u have a house than u hear about foreclosure,u wonder all this talk & no action,what r poor people to do,there is no help 4 us

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      10 years ago from Birmingham, Michigan

      From USA Today 5-7-08 reported by Kevin McCoy

      WITNESSES: MORTGAGE LENDERS ABUSING COURT SYSTEM

      Mortgage lenders are abusing the bankruptcy court system by pursuing unjustified foreclosures against strtuggling homeowners, piling on questionable fees and misstating the amounts owed, witnesses alleged at a congressional hearing on Tuesday.

      The result is a systemic breakdown that increases forecolsures, raises the number of families losing their homes and threatens the integrity of the legal system....

      Robin Atchley, a letter carrier from Georgia, said Countrywide Financial the nation's largest home lender, twice asked a bankruptcy judge for permission to foreclose on her home in 2006, even though "we were current on our mortgage payments."

      Countrywide dropped the efforts when given proof the payments had been made. But Atchley and her husband, who sold the home last year, said Countrywide claimed the final mortgage amount owed was nearly $14,200 igher that what the company had claimed in bankruptcy court.

      http://www.usatoday.com/money/economy/housing/2008...

    • Ralph Deeds profile imageAUTHOR

      Ralph Deeds 

      10 years ago from Birmingham, Michigan

      Yep, big bad mortgage companies like Countrywide, crooked mortgage brokers, dishonest appraisers, and greedy over-leveraged Wall Street Banks. You sound like you've been drinking Angelo Mozilo Koolade.

    • profile image

      Greg 

      10 years ago

      Gimme a break people. The mortgage companies made it possible, at their own risk, to give people who should never have qualified to purchase a home in the first place, a chance to have a part of the American Dream. Now, when these people break their contract, you're telling me it's the "big, bad corporations" who are to blame. Time for a gut check, America, the old fashioned values of earning your rewards still applies.

    • profile image

      mithcel 

      10 years ago

      It is fact that mortgage racket moves on to foreclosure fees and it is very hard for the home owners who are facing the problem of foreclosure they are losing more money in the form of late fees or legal fees due to mortgage racket and bankruptcy.

    • profile image

      John 

      10 years ago

      Once homeowners start missing payments on the old house, the foreclosure process will start (especially if they planning on letting it go into foreclosure and are doing nothing to gain foreclosure advice or seek out options to save their home). The bank will sell the house at a sheriff sale, and the new owners will be able to evict the foreclosure victims and anything that is left in the old house. Purchasing a new house after this process has begun will be impossible due to the foreclosure status of the old house and the negative effect on one's credit after several mortgage payments go unpaid.http://www.thejohnbeck.tv

    • William F. Torpey profile image

      William F Torpey 

      10 years ago from South Valley Stream, N.Y.

      Business as usual.

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