As Regulators and Banks Review Foreclosures, We’ll Be Watching

As Regulators and Banks Review Foreclosures, We’ll Be Watching

by Paul Kiel ProPublica

The country’s bank regulators are launching an unprecedented plan to undo some of the damage done by mortgage servicers, compensating victims of shoddy or illegal foreclosure practices. Part of the plan involves a massive outreach effort to contact the potentially millions of borrowers affected.

Exactly how this will unfold is, for now, unclear; if regulators hold true to form, the process figures not to be transparent. Homeowner advocates applaud the idea of the banks righting their wrongs but are skeptical the process will be thorough and fair. The regulators don’t “have a good track record at identifying or fixing servicer misbehavior,” said Diane Thompson of the National Consumer Law Center.

ProPublica will be watching closely. We’d like to hear from current and former homeowners who wrongfully faced foreclosure in the last couple of years [1]. Much as we’ve tracked [2] the administration’s mortgage modification program [3], we’ll be tracking what happens with these cases.

Last week, regulators released “consent orders” that laid out problems at many of the country’s biggest servicers (see sidebar for the list), which collectively handle almost 70 percent of the country’s mortgages. The orders followed an investigation [4] prompted by widespread revelations [5] last fall that servicers were regularly filing false affidavits signed by so-called “robo-signers [6].” According to the orders, regulators found that servicers weren’t properly evaluating homeowners for loan modifications, had wrongly foreclosed on some homeowners, and in addition to doing a generally poor job, had broken the law. (None of this should surprise those who’ve been reading our coverage [7].)

You can see the regulators’ report on their investigation and all of the orders here [8].

To fix the ongoing problems, the orders lay out broad principles that servicers should follow — basics such as having sufficient staff, training them adequately, not losing documents, etc. But because the orders are so general, borrower advocates have been vocal [9] in saying they won’t be enough to fundamentally change the industry’s cost-cutting ways [10] or to ensure that homeowners are properly evaluated for a modification.

The orders include a requirement for the banks to do foreclosure reviews to address problems that have cropped up during recent years. The process will start immediately but won’t culminate until early 2012.

Each bank is required to hire an outside firm to review all of its foreclosure actions in 2009 and 2010. The firm will be tasked with looking for certain violations (see our list below [11]), ranging from robo-signed affidavits and forged documents to foreclosure sales that occurred without a proper review for a modification. Based on those findings, banks will compensate the victims, or as the orders put it, “remediate all financial injury to borrowers caused by any errors, misrepresentations, or other deficiencies.”

So, how exactly will this work? Many of the details remain unclear, but we spoke to regulatory sources who provided some additional information.

Over the next couple months, the banks will hire the outside firms to conduct the reviews. The actual reviews are expected to begin this summer. They are supposed to cover all mortgages that were in the foreclosure process at any point in 2009 or 2010, but because that involves more than 3 million loans, the firms will use sampling to do their analysis.

The process won’t be strictly internal, however. Regulators also will require some form of outreach. It’s likely, for instance, that all the banks will be sending letters to every homeowner who was in foreclosure in 2009 or 2010.

Of course, some of these people are likely to be former homeowners who may well no longer reside at the same address. There might also be a kind of ad campaign, but regulators acknowledge these people will be tough to reach.

However it’s done, there will be some way for homeowners to submit their complaints to banks. Those who think they might be eligible for reimbursement or remediation should “get their documents together,” said one regulatory source. When the reviews launch in the summer, it should become clear exactly where those complaints should go. (You can be sure we’ll post that information when it’s available.)

It’s still anyone’s guess what will happen after complaints are submitted. Among the important unanswered questions: whether the review will involve homeowner interviews; how the outside firms will investigate claims of violations; whether those who complain will receive some sort of explanation if they’re denied; and how banks and regulators will calculate what victims are owed.

Thompson, of the National Consumer Law Center, said she worries the reviews will “shift the burden onto homeowners” to prove they were wronged. Homeowners won’t necessarily have kept the documents that demonstrate harm, she said. Even those who do have documentation may not know they were wronged, she added. They wouldn’t know, for instance, whether the fees they were charged were improper or whether they were considered for a modification.

If the reviewers do no investigation of their own and simply reply on homeowners to submit proof of wrongdoing, she said, it will miss most of the problems: “The process and remediation will serve as a whitewash for servicer misbehavior without actually either remediating past errors or preventing future ones.”

The reviews are expected to culminate late this year or early next year, when checks are scheduled to go out to victims. Regulatory sources told us that the total amount sent to eligible homeowners would likely be disclosed. Even before this phase, observers may get a hint of what’s happening if, as expected, regulators levy financial penalties against the banks. The findings of the reviews will determine the size of those penalties, regulatory officials said.

Regulators have done similar reviews in the past to compensate victims of bank wrongdoing, but not on this scale. In 2008, the Office of the Comptroller of the Currency (one of several regulatory agencies for the biggest banks and servicers, such as Bank of America, Wells Fargo, JPMorgan Chase, and Citibank), oversaw a process that resulted in Wachovia Bank issuing $150 million in checks [12] to more than 740,000 consumers for the bank’s role in a telemarketing scam. Regulators acknowledge, however, that the foreclosure reviews, which will involve 14 banks, millions of consumers, and billions of dollars in claims, is in a class of its own.

If you think you’re a borrower who should be compensated through this process, we want to hear from you [1]. We also want to hear from homeowners who have mortgage servicers not covered by this process (there are some large ones), because they might be covered by efforts from other regulators down the line [13].

Here’s the language from the Consent Orders that describes the scope of the foreclosure review:

The purpose of the Foreclosure Review shall be to determine, at a minimum:

(a) whether at the time the foreclosure action was initiated or the pleading or affidavit filed (including in bankruptcy proceedings and in defending suits brought by borrowers), the foreclosing party or agent of the party had properly documented ownership of the promissory note and mortgage (or deed of trust) under relevant state law, or was otherwise a proper party to the action as a result of agency or similar status;

(b) whether the foreclosure was in accordance with applicable state and federal law, including but not limited to the SCRA and the U.S. Bankruptcy Code;

(c) whether a foreclosure sale occurred when an application for a loan modification or other Loss Mitigation was under consideration; when the loan was performing in accordance with a trial or permanent loan modification; or when the loan had not been in default for a sufficient period of time to authorize foreclosure pursuant to the terms of the mortgage loan documents and related agreements;

(d) whether, with respect to non-judicial foreclosures, the procedures followed with respect to the foreclosure sale (including the calculation of the default period, the amounts due, and compliance with notice periods) and post-sale confirmations were in accordance with the terms of the mortgage loan and state law requirements;

(e) whether a delinquent borrower’s account was only charged fees and/or penalties that were permissible under the terms of the borrower’s loan documents, applicable state and federal law, and were reasonable and customary;

(f) whether the frequency that fees were assessed to any delinquent borrower’s account (including broker price opinions) was excessive under the terms of the borrower’s loan documents, and applicable state and federal law;

(g) whether Loss Mitigation Activities with respect to foreclosed loans were handled in accordance with the requirements of the HAMP, and consistent with the policies and procedures applicable to the Bank’s proprietary loan modifications or other loss mitigation programs, such that each borrower had an adequate opportunity to apply for a Loss Mitigation option or program, any such application was handled properly, a final decision was made on a reasonable basis, and was communicated to the borrower before the foreclosure sale; and

(h) whether any errors, misrepresentations, or other deficiencies identified in the Foreclosure Review resulted in financial injury to the borrower or the mortgagee.

Follow on Twitter: @paulkiel [14]

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4closureFraud.org

Comments
12 Responses to “As Regulators and Banks Review Foreclosures, We’ll Be Watching”
  1. Neal says:

    (Thank you for your excellent article)

    Here’s a bombshell article that may be of interest to anyone who’s conducting an investigation about mortgage fraud. If allegations are true (claimed to be verified) then a RICO suit should be appropriately filed against those who committed these heinous crimes against the American people.

    http://livinglies.wordpress.com/2011/01/11/wells-whistleblower-reveals-black-hole-for-documents-and-procedures/

    The lender’s conspiracy to hide fraudulent activities from regulators was calculated, premeditated and concise. They KNEW what they were doing. They KNEW that govt regulators were underfunded & understaffed. By (purposely) keeping their scheme under the radar, they were hoping that it would slip by unnoticed. If LPS was involved, it may be likely that other lenders also participated.

    My heart goes out to homeowners who were put through the wringer in their desperate attempts to save their homes. The few who managed to get loan mods never realized that they were simply used to squeeze more money out of them.

    Please share this with those who need to know …. Pass it on to lawmakers, AG’s, defense counselors, investigators, news media ….. Let’s get it out to the main stream!

  2. Sooooooooo…what gives to those who’s foreclosures started in Jan 2010 and the banks are still stalling on the motion to produce all documents….it could go on for many more months…same with those who went thru foreclosure and lost their homes before 2009??? WHERE DO THEY COME IN THIS PICTURE? Fraud and foreclosures are the same regardless when it happened….maybe I missed something when reading it…OR maybe they thought no one would realize they jumped over a few years…I am not going to try and figure anything out…I am still way tooooo pissed that this whole massive crap of fraud was a planned crime to take everything from the people….all for the sake of greed and control. They need to cut the cord and end the federal reserve…..split the banks up….and arrest the CEO’s and the rest of the pee-ons.. and the regulators…any and all who were/are involved in this mess. They have the money….a whole lot of money that does not belong to them….they can pay for all damages done. a bank robber goes to prison for a lot less money taken in a robbery….is something wrong with this picture?

  3. J A says:

    This is encouraging news, but not good enough.

    My foreclosure was finalized in June 2008 — just six months prior to the two measly years they say that people have to have gone through foreclosure (2009-2010) in order to possibly get compensation.

    I will not rest until I get what is owed to me because I have a thick file of proof, proof and more proof, and I will NOT be shut out of this over a mere six months.

    They should base this on who can prove it, not on who went through foreclosure once Obama got in office. Just because my foreclosure happened while Bush was in office doesn’t mean it wasn’t as bad — if not WORSE — than what people have gone through with loan mods under HAMP, because at least that has bought people lots of time, whereas people like me in 2007-2008 had no time but whatever we generated on our own in court by being savvy and learning more than we ever knew we would learn about the Florida Foreclosure Statutes.

    I have filled out the long information form on ProPublica and I plan to submit all my documents as proof to them too, just as I’m sending it to LPS and asking, “See what you did? Now what do you plan to do about it?”

    JUSTICE FOR ALL!

  4. Shelley says:

    I am really glad to see this article. I have a question and hope someone can help. I am 99% sure of accounting fraud in my mortgage. I need to know if the foreclosure and bankrupacy was in 2004 can I get my account looked at? Should I get an Attorney and just file something on my own or wait. I was sent a modification that starts in May but the wording at the top worries me. Can they use the modification that I sign to replace the paperwork they do not have due to MERS?

  5. l vent says:

    FANNIE/FREDDIE SHOULD HAVE NEVER BEEN ALLOWED BY OUR GOVERNMENT TO FLOAT ALL OF THOSE MORTGAGE LOANS, THEN SELL AND GAMBLE OFF OF THAT FLOAT. THEY MADE MEGA TRILLIONS OFF OF THAT PONZI SCHEME MORTGAGE FRAUD. WALL STREET MADE 60 TRILLION U.S IN MORTGAGE DERIVATIVES FRAUD IN 1999 ALONE, THESE SHEISTERS MADE UPWARDS OF 100 TRILLION, U.S. CNBC REPORTED. MAKE THEM PUT BACK THE MISSING TRILLIONS, THEY STOLE, WE THE PEOPLE DID NOT STEAL IT…

  6. l vent says:

    THE ORIGINATION FRAUD PROVES THESE LOANS NEVER EXISTED. OUR HOMES ARE PAID FOR FREE AND CLEAR.. GET THE MONEY FROM THE THEIVES AT FANNIE MAE AND FREDDIE MAC AND ON WALL STREET, THAT ROBBED US ALL. THEY MADE 100 TRILLION IN MORTGAGE DERIVATIVES FRAUD. TELL THEM TO PAY FOR ALL OF THE MISSING MONEY.

    • l vent says:

      WALL STREET, THE BANKSTERS AND FANNIE/FREDDIE STOLE OUR WEALTH. WE DO NOT HAVE THE MONEY. THEY ROBBED US. WE THE PEOPLE CANNOT PAY FOR THE THEFT OF OUR OWN WEALTH. THAT IS UNSUSTAINABLE BECAUSE THE ONGOING CRIMINAL ENTERPRISE CONTINUES ITS ONGOING FINANCIAL TERRORISM TACTICS VIA THE FOREIGN MULTINATIONAL ENTERPRISE THE FEDERAL RESERVE/WALL STREET CRIME SYNDICATE. THEY HAVE NEARLY DEFRAUDED THE LIFE OUT OF THE AMERICAN PEOPLE. SEND WALL STREET, THE BANKS AND THE FEDERAL RESERVE THE BILL. THEY HAVE THE STOLEN MONEY. THE AMERICAN PEOPLE _DO_NOT_ HAVE_ IT_!!!!!!!!!!!!!!!!!!!!!!!!

    • Bobbi Swann says:

      @ Ivent – The problem herein is that Fannie/Freddie are BROKE and the government bailed them out along with all the other shyster banks with the bailout funds so how are the homeowners supposed to get their money from Fannie/Freddie? Huge salaries and bonuses were paid to those in Fannie/Freddie so where did all the rest of that money go? Funnelled somewhere else? Where? As a private corporation (Fannie/Freddie) aren’t their books subject to some sort of public view? Doesn’t it make you wonder why the government wants to own them….to hide the facts?

      • l vent says:

        Bloomberg reported that the IMF owns FANNIE/FREDDIE. That is where the deception is in all of this. Foreign owned MULTINATIONAL CORPORATIONS that wear an American face have pulled this PONZI SCHEME HEIST AND SWINDLE off to make it look like it is the U.S. GOVERNMENTS FAULT. KINDA LIKE ALL OF THE WARS WE ARE FIGHTING AROUND THE WORLD FOR THE U.N./ NEW WORLD ORDER. AMERICA IS NOT THE GREAT SATAN OR THE EVIL EMPIRE, THAT WOULD BE THE SMOM/VATICAN/JESUITS. THEY ARE HIDING BEHIND THE SCENES OF ALL OF IT. THEY USE PERPS TO HIDE BEHIND LIKE THE SO CALLED AMERICAN BANKS, CHASE, BOFA WELLS FARGO, DEUTSCHE. THEY ARE NOT AMERICAN BANKS. GOLDMAN SAKS IS ONE OF THE LARGEST SMOM/VATICAN/JESUIT OWNED BANKING PROXIES IN THE WORLD. THEY OWN WALL STREET, TOO. YOU HAVE TO REMEMBER WITH THESE SHEISTERS, BLACK IS WHITE. AMERICA IS NOT BROKE AND EITHER ARE THE SHEISTERS, THEY JUST WANT THE VICTIMS TO PAY FOR THE PONZI SCHEME HEIST. CHECK OUT THIS LINK, IT REALLY CONNECTS THE DOTS. http://www.theforbiddenknowledge.com/hardtruth/jesuit_world_control.htm

      • l vent says:

        I forgot to mention, the revived roman empire have completely infiltrated America and have corrupted just about all of our politicians and our judicial system. There are still some honest American people left for us to rally behind.

  7. l vent says:

    The DOJ was on CNBC this morning on a world wide news broadcast AND ADMITTED that they are investigating THOUSANDS for MORTGAGE FRAUD. There is now, NO VALID REASON WHY there should not be a complete NATIONWIDE HALT TO THE FRAUDCLOSURE SCAM and all of the other SCAMS because of a NATIONWIDE INVESTIGATION into the RAMPANT MORTGAGE FRAUD BY THE UNITED STATES DEPARTMENT OF JUSTICE. NOW IS THE TIME TO CALL FOR AN INDEFINITE NATIONWIDE MORATORIUM ON ALL FRAUDCLOSURES. THE AMERICAN PEOPLE NEED THEIR RIGHTS PROTECTED. THE FOREIGN MULTINATIONAL INTEREST HAS ROBBED THE AMERICAN PEOPLE BLIND. IT IS WAY PAST TIME FOR THE UNITED STATES GOVERNMENT TO INTERVENE ON BEHALF OF THE AMERICAN PEOPLE..

  8. John says:

    No matter what’s offered, someone will still have to prove they are the right company to do business with before anything can be agreed upon or the homeowner is very foolish.

    For we, the homeowner to agree and sign any agreement regardless of how good it sounds is admitting you agree this is the right company.

    Getting that from you in writing is in itself a great advantage to them if they want to do anything detrimental to you.

    I’d rather lose my home and start over than be paying the wrong company a monthly payment.

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