Bank Errors Continue to Cause Wrongful Foreclosures

Bank Errors Continue to Cause Wrongful Foreclosures

by Paul Kiel ProPublica

Four years into the foreclosure crisis, banks say they’ve made major improvements in how they handle struggling homeowners. They’ve promised, for example, not to foreclose on homeowners who are being considered for mortgage modifications. But that’s still happening.

Consider the cases of Laurie Pinkerton and Lisa Peterson. The two women, both Californians and Bank of America customers, had been assured by the bank that they wouldn’t lose their homes before they’d been evaluated for a possible modification. Both had their homes sold last month.

Such cases are particularly senseless, because simply modifying the mortgage by reducing the monthly payment might be in the interest not only of the homeowner, but also of the investor who owns the mortgage. Both Pinkerton and Peterson said their homes were sold after foreclosure for far less than they’re worth.

Regulators have done little to stop the practice, and the “problem appears to be getting worse,” said Kevin Stein, associate director of the nonprofit California Reinvestment Coalition [1].

Last month, the coalition surveyed 55 foreclosure-avoidance counselors throughout the state. Collectively they serve thousands of borrowers every month. Almost all of the counselors, 94 percent, reported having worked with clients who’d lost their homes while under review for a modification. About half of the counselors reported this happened “often.” This year’s totals, which are due to be publicly released next week, are higher than those in the group’s survey last year [2].

Regulators have acknowledged the problem but have so far stopped short of solving it, say borrower advocates. More than a year ago, ProPublica reported extensively on how the banks’ inadequate systems were causing wrongful foreclosures [3].

This past April, the federal banking regulators released “consent orders” with 14 of the largest banks [4] requiring various improvements in their handling of mortgages and foreclosures. Prior to the orders, the regulators had not had clear rules on how the banks should handle modification applications. Among the new requirements, banks will now be forbidden from actually selling a home before a final decision is made on a modification. Also, if a homeowner is approved for a modification, the foreclosure process is supposed to stop. The new requirements will go into effect later this summer.

While those are necessary requirements, regulators took a “huge step backward” by not explicitly forbidding banks from pursuing foreclosure at all until a final decision has been made on a mortgage modification application, said Alys Cohen of the National Consumer Law Center.

The administration’s mortgage modification program, which offers incentives to encourage modifications, has that requirement [3]. But that program is voluntary for the banks and has been hobbled by lax oversight [5]. What’s more, over two-thirds of modifications occur outside of the program.

Federal regulators have the power to require all banks to make a decision on a modification application before moving to foreclose, but they’ve simply chosen not to.

Allowing the banks to pursue foreclosure while the modification process plays out hurts homeowners in multiple ways. First and foremost, there’s the hazard of actually losing the home to foreclosure because of bank error. The two homeowners featured in this story show that this continues to be a real danger, especially in states like California where the bank doesn’t need to go to court to foreclose. It’s also just confusing and unnecessarily stressful for homeowners. Finally, in a foreclosure homeowners actually get billed for bank costs, such as paying for a bank’s lawyers.

Instead of outright forbidding banks from pursuing foreclosure while they’re considering homeowners for a modification, regulators have asked the banks to explore whether it’s a problem. The orders ask the banks [6] to “conduct a review to determine whether processes involving past due mortgage loans or foreclosures overlap in such a way that they may impair or impede a borrower’s efforts to effectively pursue a loan modification.”

The primary regulator for the biggest banks is the Office of the Comptroller of the Currency, which has been much criticized for failing to crack down [4] on banks’ foreclosure failures. Bryan Hubbard, a spokesman for the OCC, said that the orders addressed the “situations that were most confusing to the borrower” and that the issue would be revisited at a later time when regulators draft new, comprehensive standards for the industry [7]. When asked whether regulators were deferring to the banks on the issue, he said they were not deferring, because regulators would have to approve whatever conclusion the banks came to.

Two homeowners’ tales

Although Pinkerton and Peterson live about 450 miles apart, they’ve had strikingly similar experiences with Bank of America.

Both contacted the bank before even missing a payment to see what steps to take, because they’d taken a hit to their income. Both say Bank of America employees told them they’d have to fall at least three months behind to be considered for a modification (advice that is both inaccurate and frequently given [8]). Reluctantly, both did so.

As a result of missing payments, both soon found themselves facing foreclosure. But at least the modification process had begun, too.

Of course, it went slowly. Like millions of other homeowners [8], they waited months and months for an answer on their modification applications and sent in the same documents over and over again. Despite sending in those documents, both were told at one point that they’d been denied because they hadn’t sent in the required documents (another extremely common problem [9]).

Finally, last month, both had their homes sold at a foreclosure auction, despite the assurances of Bank of America employees that that wouldn’t happen until they’d received a final answer on their application for a modification.

“The next thing I know, a guy is knocking on my door saying his boss is at the courthouse buying our house,” said Peterson.

What makes foreclosure particularly unnecessary in both cases is that Pinkerton and Peterson had made a point of telling the bank they had the means to bring the loan current even if they didn’t get a modification. And unlike many Californians [10], both had the option of selling the home to pay off the mortgage because their homes are worth more than they owe on their mortgage.

“I never received any letter saying you’re denied,” said Pinkerton. “If that would have been the case, I would have borrowed the money and went and paid it current.” Her family had offered to help, she said.

Both errors are particularly hard to undo because Bank of America can’t simply give the houses back: The bank sold both homes to others. In order to get the homes back, the bank would have to essentially convince the new owner to sell the home back. In a case we reported on last year, JPMorgan Chase paid about $20,000 [11] above the purchase price to the buyer of a property the bank had mistakenly sold.

At this point in the two stories, the homeowners’ paths diverge.

After complaining to everyone she could think of, Pinkerton was contacted by a Bank of America employee who said he worked in the bank’s office of the president. He told her he’d work to get the sale reversed. Regardless, Pinkerton was evicted from her home last week.

“I’ve spent thousands of dollars moving that I didn’t have,” she said.

As recently as Wednesday, the Bank of America employee told her he’s still working on her case.

Bank of America spokesman Rick Simon said the bank was researching whether a mistake had been made. “To the extent it is determined that mistakes in the process contributed to the mortgage reaching foreclosure, the bank will work with Ms. Pinkerton to explore viable and appropriate considerations, which may include rescission.”

Simon also noted that Pinkerton had been sent letters in March and April saying that she’d canceled her application for a modification.

Pinkerton said she’d never asked to cancel her application, and when she called Bank of America to ask about the letters, she was told to disregard them. She did once reject a modification offer, but that was because it would have significantly raised her monthly payments. She says a Bank of America employee told her to appeal the offer because it had erroneously calculated her income at twice its actual level.

Peterson has been more successful. After the foreclosure sale, she made a number of frantic calls and finally got a bank employee to admit there’d been a mistake, she says. But nothing could be done about it, she was told.

After being contacted by various employees who said they’d been assigned to help resolve the matter, but who then couldn’t be reached, she eventually hired an attorney.

Earlier this month, Bank of America rescinded the sale and returned the title to Peterson.

It’s unclear whether the bank paid a premium to the buyer of Peterson’s property in order to get it back. Bank of America’s Simon said, “We continue to work on resolution of remaining third-party issues.”

In general, Simon said such mistaken foreclosures “have been relatively rare, compared to the volume of defaults and foreclosure activity in today’s economy.” Across the country, about 4 million mortgages are currently more than three months delinquent.

“Any problem in this regard is of tremendous concern, and we have put additional checks and practices in place to further limit the possibilities,” he added.

To Peterson, the lesson from her experience is clear. “This system is broken,” she said. “You can’t trust what the bank tells you.”

~

4closureFraud.org

Comments
31 Responses to “Bank Errors Continue to Cause Wrongful Foreclosures”
  1. ELLEN says:

    My mom at age 70 re mortgage her home to save my brother who was into drugs my mom was in denial he died then she died leaving me with a 133,000.00 loan that she while alive had no idea how she could of spent 133.00.00 I have nothing to show for this loan I will be 80 when done in 2011 I started questioning this loan asking for information as to what was spent questioning the the ethics wrong thing to do it may have cost me my home a home that I want my two sons in the Military the Army to return to. My account went to a woman in Texas who just toss it aside for 90 days I got a default for 1700 and was thrilled finally someone had figure out what I really owed no My next statement was for a year I had already paid I ask this person for assistance and she refused to do anything and without her releasing my file it sat despite my pleas for 90 days after 90 days the bank Wells Fargo refused to take my money a rule did I break that rule no then I waited a year for a modification and was told do not pay anything on this account as it will knock out your hardship I was denied and offered no other assistance told all my previous records destroyed this account had a debt card never saw it but someone used it and now I am holding the bag can not get any help and Wells fargo does not honor those serving it is awful and all this started when I said and ask for account history and accountablity for a loan I have to endure and pay until I am 80 I am only 50 ANY LAWYER OUT THERE I LIVE IN NJ WANT TO HELP OUT A MILITARY FAMILY ANYONE WANT TO HELP US

  2. Brian Godwin says:

    We are in a law suit against Bank of America for just those reasons and more, Wells Fargo owned the note and started foreclosure proceedings on us two years ago, all this while telling us we were approved for a loan modification, then transferred the note to Bank of America without telling us, then auctioning of the house to which Wells Fargo had to buy it because they would not let anyone else bid in it, then transferred the title to Bank of America which then got recorded in county records, then BofA foreclosed on us and took the house without giving us a chance to modify the loan or filing chapter 13 which would have forced them to modify the loan. And Bof A too made a profit off the house.

  3. lvent says:

    Bloomberg just reporting that THE MAJORITY OF FRAUDCLOSED HOMES ARE GOING TO BECOME RENTAL PROPERTIES.. THERE YOU HAVE IT FOLKS. THE PROOF THE NEW WORLD ORDER, VIA THE IMF WANTS TO FORCE AMERICA INTO NATION OF RENTERS. Bloomberg also reported that HOUSING STARTS ARE ZERO. THESE FOREIGNERS ARE DESTROYING AMERICA. The people who lost their homes fraudulently need to fight to get their homes back.THE TITLES ARE DESTROYED AND THEY CAN’T SELL THESE HOMES, THEY CAN ONLY RENT THESE HOMES. THEY DO NOT OWN THESE HOMES. People in fraudclosure need to fight for a clear title to their homes because of ALL OF THE FRAUD IN THEIR LOANS. WAKE UP AMERICA AND STAND UP FOR YOUR RIGHTS FOR THE LOVE OF GOD!!!!

    • lvent says:

      SCREW ‘EM. GO FIND THE ORIGINATION FRAUD AND THEN DON’T SEND THESE BASTARDS WHO HAVE BEEN ROBBING US BLIND, ANOTHER FREAKING DIME. THEY VOIDED THEIR OWN CONTRACTS. FRAUD ANYWHERE IN THE CONTRACT KILLS THE LEGAL CONTRACT, IN ANY STATE!!!!!

  4. I was actually approved for the mod. Paid for five months then get a letter I have been disqualified , so my payments were now considered partial payments and I was in foreclosure unless I came up with over twentyfive thousand. This is not an uncommon story either. I was told by three different servicers to fall behind or I would not qualify, in order to receive the mod loan. So after the third one I did allow my mortgage to fall behind. After all it was the bank telling me do so to qualify. The beginning of my nightmare, when I thought I had recieved some help. My business is down over a hundredthousand a year net caused by the banksters economic crimes. We are all victims of these criminals. Read the 650 page senate report that should have put these criminals in jail. Everyone needs to contact our government officials in the masses to let them know we will vote them out if they support the criminals and do not support their victims.

    • Readdocs says:

      Shelley,,

      Would you commit a crime if the police told you to in order to not get a fine?

      Well all three of these entities directed you to deliberately break your contract

      which automatically put you into foreclosure. Another thing, service companies

      do not have the authority to lower your mortgage payments unless they are your

      TRUE lender. Only the lender who loaned you the money for your mortgage has

      that authority. to change your payments.

      Loan modifications are honey pots to trap the home owner in foreclosure.

      • lies all of it says:

        @ redoc so……if our servicer told us we had to be in eminent default to get help with a mod then they are responsible for the default not he home owner correct.??? so technically they voided the contract/note not the homeowners so why are the judges not giving us due proccess. there must be case law about one entity telling the other entity that has a contract to break the contract would cause the contract to be null and void. direct verbalization to break an existing contract MUST NULL AND VOID THE EXISTING CONTRACT. why has this not been examioned yet. i am so suprised with all the fraud. lost docs and appraisal fraud. and now telling us to not pay in order to get help.

        unfortunatly for wells fargo i know the exact date i called. must be case law people??????

    • lvent says:

      The pretender lender for my loan told me when I was not yet in foreclosure and going through the loan mod scam. YOU ARE ALWAYS IN FORECLOSURE. WAKE UP AMERICA!! You can fight now, or you can fight later. They want your home. They DO NOT want WE THE PEOPLE to EVER own our homes. THEY WANT A NATION OF RENTERS. SAVE YOUR HOME, FIND THE ORIGINATION FRAUD!!!!! THIS IS NOT ABOUT A CREDIT SCORE, WE ARE NOT A NUMBER. THIS IS ABOUT FREEDOM. STOP PAYING THE UNSECURED DEBT, STOP USING THE FDIC BANKS AND CUT UP THOSE CREDIT AND DEBIT CARDS. THEY ARE SPYING ON YOU AND THEY WANT TO OWN YOU AND MICROMANAGE YOUR LIFE.

  5. COCO says:

    BANKS CANNOT FORECLOSURE ON YOU IF THEY DO NOT HAVE THE PROPER ASSIGNMENT OF MORTGAGE THAT ALLOWS THEM STANDING TO FORECLOSE. PLAIN AND SIMPLE.CHECK YOUR ASSIGNMENT OF MORTGAGE TO SEE THAT THE LENDER WHO SERVED LIS PENDENS IS ENTITLED TO FORECLOSE. THERE MUST BE AN ASSIGNMENT OF MORTGAGE FROM ONE LENDER TO ANOTHER IN ORDER FOR THE THEM TO HAVE A STANDING TO FORECLOSE. THAT IS ALL. IF NOT, THEY HAVE COMMITTED FRAUD UPON THE COURT. YOU CANNOT TO PURPORT TO OWN COLLATERAL THAT YOU DO NOT OWN. IT IS FELONY THEFT.

    • lvent says:

      Not only did PHH Mortgage put a Foreclosure Lis Pends on my public recordings without ever being assigned the mortgage, but I also have a Pretender Lender from Bayview Loan Servicing trying to fraudclose on my commercial property by attaching themselves to an old assignment by the lender who sold off the loan to Bayview after they filed the foreclosure lis pends . BAYVIEW had the balls to do that with from out of state. I also have 2 copies of 2 bogus allonges to both notes. They are all criminals and need to be stopped. How could the judges be allowing this shit to go on? They are just praying we miss a court date so they can steal our shit. You just can’t make this stuff up.

      • housemanrob says:

        You can make it up, but it is too unbelievable to completely digest! These greedy fools do not realize that they are proving that capitalism will not work………….that it only becomes fascism!

    • housemanrob says:

      Coco, Good for the heart, We will need plenty of heart for the coming battles! And how many felony theft charges have been prosecuted during the millions of fraudulent foreclosures already in public records. Remember………..judges have only to review the paperwork to see it stinks, but often they do not……tell me what that means? Does not take much pondering. The courts are often complicit….it is obvious……just ask Charlie Green….he is too stupid to have enough imagination to hide the truth. You can see through him like a bay window!

  6. Nora says:

    MISTAKES!!!!!! These are not mistakes. Banksters of America DELIBERATELY STOLE these homes, knowing they didn’t own them. It’s all shuck and jive, friends. NONE of these foreclosures are legal if the notes were converted to Mortgage Backed Securities.

    So few people realize how they’ve been duped, it’s amazing. In addition, there was clear intent to drive the price of real estate up artificially and qualify borrowers for loans the banks knew were unsustainable. Their only mistake was not setting a law in place that would allow them to foreclose without proper documentation.

    They’ve caused their own undoing, because when all foreclosures are overturned through millions of law suits, the massive profits they managed to steal from American families will be eaten away. The lawyers who represent them will eat away at their wallets, too. Eventually citizens will demand that criminal charges are filed and they’ll be sentenced to huge fines and jail sentences, which they deserve.

    • Dont think they have not passed laws that allow them to steal homes without proof. Especially in the State of WA. Summary judgment helps them steal the house also. Summary judgment is a war against the constitution and due process..

  7. Lie all of it says:

    what i not get in my county near tampa florida the county is taking money from oour schools and then giving people down payment assistance to people to buy foreclosed homes. Why does the county contact the people whom were foreclosed refi at property value and keep families stable? please all write hernando couty florida commissionand tell them to stop raping foreclosure victims. The banks have committed fraud from the begining appraisal fraud and application fraud and now robo signing and modification fraud. Homes are stolen by incompetant judges . Judges need to be educated about what is happening. do not punish families for losing their home the money should be used to keep families stable. please everyone help me flood the commissiom stop the sale of foreclosure keep families in their homes. this is an outrage i was disgusted when iread this on sunday. How barbaric to buy someone else house and put another family in there and giving them money why not help the family that is in there

    • housemanrob says:

      The money is in foreclosure…………none in saving people’s homes.

      • lies all of it says:

        i know the news paper article quoted how much all the entities in the county make for the sale of these foreclosed homes. robbing paul to pay petter how sick. please all help me write hernando county florida commission and stop the raping of foreclosure victims. return homes back to them.

      • lvent says:

        I don’t even think this is about the money. I am convinced this is about World Domination by the NWO.. They simply do not want us to own anything.They want a nation of eternal renters or they want you to get out. I have heard of many cases of banks simply walking away from the fraudclosures after the people leave their homes. I read that in the City of Chicago they can’t even find out who owns all of the abandoned homes so the City is bulldozing the homes. If the bank and the homeowner walk away than does Uncle Sam get the property back because of Escheat? The U.N. holds all land in America in fee simple because of treason by our own politicians, namely Nixon. There are only 3 things that trump the fee simple deed 1) is Escheat, 2) is Emminent Domain and there is 3) but I can’t remember what the third one is. This whole thing reeks of rampant massive corruption. Looks like alot of dirty deals were made here from behind the scenes. There is an evil tyranny lurking from the inside and the outside. All the devils are here for sure playing all sides of this Ponzi Scheme but hiding in plain sight..It is our patriotic duty to fight this illegal and unconstitutional tyranny who are trying to steal our homes that they do not own..

      • Readdocs says:

        Ivent,

        Don’t blame it all on Nixon. Obama has just signed an executive order placing all rural areas,

        private and publically owned over the U.N. The was we are going to be ALLOWED to use any

        rural properties is about to change unless we either force Obama to rescend that executive order.

        By fiat rule Obama has bypassed the people and our congress on this decision.

      • housemanrob says:

        Vent, Money is power, power is money! Add p+m=CORRUPTION!

      • lvent says:

        Readsdocs, I believe every president has chipped away at our freedom. Do you know about the Exec Order Obama signed? I believe it was signed on 1-11-10 that was designed to weaken the POSSE COMITATUS ACT OF 1878 The POSSE COMITATUS act bars the use of the military for civilian law enforcement. You can google key words because I can’t remember the exact name of the Exec. order. There is real evil lurking in the shadows here. The media never mentioned that exec. order being signed that I can recall.. There is a ginormous cover-up of the destruction of our U.S. CONSTITUTION and our U.S. BILL OF RIGHTS and all of the laws put in place to protect WE THE PEOPLE from a GOVERNMENT TYRANNY. THIS IS STRATEGIC NAZI CLASS WARFARE. . THE DEMS AND REPUBS ARE COMPLETELY CORRUPT AND NEED TO GO AWAY. WE THE PEOPLE want no part of the NEW WORLD ORDER’s EVI L PLAN plan for GLOBAL GOVERNANCE or a GLOBAL CORPORATE TRUST, GLOBAL HEALTHCARE, WE WANT NO PART OF ANY OF IT.. THAT IS A FOREIGN MULTINATIONAL TYRANNY.

      • lvent says:

        Anyone here ever here of the LUCIS TRUST formerly know as the LUCIFER TRUST?? GOOGLE IT and the WCPA and the WORLD CONSTITUTION as well as AGENDA 21. There is a satanic cult running the world. Wake up America.

  8. Scotty Simpson says:

    We have a MERS problem and can’t find out any information after our home town bank assigned the mortgage nover to MERS in April of 2007 and then MERs assigned it to Sun Trust Mortgage in may of 2011 so they could proceed with forclosure on us. Scottie_simpson@sbcglobal.net

  9. housemanrob says:

    Who is going to work these new jobs from all the business that is going to come to florida after all have been foreclosed upon……………..Florida Skunk Apes? Can’t evict them. Maybe a more invasive species like……..Pythons and Nile Monitor lizards would make good employees because they and the gators will be all that’s left to hire.

  10. housemanrob says:

    This is beyond ridiculous to the sublime! There cannot possibly be enough ignorant officials left, not living under a rock like a Hellgramite, who don’t know what is happening during these foreclosures. It’s about pretender lenders stealing residential real estate for their own gain. That is one reason foreclosed homes are selling so cheap………….. if one was to sell something far below market value, in business, a red flag should go up! Thieves steal and then unload cheap……….akin to a counterfeiter trading bad money for good money. Fifty cents on the dollar? AND HOW ABSURD IS RICK SCOTT’S COMMENTS ON FORECLOSURE.” Let’s get those people kicked out so we can draw business to Florida.” WWWWHHHHHHHAAAAAAATTTTTT!!! He is not a smoothie crook, so……..just how big is this con?

Leave a Reply