Bankruptcy Court Watchdog In Ongoing Probe Into Allegations Of Foreclosing Banksters' Mortgage Escrow Fee Double Dipping Yielding Million$ In Profit$

In New York City, the New York Post reports:

• Federal investigators are looking into allegations that banks have wrongly pocketed tens of millions of dollars from troubled homeowners by double-billing for mortgage escrow fees, The Post has learned.



• Exactly how much in phony profits the banks may have pocketed from this alleged practice is not known, but an analysis by The Post of bankruptcy cases in 2011 shows it could range higher than $150 million for just the new cases filed this year.



• The problem has gotten so out of hand that lawyers and accountants at the New York City office of US Trustee — charged with protecting the integrity of US bankruptcy courts — are poring over local Chapter 13 bankruptcy cases for evidence of wrongdoing.



• The federal investigators were tipped to the alleged practice by metro area bankruptcy lawyers. Cases specifically involved Wells Fargo and GMAC Mortgage, but lawyers say most banks had double-dipped.



• “It seems prevalent, and it’s a moneymaking machine,” David Shaev, a Manhattan bankruptcy defense lawyer, said of the banks’ double-dipping.



• Westchester bankruptcy defense lawyer Linda Tirelli says 75 percent of her clients face escrow double-billing by their lender or mortgage servicer, for amounts up to $2,800.



• Here’s how the double-dipping scam can be pulled off. Many homeowners opt to pay part of their property taxes and homeowners insurance with their mortgage every month. The funds are then put into an escrow account and used to periodically pay the taxes and insurance.



• But after falling behind on a few payments, troubled borrowers in Chapter 13 often find that their bank or mortgage servicer tries to collect twice on the escrow funds — once as part of the overall mortgage payment, and again as a separate “escrow shortage” charge.



• The average double charge is about $2,000, said forensic accountant Jay Patterson of Full Disclosure in Arkansas, who sees escrow issues in half the cases he examines. In 2011, there were 362,000 Chapter 13 cases filed nationwide, according to the National Bankruptcy Research Center. If three-quarters of those cases involved homeowners, and even one-third of that subset of cases had extra escrow charges of $2,000, then banks clobbered homeowners with an astonishing $179 million in false charges.



• Following on the heels of the widespread robo-signing scandal — where executives signed reams of foreclosure paperwork without reviewing it — the escrow double-dipping is just another example of the shoddy if not outright fraudulent practices by banks thirsty for profit above all else.

Source: Sloppy seconds: Feds probe million$ in 'double-billing' by banks.