Reluctant Banksters Refuse To Correct Loan Servicing Abuses, Resulting In Continued Harrassment Of Homeowners With Foreclosure Threats

An excerpt from a recent story from The Center for Public Integrity's iWatch News:

• Since 2007, nearly 9 million homes have been lost to foreclosure, according to data from RealtyTrac. About 4 million are currently in default on or in some stage of foreclosure. Some of these homeowners saw their payments skyrocket, some lost their jobs, and some bought a more expensive home than they could afford.



• But many, [...], say that their foreclosures or defaults were triggered by an error made by the mortgage servicing company. Common errors include late fees generated through questionable accounting and imposed without notice, excessive charges for property inspections and maintenance, and inflated or unnecessary attorneys’ fees.



• Many homeowners who have tried to correct what seem to be simple accounting mistakes say that the servicers — often, an arm of a major bank — are unable or unwilling to help them resolve even the most basic problems.



• “Every time I would call I’d get a different person,” said William Allen, a retiree near Baltimore who is fighting a Bank of America foreclosure. “I worked on it nearly a year and it didn’t do me any good.”



• Most banks and independent loan servicers now say that they have cleared the decks on systemic problems that led to the errors and that they now make it much easier for homeowners to easily resolve their problems with bank representatives.

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• But veterans of the foreclosure wars tell a different story. More than four years after reports of these kinds of errors began bubbling to the surface, homeowners are still fighting to fix servicer mistake that threaten their homes, they say.



• “Almost all loans in default have something wrong with them,” said Tara Twomey, a lawyer at the National Consumer Law Center who recently completed a study of the servicing industry.

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• So why are things such a mess? Much of the blame can be directed at a foreclosure machine created during the housing boom to deal with the mad rush of mortgage applications. The automated system prizes efficiency over customer service, makes frequent errors in the administration of troubled home loans, and, according to one study, pays servicers more for foreclosures than loan modifications.



• “They don’t want to spend enough money to not make mistakes,” said Kurt Eggert, a law professor at Chapman University, who testified about servicing errors at a Senate hearing in 2010 and has written extensively about the industry.

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• [R]ather than hire and train enough employees to personally manage troubled loans in a way that minimizes foreclosures and encourages loan modifications, servicers entrusted management of troubled loans to old computer software that legal experts say isn’t up to the task.



• The end result is a system with little accountability and a whole lot of angry homeowners. It is impossible to know how many loans have been subject to wrongful fees and accounting errors, but foreclosure war veterans say the number is high.



• Jay Patterson, a forensic accountant who has examined hundreds of mortgage loans in bankruptcy or foreclosure, said that “95 percent of these loans contain some kind of mistake,” from an unnecessary $15 late fee to thousands of dollars in fees and charges stemming from a single mistake that snowballs into a wrongful foreclosure.

For more, see Raging against the foreclosure machine.