New Anime: foreclosure victims

In the wake of many highly-publicized stories about rampant fraud perpetrated by banks in foreclosure proceedings, the Federal Reserve has decided to support stronger regulations under financial reform President Obama signed into law last summer.

The FDIC has been pushing hard to ensure that new regulations on the mortgage bond market include clear instructions for how banks handle mortgages-- and under what circumstances they can evict delinquent borrowers. The bank divisions that collect payments from borrowers and implement the foreclosure process-- known as "mortgage servicers"-- have been plagued by rampant problems with fraudulent documentation. This fraud has resulted in everything from illegal fees charged to borrowers to improper evictions.

The Fed had opposed using the mortgage bond rules to crack down on foreclosure abuses, despite pressure from the FDIC. But FDIC General Counsel Michael Krimminger recently told the Fed his agency would not support any new mortgage bond regulations that do not include strong rules forbidding foreclosure abuses. Krimminger told HuffPost that other regulatory agencies are "moving in our direction on the issue."

Krimminger would not specify which agencies were coming around. But a separate source close to the discussions told HuffPost that the Fed has come on board, with systemic risk watchdogs at the central bank sympathetic to Krimminger's position.

It doesn't do much to help existing victims of foreclosure fraud, nothing short of sending some bankers to jail would. But this is an important step in creating accountability for banks and protections for borrowers.

Even though banks piously insist that every one of their foreclosure actions is fully justified, evidence in the court system continues to prove that claim to be false. We pointed out this sorry development in October, that of banks entering and changing the locks on homes they had not foreclosed upon. Per a report from the Sarasota Herald Tribune:

The process of banks hiring people to break into homes, even when occupied, is just the latest oddity of the messy foreclosure crisis in Florida.

Some property owners are reporting the break-ins to law enforcement as burglaries. Yet investigators consider the disputes a civil matter because the contractors do not display criminal intent.

That essentially leaves the property owners without recourse…

“It is vastly underreported; it is happening in counties all across the state,” said St. Petersburg foreclosure defense attorney Matt Weidner. “The more this occurs, the more prevalent it’s going to become.”

The lack of willingness of the local police to deem destroying property and unauthorized entry as criminal acts leaves wronged parties with litigation as their only recourse. And some are filing suits.

Note that these suits likely represent only a small fraction of the actual cases of bank miscreance, since few of the victims are likely to have the financial wherewithall and intestinal fortitude to sue a bank. Per the New York Times:

When Mimi Ash arrived at her mountain chalet here for a weekend ski trip, she discovered that someone had broken into the home and changed the locks.

When she finally got into the house, it was empty. All of her possessions were gone: furniture, her son’s ski medals, winter clothes and family photos. Also missing was a wooden box, its top inscribed with the words “Together Forever,” that contained the ashes of her late husband, Robert.

The culprit, Ms. Ash soon learned, was not a burglar but her bank. According to a federal lawsuit filed in October by Ms. Ash, Bank of America had wrongfully foreclosed on her house and thrown out her belongings, without alerting Ms. Ash beforehand….

Identifying the number of homeowners who were locked out illegally is difficult. But banks and their representatives insist that situations like Ms. Ash’s represent just a tiny percentage of foreclosures.

This, as the British would say, is bollocks. The traditional procedures around the transfer of title made the old system virtually fail-safe. Any number above zero is unacceptably high. And “a tiny percentage” across the huge numbers of foreclosures happening across the US adds up to meaningful numbers in real terms.

The examples in the NY Times story are all from middle to upper income homeowners. For someone of lesser means, the consequences of wrongful action can be devastating. If possessions are removed, or worse, put out on the street, the losses can be significant.

This is the banks’ excuse:

A clause in most mortgages allows banks that service the loan to enter a home and secure it if it is in default, meaning if the mortgage payment is 45 to 60 days late, and if the house has been abandoned, authorities said.

First, some of the homes broken into have been current on payments. Second, “abandoned” seems to be interpreted as “no one at home when the contractor showed up” which would be true during the business day for most working families.

This pattern again proves what we know all two well, namely, that we have a two-tier system of law in the US: one for the banks, one for the rest of us.

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Thursday, January 13, 2011

foreclosure victims

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