Justice Department Probing Foreclosure Processes

Justice Department Probing Foreclosure Processes

Published: Wednesday, 6 Oct 2010 | 6:33 PM ET

The U.S. Justice Department said on Wednesday it was probing reports that the nation’s top mortgage lenders improperly evicted struggling borrowers from their homes as part of the devastating wave of foreclosures unleashed by the financial crisis.

Foreclosed Home
Repres
There has been a push by federal and state officials to suspend foreclosures after reports that banks signed large numbers of foreclosure affidavits without conducting a proper review.

Attorney General Eric Holder said the Justice Department would look into media reports that loan servicers improperly have used “robo-signers” to process foreclosure orders, stepping into a controversy that has forced at least three banks to halt eviction proceedings and prompted calls for an industry-wide moratorium on home repossession until the problems are fixed.

The move, coming before November’s congressional elections, takes aim at one of the most visible signs of the U.S. economic crisis, which saw hundreds of thousands of families lose their homes.

But it could risk further slowing the fragile U.S. economic recovery, leaving banks unsure about whether they will ever claw back their losses and the struggling housing market overshadowed by a mounting inventory of homes still likely to face foreclosure in future.

 

Key Points

Banks’ use of “robo-signers” under scrutiny by Justice Department.Wells Fargo agrees to offer loan modifications.North Carolina joins calls to suspend repossessionsOhio Attorney General sues GMAC, Ally Financial

House Speaker Nancy Pelosi and fellow Democrats wrote to Holder earlier this week asking the Justice Department look into the matter after receiving reports from thousands of homeowners about their foreclosure woes.

Separately on Wednesday, Wells Fargo [WFC  25.685  -0.265  (-1.02%)   ] agreed to pay eight states $24 million after allegations of deceptive marketing practices at its home loan unit. The firm said it would also alter its foreclosure prevention practices that could benefit struggling homeowners by more than $700 million.

The bank’s chief financial officer, Franklin Codel, told Reuters in an interview that Wells Fargo Home Mortgage did not cut corners to speed up the foreclosure process, and said he was “confident that the paperwork is being properly produced.”

In the aftermath of the financial crisis and ensuing recession, banks are expected to take over a record 1.2 million homes this year, up from about 1 million last year and just 100,000 as recently as 2005, according to real estate data company RealtyTrac.

There has been a push by federal and state officials to suspend foreclosures after reports that banks signed large numbers of foreclosure affidavits without conducting a proper review.

Banks and loan servicers, companies that collect monthly mortgage payments, reportedly have used “robo-signers” — middle-ranking executives who signed thousands of affidavits a month claiming they were knowledgeable of the cases.

States Take Action

The issue on improper handling of foreclosures came to the fore last month when Ally Financial, formerly known as GMAC, revealed that officials had signed thousands of affidavits without having personal knowledge of the borrower’s situation.

Ally suspended evictions and post-foreclosure proceedings in 23 states last month. JPMorgan Chase [JPM  39.81  0.50  (+1.27%)   ] and Bank of America [BAC  13.169  -0.011  (-0.08%)   ] later said they were suspending some foreclosures in 23 states while they reviewed their practices.

Lenders are scrambling to defend and improve foreclosure procedures under scrutiny in state courts and from regulators.

The foreclosure issue and the battered state of the U.S. housing market have weighed on the Obama administration ahead of the November congressional elections in which the Democrats already face the possibility of big losses.

The administration has a $50 billion war chest to fight foreclosures, but disbursements have been limited because the program is narrowly tailored to help responsible borrowers.

Any broader push to resolve the crisis, such as the wholesale forgiveness of principal debt of struggling homeowners, is unlikely to find support among lawmakers because of the cost and the potential for political backlash from any move seen as rewarding reckless behavior by banks or borrowers.

The focus on bank procedures has thrown a new twist into the saga.

North Carolina’s attorney general, Roy Cooper, on Wednesday became the latest state official to ask lenders to suspend home repossessions as he expanded a probe into improper foreclosure processes.

Senator Robert Menendez earlier this week raised the idea of a national foreclosure moratorium, saying it was “simply inexcusable” that proper oversight procedures were not in place for actions that deprived families of their homes.

Menendez and Senator Al Franken, a fellow Democrat, also called for congressional investigators to look into reports of misconduct in the foreclosure practices of Ally, JPMorgan and Bank of America.

Ally Financial and its GMAC Mortgage unit also were targeted by Ohio’s attorney general on Wednesday. Attorney General Richard Cordray announced a lawsuit alleging fraud and violations of Ohio’s consumer law.

Cordray also said he has sought meetings with Citibank, Bank of America, JP Morgan Chase and Wells Fargo to try to ascertain whether their foreclosure processes include any of the “mass” signing of official papers that are the subject of the suit against GMAC Mortgage.


20 Responses

  1. knowing my husbands health was going bad we tried to pay off our loan we were with wesrern finicial they turned over to h/c gmac and pow problems for example 800.00 a mth est shoul be 117000.00we have recipts for 140000.00and our note with western was for 72000.00 and h/c gmac says it is 92000.00 now we have paid 140000.00and quess what foreclosure we went to court last mth and got a thirty day extension because they left out o paragraph in their paperwork ok if they forgot that how many payments of yours and mine have they forgot
    thank you
    Terri Jordan
    919-271-3503

  2. Mark My Word……….IF AXELROD, HOLDER & the DEMS get involved, 6 million homes will end up getting screwed!

    Their position on this is PRO-BONO-BANKO.

  3. Wells Fargo just told me Friday they can NOT do a modification of ANY kind because the investor is not participating in any programs. They of course told me this after a 4 month ordeal of paperwork and mishaps on their part. And of course the Auction was set long ago.

  4. When Brooksley Born warned congress back in the early 2000’s (watch the video THE WARNING produced by Frontline), about the total economic chaos that would happen to the American people if congress allowed securitization of mortgage loans to continue, she was ridiculed by congress and when she confronted Alan Greenspan he said he knew that there were big problems but that the “market would work it out” . Some great workout isn’t it?
    Why is the government just now “discovering” this fraud and problem? Isn’t it odd?
    Seems like the same problems that occured when the IRS made tax shelters in the 80’s. Many unsuspecting Americans got into that scam, only to find out that the shelters were later disallowed and those investors had to pay back fines, penalties and all the money they had saved in the fraudulent tax shelters.
    Isn’t this just another scam perpetrated by our government?
    Why did AIG get $175 Billion in Tarp funds to bail out AIG and AIG paid out $175 Billion to the investors of these fraudulent trusts?
    Why does TARP money get funneled through the FDIC and paid to these fraudulent servicers via the “Shared Loss Agreements”
    What is going to happen in April 2011 when the Bureau of Consumer Financial Protection begins operating and consolidates the FDIC, Federal Reserve, OTS, and Federal Trade Commission into one government organization. The bureau will consolidate employees and responsibilities from a host of other regulatory bodies, including the Federal Reserve, the Federal Trade Commission, the Federal Deposit Insurance Corporation and even the Department of Housing and Urban Development.
    Is this all preplanned due to the securitization scam that our government allowed?
    We should all stop making our mortgage payments to show support for the millions of Americans that have been foreclosed on illegally by these crooks

  5. Robo-signers: Mortgage experience not necessary

    NEW YORK (AP) — In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in “foreclosure expert” jobs with no formal training, a Florida lawyer says.

    http://finance.yahoo.com/news/Robosigners-Mortgage-apf-382327091.html?x=0&sec=topStories&pos=main&asset=&ccode=

  6. usedkarguy

    DITTO

    “We’ve got to make more NOISE, PEOPLE!”

  7. we better make sure that the justice dept also start to defend the homeowners that time in and time out are in and out of court trying to get the banks to modify a loan. while they figure a way to scew us and delay the process every time!!!!!

  8. We need to stop perpetrating this myth that the banks have incurred losses, that they need to “claw back their losses.”

    THEY HAVE NO LOSSES. Only profits.

    If the press continues to talk about the banks like they have losses, people will only continue to feel sorry for the banks.

    Let’s educate the American public with the facts, not with the lies.

  9. Don’t get me going on Terry Savage. I pounded her a year ago about what was happening. The media will not report this headline:

    “The CAT is OUT of the BAG: the BANKS are BROKE”.

    The second mortgages are carried at face value on the balance sheets; who believes that ANY second mortgage is worth more than ZERO? The “Mark-toFantasy” accounting practices enable this to go on into perpetuity. The public officials (like my judge) believe it’s still “the borrowers fault”.

    Don’t think for a minute that a (D) or an (R) after a name means anything when it comes down to US, as in “us people”, when the “ruling class” makes a decision about how this is handled. The laws are already on the books (SEC ’33-’34, UCC, state recording laws, TILA, RESPA, etc., etc., etc.) and OUR public officials CHOOSE NOT TO ENFORCE THOSE LAWS! LET’S HOLD THEM ACCOUNTABLE!

    We’ve got to make more NOISE, PEOPLE!
    RESEARCH, CONTACT, AND STUDY YOUR CANDIDATES! AND VOTE!

  10. Bob G.,

    Yeah – sounds like a bribe (from banks to title companies) to me. But, these banks cannot fix the problems – media thinks they can – they cannot. Thus, title companies will just be insuring false title – but liability is shifted to banks.

  11. You’re exactly right, dying. How about the tens of thousands of people that these scoundrels have driven to suicide as a result of their greed? While the American idiotic public was distracted by this bs “War on Terror”, the bankers and elitists completely destroyed the American system of home ownership. Slowly but surely, this SCAM developed into a $630 TRILLION leeching of the American economy. And yet the Lemmings in the American public are addicted to the fact that “everyone must make a mortgage or rent payment”- EVEN WHEN THEIR PROPERTIES HAVE ALREADY BEEN STOLEN FROM THEM!!!!! When will people WAKE UP and realize that the US Government is merely a weak facade for the “rich and powerful”?

  12. I have an issue with the loans simply being marked to market, unless that marking includes any and all payouts from insurances, as well as from investor repos, then let’s talk about real balance owed reductions, including values lost.

    This “buyer shouldn’t get a free home” concept tends to attempt to take away considerably from the magnitude of the crime perpetrated on unsuspecting victims everywhere. I’m sure that “free house” line will be the GOP’s mantra. If you’ve read Eric Cantor, you know it already is.

    We can’t allow this financial meltdown to be reduced to a “don’t ask, don’t tell” type of problem, where the perps get to work things out in the best interest of getting whole again. The desire from the politicos is always to get back to business as usual to protect their status quo, even if it means screwing age old laws and each and every American in the process.

    There can’t be business as usual, until there is the “GREAT RESET”. Where MERS is brought down and the county recording system is re-established nationwide and funded as if MERS never existed, if it takes the blood of the bankers and every ounce of gold they own in the process, so be it.

    There can’t be business as usual until every single person who was kicked out of their home and suffered such incredible duress is made whole again.

    I for one have no desire to work things out with anyone from the lending faction. Their corruption is a hugely destructive force and needs to be wiped out entirely.

  13. However, this might not be as bad as we think.

    Consider this. The title cos. give clear title to all these deals, and so clouds are removed. Now the banks can sell their foreclosed inventory without further ado. But they still must prove that they own the note and mortgage in order to foreclose. If they can’t do that, they are SOL, title policies notwithstanding.

    Am I missing something here?

  14. This would make sense, as the banks have more political clout with the pols than do the title cos. So the banks are saying to the title cos. “you guarantee our titles and we will indemnify you and have the pols cover our contingent liabilities on the back end.” This cannot be accomplished without increasing the amount of fraud in the system.

  15. I think I got it the reason why they stopped foreclosures in 23 states is because they’re trying to push for those states to pass non-judicial foreclosure statutes so they won’t have to make sure everything’s in order and we all know how state and federal legislators care so much about the foreclosure market (pension profit) and less about the lives they’ve helped destroy and the people they’ve forced to commit suicide.

  16. Bob G.

    You are right. Cannot sit still for one moment. New reporting today that title companies are in talks with banks for guarantee of clear mortgage title. This is to take liability off the title agencies. The title agencies want a guarantee from the banks.

    Also, there is story out by Terry Savage, columnist for Creators Syndicate, telling people not to strategically default – to keep paying the mortgage. Doesn’t Terry get it – these are fraudulent mortgages. And, no one in right mind is going to keep paying – for example – $400,000 – on a house that neighbors are now purchasing for $200,000. (they are really paying much more because of interest). Ms. Savage almost threatens that borrowers that will not be able to even rent due to destroyed credit. Ms. Savage – the strategic defaulters would rather take the credit hit than continue the extortion..

    And – according to my contacts – many strangely agree with Ms. Savage – there is much resentment . These people are almost angry at any talk of principal reductions. Could never really understand why – but have come to realize that some just like being “better” than others – having more money – more power. Makes them feel more successful. They have almost enjoyed the foreclosure evictions. Incredible.

  17. Dying Truth

    You might want to find the proper blog/forum for your Israeli-Palestinian rant. Cuz this ain’t it. I believe that it is down the hall, 5th door on the left.

    You’re welcome.

  18. If just a few more ‘inside’ people could come forward with more information like this. Recently Wells Fargo has denied any irregularities processing foreclosures. Maybe so, but this kind of inside information proves they do not have the Note and standing to foreclosure. We are collecting names for class action suits against WF and other banks. Call Robert 860-599-5557 to get on out list. I believe that our actions in court is what is getting the states to start investigations. But we must press on with our own individual actions.

  19. It’s All BS it’s just another trick. These crooked public employees, judges and officials won’t give a damn until it happens to them too and they face homelessness which should come eventually for all of them. Look >

    “A San Diego police officer and his wife allegedly looted and then trashed their foreclosed home in Riverside County out of spite”
    http://www.cbs8.com/Global/story.asp?S=13258248

    Just Wait It’ll happen to all of them, but they actually deserve it because they’re the ones who gave into greed and signed those public/private partnership pension agreements that allow them to profit off of real estate foreclosures of the people they work for creating major conflicts-of-interests even treason because this is what happens in war Israel does the same thing to Gaza and we all may soon face the same fate as the Palestinians. God Help Us All (Palestine and the American People. But Screw Israel and their cronies that hijacked our government)

  20. After the elections, all this (manufactured) political outrage is going to settle down. Wait and see. The republicans should be on the side of law and order on this issue, but they will probably tilt toward business. Their mindset will probably be that obeying laws are part of the moral fiber and foundation of the country, and if you borrowed the money you should have to pay it back. That’s probably how the banks are going to siren this song to the repubs, who will not see this entire mess in context. Unfortunate.

    The dems are a total fraud and will whore out to the highest bidder.

    Would most folks here object if the loans were marked to market, and repayment was based on that new loan value? And accompanying that would be stiff prison terms for the banksters and their accomplices, and no more bank bailouts, i.e., the banks would have to suffer their own losses, and then the banks and the investors could slug this out in court amongst themselves for the next 10-15 years.

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