The Psychological Warfare of Loan Servicing



Trust your Loan Servicer at your own Peril.


By William Hudson


“Emotional violence is another kind of abuse … it’s not about words because an emotionally abusive person doesn’t always resort to using the verbal club, but rather the verbal untraceable poison.”   ~Augusten Burroughs

The banks commit felonious financial crimes against homeowners with impunity. But even more egregious and unconscionable than the theft of assets, is the theft of solitude, hope, and life quality. The banks decimate families and often eradicate a person’s belief in what is “just” and lawful.

Millions of American homeowners have arrived at the harsh reality that government, the judiciary and law enforcement are not to be trusted. The reality is that the banks are engaging in psychological warfare against the American homeowner- and no one is doing a thing to stop the bullying or psychological abuse.

Banks utilize the planned use of propaganda and other psychological operations to influence the opinions, emotions, attitudes, and behavior of homeowners, attorneys, the courts and policy makers. This practice is actually a breach of Article 10 of the European Convention on Human Rights, which reads, “Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers.”

The Foreclosure Machine is engaging in a deliberate strategy of emotional abuse towards desperate homeowners who are looking for an equitable solution (when most simply want an opportunity to meet the terms of their mortgage). The bank representatives may speak professionally, and even appear to be concerned, but their words are meant to deceive and may even kill. The stress created from corporate psychological abuse often culminates in health problems that may result in a silent death or even suicide. The banks do not play fair, and they will do whatever is necessary to take a home- including the destruction of a life if necessary.

The covert abuse used by banks is administered in barely detectable and cunning strategies that can, over time, cause a homeowner to doubt their own sanity. Called ‘gaslighting’ by psychologists, this process is implemented to cause the homeowner to doubt their own decisions and thoughts- and to keep them off-center. Because of the uniformity of this practice among servicers, there can be no doubt that employees were trained in this process.

The Gaslight Effect allows the loan servicer to define the reality and the rules, while the less powerful party is left vulnerable by relying on the abuser for information or validation. Many homes have been lost to a servicer who used this technique to exploit the vulnerabilities of a homeowner who has had financial problems, emotional upheaval, divorce, illness or job loss that resulted in the homeowner falling behind on their mortgage payments. The process is systematic, confuses the victim and by providing erroneous information ultimately results in the loss of a home. It is not a random practice but executed to target society’s most vulnerable.

For instance, back when banks were pushing loan modifications, the banks deliberately lost paperwork and provided contradictory information to ensure the customer would fall further behind on their mortgage. It was a uniform practice among all large servicers. The homeowner, despite having fax and mail receipts, would be told the information was never received- and often questioned their own memory of events. In our society, for hundreds of years, banking was built on the concept of “trust” and this in itself provided a false confidence that the banks would not engage in illegal acts.

There were other games the banks played to ensure they would get the foreclosure they so desperately wanted. One game was the game of “musical-chairs customer representative agent” where the homeowner was forced to start from the beginning and explain their complex situation to a new agent every time they called the bank. This was done so there was no solution continuity. Homeowners would speak to agents who provided conflicting information from each representative. Just when the homeowner thought a solution was at hand after hours on the phone, the phone call would be “accidentally” disconnected. This psychological tactic was well rehearsed, until when after years of this abuse, new rules assigned a homeowner a single point of contact.



A majority of homeowners we have spoken with at LivingLies, have reported methods of intimidation that often result in the homeowner wanting to walk away from the home.  These tactics include having people sit outside their homes in cars watching the house, bank employees peering inside their windows (many owners claim they have resorted to covering all windows), and even having realtors list the home while they are still in possession and living in the home.


There have been hundreds of reports of banks breaking into occupied homes, and when the homeowner reports the break-in to law enforcement, the homeowner is told the trespass is a civil matter.  The homeowner literally has no relief or protection from their loan servicer, except to sue.

The negative impact of foreclosure on emotional and physical health, as well as overall mental functioning is gradual and insidious. When the trauma of endless delays in resolution, unjust court tactics, financial burden and the feeling of having impending doom hanging over your head (sometimes for over a decade) becomes overwhelming- something has to give and it is typically either mental or physical functioning. Careers are impacted, the raising of children neglected, and other opportunities forsaken because the homeowner- armed with evidence the bank has no standing- still clings to the belief that the system is fair.



The homeowner has so much invested emotionally, financially, and in life sacrifices- there becomes a point of no return where the homeowner feels they must take the case the entire distance. To quit would be to admit yet another life failure. Therefore, many homeowners will hang on until they can no longer afford the costs (financially or emotionally).   The bank has the resources to outlast, outspend and often outmaneuver but it doesn’t mean a homeowner can’t prevail.  The key is to document every interaction or event that occurs over the course of negotiations, and to examine the Note, assignments, signature and balances that inevitably tell the truth about the lack of standing.

Back to the methodology employed by banks. The banks use the guise of customer service to create the appearance of assistance. Under this act the emotional abuse is passive, subtle, and covert. This strategy makes assigning blame to the bank more difficult because the bank is creating the illusion of service. “Oh go ahead and miss a few payments- we will add it back in when your modification papers are done, “ or they will say, “We can find a solution and you are a good candidate for our program.” Meanwhile, the bank has already filed to foreclose. “You can just ignore the foreclosure letters you are receiving- my notes say that your modification is waiting for final approval.” The unsuspecting homeowner is the wounded impala and the banking lion is simply toying with its prey while creating arrearages and servicing fees.

The homeowner senses that something isn’t right, but saddled with financial worries and the fear that foreclosure brings- they attempt to grasp onto anything that seems like hope. That is where homeowners can get into trouble. Desperate for a list of options or some type of solution- the homeowner, terrified and confronting a ticking clock, begin pursuing any type of remedy- instead of focusing on one that might actually work. The homeowner’s strategy becomes fragmented from the lies their servicer is telling them, the facts they see on paper, an inaccessible justice system, and a shady attorney looking for a high retainer.

Often an attorney, sensing the homeowner’s desperation, will agree to represent the homeowner when they have no knowledge of foreclosure or securitization. These attorneys are known to purchase pre-fabricated legal Motions off the internet to defend a case. The unsuspecting and naïve homeowner has no idea that their attorney is failing to properly defend their case since everything “looks” fine to a homeowner who is not familiar with law. The homeowner will lose their retainer, all payments made to date, and often the home and any equity in the property (down payment, improvements). In reality the homeowner is surrounded by vipers, opportunists, conmen and predators who will do anything to receive payment or the home.



Emotional abuse has an aim, and that is to control, belittle, isolate and shame people into subservience. It doesn’t take much skill when dealing with a vulnerable homeowner. This occurs gradually until the victim’s sense of self-worth, self-confidence, and own ideas and perceptions erode.

The banks or servicers are emotional abusers and operate under the guise that they are “helping”, “advising”, or “assisting”, and therefore fly under the radar when they are deliberately sabotaging any opportunity the homeowner has to save the home.

The bank will now attempt to extort information from the homeowner so that they know where to strike where you are vulnerable. Under the appearance of a loan modification or short sale, they will have you provide extensive personal financial information. Although they have no intention of providing assistance, this form provides your income, finances, assets, accounts and other information you might not share if you had any idea that is was being collected for nefarious purposes. Once this information is front of an agent, they can determine just how many payments at what amount you will be able to afford before you are forced into insolvency.

Because people are human and do not hide their emotions or vulnerability well, bank serving agents are able to detect blood in the water. My dealings over the years with service agents is that they treat homeowners like you are expendable, inferior, inadequate, or ignorant. Imbued with the power to engineer a default, some of them have God syndromes.



I remember a client who had less than three days before she lost her home to foreclosure. After hours on the phone she was able to speak to a senior manager who promised the homeowner she could reinstate her mortgage if she agreed to pay all late fees and arrearages. The homeowner readily agreed to accept over 50k in fees and arrearages (even if she felt they were erroneous). The manager promised to overnight the papers and they would arrive by noon the next day. The manager never had any intention of sending the documents, but it allowed the bank to consume two days where the home owner should have been pursuing other options. The empty promise was given to maximize the chance of foreclosure.
Another game the banks play is to act like they are right, while the homeowner has no valid objections or complaints. Homeowners report that they feel like they must “get permission” and beg and plead for information they have an absolute right to obtain. Bank servicers are predators and it is time that some type of legislation is passed to stop their abusive tactics. The State of California has had to intervene with legislation to protect widows and widowers who are falling prey to servicers who use a spouse’s death to engineer a default.
Although loan servicers typically will accept loan payments, if a homeowner is not on both the loan, the bank will utilize this legal gray area to refuse payment, thus causing fees and an arrearage to occur. When the surviving spouse attempts to make good on the payment they may still be prevented from doing so. The banks also has the power to deny any accommodation to assist the surviving spouse- especially if the see an area to exploit that might result in default. For example, often the widowed spouse who has temporarily lost their spouse’s income, or is waiting on life insurance proceeds will be denied a loan modification.
The problem is growing, advocates say, and the issue has caught the attention of federal regulators and state lawmakers. In just the first three months of this year, the Housing and Economic Rights Advocates, a statewide advocacy group in California, had handled 16 such cases. The California Reinvestment Coalition discovered that 44% of housing counselors said that servicers “always” or “almost always” declined to discuss loan modifications with widowed clients when they weren’t on the loan.


Last year the National Housing Resource Center gave servicers a poor rating for communication with widows, widowers and others in similar circumstances. The banks, again, have found a vulnerable client population in which to exploit by failing to provide accurate information or assistance to increase the possibility of default.
Widows and even the elderly are especially vulnerable to the predatory practices and emotional abuse by banks. With the rise of risky first and second mortgages — including many taken out by older Americans who previously avoided getting into new debt, reverse mortgages, and complex securitization schemes, servicers have created a new business model that is intent on foreclosure at all costs. In fact loan servicers no longer service- instead they provide a predatory disservice, provide pseudo-assistance, and target the most vulnerable homeowners.
Servicing companies often refuse a modification until the surviving spouse assumes the loan, which can’t happen until the owner is current on the mortgage — resulting in a catch-22. The spouse may then end up losing their life investment simply because the bank ensured there was no way to cure the default. Misinformation serves to compound the late fees and charges creating a dire situation for those who don’t have the resources (emotional or financial) to force the bank to comply with law.
The bank servicing industry is rotten to the core. It isn’t enough that they are taking a home they have no standing to foreclose upon- but to get the job done they resort to psychological warfare, target the nation’s most vulnerable homeowners, and play dirty tricks that should undermine all credibility within the financial industry. Homeowner beware- document EVERY conversation with the servicer, retain EVERY document they send you, and NEVER believe a word your servicer says. The Bank will do whatever is necessary, legal or illegal, to foreclose on your home-even if it requires resorting to mentally abusive tactics. Be prepared.  The power to service- is the power to destroy.




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EDITOR’S COMMENT: That the resolution was even necessary shows how much pressure the Banks are using to get out of the corner they painted themselves into. The stage is set for the real facts to come out and they will continue to come out in large quantities of information and data that will show that the Banks didn’t just make mistakes — they took the honored traditions of Banking and turned them on their head using the irrelevant past as a means to deceive investors, consumers, homeowners, taxpayers, legislators and law enforcement.

The key fact that I see coming out is going to be relative to the Tier 2 yield spread premium that the Banks booked as trading profits. When investors get the data, they will be able to prove that the Banks skimmed a large chunk of the money intended to be used for funding mortgages. The amount loaned by the investors will not match up with the amount loaned to borrowers. Add that to the long list of intentional acts of fabrication, fraud and deception and those Banks are extremely vulnerable not only to civil attack for damages and injunctive relief but for criminal behavior. Remember that over 800 people went to jail when the savings sand loan crisis was revealed in the 1908’s. So far, in this case there have only been a handful of people.

If the full accounting for all money in and out is completed, there will be no doubt what happened. Whether the investors will recoup the money stolen from them by the Banks is for another day. But one thing is certain — if there was money coming in the Banks kept most of it and didn’t report accurately to either the investor lenders nor the borrowers. It is a certainty in my opinion that the account balances of borrowers on every type of loan will be affected and shown to be misrepresented when the Banks sought to enforce the debt. The balances will be reduced, in some cases below zero and in many cases the undisclosed profits and compensation is due back to both the investors and the borrowers under different laws. The Banks have created a double liability situation for themselves and I have no compassion for their situation.

The Banks are using their formidable resources to create a vehicle for amnesty in which the settlement is small and the liability for criminal or civil wrongs is effectively cancelled. Tammy Baldwin is running for Senate from her Congressional seat. She is running against the Banks and for America. Anybody in Congress who opposes this resolution will be an easy target in this election cycle. Aligning with the Banks now is seen by most as aligning with the forces of evil. Any politician looking to win an election this season had better take note.

Tammy Baldwin To Introduce Resolution Opposing Immunity For Banks In Foreclosure Deal

First Posted: 11/3/11 09:00 AM ET Updated: 11/3/11 09:00 AM ET

Tammy Baldwin

Rep. Tammy Baldwin (D-Wis.)

WASHINGTON — Rep. Tammy Baldwin (D-Wis.) is set to introduce a resolution in Congress this week calling on the Obama administration and state attorneys general to ensure that any deal reached with the nation’s biggest banks on foreclosure abuses includes full investigations into what happened, awards proper compensation to victims and provides no immunity for potential wrongdoing.

U.S. Attorney General Eric Holder and the state AGs have been working with the nation’s five largest mortgage firms — Ally Financial, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo — to settle disputes over potentially illegal foreclosure practices, such as the so-called robo-signing of foreclosure documents.

Baldwin’s resolution states that any settlement should follow three guidelines: 1) Banks that engaged in fraudulent behavior “should not be granted criminal or civil immunity for potential wrongdoing related to illegal mortgage and foreclosure practices,” 2) the federal government and state AGs should “proceed with full investigations into claims of fraudulent behavior by mortgage servicers” and 3) any monetary sum paid by the banks should “appropriately compensate for, and accurately reflect, the extent of harm to all victims.”

“We have to do the best we can to make innocent victims whole. But secondly, especially in light of the taxpayer bailout of the biggest banks, we owe taxpayers a solemn effort to do everything we can do to uncover what went wrong and whether laws were broken,” Baldwin said in an interview with The Huffington Post. “Part of that is to make certain this won’t happen again. That, to me, is one of the most basic responsibilities we have.”

According to news reports of a possible settlement between the parties, banks would pay around $2025 billion in return for immunity from state lawsuits.

“While I can’t discuss the details of our negotiations, I will say that we are negotiating a limited — not a broad — civil liability release. We are discussing additional ways to help homeowners while still holding the banks accountable,” said Geoff Greenwood, spokesman for lead negotiator Iowa Attorney General Tom Miller.

Baldwin’s resolution follows a letter she wrote to Holder on Nov. 1, in which she argued that the low sum being discussed in settlement talks would be insufficient to help underwater homeowners. Twenty-four of her colleagues in the House of Representatives joined her on the letter.

“These underwater homeowners owe roughly $750 billion more than their homes are currently worth,” she wrote. “This $750 billion stands in contrast to reports of a $20 billion settlement with mortgage servicers. We are concerned that this $20 billion will provide little help to the estimated 14.6 million struggling homeowners who are underwater. Indeed, many of these families have been victims of outright fraud, and they deserve justice and just compensation.”

Obama administration officials, such as Housing and Urban Development Secretary Shaun Donovan and Treasury Secretary Timothy Geithner, have repeatedly said they would like to see a quick resolution to the mortgage probe.

When asked why there is such a push for a settlement amongst some of the members involved in the probe, Baldwin replied, “What I’ve read is that there’s an interest in resolving this prior to the next set of elections.”

But, she cautioned, such a strategy could backfire. “I do fear that a settlement that is just a tiny drop in the bucket, given all the devastation that’s occurred because of this, would have strong political ramifications,” she said.

The negotiations originally involved AGs from all 50 states, but a handful of them have pulled out due to concerns reflected in Baldwin’s resolution.

New York State Attorney General Eric Schneiderman (D) has been the leading voice pushing for a narrower deal, expressing concern that the proposed settlement would preclude state AGs from fully investigating and prosecuting banks found to have committed wrongdoing. In late August, he was kicked off of the 50-state task force after he refused to go along with the quick settlement the administration and his fellow state AGs were working out. Since then, several other state AGs have backed Schneiderman’s position.

Congress is not directly involved in the negotiations, but Baldwin said it was important for the administration and the state AGs to hear from the people’s representatives.

“I get a lot of constituents calling my office who are underwater in their mortgages, who are paid up but can’t refinance, can’t get lower interest rates. They’re struggling financially because of the economy,” said Baldwin. “Their calls aren’t even responded to by the big banks. They’ll call [my office] and say, ‘How am I supposed to talk about these federal programs that are out there for refinancing and help for homeowners who are underwater, if my bank won’t even call me back?'”

Baldwin is running for the U.S. Senate seat in Wisconsin being vacated by Sen. Herb Kohl (D) and currently has no Democratic primary challenger. The GOP field is more crowded: former governor Tommy Thompson, Wisconsin state Assembly Speaker Jeff Fitzgerald and former congressman Mark Neumann are all running.

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