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Managers at major banks ignored widespread errors in the foreclosure process, in some cases instructing employees to adopt make-believe titles and speed documents through the system despite internal objections, according to a wide-ranging review by federal investigators.
The banks have largely focused the blame for mistakes on low-level employees, attributing many of the problems to the surge in the volume of foreclosures after the housing market collapsed and the economy weakened in 2008.
But the report concludes that managers were aware of the problems and did nothing to correct them.
New York Times reports that an audit of 400 home foreclosures in San Francisco, California revealed that 84% of the cases involved some kind of legal violation or suspicious documentation. Violations ranged from failing to notify borrowers they were in default or transferring of loans by unauthorized entities.
...an interesting if unsurprising article today, showing that expensive homes are less likely to be foreclosed on than cheaper homes.
...And if a rich person owes a bank somewhere north of a million dollars, the bank is likely to be quite aggressive in attempting to get all of the money it’s owed, rather than simply letting the borrower walk away from their house.
[I'm puzzled at the reference to "foreclosing" as "letting the borrower walk away", which sounds like magnanimity from the bank and freedom for the borrower; I expect that most people who are foreclosed upon do not find it a burden-free experience, and since the bank can be expected to resell the house, I don't think it can be called generous. Neither aggressive pursuit of repayment nor foreclosure are generous, but I don't blame banks for taking either option as long as they are not doing so fraudulently. -L]
...there is a problem here, and it’s not that people in expensive houses get to live rent-free for 792 days on average. Rather, it’s that people in normal-sized homes are treated unnecessarily badly by Fannie and Freddie.
...“mortgage servicers continue to initiate foreclosure proceedings improperly, either while a homeowner is awaiting a loan modification or due to improper fees or payment processing.” This is a key element of the servicing standards in the (as-yet unseen) foreclosure fraud settlement, but it was also part of the consent order last year from the Office of the Comptroller of the Currency. In other words, the banks are under an order to stop doing these types of things, and they have simply not complied. That’s the state of things heading into the settlement, when the banks will be asked to comply again.
...Servicers routinely place people in foreclosure while negotiating a loan modification, and they routinely apply illegal fees to homeowners, helping to drive them into default. And the government settled with these companies!
I’m trying to keep a running tally of the direct funds to states from the foreclosure fraud settlement that will get diverted to General Funds to fill budget holes. When we last left this story, Maine had decided to send $5.7 million to the general fund, joining Missouri’s $40 million and Wisconsin’s $26 million. ...
Like many states that are trying to both expedite judicial review of foreclosures and keep as many people in their homes as possible, New York has enacted new measures, like requiring that bank lawyers verify foreclosure paperwork and that all homeowners receive legal assistance. But a big problem keeps coming up that continues to cause delays — no one in the room actually has the authority to change a loan agreement.
Citigroup agreed yesterday to pay $158 million to settle a lawsuit over bad loans that the bank passed on to the Federal Housing Administration to insure. The whistle-blower who originally brought the case, Sherry Hunt, an employee of Citi's mortgage department, said the company actively undermined the process that was supposed to check for fraud in order to push through reckless loans and get higher profits.
The suit itself makes for good reading. We've pulled out the juiciest bits, and explain just what Citi appears to have been doing. ...
The housing crisis in the U.S. has now been going on nearly five years, with still regular revelations about misdeeds by banks and others. Here’s our round up of standout reporting on the crisis.
[Links stories from July 2009 to the present. -L]
Essentially, the settlement...provides a much broader release of liability to our too-big-to-fail banks than was noted in coverage on the matter late last week. ...
The issue here (at a minimum) is that MERS is arguably responsible for running a terrible database (from what we have been able to infer, it is lacking in normal protocols to assure the accuracy and integrity of information, such as audit trails) and in failing to devise procedures that were permissible in all the states in which it operated. That presumably constitutes negligence. In turn, the MERS members were arguably liable for taking impermissible actions, such as assigning mortgages when they did not own the note, or making assignments after foreclosures had been started. So they were also negligent. ...both parties are likely to argue that their indemnification isn’t operative due to the negligence (and also possibly bad faith) of the other party. Put more simply: even with the indemnification of MERS by MERS members, don’t expect it to be easy to pin liability on banks.
...this seems to call into question the claim that Schneiderman got a carve-out for his MERS suit ...
But even with all these caveats, it’s hard to read the executive summary, which no doubt was vetted by the bank, Administration and AG sides, as meaning other than what it intends to mean: that the banks have been released ...of the monstrous mess they made in their failure to convey notes as stipulated in their own contracts...
It's been nearly a half decade since the housing market imploded like an old stadium packed with explosives and the ground is still rumbling from the impact. Realizing it's better to recover some money now rather than trying to get all their cash back eventually, more banks are making it easier for homeowners to unload their houses for less than what is owed on the mortgage. ...
In the last two years, short sales have jumped from only 2% of U.S. residential transactions to 9%.
CBS Detroit says more than 6,000 homes were foreclosed due to unpaid taxes and didn't sell at auction. The county treasurer's office would rather see those homes with occupants than sitting abandoned, so they'll negotiate with anyone living inside, including former owners.
Last night was the deadline for the attorneys general of each state to sign onto a massive settlement with the nation's five largest mortgage lenders, and more than 40 of the states opted to join in the pot-sharing.
The settlement would reduce mortgages by about $20,000 for upward of 1 million homeowners and as many as 750,000 people who were foreclosed upon could see $2,000 settlement checks.
Among the few holdouts are two of the country's largest and most populous states, California and New York, as well as Nevada and Arizona, two of the states hit the hardest by the collapse of the housing market.
Last week, a number of important events occurred in Washington, including important recess appointments by President Obama. However, the most noteworthy event did not make front page news: the Federal Reserve's (apparently) unsolicited memo to the committees of Congress that oversee financial services warning of the dangers the current housing market poses for the economy.
This represents an extraordinary action and underscores both the seriousness of the continuing crisis and the absence of meaningful discussion of the problem in Washington. Bernanke's memo reviewed federal actions to date and effectively concluded that they were unlikely to solve this national tragedy.
The increasing political sophistication of the local squatters has convinced some fairly mainstream affordable-housing groups to lend a hand this time.
Harris, San Francisco's former District Attorney, has made mortgage fraud one of the hallmarks of first year in office -- launching a Mortgage Fraud Strike Force, prosecuting attorneys who scam troubled homeowners, and walking away from the table in national settlment talks with the nation's largest banks because she thought the demands of other states were too weak.
The Federal Housing Administration's cash reserves have fallen so low that there is a "close to 50%" chance the agency could run out of money and require a taxpayer bailout in the next year, according to the annual independent audit of the FHA's finances.
A loose-knit coalition of activists known as "Occupy Homes" is working to stave off pending evictions by occupying homes at risk of foreclosure when tenants enlist its support. The movement has recently enjoyed a number of successes. We speak with Monique White, a Minneapolis resident who is facing foreclosure and recently requested the help of Occupy Minneapolis. Now two dozen of its members are occupying her home in order to stave off eviction. We are also joined by Nick Espinosa, an organizer with Occupy Minneapolis, and Max Rameau, a key organizer with Take Back the Land, who for the past five years has worked on direct actions that reclaim and occupy homes at risk of foreclosure. "The banks are actually occupying our homes," Rameau says. "This sets up for an incredible movement, where we have a one-two punch. On the one hand, we’re occupying them on their turf, and on the other, we’re liberating our own turf so that human beings can have access to housing, rather than them sitting vacant so that corporations can benefit from them sometime in the future." [includes rush transcript]
Since September, Richmond has vowed to crack down on banks that have neglected to clean up foreclosed properties, which have become more of an issue since the housing crisis began in 2008. Neglected houses are not just eyesores; Richmond residents said they increased the risk of crime, squatters and fires.
Yet city officials are being frustrated in their search for the financial institutions or people who are responsible for many of the city’s foreclosed and preforeclosure properties. Determining whom to hold accountable often takes so long that properties continue to decay and create problems in neighborhoods. ...
Since 2008, when Richmond enacted an ordinance that fined banks $1,000 a day for foreclosed properties with code violations, the city has issued more than $1.8 million in fines to property owners of foreclosed houses. Yet only about $550,800 of that has been paid...
Announcing the settlement that October, Jerry Brown, then the California attorney general, called it “the biggest loan modification in American history.” He said it would provide $3.4 billion in relief to Countrywide borrowers in California who, like Peña, were sold creative financial products that ended up driving them into debt. But no loan-modification help ever reached Peña or many other troubled homeowners like him, a situation consumer advocates and legal experts said showed that the settlement had failed to deliver.
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