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Misbehavior and Mistake in Bankruptcy Mortgage Claims

Misbehavior and Mistake in Bankruptcy Mortgage Claims

Katherine M. Porter
College of Law, University of Iowa

Abstract

The greatest fear of many families in serious financial trouble is that they will lose their homes. Bankruptcy offers a last chance for families save their houses by halting a foreclosure and by repaying any default on their mortgage loans over a period of years. Mortgage companies participate in bankruptcy by filing proofs of claims with the court for the amount of the mortgage debt. In turn, bankruptcy debtors pay these claims to retain their homes. This process is well established and, until now, uncontroversial. The assumption is that the protective elements of the federal bankruptcy shield vulnerable homeowners from harm.

This Article examines the actual behavior of mortgage companies in consumer bankruptcy cases. Using original data from 1700 recent Chapter 13 bankruptcy cases, I conclude that mortgage servicers frequently do not comply with bankruptcy law. A majority of mortgage claims are missing one or more of the required pieces of documentation for a bankruptcy claims. Fees and charges on claims often are poorly identified and do not appear to be reasonable. The bankruptcy data reinforce concerns about the overall reliability of the mortgage service industry to charge homeowners only the correct and legal amount of the debt and to comply with applicable consumer protection laws. Mistakes or misbehavior by mortgage servicers can have grave consequences. Bloated claims can jeopardize a family’s ability to save their home in bankruptcy. On a system level, mistakes or misbehavior by mortgage servicers undermine America’s homeownership policies for all families trying to buy a home.

The data also reinforce concerns about whether consumers can trust financial institutions to adhere to applicable laws. The findings are a chilling reminder of the limits of formal law to protect consumers. Imposing unambiguous legal rules does not ensure that a system will actually function to safeguard the rights of parties. Observing the reality that laws can under perform or even misfire has crucial implications for designing legal systems that produce acceptable and just behavior. *

[ipaper docId=37127499 access_key=key-1py1ywgn8bbgdaroowup height=600 width=600 /]

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in bankruptcy, deed of trust, Economy, foreclosure, foreclosures, investigation, mortgage, note, Real Estate, university1 Comment

Can’t add?… In FORECLOSURE? Yea …thought so!

Can’t add?… In FORECLOSURE? Yea …thought so!

What in the world does math have to do with foreclosures?? If you lost your job or simply cannot afford the payments chances are you found yourself in foreclosure. You see this took me what 2 seconds to figure out? The study was conducted on 340 people…a pin hole compared to a sink hole! Eh?

Study Says Math Deficiencies Increase Foreclosure Risk

By BOB TEDESCHI Published: June 9, 2010 NyTimes

IF you can’t divide 300 by 2, should you qualify for a loan?

That is one of the questions raised by a new study led by a Columbia University assistant business professor, Stephan Meier, who found that borrowers with poor math skills were three times more likely than others to go into foreclosure.

Mr. Meier conceded that the results were not shocking, but he said he had not expected the connection between math skills and mortgage default to be so pronounced.

About 340 borrowers in Connecticut, Massachusetts and Rhode Island who took out subprime loans in 2006 and 2007 were surveyed in 2008. None were in foreclosure.

The respondents were asked five questions, with the first requiring borrowers to divide 300 by 2, and the second to calculate 10 percent of 1,000. (Since the survey was conducted by telephone, the questioners did not know who was using a calculator.)

About 16 percent of the respondents answered at least one of the first two questions incorrectly. Mr. Meier said that the results were consistent among all levels of education and income.

Over all, 21 percent of the respondents whose math abilities placed them in the bottom quarter of the survey experienced foreclosure, versus 7 percent of those in the top quarter.

Mr. Meier said the fact that the borrowers in the sample had subprime loans — which in 2006 and 2007 were given even to those with dismal financial histories — did not lessen the significance of the findings. A larger survey in Britain, he said, found nearly the same levels of math illiteracy among those questioned about retirement savings.

Mr. Meier said the study had at least two implications for mortgage lenders. “Maybe start adding math tests to the process,” he said, “and screen them away.”

The other alternative, he said, would be working to help borrowers improve their financial literacy before they took out the loan.

“There are a lot of financial decisions you have to make as a homeowner,” he noted, “but some of the more difficult decisions have to do with how to rebudget if you’re hit by an income shock, which a lot of people had to do during the recession.”

Mortgage lenders, brokers and counselors mostly agree that it’s difficult to gauge a borrower’s math skills under the current mortgage-application system.

“A lot of payment numbers are discussed,” said Richard L. Tracy Jr., the chief executive of Campbell Mortgage in West Haven, Conn., “but by that time the computer programs have already done the math.”

Mr. Tracy said that although he believed financial literacy and math skills were important predictors of a borrower’s ability to pay, borrowers deficient in those respects would most likely also have weak credit scores.

Jacqui Atcheson, a senior loan officer with Prospect Mortgage of Sherman Oaks, Calif., said that she worked closely on budgeting possibilities with any borrower whose credit history was checkered. She added that she would not offer a loan to a borrower she found lacking in the mathematical or financial skills needed to pay it back, even if the borrower could qualify for a mortgage.

Eileen Anderson, a senior vice president of the Community Development Corporation of Long Island, a nonprofit housing organization, says her group counsels struggling borrowers through the foreclosure-avoidance process. “Many of them don’t understand how to do a budget — which is basic math, I guess,” she said.

Borrowers who receive prepurchase buyer education are less likely to end up in foreclosure than those who do not, she added.

“In our programs,” Ms. Anderson said, “we’re doing the math with them, not for them.”

And better-educated borrowers are not exempt, either.

“People say they’re doctors, so they don’t really need it,” she said. “So what? We see doctors who took out loans they didn’t understand, and who are in foreclosure now.”

© 2010-17 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in foreclosures, university0 Comments

§ 152. Concealment of assets; false oaths and claims; bribery

§ 152. Concealment of assets; false oaths and claims; bribery

 

 TITLE 18 > PART I > CHAPTER 9 > § 152
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http://www.law.cornell.edu/uscode/html/uscode18/usc_sec_18_00000152—-000-.html
 

§ 152. Concealment of assets; false oaths and claims; bribery

How Current is This?
A person who­
(1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States Trustee, any property belonging to the estate of a debtor;
(2) knowingly and fraudulently makes a false oath or account in or in relation to any case under title 11;
(3) knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, in or in relation to any case under title 11;
(4) knowingly and fraudulently presents any false claim for proof against the estate of a debtor, or uses any such claim in any case under title 11, in a personal capacity or as or through an agent, proxy, or attorney;
(5) knowingly and fraudulently receives any material amount of property from a debtor after the filing of a case under title 11, with intent to defeat the provisions of title 11;
(6) knowingly and fraudulently gives, offers, receives, or attempts to obtain any money or property, remuneration, compensation, reward, advantage, or promise thereof for acting or forbearing to act in any case under title 11;
(7) in a personal capacity or as an agent or officer of any person or corporation, in contemplation of a case under title 11 by or against the person or any other person or corporation, or with intent to defeat the provisions of title 11, knowingly and fraudulently transfers or conceals any of his property or the property of such other person or corporation;
(8) after the filing of a case under title 11 or in contemplation thereof, knowingly and fraudulently conceals, destroys, mutilates, falsifies, or makes a false entry in any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor; or
(9) after the filing of a case under title 11, knowingly and fraudulently withholds from a custodian, trustee, marshal, or other officer of the court or a United States Trustee entitled to its possession, any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor,

shall be fined under this title, imprisoned not more than 5 years, or both.

Posted in bankruptcy, case, concealment, conspiracy, corruption, foreclosure, foreclosure fraud, forensic mortgage investigation audit, Mortgage Foreclosure Fraud, securitization, university0 Comments

ISO Universities To Share Thoughts

ISO Universities To Share Thoughts

Stop Foreclosure Fraud would like to hear from you and post your thesis, articles, views related to our subject matters. Please contact us at StopForeclosureFraud@gmail.com. We look forward to hearing from you.

Here are excellent samples: 

HARVARD LAW AND ECONOMIC ISSUES IN SUBPRIME LITIGATION 2008

Michael Lewis’s ‘The Big Short’? Read the Harvard Thesis Instead! “The Story of the CDO Market Meltdown: An Empirical Analysis.”

Posted in foreclosure fraud, thesis, university0 Comments


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