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RE-POST: Misbehavior and Mistake in Bankruptcy Mortgage Claims – by Katherine M. Porter

RE-POST: Misbehavior and Mistake in Bankruptcy Mortgage Claims – by Katherine M. Porter


Originally posted on 9/12/2010

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 STOP FORECLOSURE FRAUDComments (0)

AP IMPACT: Caught by mistake in foreclosure web

AP IMPACT: Caught by mistake in foreclosure web


Christopher Marconi was in the shower when he heard a loud banging on his door. By the time he grabbed a towel and hustled to his front step, a U.S. marshal’s sedan was peeling out of his driveway. Nailed to Marconi’s front door was a foreclosure summons from Wells Fargo, naming him as a defendant. But the notice was for a house Marconi had never seen — on a mortgage he never had.

Tom Williams was in his kitchen thumbing through the mail when he opened a letter from GMAC. It informed him that the bank would confiscate his house unless he immediately paid off his mortgage balance of $276,000. But Williams had never missed a mortgage payment. And his loan wasn’t due to mature until 2032.

Warren Nyerges opened his front door to find a scraggly haired summons server standing on his stoop. He plopped a foreclosure notice from Bank of America in Nyerges’ hands. But Nyerges had paid for his house in cash. And he’d never had a checking account, much less a mortgage, with Bank of America.

By now, you may have heard the stories of bank robo-signers powering through hundreds of foreclosure affidavits a day without verifying a single fact. But most of those involved homeowners who had stopped paying their mortgage. They were genuine defaulters. Now a new species of homeowner is getting pushed into foreclosure hell.

People have always loved to complain about their banks. The push-button circus that passes for customer service. The larding on of fees. But the false foreclosure cases are hardly the usual complaints. These homeowners paid their mortgages — or loan modifications — on time. Some even paid off their loans. Worse, those on the receiving end of a bad foreclosure claim tell similar stories of getting bounced from one bank official to the next with no resolution while the foreclosure process continues apace.

Many have to resort to paying a lawyer, even after presenting documentation. They say they have to sue not only to stop the wrongful foreclosure but also to attempt to win back their costs.

There are no official statistics for these homeowners, but lawyers, real estate agents and consumer advocates say their ranks are growing. In November, during foreclosure hearings on Capitol Hill, senator after senator scolded the banks about wrongful foreclosures. They said their offices were deluged with complaints from people who had done everything right but were being treated by banks as if they had done everything wrong. And the Florida attorney general’s office is also investigating the issue as part of its foreclosure probe.

“This is the worst I’ve ever seen it,” says Ira Rheingold, an attorney and executive director of the National Association of Consumer Advocates. Diane Thompson, a lawyer with the National Consumer Law Center, has defended hundreds of foreclosure cases. “In virtually every case, I believe the homeowner was not in default when you looked at the surrounding facts. It is a widespread problem throughout the country.”

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



Posted in STOP FORECLOSURE FRAUDComments (3)

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, universityComments (1)

‘CAVEAT EMPTOR’ |Family buys WORTHLESS WELLS FARGO MORTGAGE at AUCTION

‘CAVEAT EMPTOR’ |Family buys WORTHLESS WELLS FARGO MORTGAGE at AUCTION


Boulder Creek family bought worthless second mortgage from Wells Fargo at foreclosure auction

Posted: 07/22/2010 01:30:01 AM PDT


 

… (A nearly $100,000 payment landed Hayley Strand, her fiance Bryan Janbay and her parents Randall and Roberta Strand a piece of paper, not the house they thought they’d purchased near Boulder Creek.)

BOULDER CREEK — Roberta and Randall Strand thought they were getting a great deal on a foreclosure and helping their daughter and future son-in-law become homeowners. Instead they are holding a worthless second mortgage.

The home they bought for just under $98,000 and fixed up for $25,000 is scheduled for a foreclosure auction this afternoon to satisfy a debt of more than $529,000.

They offered lender Wells Fargo $75,000, but it was to no avail.

Wells Fargo spokeswoman Michele Ashley issued a statement saying, “We believe the foreclosure auction of the property on which the Strand family bid was done correctly, and are confident the legal resolution to this matter will bear that out. Currently, Wells Fargo has presented the family with options that can help them through this matter.”

The Strands saw a newspaper notice last fall about the home, which is a mile from theirs, slated for a foreclosure auction. The unpaid debt was listed as $97,604.

Nestled under the redwoods on Cypress Trees Lane, the place needed work but their daughter, Hayley, 24, and her fiance, Bryan Janbay, 28, were willing to put in the effort.

Roberta looked up the property records. She saw there were two mortgages, a first and a second, recorded on the same date with the same lender. She figured the lender was auctioning the first and that the second mortgage would be wiped out.

“The price was right,” her husband said.

They took out a mortgage

on their own home to make their offer. At the auction on the steps of the county Governmental Center in November, they were the only bidders.The house had been stripped, and they spent $25,000 on improvements — windows, paint, carpet, lighting and appliances.

In January, before Hayley and Bryan could take out a mortgage to pay them back, a notice arrived from Wachovia Bank, saying the previous owners owed $529,259 on their loan.

Roberta thought it was a mistake.

“I tried speaking to someone at Wachovia, but no one would speak to me because my name was not on the loan,” she said.

She sent certified letters to Wachovia and didn’t hear back until April, when a foreclosure sale notice was posted on the property.

“Rather than foreclose on both loans at the same time, Wachovia chose to foreclose, market and sell the worthless junior lien, purporting it to be the real property, which is what we purchased,” she said.

The family sued Wells Fargo, which acquired Wachovia, and Cal-Western Reconveyance, which posted legal notices of the sale, claiming deceit, fraud and wrongful foreclosure. They want their money back.

The Strands’ attorney, Steve Vondran of Newport Beach, argued that “Wells Fargo and Cal-Western have set up a system that allows them to mutually profit off the sale of worthless second mortgages.”

Continue reading….santacruzsentinel.com

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



Posted in auction, foreclosure, foreclosure fraud, foreclosures, Mortgage Foreclosure Fraud, wells fargoComments (1)

Groves woman claims Bank Of America mistake led to foreclosure

Groves woman claims Bank Of America mistake led to foreclosure


Starting to sound like a broken record with these bank “mistakes”!

6/28/2010 12:55 PM By Kelly Holleran

A Groves woman has filed suit against a bank that she says failed to automatically withdraw mortgage payments from her account, causing her to face foreclosure and eviction.

Charlenee Renee Hardee claims she first learned of the foreclosure on her house when she received an eviction notice posted on her door.

According to the complaint filed June 17 in Jefferson County District Court, Hardee had set up automatic withdrawals with defendant Bank of America in December that were supposed to go toward paying off her mortgage.

However, she alleges Bank of America had not been withdrawing payments as scheduled, which Hardee claims she was unaware of until she received the eviction notice, the suit states.

“At that time, Plaintiff checked her bank statement and discovered that no payments had been taken out of her account and that there was sufficient balance to pay the deficiency,” the complaint says. “Plaintiff went to Defendant, Bank of America National Association, and attempted to bring the note current but Defendant, Bank of America National Association, declined to accept her payment because the house had already been sold in foreclosure.”

On April 10, Bank of America executed an appointment of a substitute trustee, who then held a truste’s sale on May 4 and conveyed the property to defendant Estatepro, Hardee claims.

However, before the sale, Estatepro failed to supply Hardee with the required 30-day notice of default or with the notice of foreclosure sale, although it asserts that the required notices were sent, according to the complaint.

It was not until after the sale that Hardee received the notice of eviction, the suit state.s

Hardee alleges breach of contract against Bank of America for its failure to automatically transfer payments from her account. She also claims Estatepro’s deed of the property constitutes an impermissible cloud on Hardee’s premises.

In her complaint, Hardee is asking the court to declare the foreclosure, sale of her property and deed invalid. She is also asking the court to enter an order declaring her to be the rightful owner of the property. She is seeking actual damages, judgment for breach of contract, attorney’s fees, costs and other relief the court deems just.

Bruce Gregory of the Gregory Law Firm in Port Neches will be representing her.

The case has been assigned to Judge Donald Floyd, 172nd District Court.

Jefferson County District Court case number: E187-098.

Source: SeTexasRecord.com

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



Posted in bank of america, Eviction, foreclosure fraud, mistakeComments (0)


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