Servicer-Driven Foreclosures: The Perfect Crime?

As much as I’ve seen a lot of financial services industry misconduct at close range, sometimes even a cynic like me is not prepared for how bad things can be. And mortgage abuse is turning out to be one of those areas.

I’ve been in contact for over the last six months with attorneys involved in foreclosure defense. Unlike the foreclosure mills, which seem to coin money, the attorneys on this front are either laboring pro bono or making considerably less than they could in other lines of work. They also can back up their views with depositions and trial transcripts.

One thing they stress is that a significant number of their clients facing foreclosure has made every single mortgage payment. . Read that again.

Now how can that be? How can that square with the banks’ assertion that in every instance, their foreclosures were warranted, that the borrower was hopelessly behind?

It’s actually very simple. It’s called servicing errors and fraud. And whether by mistake or design, when a borrower gets caught in the servicer hall of mirrors of compounding fees and charges, there is no way to appeal and pretty much no way out.

Let’s look at how this begins. A payment is credited as being late. It might actually legitimately be late, the borrower might have neglected to send it in on time. Or the bank might have been slow to process it. That might be simple queuing meets bad controls, or it might be deliberate. Servicers have been found to delay posting checks to incur late fees. Unless the borrower incurs the cost of sending mail via a service that provides proof of time of delivery, the bank can always claim the payment arrived late.

Let’s say the late fee is $75. It will be charged against the next month’s payment. But the borrower doesn’t know that he owes more that month. He gets a mortgage coupon and sends his regular payment in.

Now the servicer starts playing the sort of tricks practiced elsewhere in retail banking. Under the terms of the loan and Federal law, monthy payments are to be applied to principal and interest first, fees second. But the bank applies it to fees first. This makes his second month come up short. He gets charged a fee for insufficiency, and perhaps a late fee too.

Once the borrower has had two late fees, the servicer is often required by the pooling and servicing agreement to get a broker price opinion (BPO). This is a typically $250 exercise in form in which a broker drives by, takes a couple of pictures of the house, and offers a guesstimate of what it might be worth.

Many servicers double dip and also charge the BPO to the borrower as well. So the fees and arrerage charges and interest charges are compounding at a faster rate now.

It takes a remarkably short amount of time for pyramiding fees to add up to a few thousand dollars, unbeknownst to the borrower, until he gets a call from the servicer, or worse, a foreclosure notice.

This is where it gets even better. Even when the borrower hires an attorney, it is remarkably difficult to get the servicer to disgorge its records showing the borrower payment history and its fees and charges. I’ve also been told by attorneys that the reports are difficult to decipher and reconcile with the borrower’s records of payments that have cleared his account. So unless the attorney is tenacious, or has been down this path before, he may not realize that the borrower isn’t nuts when he says he was late only once, maybe twice at most, and doesn’t understand how they bank is now foreclosing.

In the first part of the Senate Banking Committee hearings on mortgage modifications and foreclosure, Diane Thompson of the Consumer Law Center and Professor Adam Levitin forcefully disputed the banks’ claim that all foreclosures were warranted. Each pointed to servicer driven foreclosures as well as consumers being instructed by their serivcer to become delinquent so as to qualify for a mod program, being led to believe they would qualify (and even encouraged to use the money saved to pay down other debt), then either foreclosed upon while the mod was under consideration, or denied the mod and foreclosed upon. And to add insult to injury, homeowners who are denied “permanent” mods are not only charged the difference between their reduced payments and their regular amount due, but they are charged late fees, which per our example above, compound in nasty ways.

Thompson, who defends borrowers herself, estimates that servicer-driven foreclosures represented about 50% of the cases she handled. The attorneys I have been dealing with put the estimate even higher, for the simple reason that servicer errors also led to refis that failed.

Remember how this pattern would have worked pre-bust. Borrower finds out from servicer that he is, for reasons he cannot fathom and cannot get the servicer to explain, $4000 behind on his mortgage. He can’t swing that now, and if he only pays part of the overdue amount down, it will quickly compound back up to a big bad number. So sooner or later, his only way out is a refi.

I had always assumed cash-out refis (where the borrower took out a mortgage on a refi that was bigger than his previous mortgages) were to pay down credit card debt, invest in home upgrades, or fund consumption. But at least a portion of those refis were to pay off the mortgage to prevent a foreclosure due to an inabilty to make up for a major arrearage. And some of those were servicer induced.

This pattern of servicer abuse is far from new. I hope readers will watch the second installment of the Senate Banking Committe hearings on the mortgage mess (the Senators were quite entertaining in their first go on this topic), this Wednesday at 9:30 AM. One of the witnesses, Kurt Eggert, law professor at the Chapman University School of Law, must feel like a Cassandra. He was writing about subpime origination fraud in 2002, and in a 2007 article, “Limiting Abuse and Opportunism by Mortgage Servicers,” goes through a sad and familiar litany of servicer misconduct: attempting to foreclose when borrowers were current (!), not giving borrowers time to get current, charging late fees when payments were made on time, improper force-placed insurance, and chicanery with escrow funds. As Eggert pointed out:

Late fees on timely payments are common when consumers are making payments through a ankruptcy plan. Moreover, some servicers have added false fees and charges not authorized by law or contract to their monthly payment demands, relying on borrower ignorance of the exact amout owed…Some servicers may add a fee by conducting unnecessary property inspections, having an agent drive by even when the borrower is not in default, or conducting multiple inspections during a single period of default to charge the resulting multiple fees….

Moreover, servicers can frustrate any attempts to sort out which fees are genuine. On McCormack v. Federal Home Loan Mortgage Corp., when the borrower challenged Chase Manhattan Corporation’s insistence on collecting disallowed attorneys’ fees and mortgage payments that had been cured in a bankrutpcy, the servicer subjected the borrower to what the court called “a barrage of totally meaningless and in fact misleading printouts” that was “”truly egregious and outrageous conduct”. The servicer repeatedly promised to correct its errors, but did not do so.

Servicer bad conduct is a long-standing problem, but in a rising housing market, no one much cared if the banks were effectively stripping borrower equity to pad their profits. And perhaps even worse, many people are still inclined to trust banks when they trot out their party line. Recall the bunk their representatives offered with touching shows of concern in the pre-Thanksgiving Senate and House hearing on the mortgage mess: their policies are pro-consumer, they don’t make money on foreclosures (!), any problems are “mistakes” and they of course correct them as soon as they become aware of them. The over-decade long record of persistent servicer abuses shows this spin to be pure fabrication. The sooner the media and the public learn to assume banks are liars until they offer solid evidence to the contrary, the better off we will all be.

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  1. F. Beard

    The sooner the media and the public learn to assume banks are liars until they offer solid evidence to the contrary, the better off we will all be. Yves

    The lies originate in this one: “Your deposit is available on demand even though we lent it out”.

    This shrinking pie business is nasty but fascinating in a morbid way.

    Thanks for all the work you do, Yves. The truth will set us free, hopefully.

    1. sneelock

      Aside from the criminality, this is more evidence of why bankers love checking, even though compared to direct debit, checking is an absurd run-around. It looks inefficient, costly, old-fashioned, and the industry makes money on it, or more precisely on bounced check fees and the time-lag that is usually seen as a give-away to the consumer. There are more than enough homeowners who don’t think of using registered mail for something like a mortgage payment, let alone know that something like registered mail exists.

  2. john

    Do you know if this rot falls within the “Consumer Protection” remit of the “reforms”, or has Wall Street managed to have this money/theft machine shrouded beneath tarps at the Fed or SEC ( who have, interestingly, begun to notice criminal behavior lately)?

    I notice the Times and the FT dancing around the edges of the investigative work you do, what do you suppose it will take for this kind of massive criminality to become news? It seems to be so common that it may no longer pass the “man bites dog” test: “banks rob clients” appears to be a mundane truism.

  3. Lurker

    In case one of your readers, or contacts of theirs needs to know this, one way to create a legal right to cure these kinds of arrears is through a confirmed Chapter 13 bankruptcy plan.

  4. toshiro_mifune

    I’m going to ask a question that may be foolish. It’s noticeable that many, if not most of the servicers have large IB arms (JPM, Deutsche, BAC, etc). What are the IB’s swaps positions in relationship to the MBS the servicing arms are servicing?** That is; has the IB arm taken insurance out on a particular pool of mortgages that the servicing arm is now going to guarantee have a ‘credit event’? I ask only in light of the shenanigans that went on with the Magnetar deals.

    ** Again this may be a silly question, but it’s one that has bothered me for a bit now.

  5. sonya

    This is so true (even though I did not have to pay as I hold the note I continued under advice of counsel) The term is called a manufactored default. I have NEVER missed nor EVER have I been Late!I was charged late fees, attorney fees, breach of contract,advances,property inspections and property preservation(the inspections is where the come out and take pictures to make sure someone is still living)Now the Property preservation is where they secure the property,cut grass,board up windows , doors,etc. I was charged many times for this in the last 8 years.I have always lived here and I assure you they have never secured my property. They also forced place insurance that was paid up for a year at closing for double the price and they paid taxes twice as it was paid in closing. Many times through the years they have paid insurance and taxes late and charged me.

  6. constantnormal

    @john — I don’t know if this falls within the purview of the Consumer Protection legislation, but that seems to be irrelevant, as the next Congress is likely to dismantle it.

    However, the RICO statutes would seem to be a veritable Swiss army knife for prosecutors, and I expect this to draw the attention of the state attorneys-general’s task force.

    If this doesn’t qualify as “organized crime”, I don’t know what would. However, I am handicapped in my ability to assess that, as IANAL, and am in possession of an operational ethical capacity.

  7. Angie

    Yesterday … I initiated a discussion with my county’s records and attorney about sending a formal request to our Attorney General along the lines of the MA County. More specifically I asked that we request our Attorney General subpoena the number of times a property’s note has changed hands per MERS.

    I told them that MERS contracts were supposed to follow a strict path from MERS’ hands into a final trust that is represented by an actual piece paper referred to as a CDO. This path typically had one or more intermediary entities that briefly held the paper. The county is due filing/recording fees, penalties for not filing/recording and interest for each step of the MERS securitization process.

    It’s actually pretty hard for a local official to ignore an opportunity to bring in cold hard cash and get good press at the same time.

    I don’t suppose you’d help me supply my county with background information on the issue and how some are suggesting this be approached. My County Attorney has zero experience with MERS and the whole securitization process. He hadn’t heard of MERS before I brought it to his attention.

    Then … quite frankly it’s time for others to approach their county officials, too.

    1. attempter

      I don’t suppose you’d help me supply my county with background information on the issue and how some are suggesting this be approached. My County Attorney has zero experience with MERS and the whole securitization process. He hadn’t heard of MERS before I brought it to his attention.

      You mean Yves should complie a list of 5-6 posts of the many she’s written and call them collectively, “Recommended Primer for County Attorneys” or something like that?

      That’s a good idea.

      I’ve been thinking about how to distill all of this into a c. 60 minute presentation which would be suitable for community centers. The goal would be to introduce it all to an audience new to it, who might have heard rumors of something wrong with mortgages, but really don’t understand what it’s about.

      1. Angie

        Yes … exactly.

        If the figure of roughly 60% of Mortgages were/are MERS is correct then there are a lot of recording fees due. The title on these properties is in question until the chain is firmly re-established.

  8. Tom Stone

    Yves, I know of quite a few of these cases of servicer caused foreclosure including two involving local Real Estate Brokers. As far as the cost of a BPO, the standard Fee in my part of California is $50 ( I am doing one this morning).

    1. Yves Smith Post author

      It’s higher in other states, the $250 is a real number. But fair to make clear that it can be considerably cheaper.

  9. Cian

    They’re phasing checks out in Europe. Even in the UK, which has a fairly antiquated consumer banking system compared to Germany/Netherlands, nobody much uses them anymore. They’re pretty expensive to process (allegedly), and so fully computerized systems are used instead.

    So typically your mortgage is paid via an automated payment system, where you give the bank the right to take the monthly mortgage payment out each month. The system is regulated (if they take too much out, or the wrong amount out, they have to repair the financial damage), and obviously if you’re late due to their incompetence its their problem. There’s a similar thing in place for consumer bills generally. The only way you can end up in arrears is if you deliberately stop the payment, or you don’t have enough to cover it in your bank account. Its not perfect, but it works pretty well in practice.

    Is there nothing like this in existence in the US? It sounds like our banking system in the 80s (and did I mention the UK is a laggard here). I mean seriously, checks?

    1. pineywoodsfats

      Yes, my mortgage was entirely paid through automatic debit. I pay all my other bills online as well. I only have maybe a half dozen checks around the house–and use maybe 1 every 3 months or so.

    2. Karen

      Payment by Automatic withdrawls did not stop Wells Fargo from charging a late fee to my mortgage every month. Servicers do not send out monthly statements, so I did not know it was happening for months. This happened to me in 2003, so I was able to refinance to get away from them.

      There is little to no enforcement of any laws against corporations, and they have become completely brazen. When the government actually does something, the small fines are less than the huge profits made from fraud, and no one is criminally charged.

      1. Hans Wermhatt

        I had automatic withdrawals as well. I even had it set up to pay an extra $75 or so in principal every month. When they inexplicably raised my escrow contribution (despite the fact that property taxes went DOWN), my monthly payment was suddenly not enough, and of course it wasn’t adjusted. Because the payments were automated, I did not catch this until it was too late, and my payment was considered late, and I was reported to the credit agencies for a “missed payment”.

        IT GETS WORSE. The bank demanded that I pay the ENTIRE AMOUNT OWED and did not credit ANY of my payment towards my account. So I had paid, lets say, $1600 when I owed $1620. I had underpaid. They said I had to pay THE ENTIRE $1620 to come current, EVEN THOUGH I was only $20 short. I had to borrow $1600 from a family member just to resolve it, at which point they credited back the “underpayment”. I spent hours screaming at call center agents in India to no avail, until I eventually gave up and borrowed the money to make it go away.

        That was a year ago. When they transferred me to yet another servicer several months ago and I would’ve had to set everything up again (including the automatic payments), I had had enough. I stopped paying. The house will eventually go into foreclosure and I will leave when the sheriff shows up. I am fine with this, as I am 25% underwater and the value continues to decline. The 100% 30-year fixed home loan is the only thing I’ve ever used credit for, and it’s the last thing I ever will.

  10. CS Laftery

    One question – WHY would a bank foreclose on somebody who is current? What do they stand to gain by selling a foreclosed house at a price that would likely be lower than they loaned against it? Doesn’t that create a capital loss as well as a loss of a stream of payments?

    I don’t like banks more than anybody else but there is something about this that doesn’t pass the smell test.

    1. DownSouth

      CS Laftery,

      Most residential housing loans in the U.S. have been securitized. The servicer doesn’t own the loans, so could care less about either 1) the homeowner, or 2) the investor who currently owns the loan.

      Servicers make money by trumping up frivilous charges. As Yves states above, they charge inflated fees for their services and in some cases they double dip, charging both the homeowner and the owner of the mortgage for the same service. That is they get paid twice.

      As Yves points out, in the servicing process and in the foreclosure proceeding itself there are ample opportunites for the servicers to run up these exorbitant and totally uncalled for charges. There is no other word for this other than theft. But because the banks own the President, congress, courts and regulators lock, stock and barrel, it is all “legal.”

      If the homeowner cannot be coerced to pay these, then upon selling the house susequent to the foreclosure the servicer can charge these back to the current owner of the loan. The owner of the loan receives the amount received from the sale minus the cumulative charges run up by the servicer. In other words payday for the servicer in this case is ahcieved by foreclosing.

      The servicer has no economic incentive to be fair either with the homeowner or with the owner of the loan. And the laws that should be in place to regulate these sort of practices have fallen victim to legislation or non-enforcement by a President, judges and regulators that are completely in the pockets of the bankers.

      1. JMT

        CS Laftery,
        As noted above the servicers are operating on a 3rd party basis with “no skin in the game”.

        The real motivation is spelled MSR – “Mortgage Servicing Rights”. Initially sold by the lender, the right to service a package of mortgages for profit is bid upon, and often bought, sold and traded by servicers without further agreement or consideration from the lender.

        There are actually software applications whose purpose is to help servicers evaluate the value of the MSR’s fee potential based on the characteristics of the loans and borrowers.

        Think about that for a moment: why would one servicer pay another a higher price/lower yield for the MSR unless they believed they can squeeze more revenue from it than the previous lender? Why would a servicer sell the MSR to another unless it was being offered a higher price than is implied by the yield they currently enjoy?

        There are only two plausible scenarios – either the servicer is betting on an “improvement” in fee generating borrower behavior outside their control, OR has a strategy for inducing such behavior. You decide which is the more likely…

  11. sonya

    Guess what i just looked at my statements from the servicer business records and there it is BPO,$100.00 charged to me. I have 3 inspections fees charged in 1month and 4 attorneys fees in a month’s time.

  12. LeeAnne

    In the land of Goebbel’s/Frank Luntz corporate financed propaganda tactics, C-Span is a propaganda opportunity for the fraud gangsters. There is no rule of law to inhibit them.

    They lie. They and the congresspeople questioning them. The lie can and will be taken out of context, media stenographers will print whichever is in their own interest to support, and those with limited time (most of us) to attend C-Span events can at best take away an impression too thin to argue for one way or the other.

    Thank you, Yves for watching them and parsing them. If you didn’t watch, I would have to.

  13. AR

    From my notes of the last few minutes of the 11/16/10 Senate Banking Committee hearing, an exchange between BoA’s Desoer and Dodd, just before gaveling the hearing to a close:

    Dodd: 30% FC sales bought w/cash. DeSoer: 30% of all home sales are purchased w/cash — for the past several months.
    Dodd: Investment properties?
    DeSoer: Yes, bought by investors. Shift to rentals. Cash investors are swooping in, in certain communities.

    Could this point to the possibility of forcing defaults by zipcode where quick sales to investors are assured, to bring in cash? Pre-selection by zipcode?

    Also, as the economy and housing prices decline, it’s better to force defaults and foreclose sooner rather than later, if the banks hope to have any chance to recoup losses in foreclosure sales.

    And then there’s the question of CDS: are certain MBS pools being manipulated in order to cash in on CDS?

    Yves, you alluded to manipulation of MBS in your 10/8/10 post about John Paulson:

    CDS figured big in the AIG bailout. We’ve not heard much about them since. Do you have anything new on what’s happening with CDS as the cascade of defaults washes through the MBS pools?

  14. AR

    Alternatively, the banks know that most of the loans of the era will default. Their process is software-driven, and does not take into account those who can afford their loans, who are being intentionally forced into foreclosure.

    If this was planned, then default/foreclosure software (from LPS) would be designed to produce exactly what Yves describes. This is designed to strip the investors’ equity. That’s where the real money is: the investors and the CDS.

    MERS and LPS were planned platforms/black boxes for carrying out what Yves describes.

  15. AnastasiaBeaverhausen

    This story is so sickening. Who do we rabble turn to for help because my Tea Party mother-in-law says the free markets will sort this fraud out. You know, like how the free markets reigned in the banks usury abuses. Or how the free markets stopped outsourcing jobs. Or how the free market stopped itself from polluting the environment.


  16. AR

    John Paulson & Co., Inc. granted $15M seed money in fall 2007 to the Center for Responsible Lending to found the Institute for Foreclosure Legal Assistance, to be managed by the National Association of Community Advocates. The mission statement says: “The majority of the funds will be grants to support direct legal assistance to borrowers in 10 or more states to fight foreclosure, predatory lenders and abusive loan servicers. It will do this primarily by providing money to top non-profit legal-aid groups and law school clinics.”

    IFLA has four board members, one of whom is Michael Waldorf.

    Here’s an article about Michael Waldorf warning the SEC about ‘manipulation of bonds backed by subprime mortgages’:

    Hedge Funds Ask SEC to Look for Subprime Manipulation

    June 13, 2007 (Bloomberg) — A group of hedge funds is telling the U.S. Securities and Exchange Commission to be on the lookout for manipulation of bonds backed by subprime mortgages.

    Paulson & Co., based in New York, told the SEC that investment banks may pay inflated prices to buy bad loans that are collateral for bonds, said Michael Waldorf, a senior vice president at the hedge fund. Removing delinquent loans may prevent bonds from defaulting and triggering losses in the banks’ investments in derivatives, he said. Waldorf declined to name the other hedge funds that also warned the SEC.

    “We hope you will clarify the application of the anti-manipulation provisions of the federal securities laws to credit default swaps in order to assure market participants that no one will be allowed to engage in manipulative practices,” according to a copy of a letter sent to the SEC and Bloomberg News. Waldorf confirmed the contents of the May 14 letter sent to Erik Sirri, director of the SEC’s division of market regulation.

    Bondholders stand to lose as much as $75 billion on securities made of mortgages to people with poor or limited credit histories because of a rise in defaults, Newport Beach, California-based Pacific Investment Management Co. estimated in April. Delinquencies and defaults on subprime loans in bonds are the highest since 1997, Arlington, Virginia-based Friedman Billings Ramsey Group Inc. says.

    More than $800 billion of bonds are backed by subprime mortgages….

    Paulson was also lobbying for cramdown legislation.

  17. Stop Paying

    I’m shocked – people are actually “making every single payment on time” on their upside down properties?

  18. Fannie Helps the Homeless

    When will the discussion turn back to underwriting standards?
    When will Fannie Mae executives see jail time?
    When will the creators of the bubble face their foreclosures? This is fucked – the parallels to Palestinian Apartheid are here and now in the USA.

    “The wealthy want just what bankers want: the entire economic surplus (followed by a foreclosure on property). They want all the disposable income over and above basic subsistence – and then, when this shrinks the economy, they want the government to sell off the public domain in “privatization” giveaways, and they want people to turn over their houses and any other property they have to the creditors. “Your money or your life” is not only what bank robbers demand. It is what banks themselves demand, and the wealthy 10 per cent of the population that owns most of the bank stock.
    And of course, the wealthy classes want to free themselves from the share of taxes that they have not already shed. The flat-tax ploy is their godsend.

  19. sonya

    The Federal Trade commission Fined EMC 28 Million, Didn’t do anygood. The FTC told them to stop these practices sent me a great big ole check for 45 dollars, I did not cash that and called the FTC to “explain a few things”. EMC continued and is still continuing there Shady transactions.

  20. Doug Terpstra

    An NYT editorial “The Fed and Foreclosures” exposes the Fed pushing to change the Truth in Lending Act of 1968 to end borrower recourse against banks for fraud.

    For any remaining “free” market cult monks out there who still think the “Fed” operates in the public interest, this shows it no longer has or needs even a fig leaf of cover for its predations. It is nothing but a criminal racket that operates with impunity solely for its syndicate banks, and any pretense of a public interest charter is purely optional—only flock management “guidelines”.

    Remember Elizabeth Warren? Obama effectively muzzled and/or co-opted her and sidetracked, while the Consumer F Protection Agency, in Orwellian fashion, is housed in the “Fed” fox den itself. They should simply call it the “Ministry of Consumer Protection”.

    We are surely nearing the terminal stage of parasitic, Darwinian cannibalism, where unregulated, unfettered greed finally devolves into a predator feeding frenzy. As prey is overhunted and the commons severely overgrazed, this unsustainable econosystem must collapse as the sharks begin consuming each other. That can’t be far off as servicer and foreclosure fraud now bleeds the investor class and the banks themselves.

    One day we will turn our swords into plowshares and the lion will lie down with the lamb, but it’s going to get uglier in the near term.

  21. Hugh

    “The sooner the media and the public learn to assume banks are liars until they offer solid evidence to the contrary, the better off we will all be”

    It’s not lying. It’s fraud. It’s kleptocracy. And if you are uncomfortable with that term, then how about racketeering. Fraud falls under RICO, and these companies and those who run them should be RICO’ed back to the Stone Age.

    1. alex

      Ooh, I did lots of these in school. The correct description is:

      a. fraud
      b. kleptocracy
      c. racketeering
      d. all of the above

      I pick ‘d’.

  22. Paul Tioxon

    There is also the force placed insurance. Many homeowners decide on the ease and wise budgeting of monthly escrow payments for the T&I of PITI(principal and interest, taxes and insurance). If the insurance company does not directly contact the servicer or the servicer falls down on the job and does not assume this responsibility or you do not forward insurance renewal notices, you will be insured with a type of policy known as the force placement policy. This can be 10 times the cost of a typical homeowners policy. Your monthly payments that you thought were on time go to to pay, in arrears, the extortionately priced force placed policy. Until that policy is paid in full, the monthly payments will not be considered paid in full, on time. You will almost certainly find yourself getting default notices within 90 days of this scam initiating.

    Then there is the we changed the policy or the terms of accepting escrow and just kept the money and did not pay taxes or insurance but just credit your account, without interest of course. See force placed insurance policy in this scenario for what happens next. This can happen with perfectly standard 30 yr fixed rate, brand name servicers, even in the 1990’s.


    The character of a nation seems to vary in direct proportion to the size of its largest banks.
    Same trick reworked again and again. This is merely a scale up version of “choose and sort” strategy for selecting debit card items by size and time to allow bank to purposefully allow customer to be placed in an overdrawn condition and therefore subject to fees and penalties. Even the least aware of regulators would have seen this conduct as a breach of fiduciary responsibility by the offending bank. Only now is this abuse even being considered as inappropriate.

  24. Cog

    Banks are much more profit seeking, than malicious. So, how could this be widespread if a bank is better off by not foreclosing on otherwise performing debtors? Sure, they are “innovating” for fee revenue, but the tone of this article seems to suggest foreclosure is a win for the bank. It certainly would not be in negative equity situations.

    Maybe we’ll have to wait for the next Wikileaks to see…

    1. DownSouth

      Again, you operate in a fact-free universe.

      So let me say this again. The majority of loans on residential property in the United States have been securitized. That means the servicer is not the owner of the loan.

      1. Karmakin

        Yeah what’s being said here is that to a degree the banks are being screwed here too. Although my guess is that the banks are heavily invested in these companies so they’re really just pushing money around.

        The people making off like bandits here are the executives of these servicing companies. And to be honest I suspect that if you look at banking executives, they’re probably invested with these servicing companies as well.

        Modern business is not run for the enrichment of shareholders. It’s run for the enrichment of executives.

  25. Brian Kessler

    Simple solution to erroneous fees:

    Pass a law that any bank or organization that is shown to charge an erroneous fee to a client, whether accidentally or maliciously, automatically voids all current debt from that client.

    See how carefully things get proofread afterwards!

  26. Post Forward Distribute

    New York Deletante:

    The wealthy want just what bankers want: the entire economic surplus (followed by a foreclosure on property). They want all the disposable income over and above basic subsistence – and then, when this shrinks the economy, they want the government to sell off the public domain in “privatization” giveaways, and they want people to turn over their houses and any other property they have to the creditors. “Your money or your life” is not only what bank robbers demand. It is what banks themselves demand, and the wealthy 10 per cent of the population that owns most of the bank stock.
    And of course, the wealthy classes want to free themselves from the share of taxes that they have not already shed. The flat-tax ploy is their godsend.

  27. mark

    Your getting hot. Start focusing on the double and triple billing by the servicers and foreclosure mill firms, the phony invoicing for ghost services, and the fraudulent amounts the investors get hit up for. In a predatory lending criminal enterprise, more is stolen on the servicing end then is stolen on the origination end.

    1. Jim

      I’m with you here Mark. Foreclosure is expensive for all parties involved. Attorneys and courts need to be paid for the months of work involved as well as pay for the BPOs & property inspections related to the foreclosure. Why wouldn’t the investor complain about it first? I’m sure the vast majority of these people don’t pay them anyway (because they afford it).


      The more accounts in foreclosure looks bad on the investor who request constant status updates on their money (Who is paying, who is not) from the servicer. The more accounts in foreclosure the worse the servicer looks in the eyes of the investor. This leads to fewer loans the investor will give to the servicer in the end. That’s what smells.

  28. c.

    Two solutions:

    Get a large percentage of people to go down to the county recorder’s office and look up their mortgage servicer of record.

    1. Send payment to the mortgage holder/servicer of record at the county records office

    2. Send it by certified/registered mail with return receipt requested.

    If a million home owners decided to do that as of Jan. 2011 you’d see the system straighten itself right up.


  29. Leland Somers

    One thing that we all have to remember is that all of the large banking operations in this country are little more than giant criminal conspiracies involved in scamming not just homeowners and credit card users but make a considerable amount of profit from laundering money for drug cartels here in the Americas and around the world. The best solution is to dissolve private banking the way we dissolved the big business of piracy on the high seas – you figure it out. Then whatever “banking” needs to be done can be done by institutions, local, state and national owned and operated by the people with boards elected by popular ballot. O yes. And the penalty for drug money laundering should be death – after all they freely engage in a criminal conspiracy that kills millions of people every year.

  30. Vincent

    I’ve a stupid question (observer from France) :

    What’s the interest for the bank to bankrupt clean borrowers ?

    Is it related to CDS issues ? (if the pool of loans fails, the servicer can get a CDS on it) ? Or is there stg else ? I can’t figure out why banks could be better off bankrupting people than getting regular payements during the whole loan’s duration.

    1. Dave of Maryland

      This post made me completely paranoid, and Vincent has a very good question. What’s the point of forcing people out of the legit economy into the underground economy? What presence can national banks possibly have in the near-barter black market world? Aside from laundry?

      1. Doug Terpstra

        Dave and Vincent,

        Read DownSouth’s response above about how divided predators’ interests have roiled the murky waters. To a large extent it’s now every predator for himself. These are thieves and there is little honor among them.

        Your questions are appropriate for any sane and thoughtful person. But for sociopaths or corporate “persons”, it is quite simple: love of money is an obsessive compulsion that displaces all other values; it truly is the root of evil. Profit and power-lust takes possession of unconscious people rendering them incapable of enlightened self-interest or basic human conscience. They will hunt their prey to extinction regardless of the future consequences or the extent of slaughter they inflict on the economy or on physical violence in real battlefields.

        Only when we stop them, the ecosystem collapses, and/or the generals are defeated completely can we hope to restore sanity, balance, and humanity to society. That time can’t be too far off.

      1. oldmanwi

        That is the greatest answer anyone could have come up with.
        Now how do we deal with this shit. Real simple. Stop paying all your bills. Don’t pay your mortgage, your rent, power bills, turn everything you have into cash and the lack of cash flow will kill them. Let them know they are dealing with human beings not just numbers. I do not understand how the people that work for the servicers can sleep at night. Must be fuck your brother week.

    2. AR

      Perhaps you’ve touched on the possibility that there’s an ulterior motive to loot before the US collapses. If the elite is looting collectively on such a grand scale, as seems to be the case, then they foresee no future, no continuing income stream from the US population.

      They should know. They are the ones that made the decision to send the jobs and factories to Asia.

      Here’s from p.572-3 of Mike Ruppert’s Crossing the Rubicon:

      It is my belief that sometime during the period between late 1998 and early 2000, as certain elites became aware of the pending calamity of Peak Oil, they looked at the first highly confidential exploration and drilling results from the Caspian Basin and shuddered. The economy had already been milked close to collapse, and the Caspian results could not be kept secret forever. The data woud surely come out, and what woud happen to the markets then” What if some of the major oil companies had been inflating Caspian numbers and hyping-up hopes of a bonanza in order to pump their stock value? What if all the inflated reserve estimates revealed themselves to be bogus all at once?

      A major economic collapse was imminent in the fall of 2001…..


      It was time for the major players to cash out, and that’s what some 20 giant corporations from Enron to WorldCom, to Merck, to Halliburton did, as those in the know pumped and dumped their stocks, sucking the wealth out of pension funds, small investors, and mutual funds from 2000 to 2002. For the most part only the smaller investors and funds were hurt. The people on top cashed out and moved “their” money elsewhere.

      Wall Street concocted the housing pump and dump. MERS was created in 1997, and was in full swing by 2000.

    3. CommonSense

      They don’t. This site is filled with a bunch of conspiracy nuts.

      Banks and other lenders love late fees and overlimit fees; they hate foreclosures. This is true in both the securitized and non-securitized worlds. The servicer may get a percentage of late fees, but the foreclosure process in the US is difficult and time-consuming, and it tends to yield poor results for the lender. Even the collections law firms would rather the borrower send payment after a quick demand–they get their cut and move on to the next case.

  31. S Brennan

    Greed is a communicable mental illness…similar to all substance abuse problems, the appetite once whetted is insatiable. Unlike drug users, those with greed additions have been able to legalize and de-stigmatize their disease. Our government now consists wholly of fellows with greed additions

    Let’s take a moment to thank those who funded the propaganda organs like Hoover Institute, Chicago University and others that mainstreamed this communicable mental illness.

  32. Barbara Ann Jackson

    Request for Congressional Foreclosure Panel to Examine Foreclosure Lawyers

    “Although increasing numbers of courts are continuing to reject improper and fraudulent foreclosures, the Congressional Foreclosure Panel examination of mortgage services and foreclosure practices did not include foreclosure lawyers.

    Lawyers are officers of the court; knowledge of applicable laws and civil procedure is not required from mortgage lenders. In states that require judicial foreclosures, lawyers are the ones who file lawsuits to seize and sell property; and lawyers are responsible for filing and recording foreclosure property deeds.

    An investigation could prove helpful to sorting out whether improper and illegal foreclosure proceedings are linked to any self-dealing conduct disadvantaging lenders, investors, homeowners, and city governments. . .”


  33. Karen

    I don’t understand how they can NOT TELL YOU you owe fees! Isn’t that illegal??!!

    Does anyone have specific examples of how this is done? Is there fine print in the original mortgage documents that says you have to go to their website and log in to see if there is additional money you owe besides what they bill you for? Or are the victims paying electronically by automatic deduction, and being careless about checking their statements?

    – ASIDE –
    Our mortgage was sold to a sleazy operator in the mid-1990s, and suddenly the Post Office appeared to be taking exactly the right length of time (1 week, next time 2 weeks!) to deliver the check so it was a day or two late!

    We put up with that exactly twice (yes we paid the late fees, which were almost certainly bogus), and then sent every payment certified mail return receipt requested. Magically the Post Office was back to taking 2-3 mailing days to deliver our checks. Funny, that, eh?
    – END OF ASIDE –

    The other thing I don’t understand is how they can buy force-placed insurance without first asking you for proof of insurance. Is that what’s been happening, or are people ignoring warning letters (perhaps not even opening them because they look like junk mail?)?

  34. Barbara Ann Jackson

    Request for Congressional Foreclosure Panel to Examine Foreclosure Lawyers

    Lawyers are officers of the court; knowledge of applicable laws and civil procedure is not required from mortgage lenders, nor loan servicers. In states that require judicial foreclosures, lawyers are the ones who file lawsuits to seize and sell property; and lawyers are responsible for filing and recording foreclosure property deeds.

    An investigation could prove helpful to sorting out whether improper and illegal foreclosure proceedings are linked to any self-dealing conduct disadvantaging lenders, investors, homeowners, and city governments. . .”

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