Lawsuits for nation’s largest banks

Another lawsuit is in the works for the mortgage industry.  I had recently blogged about the Obama administration’s plans to create a Justice Department unit whose main goal and intent was to prevent mortgage fraud by bringing together investigators from across the country aimed at finding out what the causes of residential mortgage backed securities.  They want to know what led to it and how to continue to prevent it.  

Well, New York Attorney General Eric Schneiderman has taken it one step further by suing Bank of America, J.P. Morgan Chase, and Wells Fargo.  His lawsuit accuses the three big banks of deceit and fraud over their use of MERS, the Mortgage Electronic Registration Systems.

He has a few claims here.  (1) That the banks submitted court documents that appeared to provide authorization for foreclosures with false and misleading information. (2) The system stores inaccurate data.  (3) It prevents homeowners from being able to track property transfer information from public records.

Schneiderman said, “Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law.”

He’s claiming that over 70 million loans were affected and that the banks saved over $2 billion.  Of course, none of the banks had any comments in response to the lawsuit when it was filed Friday.  More information can be found in this USA Today article.

So the question is, will this affect the mortgage industry and homeowners in the long run?  If anything, I can see a possible settlement by the banks rather than fighting it in court.  It seems to be something that will continuously happen throughout the next few years, banks being sued because of inaccuracies that led to false foreclosures.  Do you see this as something that can drastically change how banks loan money to future homeowners?  To me, it seems like another check mark on a checklist but nothing that would change lending terms as a whole.  Please leave me your comments.  I’d love to hear from you!

In great reversal, Bank of America foreclosed upon

Now this is irony.  I read this article, and I just had to share it.  A homeowner has foreclosed on Bank of America.  Yes, that’s right.  They foreclosed on the bank, not the other way around.

So here’s what happened.  A couple in Naples, Florida bought a home with cash (no mortgage) in 2009.  In 2010, Bank of America began foreclosure proceedings against them.  This was Bank of America’s mistake, of course.  This couple, the Nyerges, hired an attorney to help defend them against this foreclosure, and then Bank of America realized their mistake and dropped it.

Well, it’s great that it’s been dropped, but the Nyerges are out $2,534 in legal fees.  So they’ve requested that Bank of America cover the cost multiple times over the phone and in writing.  They finally get a judge to order that Bank of America pay the fees.  When they still haven’t gotten their check after five months of more calls and letters, they obtained an order of foreclosure against the bank.

Their attorney “then reported to a local branch of the bank with sheriff’s deputies, who he instructed to remove cash from the tellers’ drawers, furniture, computers and other property.  Approximately one hour later, the Naples News reports, the bank manager produced a check for $5,772.88 to satisfy  fees and additional costs.”

 ”I talked to branch managers, I called anyone who would listen to me,” the couple told the Naples News. “And I wrote a certified letter to the president (of the bank). No response, nothing.”

Can you imagine what the bankers thought when they showed up to work that morning?  I think this is great.  The banks are so quick to foreclose on properties, yet when it comes to them paying a fee (a very small fee comparatively) for something they didn’t pay, it ends up that they can’t do it.   So I can only imagine how many foreclosures that are taking place behind the scenes are incorrect because of paperwork errors.  

Reading this article just puts a smile on my face.  I’m glad that it turned out for the best for everybody in this situation, but it’s fun to see the bank get a taste of its own medicine.

What do you think?  I’d love to hear your comments.  Please be sure to visit me online.


Are the banks involved in more short sale fraud?

I came across a very interesting article on CNBC’s Web site.  Writer Diana Olick was alerted that some big banks were taking bribes to get short sales closed.  The lenders were asking for cash “under the table” from buyers of short sales and/or their Realtors.

How it’s working is if there’s two loans on the property, the second lienholder has to drop the lien for the short sale to go through.  If they don’t, the house goes into foreclosure and it’s owned by the first lienholder.  If that happens, the second lienholder doesn’t get any money from the deal.  Some banks/lenders are negotiating with the second lienholders to drop the lien by offering them some partial payment.  This whole process is completely legal.

What’s not legal is that they are now requesting money under the table to drop that lien since they are generally getting nothing or very little from the first lienholder.  If you’ve bought a house before, you’re familiar with the HUD-1 statement or RESPA that you get at the end of closing that details what the buyer is paying in fees, what the seller is paying in fees, and who ends up with what.  Everything needs to be reported on the RESPA.  So the second lienholders are asking for money that doesn’t show up on the RESPA to allow the short sale to go through. 

Olick’s source said he’s heard from over 200 agents that have requested this illegal deal from representatives at Bank of America, JP Morgan Chase, and Citi Mortgage.  When confronted with these accusations, JP Morgan Chase had no comment.

 Bank of America said, “Bank of America enforces a policy that all disbursements are documented on the settlement statement for short sales. When we are servicing a first mortgage with a second lien held by another investor, if the second lien holder asks for off-HUD payments, we will not approve the transaction (if we have knowledge of it). It is also against Bank of America’s policy to accept off-HUD payments on its second liens.

Citi Mortgage said, “We work very hard to help distressed homeowners find solutions for their financial challenges. In our attempt to amicably resolve the debt, we will generally negotiate a reduced settlement with the homeowner in order to release a second lien. Unlike some lenders who refuse to reduce the payoffs on second liens, we choose to reduce the payoff amounts in some situations to assist the borrower. We do not provide instructions to settlement agents on how to fill out the settlement statement or any other closing documents, and we certainly do not require settlement agents or any other parties to violate applicable laws.”

Olick writes, “I contacted the Treasury Department, HUD, FINCEN (Financial Crimes Enforcement Network) and the Federal Trade Commission, and none of their representatives could tell me of any active investigation into this. The folks at HUD said they’d be very interested to see my story.

So now the lenders want bribes to get rid of homes?  They haven’t gotten in enough trouble by approving loans for borrowers that didn’t have the money to pay them in the past?  That’s how we got into this mess in the first place.  We’re stuck with all these short sales because the lenders got greedy.  This is going to create a whole slew of problems.  Realtors could lose their licenses over it.  Buyers could end up having to bring even more money to the table to close. 

What is the solution?  How can we prevent this from happening?  Is it something we should consider making legal?  Let me know your thoughts.  Leave me a comment or visit me online.