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Banks Unfairly Foreclosed On Homeowners

This past week saw several news agencies reporting that as a result of a review of mortgages, several big banks have uncovered hundreds of cases of improperly foreclosed loans.

Over 700 active military members lost their homes due to the improper handling of their delinquent loans. According to the Servicemembers Civil Relief Act, lenders cannot foreclose on the properties of active duty members without court approval, yet many military members on duty overseas were receiving news that they were losing their homes without the due process assured by the Act. Several thousand more had been overcharged on their loans.

Perhaps more frightening is the news that about 20 home owners who were never late and never missed payments still lost their homes, and also those who had reached agreements with their lenders for loan modifications but still lost their homes because the lenders didn’t honor those agreements.

For years, lenders have been giving assurances to regulators that, although their foreclosure procedures may have been flawed, they rarely seized the home of borrowers unjustly. These recent numbers indicate the problem is bigger than the lenders either knew, or admitted to.

The lenders are quick to point out that the number of unjust foreclosures is actually an incredibly small percentage of the total (two banks alone reviewed a total of about 2 million files), but is it really acceptable that they violated federal law and caused families the pain and anguish of unfairly losing their homes? Is it permissible to say “Oops, I’m sorry, I didn’t mean to take your home away from you but oh well, you are part of what I consider an acceptable risk” especially when that risk is the result of breaking a law? To make matters worse, insiders claim that the lenders recently renegotiated more lenient terms for the payment of a portion of their penalties. It’s rumored that now, instead of getting credit for the amount of assistance a lender gives a borrower, they will be getting credited for the entire amount of the mortgage. For example; a borrower owes $150,000 and is given a reduction of $20,000. Under the old terms, the lender would receive credit of $20,000 against its share of the nearly $6 billion assistance penalty. Now, however, they will receive the full $150,000. It doesn’t take a great deal of mathematical prowess to realize that the lenders walked away with a MAJOR concession if this is indeed the case.

Are we really surprised though? It’s ironic that the “bad guys” in this situation just seem to receive slaps on the wrist and then are rewarded with financial concessions. Ever since the entire mortgage crisis started, the lenders have been given incredible latitude by regulators (not to mention an awful lot of taxpayers’ dollars to bail out the results of their hasty, poor business practices) and despite the outcry of an enraged public, it looks like it’s just business as usual.

Here are links to just a few of the news stories:

http://dealbook.nytimes.com/2013/03/03/banks-find-more-wrongful-foreclosures-among-military-members/

http://realestate.msn.com/blogs/listed-loans.aspx?post=08d5ef57-7987-419d-b188-d9d8d13c9dbc

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