Mortgage lenders on hot seat again
Relief checks to injured homeowners bounce, while banks are accused of continuing abusive foreclosure practices.
This post comes from MSN Money contributor Marilyn Lewis.
The nation's biggest banks just can't seem to put the nightmare of the housing meltdown behind them.
In an embarrassing incident this week, some long-awaited reparation checks to victims bounced, news outlets report.
More troubling, some banks are still starting foreclosures against borrowers while simultaneously working on modifying their mortgages, despite agreements to stop the abusive practice, a California consumer group charges.
The rubber check incident affected a dozen or more borrowers of the 1.4 million who are expecting compensation in this second big national bank settlement over abusive foreclosure practices. The problems reportedly have been fixed, according to the Federal Reserve, which led the negotiations with 13 mortgage servicers.
'Is this for real?'
"The episode is likely to further erode confidence in a program that has failed to deliver on almost every promise made by federal regulators," writes The Huffington Post.
The New York Times describes one recipient's dismay when his check bounced:
Ronnie Edward, whose home was sold in a foreclosure auction, waited three years for his $3,000 check. When it arrived on Tuesday, he raced to his local bank in Tennessee, only to learn that the funds "were not available."
Mr. Edward, 38, was taken aback. "Is this for real?" he asked.
According to the Times, the consulting company hired to distribute the money collected it from the banks but failed to put it in the account from which the victims' checks were issued.
The settlement program has been plagued with trouble. It began as an investigation into flawed foreclosure practices at the 13 bank companies. Called the Independent Foreclosure Review, the original plan, in 2011, is described by ProPublica: "If a borrower had suffered 'financial injury' (the emotional toll would not be considered), then the review would make it right. Compensation payments would range as high as $125,000."
But the investigation became so complicated (as described in this ProPublica article,) that the government substituted a negotiated penalty of around $3.3 billion, to be distributed to all the affected mortgage customers.
Payouts average $1,000 per customer, says The Huffington Post. "A small number of borrowers, mostly military personnel who were improperly foreclosed on, will receive checks for the maximum amount of $125,000," according to HuffPo. Recipients are 4.4 million homeowners who got a foreclosure notice in 2009 or 2010 from one of the servicers.
"Because the foreclosure review was shut down by regulators, it isn't clear in many cases how badly the borrowers were wronged, if at all," writes The Wall Street Journal.
The settlement also gave the banks credit for $8.5 billion worth of other efforts, like mortgage modifications, done to avoid foreclosures. About a dozen banks are involved.
More bad news
The first national foreclosure abuse settlement, between five major bank servicing companies and 49 state attorneys general plus federal agencies, also seems to be plagued with problems. That agreement, signed in February 2012, involved $25 billion in reparations along with agreements by the banks to change their foreclosure practices. The five banks are Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc.
A California consumer group now charges that, although the banks agreed to stop abusive mortgage practices, some are still at it, starting foreclosures against borrowers while simultaneously working on modifying their mortgages. Writes The Los Angeles Times:
The California Reinvestment Coalition, which lobbies for low-income Californians, said banks continue to pursue foreclosures against borrowers seeking loan modifications -- a practice they had sworn off -- and have been ineffective at providing well-informed employees to help troubled borrowers one-on-one.
The Charlotte Observer explains that ...
The rules spelled out in the settlement give banks the latitude in many cases to move toward a foreclosure sale even as they work with borrowers trying to save their homes.
Banks can send foreclosure notices and schedule court hearings and eviction dates -- all while a homeowner is filing paperwork for a loan modification.
Some practices have improved, the paper reports. Banks aren't allowed to actually sell a home while a mortgage modification is pending. And borrowers who get help shortly after they fall into delinquency are protected from foreclosure.
The Observer continues:
Both Bank of America and Wells Fargo say they are doing everything the settlement requires.
Executives at both banks say their mortgage servicers repeatedly try to reach out to delinquent borrowers before referring a loan to foreclosure.
The California advocacy group interviewed 84 housing counselors and lawyers for the survey on which it based its criticisms. The Los Angeles Times added that "John Mechem, a spokesman for the Mortgage Bankers Association, questioned the CRC survey's methodology and called it unreliable."
But Joseph A. Smith Jr., the government-appointed monitor for the settlement, told The Times:
"Unfortunately," Smith said in an email, "the survey's findings are consistent with much of what I've heard as I've traveled the nation in the past year talking with housing counselors and other professionals."
More from MSN Money:
Do nor EVER use Chase Mortgage Department to buy a house. You WILL be very very sorry you did.
Even if your FICO is well into the 800's and you have NO debt, and have always been on time with all your payments for 20 years. Just don't use Chase Mortgage. The bank side seems to be okay, but run fast as you can from the IDIOTS in the Mortgage side.
The banks have never had any incentive to modify peoples mortgages. foreclosure is far more profitable for them, seeing as the money that was lent out was not the banks money to begin with.
Te money came from the holders of the mortgage backed securities that collapsed in the housing crisis. Now when a bank resells a foreclosed home, the bank gets to keep 100% of the recovered money, because the bond holders bond is now worthless.. If this is not the biggest fraud in the history
of the world I don't know the meaning or the word.
We don't have best of the best elite. They are best of the best elite crooks. Change
all of them and let small person become best elite with experience.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
ABOUT SMART SPENDING
LATEST BLOG POSTS
If you worry about money after the streetlights come on, these actions may help you rest easier.
VIDEO ON MSN MONEY
BLOGS WE LIKE
MUST-SEE ON MSN
- Video: Easy DIY smoked meats at home
A charcuterie master shares his process for cold-smoking meat at home.
- Jetpacks about to go mainstream
- Weird things covered by home insurance
- Bing: 70 percent of adults report 'digital eye strain'