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Mortgage lenders on hot seat again

Relief checks to injured homeowners bounce, while banks are accused of continuing abusive foreclosure practices.

By Marilyn Lewis Apr 19, 2013 1:16AM

This post comes from MSN Money contributor Marilyn Lewis.

 

Image: Phoenix © Mark Downey / Lucid Images/Radius Images/Getty Images

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:

 

108Comments
Apr 19, 2013 6:42PM
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Mortgage Bankers are still Bankers, just like Wall Street Bankers they are crooks and thieves who prey on people for their greedy gains.
Apr 22, 2013 8:26AM
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Dirty, rotten, carpetbagging, bankers and politicians have absolutely ruined this country. 
Apr 19, 2013 9:46PM
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You people act like they want to fix this. This was done by design.
Apr 19, 2013 10:25PM
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Don't fall for the Reverse Mortgage scam, once you give up you deed of trust you no longer own your home and more stuff like this and how can you buy back that deed of trust, you can't and that is the scam.
Apr 19, 2013 2:59PM
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I'm a QUALIFIED LENDER not a crooked banker. How about mass-terminating bankers so we can get down to recovering America instead of bailing out coke-heads?
Apr 20, 2013 1:46AM
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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. 

Apr 22, 2013 8:36AM
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When my grandchildren go to bed, they check under the bed to see if a banker is hiding there.
Apr 22, 2013 9:47AM
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My brother fell on hard times when the economy tanked, and fell behind on his mortgage.  Attempts to get assistance through the supposed government programs failed miserably, and foreclosure was begun.  He subsequently recovered, attempted to work with the bank, to no avail, as they repeatedly "lost" various documents.  He began making his payments, but was unable to bring his loan current, so they refused his payments, and sent them back.  They're taking his home.  My belief is that his 60k loan balance, versus his 175k appraisal, has a lot to do with it.  The bank takes his home, sells it for even 50% of appraisal, and they win, win, win.  As always.  I'm sure his circumstance isn't unique, but that doesn't make it "normal".  I for one will do all I can to avoid ever giving Bank One a single dime of my money.
Apr 19, 2013 2:53PM
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Let's get a few things straight... paper and button pressing zombies who never made a native decision, stood by their loan, collected or serviced it are NOT lenders. Bankers are NOT lenders. REAL lenders build portfolios that are good until settled and keep generating consistent quality, not unit productivity. The current load of crap Ben Bernanke has carelessly bought back for several years now will bite us for decades to come. Credit doesn't belong in banks nor should bankers ever touch it. When history looks back on 20th Century banks, they will know the worst ethics, lowest character and biggest morons that ever existed. You tell ME, America... how is it that every QUALIFIED EXPERIENCED TRAINED ABLE AND CAPABLE LENDER in our country is unemployed or struggled from blockaded employment, but every bank has so many "lenders" that they aren't hiring? Time to ready some cells at GITMO and get the crap out of banks and the credit back in the hands of REAL lenders.
Apr 22, 2013 9:43AM
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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.

Apr 22, 2013 9:04AM
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America once was agrarian, fueled often by slave labor. Then she turned industrial and T. Roosevelt had to conduct war against the TRUSTS that were hell-bent to take everything and leave the people nothing, then we went into the Military Industrial age (still there) and the nearly-expired-now information age while we exported industry for the sake of the bottom line profits of a very very few. Now we have a small percentage of people who own a hyper-percentage of wealth and we don't have a T. Roosevelt to big stick the bastards back to some sort of workability. So this trend will vacillate between profit-producing war-whooping and gerrymandered political gamesmanship until social breakdown produces too much domestic blood for even the most grizzled banker to stomach. Welcome to the American version of "free enterprise". 
Apr 22, 2013 10:32AM
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how is this happening in america?i am one of the home owners who received this notification.How is this not criminal?Is the govt.going to keep letting these banks buy themselves out of trouble whe they are committing crimes against regular folks?its time to  start prosecuting people so that this injustice can stop.These banks are strumming their noses at the American legal system.
Apr 19, 2013 2:57PM
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Hey President Obama... maybe you should stop giving important jobs to the highest donator to your campaign and put someone IN CHARGE WITH IMMUNITY that can and would FIX our credit crisis? You've got everybody's cell number... why not reach out to us ordinary dumpster diver survivors and employ the competent for once?
Apr 22, 2013 10:02AM
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Why is the Federal Reserve saying the problem has been fixed instead of the banks?  Could it be because the Fed is the one who negotiated thie loophole ridden agreements that allow for the abuses to continiue?  Has the Fed become just a mortgage industry mouth piece after buying all those mortgage backed securities?
Apr 22, 2013 8:12AM
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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.

Apr 22, 2013 9:31AM
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Had a loan with Aurora Loans.  When I lost my job they refused to work with me to take lower payments until I could get back on my feet.  Had my house sold 3 times as a short sale but they refused to return calls to my realtor.  I believe they railroaded me into foreclosure.  I will never see a check because they are not one of the big banks.  Never get a loan with anyone who starts every letter and phone interaction with the words "We are a debt collector......"
Apr 20, 2013 12:16AM
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I am with you V_L. Thank goodness this president cannot run but two terms. I agree Bush had a lot to do with what is happening now but the decisions  Obama has made thus far is scary. Obama could do something about people's home problems if he would pump up his balls. Oh I forgot,he is just a pawn in a game of business.
Apr 22, 2013 6:42AM
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I never even got a check yet from Wells Fargo, just like they would not work with me on my mortgage, now they do not want to send me a check.
Apr 20, 2013 2:20PM
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I lost about $25k in equity, and the check I received is little more than a down payment on 
justice. 

See http://www.desolationpress.com/essays/indreview.html  for an average story of loss.

The checks will help America to learn a new legal term: disgorgement. A few of the less evolved 
will go on about the free handout, and how they should have stopped making their payments so they could live off the hard working, too. No one who has lost their job, and all of their equity will 
spew such vitriol. We are too busy trying to avoid that fast slide down to the lower classes. 

Once it becomes obvious the Fed won't really tickle their throats, it will be up to the more active 
citizens to put the banks on a diet. It appears the days of "supervisory information" are numbered. For a taste of what comes next, see:

http://www.desolationpress.com/essays/supervisoryinfo.html 
Apr 22, 2013 12:53PM
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I tried for years to get modified but the bank just didn't want to work with me I finally lost it in 2012 I called every representive in the state of pa couldn't get even a call back I don't trust anyone now
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