Mortgage sharks

I cited some stories of wrongful foreclosures in an earlier post.  Here’s another.

NO ONE TOLD Deanna Walters she was about to lose her home. Not when her mortgage servicing company foreclosed on it, nor when it landed on the county auction block and sold to the highest bidder. She realized what was happening only when a man taped a note to the front door of her well-kept house in a leafy corner of Stockton, California, last January. “My son went out and took it down,” recalls the 43-year-old single mother of two, “and that’s when he told me it was a ‘three-day or quit’ notice.”

Walters’ discovery that her home had been sold out from under her marked the low point of a four-year fiasco that began when Ocwen Loan Servicing became her mortgage servicer in late 2004. Through no fault of her own, Ocwen incorrectly processed or lost dozens of Walters’ payments and charged her more than $2,000 in late fees and thousands more in additional charges—all without notifying her. The Florida-based company tried to foreclose on her three times. After she paid more than $10,000, Walters figured things were settled. But Ocwen had other ideas.

via Mother Jones.

The article goes on to describe how borrowers are at the mercy of mortgage service agencies, which are not subject to effective federal regulation.  In Walters’ case, Ocwen went ahead and sold her house anyhow.

Testifying before the Senate banking committee last July, Diane Thompson, an attorney with the National Consumer Law Center, explained that servicers have an incentive to “push” homeowners into late payments: “If the loan pays late, the servicer is more likely to profit than if the loan is brought and maintained current.” After Ocwen auctioned off Deanna Walters’ house, it collected more than $3,500 from 36 different buyers’ fees, in a single day. …

Deanna Walters has sued Ocwen, and a judge has allowed her to stay in her home, even as the winner of the foreclosure auction is trying to charge her rent. …  A self-described “spitfire,” she is left to do her own legwork—”every day, all day long”—to save her home. “If you could tell me who I need to speak to,” she says, “I would be in a van tonight headed to Washington to figure this out.”

via Mother Jones.

And here is one Wall Street response.

“The first thing that needs to happen, I think, is to get these people out of their homes,” a man wearing a bespoke blue-striped shirt, a Hermés tie patterned with elephants and Ferragamo loafers said recently. “Correct! I’ll explain,” the veteran member of a bank restructuring and advisory team said. …

via The New York Observer.

The article goes on to quote Wall Street bankers on the irresponsibility of homeowners who took out larger mortgages than they could afford to pay back.  Ken Bentsen, executive vice president of the Securities Industry and Financial Markets Association, a lobbying group, said he hadn’t heard of any wrongful foreclosures and didn’t think it is a problem.  A former member of the Goldman Sachs management committee said the real scandal is allowing people not current on their mortgage payments stay in their homes because of paperwork mistakes.

“The question to me is not do you foreclose or do you not foreclose. The question is when and with what philosophy you foreclose,” the man on the bank restructuring team said. “If you want to reduce the amount of leveraged homeowners you have, you need to ultimately kick them out of their homes.” A colleague walked up: His recommendation was to burn houses. It would lower the supply.

via The New York Observer.

Click on Banks ‘foreclose’ on houses bought for cash for my earlier post

Click on How the Banks Hid Bad Mortgages for more analysis.

Click on Time for Criminal Charges To Be Filed for more commentary.

Tags: Banks, Foreclosure crisis, Foreclosures, Wall Street, Wrongful foreclosures