Posts Tagged ‘Property rights’

Banks ‘foreclose’ on houses bought for cash

October 4, 2010

A man in Fort Lauderdale, Fla., bought a house for cash last December as an investment property.  In July, he was learned that the Bank of America had foreclosed on the house and sold it at auction.  He was astonished because he didn’t have any mortgage or any other relationship with the Bank of America.  But it was only after he contacted the South Florida Sun-Sentinel that he got anywhere in trying to get his house back.

His experience wasn’t unique.  A woman in central California bought a house for cash in 2001.  But the Bank of America in February sent her a notice of foreclosure, placed ads in the local newspaper and nailed a notice of foreclosure to her door.  She said she couldn’t get the bank to admit its mistake until KCRA of Sacramento took up her case.

There are other examples besides those two cases and other culprits besides the Bank of America, although it seems to be the worst offender.

And there are worse cases than this.  Banks foreclose on properties based on mistakes in the addresses.  Property-owners come home to find their furniture and personal property missing, their utilities cut off and their locks broken by “trash out” companies that have been sent to the wrong address.

Foreclosures on houses without mortgages are only the worst and most obvious of examples of a huge and increasing number of wrongful foreclosures.  It is the result of the bursting of the housing bubble, and banks trying to clear their books of bad debts.

I don’t suppose banks intentionally seize houses for which they have no legal claim.  It is just that mortgages are sold and resold so many times that the paperwork gets messed up, and the mortgage-holders can’t be bothered to hire enough people to check whether it’s right or not.

It’s in the nature of things that a large, bureaucratic organization such as a bank will make mistakes.  But in these cases, and many more, some of which are indicated in the links below, the banks show no interest in correcting mistakes – even in something so simple as foreclosing on the wrong property because of a clerical error in the address. Usually they only act when a reporter for a local newspaper or broadcaster investigates and threatens them with bad publicity, or when the property-owner successfully sues.

True, Bank of America recently announced that it will review foreclosure documents for correctness in cases pending in the 23 states where the courts must approve the documents.  GMAC Mortgage and JP Morgan Case have said they will amend paperwork where improperly done.  We’ll see whether this makes any difference in the affected states; homeowners in the other 27 states are out of luck.  Citi and Wells Fargo, the other two big mortgage processors, claim to have no problem with their process.

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