Homeowners Latest Grind: Foreclosure Mills

October 28th, 2010. By LucyC

It seems that the banks just can’t stay out of the news these days—for all the wrong reasons. In addition to claims that they charge excessive fees and suspect overdraft charges, several banks are now facing lawsuits filed by emboldened homeowners, presumably with nothing left to lose, over their foreclosure procedures. And it looks like the homeowners may just have grounds.

Case in point, Bank of America (BoFA) was hit with a class action lawsuit in New Jersey last week by homeowners who allege the lender disregarded foreclosure process rules. Earlier this month BoFA imposed a nationwide moratorium on foreclosures and the sale of foreclosed homes after a government agency told BoFA it was worried about documentation problems.

Documentation problems? Read on…

It seems the banks have been hiring so-called “robo signers” or “affidavit slaves”—employees who literally sign hundreds of foreclosure documents a day, according to the Wall Street Journal, without carefully reviewing their contents. The Washington Post recently ran a story on a man who has signed as many as 10,000 foreclosure documents in one month. And, the suit brought against BoFA cites a statement made by a bank official in a Massachusetts foreclosure case who admitted signing thousands of foreclosure complaints without reviewing them.

Keep in mind that these people’s signatures—robo signers’ signatures—act as witness to the accuracy of home foreclosure documents.

And, in case you’re wondering—this is not a small problem or uncommon practice, hence the reason for the temporary mortgage foreclosure moratorium. For context, and to quote the WSJ again, “As of August [2010] there were more than 4.4 million home loans that were either in the foreclosure process or 90 days past due,” according to their sources. And “Since 2006, about 6.4 million homes have been lost through the foreclosure process.” That’s a lot of homes, and even more paperwork—not to mention an awful lot of people who have been made homeless—and needlessly so in some cases, it may turn out.

Interestingly, BoFA wasn’t the only bank that halted foreclosure processes. JP Morgan Chase & Co and Ally Financial Inc. also agreed to take a closer look at their paperwork in 23 states where a court approval is required to foreclose on a home. JP Morgan alone reportedly suspended 56,000 foreclosures.

But the moratorium didn’t come out of any sense of good corporate citizenry or initiative to do the right thing, but rather because state attorney generals are investigating wrongdoings on legal paperwork needed to foreclose homes and other properties that may not live up to legal requirements.

That “wrongdoings on legal paperwork” also appears to involve small law firms that act as “Foreclosure Mills”—essentially running the paper work through without due process. Among the allegations made against BoFA in the lawsuit, cited in a recent article by Law.com, is the claim that lawyers called by judges, in this case in New Jersey, to foreclosure case management conferences frequently don’t show up. “Worse still, New Jersey’s judges don’t seem to be bothered by such behavior,” Lawrence Friscia, head of a law firm that counsels distressed homeowners told Law.com. “There’s a shocking deference given to Bank of America on the part of the judicial system.”

One of the plaintiffs in the BoFA case, Jose Grullon of Passaic, NJ, claims that his binding arbitration agreement ending his foreclosure was ignored by BoFA. And Tanya Beals, the named plaintiff in the BoFA suit, also of New Jersey, claims she was found in default by BoFA after she began making mortgage payments at a reduced rate which she had successfully negotiated with the bank.

The named defendants in the BoFA case are Bank of America and two subsidiaries, LaSalle Bank and BAC Home Loans Servicing, and they are accused of “an undisciplined rush to seize homes” through “pervasive and willful disregard of knowledge, facts and statutes.”

But BoFA is not the first bank to face these types of charges. Just a few weeks ago, SunTrust was hit with a class action lawsuit filed by a couple in Ohio who allege that after successfully negotiating mortgage restructuring under the United States Treasury’s Home Affordable Modification Program (“HAMP”) SunTrust then failed to follow through on the agreements, and wrongfully refused the permanent modifications and in some cases forced homeowners into defaults.

At the beginning of October, GMAC was also served with a potential class action over its foreclosure practices. This suit seeks to represent homeowners in Maine. “Depositions of GMAC employees revealed that they do not verify the truth of information necessary to give GMAC the right to foreclose when they sign these court documents and that these improper practices have been in place since at least 2004,” the suit claims.

While some pundits say the moratorium won’t change anything—it’s just delaying the inevitable, I would say that remains to be seen. BoFA reportedly holds one in five mortgages in the US. If even a fraction of those turn out to come under scrutiny, I would think it couldn’t help but have an impact. Most importantly, if you’re a homeowner, and any of the above sounds familiar—take action.

Tags: BAC Home Loans Servicing, Bank of America, Foreclosure, GMAC, HAMP, LaSalle Bank, SunTrust

This was posted on Thursday, October 28th, 2010 at 2:43 pm and is filed under Class Action, Consumer Fraud, Emerging Issues, Financial . Feel free to respond, or trackback. Read our comments policy.