US Trustees Say Foreclosure Servicing Problems Much Worse Than Banks Claim

Today’s New York Times had another good article by Gretchen Morgenson, who has been covering the foreclosure crisis from the beginning.  She asks, “Why are these institutions [the servicers and TBTF banks] so afraid of a little sunlight?”

Yves Smith at Naked Capitalism talks about it here, with an excerpt here:

Note that this article provides support what this blog and foreclosure defense attorneys have said: that servicers are engaged in a significant amount of overbilling, via charing impermissible or inflated fees. And experts have pointed out that in addition to these junk fees and/or excessive fees, the servicers apply payments in a manner contrary to Federal law and the terms of the mortgage (to fees first rather than principal and interest first) which leads to fee pyramiding:

The other problematic area showing up in the trustees’ inquiries relates to what Mr. White calls improper default servicing fees. These include charges for legal work, property inspections, insurance and appraisals.

Often, the fees charged to troubled borrowers are not even specified. Trustee program officials found a defaulted borrower who was charged $10,260.50 in “prior service fees” with zero documentation. In another case, a borrower fell behind after the lender doubled his escrow payments with no explanation or justification. Then the bank filed a motion to lift the bankruptcy stay so that it could foreclose.

But it turns out I’ve been giving them too much credit. They also just make up the numbers:

In other cases, proofs of claim filed by servicers are just wildly off base. In one matter, a bank claimed to the court that a borrower owed $52,043. After the borrower objected and a trustee asked for documentation, the amount owed dropped to $3,156.

In other cases, proofs of claim filed by servicers are just wildly off base. In one matter, a bank claimed to the court that a borrower owed $52,043. After the borrower objected and a trustee asked for documentation, the amount owed dropped to $3,156.

I wonder about the timing. Have the phony consent decrees and the shambolic 50 state AG negotiations motivated the heretofore not very vocal director of the Trustee’s executive office, Clifford White, to speak up?

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One thought on “US Trustees Say Foreclosure Servicing Problems Much Worse Than Banks Claim

  1. After Quicken Loans originated by purchase loan in 2008, in mid 2009 I received an annual escrow statement from Chase (who had taken over servicing) demanding an additional $900 per month to “catch up” escrow for the next 12 months; then my monthly payment would increase by $300 for the remainder of the 30 year loan. Despite my calls and letters Chase never gave me any explanation; I advised them I would stop paying, and they illegally foreclosed and took my property.

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