November 06, 2007
Check out the NYT story (front page!) on Katie Porter and her research into foreclosure fees.
Bankruptcy specialists say lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount a borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.
“Regulators need to look beyond their current, myopic focus on loan origination and consider how servicers’ calculation and collection practices leave families vulnerable to foreclosure,” said Katherine M. Porter, associate professor of law at the University of Iowa.
In an analysis of foreclosures in Chapter 13 bankruptcy, the program intended to help troubled borrowers save their homes, Ms. Porter found that questionable fees had been added to almost half of the loans she examined, and many of the charges were identified only vaguely. Most of the fees were less than $200 each, but collectively they could raise millions of dollars for loan servicers at a time when the other side of the business, mortgage origination, has faltered.
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1. Posted by Jim McArthur on November 6, 2007 @ 23:56 | Permalink
I have a company that does nothing but help homeowners in foreclosure. Over the last few years, the things I've seen would scare you. The servicers are operating so outside of the law its ridiculous. The false charges I see are scary. I have one party that is being chrged triple for force placed homeowners ins policies and charged two years policies in one year, February and October ( over &6K on a $200K House). How? He qualified at #2700.00 mo. gross income and the payment is now $2840.00 Wells Fargo and Washington Mutual are crooks.
2. Posted by Gordon Smith on November 7, 2007 @ 8:54 | Permalink
Katie was on Marketplace last night. Nice interview about her work. Look here.
3. Posted by Jake on November 8, 2007 @ 19:42 | Permalink
Prof. Porter observes:
"What I found is that bankrupcy, which we conceive of as a refuge for homeowners in trouble, is actually the locus of significant misbehavior by mortgage companies. Instead of helping people save their homes in bankruptcy, some lenders are actually abusing the bankruptcy process to harm consumers and threaten their chance to save their houses."
It is not clear the problem stems from predatory lenders. The bankruptcy courts are populated by many consumer bankruptcy lawyers who disserve their clients in Chapter 13 cases by taking an up front fee, then acquiescing to oppressive conduct by the lenders because putting up a fight costs more than the bankrupt borrower is ready to pay.
Bankruptcy courts ain't Nirvana, folks, and never will be.
