Foreclosure Fraud

Lenders Instigate Foreclosures

by Charging Outrageous Fees

By GRETCHEN MORGENSON
Published: November 6, 2007

 As record numbers of homeowners default on their mortgages, questionable
practices among lenders are coming to light in bankruptcy courts, leading
some legal specialists to contend that companies instigating foreclosures
may be taking advantage of imperiled borrowers.

Because there is little oversight of foreclosure practices and the fees that
are charged, bankruptcy specialists fear that some consumers may be losing
their homes unnecessarily or that mortgage servicers, who collect loan
payments, are profiting from foreclosures.

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.

³Regulators need to look beyond their current, myopic focus on loan
origination and consider how servicers¹ calculation and collection practices
leave families vulnerable to foreclosure,² 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.

In one example, Ms. Porter found that a lender had filed a claim stating
that the borrower owed more than $1 million. But after the loan history was
scrutinized, the balance turned out to be $60,000. And a judge in Louisiana
is considering an award for sanctions against Wells Fargo in a case in which
the bank assessed improper fees and charges that added more than $24,000 to
a borrower¹s loan.

The Foreclosure Fraud Alert Website http://www.foreclosurefraudalert.com/

The Foreclosure Fraud Alert Blog  http://www.foreclosurefraudalert.com/fraudblog

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