This far into the mortgage and foreclosure crisis, and after all of the abuses by banks and servicers have been in the spotlight, sloppy and fraudulent foreclosures should not still be happening. But they are. The National Association of Consumer Advocates (NACA), National Consumer Law Center (NCLC), and the National Association of Consumer Bankruptcy Attorneys (NACBA) released a survey of consumer lawyers conducted this month, [pdf] finding that big financial institutions are still wrongfully foreclosing, "either while a homeowner is awaiting a loan modification or due to improper fees or payment processing." This is happening across all types of modification:
- Over 90% of the respondents report representing a homeowner placed in foreclosure while awaiting a loan modification in the last year.
- Homeowners were improperly foreclosed on while awaiting both HAMP and GSE loan modifications: of the survey respondents that represent homeowners placed in foreclosure while awaiting a loan modification in the last year, 85% represent homeowners awaiting a HAMP loan modification; 66% represent homeowners with a loan owned by Fannie Mae or Freddie Mac.
- Over 80% of the respondents represent homeowners where the actual foreclosure sale was attempted while awaiting a loan modification in the last year.
- In total, survey respondents reported representing over 3,700 homeowners placed in foreclosure while awaiting a loan modification in the last year.
These aren't deadbeat homeowners, or those so beleaguered and frustrated by their situation they just decide to walk away. These are people who are trying to do the responsible thing and keep their homes by pursuing a loan modification, a process which is supposed to keep them out of foreclosure. It's particularly infuriating that it's happening at the rate it is in the HAMP program, the federal program set up, with tax dollars, to give banks incentive to help underwater homeowners.
In addition, processing errors and action are leading to foreclosures. The survey found "a pattern of shoddy, abusive and illegal practices in the mortgage servicing industry, including force-placing of expensive homeowner’s insurance, wrongful application of payments, and inflated or baseless charging of property inspection and late fees." More than 80 percent of the attorneys responding to the survey reported that represented a borrower who had fees improperly assessed on their home by banks while they were in foreclosure.
Agenda item number one for Eric Schneiderman's task force: Find out why in the hell is this still happening, and stop it.