Foreclosures rates are dropping across the country and apparently billionaire Bill Erbey didn’t get the memo. According to a quarterly presentation, Erbey foreclosed on 1,022 houses last quarter through a company he is chairman of, Altisource Residential.
Erbey, chairman of mortgage servicer Ocwen, one of Altisource’s biggest clients, stands to win big from the foreclosures, according to the New York Post. The news appears to contradict a statement he said last week of Ocwen’s goals, “We work very hard to keep borrowers in their homes.” Ocwen is currently being accused of denying struggling borrowers the chance to fix loan problems and avoid foreclosures. A recent investigation by the New York’s Department of Financial Services found that Atlanta-based Ocwen Financial inappropriately backdated thousands of time-sensitive letters to mortgage borrowers and did not take action to fix the issue despite repeated notices of concern..
The Consumer Financial Protection Bureau (CFPB) issued a report Tuesday that alleges mortgage and student loan servicers are engaged in a bevy of illegal practices.
Bureau examiners found that some servicers charged unfair late fees and harassed consumers with debt collection calls. The CFPB also found that some mortgage servicers failed to provide critical consumer protections required by the new CFPB servicing rules that took effect earlier this year.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the CFPB has authority to supervise banks with over $10 billion in assets and certain nonbanks. Those nonbanks include mortgage companies, private student loan lenders and payday lenders, as well as nonbanks the Bureau defines through rulemaking as “larger participants.”
According to CFPB, the report aims to share information that industry participants can use to ensure their operations remain in compliance with federal consumer financial law. “All borrowers should be treated fairly by loan servicers, and through our supervision program, we intend to hold them accountable for how they treat borrowers,” said CFPB Director Richard Cordray.
Below are some of CFPB’s mortgage servicing findings from the report:
- Failed to oversee service providers: Institutions in contract with service providers failed to provide policies and procedures that oversee the providers. “When institutions do not oversee their activities, service providers that are unfamiliar with consumer financial protection laws can harm consumers,” the CFPB said.
- Unfairly delayed permanent loan modifications: Servicers delayed the loan modification process, causing “harm because they [borrowers] did not promptly receive the benefits of the terms of the permanent modification.”
- Deceived consumers about status of permanent loan modifications: Examiners found that “one or more servicers” did not execute certain permanent modification agreements after borrowers had signed them. Instead, the servicers sent borrowers updated agreements with different terms.
The CFPB said they alerted the accused companies to their concerns and outlined necessary remedial measures. The regulator did not name the firms allegedly involved in the illegal activity..
Using a legal tool known as a “deficiency judgment,” lenders can ensure that borrowers sold their home on a “short Sell” or lost their home to foreclosure are haunted by these zombie-like debts for years, and sometimes decades, to come.
But the housing crisis saddled lenders with more than $1 trillion of foreclosed loans, leading to unprecedented losses. Now, lenders want their money back, and they figure it’s the perfect time to pursue borrowers: many of those who went through foreclosure have gotten new jobs, paid off old debts and even, in some cases, bought new homes.
“Just because they don’t have the money to pay the entire mortgage, doesn’t mean they don’t have enough for a deficiency judgment,” said Florida lender foreclosure attorney Michael Wayslik.
‘Slapped to the floor’
In 2008, bank teller Danell Huthsing broke up with her boyfriend and moved out of the concrete bungalow they shared in Jacksonville, Florida. Her name was on the mortgage even after she moved out, and when her boyfriend defaulted on the loan, her name was on the foreclosure papers, too.
She moved to St. Louis, Missouri, where she managed to amass $20,000 of savings and restore her previously stellar credit score in her job as a service worker.
But on July 5, a process server showed up on her doorstep with a lawsuit demanding $91,000 for the portion of her mortgage that was still unpaid after the home was foreclosed and sold. If she loses, the debt collector that filed the suit can freeze her bank account, garnish up to 25 percent of her wages, and seize her paid-off 2005 Honda Accord.
“For seven years you think you’re good to go, that you’ve put this behind you,” said Huthsing, who cleared her savings out of the bank and stowed the money in a safe to protect it from getting
It appears as if Fannie Mae is doing just that. In Florida alone in the past year, for example, at least 10,000 lawsuits have been filed—representing hundreds of millions of dollars of payments, according to Jacksonville, Florida-based attorney Chip Parker.
In Lee County, Florida, for example, Dyck O’Neal only filed four foreclosure-related deficiency judgment cases last year. So far this year, it has filed 360 in the county, which has more than 650,000 residents and includes Ft. Myers. The insurer the Mortgage Guaranty Insurance Company has also filed about 1,000 cases this past year in Florida alone.
The FHFA declined to comment..
Bank of America routinely denied qualified borrowers a chance to modify their loans to more affordable terms and paid cash bonuses to bank staffers for pushing homeowners into foreclosure, according to affidavits filed last week in a Massachusetts lawsuit.
“We were told to lie to customers,” said Simone Gordon, who worked in the bank’s loss mitigation department until February 2012. “Site leaders regularly told us that the more we delayed the HAMP [loan] modification process, the more fees Bank of America would collect.”
In sworn testimony, six former employees describe what they saw behind the scenes of an often opaque process that has frustrated homeowners, their attorneys and housing counselors.
They describe systematic efforts to undermine the program by routinely denying loan modifications to qualified applicants, withholding reviews of completed applications, steering applicants to costlier “in-house” loans and paying bonuses to employees based on the number of new foreclosures they initiated.
The employees’ sworn testimony goes a long way to explain why the government’s Home Affordable Modification Program, launched in 2008 during the depths of the housing collapse, has fallen so far short of the original targets to save millions of Americans from being tossed
In their sworn testimony, the former Bank of America employees detail a series of specific company policies designed to provide as little foreclosure relief as possible.
“Based on what I observed, Bank of America was trying to prevent as many homeowners as possible from obtaining permanent HAMP loan modifications while leading the public and the government to believe that it was making efforts to comply with HAMP,” said Theresa Terrelonge, a Bank of America collector until June 2010. “It was well known among managers and many employees that the overriding goal was to extend as few HAMP loan modifications to homeowners as possible.”
The reason was fairly simple, according to William Wilson Jr., who worked as a manager in the company’s Charlotte, N.C., headquarters, where he supervised 13 mortgage representatives working on with customers seeking HAMP loan modifications.
After stonewalling qualified borrowers seeking an affordable HAMP loan, Bank of America representatives could upsell them to a more costly “in-house” loan modification, with rates 3 points higher than the 2 percent rate available under HAMP guidelines, Wilson testified.
“The unfortunate truth is that many and possibly most of these people were entitled to a HAMP loan modification, but had little choice but to accept a more expensive and less favorable in-house modification,” he said.
Courtney Scott was among the Bank of America customers who experienced repeated delays and denials for a government-sponsored modification of the mortgage on her suburban Atlanta home. The retired nurse and grandmother grew increasingly frustrated after bank representatives repeatedly requested she fill out paperwork covering the same information.
So she was surprised when the bank approved her six months later for an “in-house” modification.
“I got the [HAMP] denial in January, 2010 and then in June they came back with an in-house offer saying ‘Congratulations, you’ve been approved for a modification,'” said Scott. “But it only lowered my payments by about $7 and some cents.”
Scott’s frustration in complying with the banks request was designed to motivate her to agree to the in-house modification according to the former Bank of America workers.
Some completed applications were denied one at a time, while other borrowers were rejected en masse in a process known as “the blitz,” Wilson said.
“Approximately twice a month, Bank of America would order that case managers and underwriters ‘clean out’ the backlog of HAMP applications by denying any file in which the financial documents were more than 60 days old,” he said. “These included files in which the homeowner had provided all required financial documents.”
Beyond the policy of denying affordable loan applications, Bank of America also encouraged its employees to move loans to foreclosure—even when the process could have been prevented, according to said Erika Brown, a former bank customer service representative.
“These homeowners were eligible for loan modifications under HAMP, sent back all the required documents and made all their required payments under a trial plan,” she said. “Bank of America nevertheless damaged their credit ratings by reporting them delinquent, tacked on additional charges to their loans, increased the amounts it considered as being owed and often referred these homeowners to foreclosure.”
When a borrower defaults on a loan and the bank forecloses, investors who own the loan typically bear the loss on the unpaid principal balance. But the foreclosure process generates a lucrative stream of fees for mortgage servicers—for everything from property inspections to legal work required to seize a home.
Those added fees provide mortgage servicers like Bank of America with a financial incentive to foreclose—and a disincentive to provide a more affordable loan, according to consumer advocates. The company shared those incentives—and disincentives—with its workers, based on foreclosure quotas spelled out in monthly meetings with managers, according to Gordon.
“A collector who placed 10 or more accounts into foreclosure in a given month received a $500 bonus,” she said. “Bank of America also gave employees gift cards to retail stores like Target or Bed Bath & Beyond as rewards for placing accounts into foreclosure. Bank of America collectors and other employees who did not meet their quotas by not placing a sufficient number of accounts into foreclosure each month were subject to termination. Several of my colleagues were terminated on that basis.”
“Often this involved double counting loans that were in different stages of the modification process,” according to Steven Cupples, who supervised a team of Bank of America underwriters until June 2012. “It was well known among Bank of America employees that the numbers Bank.
It is fair bet what all those SOB lenders did the same thing.
Big bank wrongly foreclosed on more than 2,000 borrowers
One of the nation’s biggest lenders drove more than 2,000 borrowers into foreclosure by sitting on important documents, according to the Consumer Financial Protection Bureau.
The CFPB today announced a $37.5 million enforcement action against Flagstar Bank, which the agency claims has violated federal servicing rules.
“Flagstar took excessive time to process borrowers’ applications, did not tell them when their applications were incomplete, denied loan modifications to qualified borrowers, and illegally delayed finalizing permanent loan modifications,” CFPB Director Richard Cordray said. “These unlawful practices caused many consumers to lose the homes they had been trying to save. That is wrong and it is unacceptable.”
Cordray accused Flagstar of “failing borrowers and illegally blocking them from trying to save their homes.”
According to Cordray, Flagstar saw applications for loss mitigation spike as a result of the foreclosure crisis. The bank, he said, failed to adequately handle the influx.
“For a time, it took the staff up to nine months to review a single application,” Cordray said. “In 2011, Flagstar had 13,000 active loss mitigation applications but had only 25 full-time employees and a third-party vendor in India reviewing them. The Bureau found that in Flagstar’s loss mitigation call center, the average wait time was 25 minutes and the average call abandonment rate was almost 50 percent. … To make things worse, we found that Flagstar would clear its backlog of applications by closing those with expired documents – even though the documents had expired because Flagstar sat on them for so long.”
The CFPB also alleged that even when Flagstar evaluated completed applications, “it did a poor job,” routinely miscalculating borrowers’ incomes.
“We determined that Flagstar’s failures led to wrongful denials of loan modifications,” Cordray said.
The CFPB has ordered Flagstar to pay $27.5 million to consumers whose loans were serviced by the bank, at least $20 million of which must go to victims of foreclosure. The bank was also ordered to pay $10 million to the CFPB’s Civil Penalty Fund.