Over the past few months, we’ve been following perhaps the worst abuse by the banks in the foreclosure crisis – breaking and entering homes where they are foreclosing, changing the locks, and terrorizing the owners. The banks claim that they only do this with vacant homes, in an effort to keep out squatters, but it hasn’t worked out that way. There have even been reports of break-ins on homes where the borrowers are current on their payments.
Borrowers who have seen their homes broken into are fighting back and even suing the banks over this practice. If signing false documents and lacking standing to foreclose is too technical for the courts, perhaps breaking and entering will be what stops the banks’ reign of terror.
When Mimi Ash arrived at her mountain chalet here for a weekend ski trip, she discovered that someone had broken into the home and changed the locks.
When she finally got into the house, it was empty. All of her possessions were gone: furniture, her son’s ski medals, winter clothes and family photos. Also missing was a wooden box, its top inscribed with the words “Together Forever,” that contained the ashes of her late husband, Robert.
The culprit, Ms. Ash soon learned, was not a burglar but her bank. According to a federal lawsuit filed in October by Ms. Ash, Bank of America had wrongfully foreclosed on her house and thrown out her belongings, without alerting Ms. Ash beforehand.
Ash was in the middle of working out a loan modification when this happened. “This is in essence a burglary,” Ash remarked. The bank took her late husband’s ashes.
You can talk about tacked-on late fees, wrongful denials of loan modifications, lost paperwork, and people aren’t particularly moved. When you mention that the banks are breeaking and entering into homes, clearing them out of possessions, and changing the locks, people get it. This is a criminal enterprise on the part of the banks.
In Texas, for example, Bank of America had the locks changed and the electricity shut off last year at Alan Schroit’s second home in Galveston, according to court papers. Mr. Schroit, who had paid off the house, had stored 75 pounds of salmon and halibut in his refrigerator and freezer, caught during a recent Alaskan fishing vacation.
“Lacking power, the freezer’s contents melted, spoiled and reeking melt water spread through the property and leaked through the flooring into joists and lower areas,” the lawsuit says. The case was settled for an undisclosed amount.
The banks claim they must do this as part of the normal process of inspecting foreclosed properties and protecting them from vandalism. And there is an obligation in most mortgage contracts for the bank to secure the home within 60 days of default, if the house has been abandoned. But there are so many instances of them getting it wrong. And let’s be clear, the real number of wrongful breaking and entering should be ZERO. We had 200 years of a precise title recording system, where the county, the bank, and everyone involved knew exactly who owned the home, who lived in it, and what the payments were. That time has come and gone, broken by greedy bankers who wanted to securitize mortgages quickly and save money on recording fees. They caused this problem, but they’re not feeling the pain as a result. The suffering is borne by homeowners who are getting robbed, literally robbed by the banks.
In this world of confusion and thug tactics from the banks, the least that the federal government could do is set down some legitimate rules to protect homeowners from servicer abuse. The Fed is fighting that.
Top policymakers at the Federal Reserve are fighting efforts to rein in widely reported bank abuses, sparking an inter-agency feud with the FDIC and the Treasury Department. The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures. The FDIC supports such rules, according to an FDIC official involved in the dispute.
The new regulations would rein in debt collection, loan modification and foreclosure proceedings at bank divisions called “mortgage servicers.” Servicers have committed widespread fraud in the foreclosure process. While the recent robo-signing of fraudulent documents has received the most attention, consumer advocates have complained about improper fees and servicer mistakes that lead to foreclosure for years.
“Given that we’ve seen a massive failure in servicing practices and a massive failure to address servicing in an honest way, I think this is important,” says Joshua Rosner, a managing director at Graham Fisher & Co., and longtime critic of the U.S. mortgage system.
When you read that the Federal Reserve is resisting rules on servicers, consider this story. They don’t want to stop the banks from breaking into your house.