Well, here’s an interesting report that might have been good to have in hand a few weeks ago. The National Association of Consumer Advocates, the National Association of Consumer Bankruptcy Attorneys and the National Consumer Law Center have released the results of a survey showing that “mortgage servicers continue to initiate foreclosure proceedings improperly, either while a homeowner is awaiting a loan modification or due to improper fees or payment processing.” This is a key element of the servicing standards in the (as-yet unseen) foreclosure fraud settlement, but it was also part of the consent order last year from the Office of the Comptroller of the Currency. In other words, the banks are under an order to stop doing these types of things, and they have simply not complied. That’s the state of things heading into the settlement, when the banks will be asked to comply again.
The study from NACA, NACBA and NCLC surveyed attorneys representing homeowners in foreclosure cases in 45 states and the District of Columbia. The results are really staggering. Here’s a sample:
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.
And there are more results from the study looking at illegal fees imposed by servicers:
80% of the respondents represent homeowners who were placed into foreclosure in the last year where there was a wrongful assessment of fees (e.g. late fees, broker-price opinions, inspection fees, attorney’s fees and other fees).
79% of the respondents represent homeowners who were placed into foreclosure in the last year where there was a misapplication of payments.
Almost 60% of the respondents represent homeowners who were placed into foreclosure in the last year where there was an improper assessment of force-placed insurance.
In the last year alone, survey respondents reported representing over 700 homeowners with force-placed insurance; almost 2,500 homeowners with improper assessment of fees; and over 1,200 homeowners whose payments had been misapplied.
Over 78% of the respondents represent homeowners who had been placed in foreclosure in the last year where the servicer did not properly accept the homeowner’s payments.
73% of the respondents represent homeowners who had been placed in foreclosure in the last year while the homeowner was making payments as previously agreed upon.
These numbers are simply too high to be an accident. Servicers routinely place people in foreclosure while negotiating a loan modification, and they routinely apply illegal fees to homeowners, helping to drive them into default. And the government settled with these companies!
What really galls me is that at least some of these organizations had praise for the foreclosure fraud settlement. Ira Rheingold of NACA appeared on NBC Nightly News to contrast Yves Smith, using the familiar language that the settlement represented a “good first step.” But that good first step depends on the compliance of servicers who, as a matter of course, rampantly break the law. I know we’re supposed to thrill to the monitoring and enforcement rules in the settlement (which we haven’t seen yet), but federal regulators have monitors inside banks. With CFPB they now have monitors inside servicers. We’re in the fifth year of the foreclosure crisis. If servicers haven’t cleaned up their act by now, signs point to the fact that they can’t. But instead of putting the model out of business, the authorities played nice with them.