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Still Waiting for Cleanup in Foreclosure Mess

If last year was the year in which faulty foreclosures and bank errors became a full-blown scandal, this has been the year of waiting for something to be done about it.

(Jewel Samad/AFP/Getty Images)

This is part of our year-end series, looking at where things stand in each of our major investigations.

If last year was the year in which faulty foreclosures and bank errors became a full-blown scandal, this has been the year of waiting for something to be done about it.

First, there's the still-to-come multi-state settlement over alleged fraud on the part of the country's five largest mortgage servicers. That's the settlement being brokered by a coalition of state attorneys general and once touted as homeowners' best bet for redressing banks' flaws in foreclosure and mortgage documentation. Over the past year, one story after another declared such a deal was imminent, but the details -- the total price tag, the deal's framework, and the expected date -- have continually been changing.

Earlier this month, the Des Moines Register reported Iowa Attorney General Tom Miller -- a point man for the attorneys' general probe -- as saying that the final deal should be complete before Christmas and would include a measure to reduce the total debt owed by underwater homeowners. No deal has yet been announced. Miller wouldn't disclose a dollar figure on the size of the settlement -- or whether California, one of the hardest-hit states, would participate.

Over the course of the year, some state attorneys general seemed to lose faith in the coordinated effort, voicing concerns that the eventual settlement would be too easy on the banks.

California Attorney General Kamala Harris signaled her hesitation too, as did the attorneys general of New York, Delaware, Nevada, Massachusetts, Kentucky and Minnesota. These state attorneys general -- many of whom have filed their own suits against major servicers, foreclosure processing firms, and other players -- questioned whether the settlement would limit their ability to take more aggressive action against foreclosure abuses in their states and either expressed doubts about whether they'd sign on to the final settlement or pulled out of the talks altogether.

Banks, meanwhile, have pushed for the settlement to include broader releases from legal liability over mortgage-related abuses. According to a recent Wall Street Journal piece, they've tried to make their participation in the settlement contingent on being shielded from the possibility of lawsuits brought by the new Consumer Financial Protection Bureau.

Also still to be determined? An official to monitor the banks and servicers and ensure they comply with whatever agreement is eventually reached.

Meanwhile, federal banking regulators have also begun to act. In April, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Federal Reserve accused eight mortgage servicers and two third-party mortgage processing firms of “unsafe and unsound" foreclosure practices and ordered them to come up with a plan to prevent the same errors going forward. (Read the orders they received.) But the revamp plans drawn up by the banks are kept confidential. And no financial penalties have been issued, though regulators have said that they're still to come.

Regulators also launched an interagency foreclosure review program [PDF] this year to identify and compensate homeowners who were wronged in the foreclosure process. The plan is to review sample loan files pulled from the files from 14 largest mortgage servicers, as well as files from homeowners who submit a request for a review.

The regulators in charge of the program have so far declined to disclose information on key aspects of the review, such as what kinds of compensation are available to homeowners, how compensation would be calculated, and for what specific offenses. (Homeowners with questions can see our FAQ on the reviews to see whether they're eligible for review and how to apply.)

The reviews themselves are being conducted by outside consulting firms that will be supervised by the regulators but paid by the banks. As we've reported, some lawmakers have raised concerns about the experience of the reviewers and whether they will truly be able to operate independently of the banks.

Finally, it bears mentioning that despite the efforts on both the federal and state level to address the systemic failures of banks and mortgage servicers, errors are continuing -- and they're still causing wrongful foreclosures.

The only subset of homeowners who seem to have gotten a break -- or redress for botched foreclosures -- is military families. Earlier this year, the Justice Department settled lawsuits against subsidiaries of Bank of America and Morgan Stanley over allegations that they wrongfully foreclosed on active duty service members, in violation of a law that specifically offers them greater protection from foreclosure. As part of that settlement, the two companies apologized and paid a combined penalty of $22 million, plus compensation to certain service members who suffered wrongful foreclosures.

I appreciate the update, but please also include the fact that the fhfa who oversees fannie and freddie wont allow principal reductions. Since they own most of the mortgages in CA this so called “settlement” for driving innocent homeowners massively underwater, by way of fraudclosure, really wont amount to much of anything. The fhfa was supposed to provide congress with an analysis of why the fhfa thinks principal reductions wont work, and where in the fhfa’s mandate it supposedly prevents them from allowing principal reductions. When will that analysis be available for review?

I live In Monroe County,Pa.And so far all i’ve seen is Familys forced into Foreclosers & Eviction.I myself am a victum of Fraudulent Mortgage Practices through Lend America-Wells Fargo.When I went to get Legal Help through the Legal Services I was Told they could not help us,cause they could litigate Fraudulent Mortgages in our County.My FHA/HUD Home loan NEVER had a Finished Appraisel and it was covered up till I found out 7 months later whern I refianced it & ask Wells Fargo for the Appraisel and they told me that they never received one.There is so much Fraudulent Activitys through the Loan Process that because of it we can not get help through FHA/HUD or any Justice Deptments.So we were Forced into Forecloser & know we are being Evicted from Property all without any Legal Reprentation.So to beleive that anyone out is receiving help through Programs through the HAMP or any other is all a hype to make people beleive they are actually doing something about it.

“First, there’s the still-to-come multi-state settlement over alleged fraud on the part of the country’s five largest mortgage servicers.”

ALLEGED? How many proven cases do you need to not be an apologist for the big banks? These are NOT “bank errors” but a systematic theft of homes. OK….I need you to believe. Do this….call YOUR “pretender” lender or “servicer” (aka debt collector) and ask them these questions Ms. Wang. Where is the original mortgage note? Who possesses the original mortgage note? How did they acquire it? Who is the beneficial owner? Who is the holder in due course? You WILL be lied to, misled (for sure) and even questioned over your right to know! Ms. Wang if you don’t have a mortgage do the above with someone who does. THEN I would love to see an article about what you find out. Google “MERS CONSENT ORDER” too and learn how corrupt they are and they admit it!

The article is seriously deficient because it fails to address the recently disclosed allegations that the OCC “independent ” reviews have
serious conflict of interest problems….time for all to recognize there is no fix for problems this widespread and diabolical.

The “MERS CONSENT ORDER” is from this year! 2011.

And for shits and giggles, let’s just say that the homeowner’s who were wronged by fraudulent documents the bank used to steal homes got compensated and the banks settled…then guess what they can’t be sued again…just like the Maytag front loading washer that people still buy and then are mad that their clothes stink and they spend more time cleaning the moldy washer than their clothes.  Maytag, GE and others settled the lawsuit for X amount of money and can’t be sued again for the same thing yet still produce the same front loader washer. 
It is not the banks fault….It is the Obama Admins fault for consistently creating departments and JOBS that do nothing for the people.  Expert smoke and mirror creators!!!  Spending 17 days in Hawaii,on his 3rd or 4th vacation? of 2011 while banks are stealing homes….hmmmm smells disgustingly vile!!

Would be easy if ONE political party were to blame. Both parties are owned by Wall Street and big banks. Clearly.

President Obama on vacation? Won’t even come close to “awol” and his vacations. No matter….just a distraction from the real world of corporate greed. The 1% want us divided over non issues like politics.

Only a fool would believe that this mess could come about thru the machinations of just one of the two political parties.  Just as there has been ample evidence to drop the “alleged” reference to bank and mortgage lender fraud, there is at least as much evidence to show that BOTH parties are complicit in the economic downfall of one of the greatest nations ever to raise a flag.

When you have been chosen to lead, YOU LEAD!  Nothing was done with the 2 years he could have done something nor will anything get done now.  The whole lot of them stink! Unfortunately, we will most likely endure 5 more years of this economic deterioration, i.e.Sears closing over 100 stores.I am financially ruined from NObama, yes, I took a direct missile hit when he bailed out GE and attempted a Media Blitz to drown Toyota! Soon I will be homeless so the faster they steal my home the sooner I can get on with my life. I was a fool to believe…..and yes his lavish vacations reeeeally bother me when most of us are struggling!

matt weidner, thank you for all you do.  I’m with you in the fight.  Please check out the links I posted.  You probably already know about them but if not you should check them out.

matt weidner

Today, 8:04 a.m.

The article is seriously deficient because it fails to address the recently disclosed allegations that the OCC “independent ” reviews have
serious conflict of interest problems….time for all to recognize there is no fix for problems this widespread and diabolical.
______________________________

Actually, there is a fix, and I believe it will happen.  But not without cost. Unfortunately, things will have to get worse before they get better.

@Mers Blues-I read the links you provided. What is your opinion of what this means?

Roy, I have wondered why the government is trying to legitimize MERS. 

Here are a couple of different thoughts on it.

livinglies.wordpress.com/2011/12/24/eric-holder-represented-mers/

stopforeclosurefraud.com/2011/12/27/eric-holder-covington-burling-and-merscorp/

Thanks MERS Blues, I now understand. Great links by the way!

Quality journalism

The American dream of home ownership is in the planned deteration for The Koch, Republican (ALEC) takeover.  Banks are now in the stage of renting forclosed home’s and in the ALEC scam of reverse mortgages during the ALEC Republican financial crunch are proceeding nicely.  It was just yesterday that the Koch Brothers’ in a Wall street article’ stated that Americans shouldn’t own homes but rent, in the typical Republican ALEC state of mind’ for the steal and cheat capitalist point of view.

Matt, Mark, and MERS Blues,

Thanks for the comments. I’d encourage you to read through the whole article. One use of the word “alleged” does not a bank apologist make. We’ve reported extensively on wrongful foreclosures, robo-signers, gaps in mortgage documentation, lost notes, and servicers that have gone and signed mortgage documents without signing authority.

This is a year-end lookback and therefore doesn’t go into detail about every aspect of the OCC reviews or every detail that has been reported about the pending AG settlement. But it certainly does not neglect to mention the conflict of interest concerns that Matt raises about the OCC reviews. To quote from the piece:

“The reviews themselves are being conducted by outside consulting firms that will be supervised by the regulators but paid by the banks. As we’ve reported, some lawmakers have raised concerns about the experience of the reviewers and whether they will truly be able to operate independently of the banks. Finally, it bears mentioning that despite the efforts on both the federal and state level to address the systemic failures of banks and mortgage servicers, errors are continuing—and they’re still causing wrongful foreclosures.”

We also link to our more detailed reporting on the OCC reviews: http://www.propublica.org/article/flaws-jeopardize-new-attempt-to-help-homeowners/single

Again, thanks for the feedback and discussion.

Best,
Marian

Good point…..sorry to come off snarky…but the details on the whole thing just blow my mind….and the fact that 99% of all media is just totally not reporting….you all do such great work, please accept the comment as encouragement to keep up the good work and keep digging.  The Public can no longer count on government to protect and they can no longer rely upon courts or judges to uphold the law or protect the public….and attorneys who dare to stand up get pounded down…...all we have left is the press to shine the light…and hope that it is not too late….but we are in desperate, dangerous times.  Those good reporters who are able to spend the time and chase down the evil will be fulfilling the highest calling of the profession…you are all we have left in this world…..

OK…I am sorry too. It just irks me that the term “robo-signing” is being kept in use when fraud is the better and correct term.
Thank you for the good work you are doing exposing the banks and their crimes.
How about a story about Freddie Mac and Fannie Mae NOT taking possession of the mortgages/notes from the originators?
How about a story on the MERS CONSENT ORDER?

To: c.stovall Dec. 27, 12:43 p.m.
Response: maybe they should ask Newt Gingrich, after all he got 1.6 million in consulting fees (“not lobbying”), but then again if it doesn’t benefit the 1% and the Lenders bottom line Californians will be stuck. And don’t count on any back execs going to jail for they committed in the fraudclosure, predator lending practices, other illegal practices against the working poor and middle class borrowers.

ProPublica is one of the better media outlets.  I don’t think I said anything to apologize for though.  I was trying to give you a lead.  I think there is a huge problem with MERS as I have seen Freddie and Fannie claiming to be investor on the same property without the owner aware that their prior loan was active and Fannie was the investor on that one and their current loan active and Freddie listed as investor on that one.  Does this mean that banks are pledging the same property to Freddie and Fannie, a GSE, in conservatorship and being bailed out by taxpayers?  Are taxpayers on the hook for multiple loans on the same property?  Why are there no Federal investigations ongoing by the DOJ into these irregularities?  Email me Marian and I’ll give you what I have to get you started. And why is the DOJ so enamored with MERS that it wants to institutionalize the almost always fraudulent MERS and destroyer of property records nationwide?

One issue not often discussed in the media when they speak of this financial hot mess is the fact that the person who takes out a loan is the only one who brings something to the table and takes a risk. You do NOT get anything from the entity that gives you a loan. What you do is give them the means and capital to loan and/or play with ten times the amount that you borrowed due to leverage rules that favor the special ones. They take your note and get funds from the central bank, either directly, or through yet another shell entity to “give” to you. They kick nothing real into the deal. The federal reserve is a private entity funded through the treasury in part, which gets its monies from WHOSE pockets? YOURS, the taxpayer.

When loans get securitized the pooling agreement often contains a clause that says any defaulted loan will be bought back by the sponsor of the pooled security vehicle so those who invested in the securities can be made whole. A selling tool rather than to be nice and fair I imagine. The parties who claim to be so wronged by you defaulting on a loan that is now illegal by the way it was securitized are usually paid by the insurance companies also listed in the pooling agreement filed with the SEC.

So you have a case where YOU took all of the risk and gave the “lender” ten times the investment power they would have had if they couldn’t have used your good credit to get those funds from good old shuffle paper central. They get paid when they sell that loan to another middleman entity. That person may get paid if they sell securities to another, sometimes selling the same loans more than once. Then they try to get paid again by foreclosing illegally on property that secures the “loan” that all the others already profited nicely on. A loan servicer gets paid more if you default by charging outlandish fees than if they simply serviced the loan in good standing. So of course loan mods are a sham thing. The whole incentive base in the industry is wanting you to default and lose your home. It is more lucrative that way. And now the folks soon to be reviewing this scene are to be paid by the banks they are investigating?

As always, those attempting to legislate do not have enough knowledge to do so in an effective and fair way.

Kim Regan you are so right. The problem we have had in the PAST is that judges have never read a prospectus nor had many attorneys for foreclosure defense. Now as more and more people are actually reading what is in those Prospectus we are seeing some real awareness of the way that the banks violated their own PSA and Prospectus. I especially like the parts where they agree to assignments being carried out. Also the part where the Custodian agrees to keep the original mortgage documents. The insurance, subordination and cross collateralization are all great issues but difficult to present to a judge. Easiest way we have found to keep homeowners in their home is to show broken chain of title and no original mortgage docs. We also threaten to force sanctions if the bank’s attorneys introduce fraud. THIS has really worked well!

This article is part of an ongoing investigation:
Foreclosure Crisis

Foreclosure Crisis: Banks and Government Fail Homeowners

Banks and the government have fallen short in helping homeowners in danger of foreclosure.

The Story So Far

Systemic failures at the country’s banks and mortgage servicers have exacerbated the most severe foreclosure crisis since the Great Depression, and government efforts to limit the damage have fallen short. ProPublica created an unrivaled database of homeowners who have faced foreclosure, opened a Facebook page to encourage homeowners to share their stories, wrote profiles of some of them, and incorporated their experiences into our reporting. We also provided a comprehensive rundown of the numbers behind the crisis.

More »

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