Mounting evidence indicates shady business practices(opens in new tab) are rife among big banks foreclosing on homeowners. But new evidence shows some foreclosures were not only improper or unnecessary – they may have been outright illegal.
Last year, consumer attorneys accused(opens in new tab) five major banks of filing tens of thousands of wrongful foreclosures each year. State and federal prosecutors say(opens in new tab) the banks – Wells Fargo, Bank of America, JPMorgan Chase, Citibank and Ally Financial (formerly GMAC) – have caused “the loss of homes due to improper, unlawful, or undocumented foreclosures.” According to HUD officials(opens in new tab), the banks “signed the great majority of the judgment affidavits without personal knowledge or otherwise verifying the data and information.”
Why would a bank take such a risk, or even commit fraud, in order to rush a foreclosure? In a word: Money. While mortgage loans usually involve only small fees, foreclosure proceedings allow the banks to pile on legal fees, late charges, back interest, home inspections, and maintenance charges – all to line their pockets.
Since 2007(opens in new tab), banks have foreclosed on over 4 million homes (with 6 million more facing potential foreclosure, affecting(opens in new tab) 1 in 10 children). Wells Fargo brought in(opens in new tab) $3.3 billion in profits from its mortgage servicing service in 2011 – 20% of its total net income – all paid by Americans who lost their homes.
Whistleblowers working as “legal process specialists” at Wells Fargo have revealed(opens in new tab) the existence of “foreclosure factories” – entire divisions of entry-level employees hired by banks at a salary of $30,700 per year(opens in new tab), dubbed “corporate vice-presidents,” and tasked with preparing documentation to evict people from their homes. Working long hours and some weekends, these faux executives(opens in new tab) get job security only by meeting foreclosure quotas.
Much like the (still ongoing) robo-signing scandal(opens in new tab), these employees signed affidavits(opens in new tab) used in courts across the country to seize people’s homes. But according to whistleblowers, the daily quota requirements and a high-pressure environment meant there often wasn’t often time to verify the third-party information to which they were swearing. Given the choice between losing their job and committing fraud – many felt as if they had no other choice: “I can’t afford to lose this job,” one source told msnbc.com(opens in new tab).
In addition to fraudulent filings and numerous breaches of protocol, employees have admitted to:
- denying loan modifications to families without thorough interviews,
- ignoring faxes from applicants,
- foreclosing on families owing only $1.18 per day in interest,
- failing to verify third party data,
- and in one case, foreclosing on a home with no outstanding payments.
Wells Fargo Executive Vice President Michael DeVito denies(opens in new tab) charges that the bank is encouraging improper practices or pressuring employees to fill quotas, but several employees and a number leaked emails from managers, have corroborated(opens in new tab) the allegations against the bank.
Even with evidence piling up, banks seem be showing a disturbing lack of contrition for playing fast and loose with people’s homes and finances. In settlement talks, the banks have pursued(opens in new tab) a blanket waiver of legal liability that would prevent further legal action against them if a settlement is reached.
It might not be that easy to get that waiver. New York Attorney General Eric Schniederman is leading a special task force(opens in new tab) to investigate mortgage fraud at all five banks, aimed at forcing banks to obey foreclosure procedures and contribute $5 billion to foreclosure relief programs. Since Schiederman’s task force started work, Chase CEO Jamie Dimon has publicly stated he doubts(opens in new tab) banks will get a legal liability waiver, or even a settlement.
Here in Washington, the Home Foreclosure Legal Aid project offers free legal assistance to moderate income homeowners. The program is run by the Washington State Bar Association and the Northwest Justice Project. Rep Tina Orwall also sponsored a foreclosure fairness bill(opens in new tab) that narrowly missed a full vote this year.
By Pete Stewart, EOI intern