Hoping to Modify Your Home Mortgage? Watch Out for these Predatory Bank Practices…

This month, the Securities Exchange Commission charged top former executives at Mortgage giants Fannie Mae and Freddie Mac with securities fraud for making false statements about the quality their massive loan holdings. Read more about the civil fraud suits here. While many are relieved to see the federal government finally holding people accountable, many wonder when the government will stand up to help Americans keep their homes, or pay for student loans after their livelihoods were destroyed by systematic financial industry fraud, and the resulting destruction of millions of jobs.

The blog Mandelman Matters has reported that an employee of Chase’s mortgage servicing company described his job as, “making borrowers jump through every hoop so that when something fails to get done on time, they can deny it and foreclose.”

The employee, identified only as “Jared,” said that his boss said, “We’re in the foreclosure business, not the modification business.”

According to the Chase mortgage servicing company employee, “Foreclosures are a no lose proposition for the servicers… The servicer gets paid more to service a delinquent loan, and they get to tack on extra charges. If the borrower reinstates, which is rare, then the borrower pays the extra fees. If the borrower loses the house then the investor pays them. Either way, the services gets their money.”

Perhaps this explains why so many borrowers were told that modification would only be available only if they missed several payments. Yet, when people followed the directions they had been given, and applied for the modification, they instead faced foreclosure.

Researcher Matt Stoller with the Franklin and Eleanor Roosevelt Foundation reports on another angle of the corrupt mortgage servicing industry: a payment computer program that improperly applies payments first to mortgage servicing costs instead of to interest and principal. Home loans specify that payments be applied first to interest, then principal, and then to all other fees. Yet the program used by the servicer routinely applies payments first to fees.

In other words the banks have intentionally installed computer programs that apply payments systematically in ways that violate the very contracts they are enforcing via foreclosure, but which lead to greater profit for so called “mortgage servicing.” Read more about this systematic and predatory bank practice here. The practice was identified by Judge Elizabeth Magner in the the Louisiana foreclosure case, Jones v. Wells Fargo.

Has this happened to you or anyone you know?

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