Audit Reveals 84% of San Francisco Foreclosures Violated Law

Tuesday, February 21, 2012
Affirming what anecdotal evidence has suggested about the mortgage crisis, an audit out of San Francisco has found that more than 80% of foreclosures broke some kind of law.
 
City officials requested the audit that examined 382 randomly chosen foreclosures that occurred from January 2009 through October 2011. The findings revealed that 84% of the files involved “what appear to be one or more clear violations of law.” The violations included not giving homeowners warning that they were in default on their loans (6%), not giving homeowners adequate legal warning their property was being sold (10%), backdating of documents (59%) and transfers of loans by entities that had no business doing so (45%).
 
Another disturbing discovery related to the Mortgage Electronic Registry System (MERS). In 1995 the bigger banks created MERS as a privately owned electronic system for registering mortgage sales that was supposed to replace local county recording. In the words of the New York Attorney General’s Office, they did so “to allow financial institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers, and facilitate the rapid sale and securitization of mortgages.” The San Francisco audit found that in 58% of cases, the loan beneficiary listed on the deed of sale was different from the one listed in the MERS database.
 
Kathleen Engel, a professor at Suffolk University Law School in Boston, told The New York Times: “If there were any lingering doubts about whether the problems with loan documents in foreclosures were isolated, this study puts the question to rest.”
-David Wallechinsky, Noel Brinkerhoff
 
To Learn More:
Foreclosure in California: A Crisis in Compliance (by Aequitas Compliance Solutions) (pdf)
Audit Uncovers Extensive Flaws in Foreclosures (by Gretchen Morgenson, New York Times)

California Bill Would Charge Banks $20,000 for Each Foreclosure (by Noel Brinkerhoff, AllGov) 

Comments

Storm 2 years ago
actually, the “audit” is much ado about nothing, it's a cluster of legal conclusions tied up in a pretty package. any knowledgeable attorney will tell you it's useless. btw, the noises you hear in the background are the banks laughing. first, the company that performed the "audit" also performs these bogus "forensic loan audits" aka software tila/respa audits that the california's attorney general, as well as most other attorneys general have stated are basically scams. mortgage fraud examiners was the first one to identify these audits as scams and the attorneys general picked up on it shortly thereafter. see, http://www.prurgent.com/2011-04-21/pressrelease165977.htm which begs the question: why in one breath is california commenting on bogus audits and then using them? that in and of its self doesn’t pass the smell test. second, "securitization audits" aka “chain of title audits,” like the audit in question are basically useless as well; except maybe to just stall a foreclosure. see, http://www.nakedcapitalism.com/2011/05/new-homeowner-scam-mortgage-securitization-audits.html is this just about the government trying to make itself look good, then really about anything of real substance; or is it because the assessor is up for re-election? the only methodology that has proven time and time again to work is the examination of the mortgage transaction for contract breaches and/or tortious conduct. see, http://neighbors.denverpost.com/viewtopic.php?f=215&t=123490692

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