One year after attorneys general in 49 states settled for with the big banks $25 billion over questionable foreclosure practices, it doesn’t appear much has changed, according to a joint investigation by NBC Bay Area and the Center for Investigative Reporting (CIR).
After examining bank practices surrounding the 184,000 foreclosures instigated by banks in the San Francisco Bay area during the past five years, reporters found “mistakes, mismanagement and even fraud” that allowed for the premature filing of paperwork against homeowners.
One out of every five of the foreclosures was handled by Bank of America’s foreclosure trustee, ReconTrust. NBC and CIR hired independent financial analysts to pore over BofA documents and found altered dates on property records, misstatements on fraudulent loan transfers and other suspicious behavior that allowed the bank to proceed with foreclosure on homes it did not actually control.
The two news organizations highlighted the plight of Joji Thomas, and his attempt to prevent his family’s eviction for what he considered a series of mistakes by BofA. Thomas bought a home in San Ramon for $411,200 in 2009 and was paying $1,796 a month on the fixed-rate loan until it was inexplicably raised to $3,198.
He paid the higher amount for awhile and then stopped. When the bank threatened to take the home, he sent them a cashier’s check for $27,778 to cover the missed payments. He was told the check had been received and then lost. It was never cashed, but the bank said the matter would be resolved.
It was . . . when the bank auctioned off his home the week before Christmas. Thomas sued, filed for bankruptcy and fought to stay in the house. He lost that battle and moved out April 13.
While BofA moved relatively quickly to throw the Thomas family out of their home, one of the complaints about bank behavior is that they string out the process just to collect myriad fees they assign as part of the foreclosure process. Desperate homeowners pay the fees and often continue to make mortgage payments—all for naught.
Mortgage services, often subsidiaries of the banks that allegedly hold the note, have a built-in incentive to keep the loan alive. Diane Thompson wrote in a law review article cited by the news organizations, “For servicers, the true sweet spot lies in stretching out a delinquency without either a modification or a foreclosure.”
Twenty-five percent of the 184,000 Bay Area mortgages were in default status for more than three years, about three times as long as the state average. They were mostly serviced by ReconTrust.