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Robo-Signing Victims to Get Money in April

afrmortgage.comApr 7, 2013

By AFR Mortgage

Are beleaguered homeowners who were unjustly led into foreclosure by unscrupulous mortgage lenders finally getting their financial comeuppance? Although 10 banks are preparing to provide wronged borrowers with settlements ranging from a few hundred dollars to $125,000, many are crying foul. The reimbursement plan was approved after an extensive review period of over 4 million mortgages. The analysis revealed that the financial documentation used to foreclose on millions of loans was riddled with errors.

Even though these 10 lending institutions have agreed to begin paying back the funds by April, many have major criticisms of the plan. For starters, the paltry amounts cannot begin to cover the losses these homeowners have suffered.

So, how did this happen? The practice of robo-signing is often mentioned as a major instigator. It all started with the greed brought on by the housing boom. Homeowners who probably would not have qualified for a mortgage in the first place were approved anyway. Soon, they began defaulting on their loans and mortgage offices were flooded with paperwork. Enter the practice of robo-signing, which is explained here by Investopedia:

“Because of massive case overload, an employee of a mortgage servicing company signs foreclosure documents without reviewing them. Rather than actually reviewing the individual details of each case, robo-signers assume the paperwork to be correct and sign it automatically, like robots.”

Of course one of the big problems when examining which homeowners should be compensated for misguided foreclosures is determining which homeowners where actually victims of robo-signing. Critics are also dismayed at the waste of time and money put into 18 months of reviewing these cases. After 18 months, only 104,000 loans had been reviewed completely and the independent financial consultants handling them had been paid $1.5 billion!!!

Thomas Curry, who is the comptroller for the federal agency, the Office of the Comptroller of the Currency or OCC, summed it up this way, “It just doesn’t make sense for these (mortgage) servicers to continue funneling money to consultants that could be better used to help distressed borrowers who have lost their homes. The cost of concluding these reviews would far exceed the harm that would be found.”

Another ridiculous component with this disaster is that the errors being scrutinized range from minor mistakes to large-scale cases of fraud. These careless practices led to wrongful foreclosures that resulted in the unlawful seizure of properties and evictions of homeowners who were not even in default.

The banks that agreed to pay out 3.7 billion into a special fund to be used to compensate borrowers are doing so based on how the borrowers fit into one of 11 categories that determine the severity of their individual cases. A consumer attorney for the National Consumer Law Center, Alys Cohen, observed, “If the review is being done on the basis of the (mortgage) servicer files, and the servicer files are a mess, how can you make a finding that’s accurate?”

The OCC has responded to such criticism by explaining that there is enough information in these cases that the error rate is only about 6.5 percent. John W. Schoen of NBC News reported in February that further investigation shows that the error margin is even lower. Along with handling the settlements, the 10 lenders have also agreed to provide $5.7 billion more to be used to lower loan balances and initiate short sales. As this process continues, consumer watch agencies and banking regulators are urging lenders to stop foreclosures that are in progress.

The 10 banks involved in this settlement are: Aurora Bank, Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, Sovereign Bank, U.S. Bank National Association and Wells Fargo Bank.

Back to April 2013 Archive

CFLA was founded by the Nation's Leading Foreclosure Defense Attorneys back in 2007 to serve the Foreclosure Defense Industry and fight pervasive Bank Fraud. Since opening our virtual doors, CFLA has rapidly expanded to become the premier online legal destination for small businesses and consumers. But as the company continues to grow, we're careful to hold true to our original vision. For us, putting the law within reach of millions of people is more than just a novel idea—it's the founding principle, just ask Andrew P. Lehman, J.D.. With convenient locations in Houston and Los Angeles, you can contact Our National Account Specialist and General Manager / Member Damion W. Emholtz at 888-758-2352 for a free Mortgage Fraud Analysis or to obtain samples of work product, including cutting edge Bloomberg Securitization Audits, Litigation Support, Quiet Title Packages, and for more information about our Nationally Accredited and U.S. Department of Education Approved "Mortgage Securitization Analyst Training Certification" Classes (3 days) 24 hours for approved CLE & MCLE Credit (Now Available Online).

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