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Were big banks ‘stealing homes’?

By Jay MacDonald · Bankrate.com
Monday, December 19, 2011
Posted: 10 am ET

Forget for the time being all the Three Stooges document-fumbling surrounding the housing collapse. Set aside the obvious malfeasance of robosigning and rocket dockets.

The question on the table now is, were America's largest mortgage lenders stealing homes?

The recent lawsuit filed by Massachusetts Attorney General Martha Coakley against five of the nation's largest banks for deceptive foreclosure and loan modification practices essentially accuses them of doing exactly that.

Coakley accuses Bank of America, JPMorgan Chase, Wells Fargo, Citibank and Ally Financial of the following:

1. Engaging in unfair and deceptive foreclosure practices by conducting foreclosures when the defendants lacked the right to do so and misrepresenting to homeowners their roles as mortgagees or as the holders of the mortgages.

2. Engaging in false documentation practices to facilitate their foreclosure practices.

3. Deceiving homeowners in the course of servicing mortgage loans by misrepresenting to borrowers regarding its loan modification programs, acting deceptively in implementing loan modifications and deceiving borrowers regarding foreclosure proceedings.

"The layman's term for that is 'stealing homes,' says Firedoglake blogger David Dayen. "Coakley is accusing banks of stealing homes. They didn’t have the proper proof of ownership to take control of the homes in a foreclosure, and they did it anyway, by forging documents and committing fraud upon state courts."

Coakley's suit also includes the Mortgage Electronic Registration System, or MERS, the epicenter of its "false documentation practices" charge.

Massachusetts isn't the only state that has grown frustrated with the Obama administration's year-long attempt to negotiate a let's-move-forward settlement between the 50 states and the banks. Others, including California, Delaware, Nevada and New York, have distanced themselves from the talks, which appear headed toward an agreement that some AGs say amounts to a hand slap for the big banks.

But as the first to break from the pack, Coakley's suit reframes the debate from a snipe hunt for sundry robo-shenanigans by underlings to some serious charges leveled at top management.

The 50-state agreement under construction looks like it would grant the lenders immunity from prosecution in exchange for a settlement of $20 billion to $25 billion, to be used primarily for principal reduction and loan mods.

Coakley says she'll consider signing onto any forthcoming agreement based on its merits but has made clear she won't be party to any plan that includes broad liability release regarding MERS and other issues.

What's next? Will other states follow Coakley's lead?

Only time will tell.

But her bold break certainly throws into question the attraction of that (now) 49-state work-in-progress, and perhaps the wisdom of attempting to collectively bargain away a national disgrace.

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80 Comments
ROBERT V
January 22, 2012 at 1:48 am

BANKS DON'T CARE ABOUT THE PERSON ON THE STREET,THEY WONT HELP ANY ONE CROSS THE STREET WITH OUT GETTING MONEY IN THERE POCKETS.ALOT OF PEOPLE CAN HARDLY MAKE THEIR HOUSE PAYMENTS,LET ALONE PUT FOOD ON THE TABLE,WHILE BANK CO'S GIVE OUT MILLONS OF DOLLORS TO THE THERE TOP EMPLOYEES. IT DON'T SOUND LIKE CUSTOMER CARE HAS ANY THING TO DO WITH REGULAR PEOPLE LIKE ME.I THINK IT WOULD BE GOOD FOR THE COUNTRY FOR THE BIG SHOTS IN THESE BANKS FACE THE COURTS FOR THE LAWS THEY KNOWLY BROKE,AND THE GOVT: PLACE KNOWLEDGEABLE IN CHARGE OF THE BANKS, THATS HOW I SEE IT...

marie
January 22, 2012 at 12:43 am

People, lets not forget if we the average person, were to break the law and do Engaging in unfair and deceptive practices or break the law in anyway....WE WOULD GO TO JAIL,OR BE STRAPED WITH
CHARGES or fines THAT WERE SO FAR OUT, we could not get out from under it. Now because these big banks have lots of money and can push it around and buy their way out, they are trying to and unless you step up and act with this movement and show your suport, you will be next or your children, your mother or father when they try to buy a home. This is big money stuff here and you people who are perfect in everyway, should try to step out of your pretty world and walk a mile into others shoes. Its is amazing how much you will learn when you do! Most people buy a home with good intent they do not see the big bank doubleing and triping their payments just because they can! most people do make a budget and they stick to it...it is the banks that do not stick to the agreement period! I say if there is to be punishment for the wrong doings of the banks, then give the people back their home! This is fair. many do not have a home becuase of this uglyness and dont have the means to have a home because of this garbage that has come their way. I saw it coming and sold my house, but I feel very much for the people who did not see it comeing, its just sad! Because of the hard times we have faced people were living paycheck to paycheck the banks knew that and took advanatage of all who could not make their demands and the banks got rich here off the backs of the customers they served. Stand for what is right NOT how you might look to others! What i am saying here is to send your letters, phonecalls or what ever to this atty office and congress or CNN or what every it takes to stop this settlement from happing! to me there is not settlement until everyone has thier home back! How is it going to help all the people who lost their homes? ITS NOT!

Robert
January 22, 2012 at 12:21 am

It is truly upsetting to see Banks such as Wells Fargo get away with robbery. We have an interest only loan which was to be renegotiated after 10 years. The idea was that the equity built up in the home would significantly reduce the amount owed when we renegotiated our loan. Wells Fargo immediately bought this loan [just like a vulture]. They have now refused to renegotiate our loan even though we've never missed a payment or been late. It is obvious to me that they are planning to steal our home in spite of governmental instructions to the contrary.

GMan
January 21, 2012 at 11:58 pm

Well first off for full disclosure I happen to be one of the people caught up in a chase\emc loan, loan modification. I don't have to tell people how it works as its the same story, Sent in docuements , over and over and lies and more lies. Then try to see if your still stupid they give you a loan modification that only an idiot would sign. Hence why I told them come get the keys. But lets look at the big picture. Fanny and Freddie gave peopel that had no business being in a mortgage loans. So now what happens if you were one of those people.. Your going to get a no interest, no back payment loan of what 1 or 2 %. However others that didn't get themselves into trouble. ANd I did say get themselves in trouble. As look deep down you knew you couldn't afford those payments but who wouldn't take advantage of it.. But when the piper gets home and reality sets in.. you cry wolf.. You have to take some respondsiblity.. So what about those honest people that did what they had done for years. Not go over 28% of your income for a house payment.. So they got nice 6ish % loans, 15 or 30 years. Are they to get rewarded for being good stewerts .. no they will have to swallow hard while other losers get to clean up.. Shame on the goverment for getting involved in the first place. So what happens, those people are going to have to eat the service fees.. oh trust me banks are not going to take a loss. No it will be fee Hell to pay. But let me guess the 99%'rs will say we got justice and oh yeah you.. you can afford it.. its always you can pay more for my laziness.. No let the market take care of the problem. There will be people who can afford them if the stinking Dems would get a clue how to create Jobs. Because as far as I see it. If you aint got a job.. why are you getting back into a home that you can not afford??? but oh lets not ask that question.. Goverment get out of our business. We don't want to be slaves to your entitlement mantaility

The Informer
January 05, 2012 at 12:37 pm

Look, get wise, get educated! The banks intent from the very begining was to defraud the "alleged borrower" Why do I use "alleged"... because the banks NEVER loaned/risked a cent of their own money. It was YOUR promissory note that was the cash item that funded the "loan". Don't believe it? Search and download a copy of "Modern Money Mechanics" (no longer published/inprint by the Chicago Federal Reserve, read and understand page 6. In this debt money system promissory notes are identical to cash and checkbook 'money'. Then I recommend you get over to Livinglies Webblog (livinglies.wordpress.com) attorney Neil Garfields foreclosure info clearing house. Nearly every loan between 2000 to 2008-9 has about 14 frauds built in. Defend your property.
I've been helping people killing the banks and non-judicial sales with this info and I'm not even a lawyer.

iraynbo
January 04, 2012 at 5:57 pm

I am 81 yrs old. My husband is 86. We have been trying very hard to pay off a mortgage since 1993 and we have 2 yrs to go. We have the payment taken out of our income automatically. $1,360 a month. We have never missed a payment.until last month the bank (Wells Fargo) didn't take it out then redid our contract to up our payments $30. more. it will be almost impossible to make these payments on our fixed income. So what do you think they have planned for us and our house? Where can we turn for help? We can't renegotiate our contract because we are too old and I have incurable cancer. When I die my income stops and there won't be enough to pay it off.

jjj
January 04, 2012 at 12:11 pm

Sigmund's views are all nice for those that have the capacity, but honestly there's lots that don't. THAT is why banks are supposed to evaluate risk, and say no when appropriate. Banks didn't because they planned to offload the loans before they could come back and bite them. It was all upside to them.

Leo
January 02, 2012 at 6:40 pm

I tend to shy away from "fraud" as a business model for major institutions.

Really, .. If "the bank" so coveted your house and property as to commit fraud to obtain ownership, why didn't they just buy it for themselves instead of lending you the money?

One employee with access to sensitive information concerning such fraudulent practices could do as much damage to a BOA or Wells Fargo as Was done to the entire industry by the Community Redevelopment Act did in in 25 years.

Jay MacDonald
January 02, 2012 at 5:15 pm

Hi, Sigmund: Thanks for your comments. I agree, there's plenty of blame to go around on this debacle, and let's not forget to include the regulators who were apparently unconcerned by the risky nature of these loans. Sadly, it's a whole lot easier to get into a mess like this than to get out of it. Will we be the wiser for it? I'm not sure. It seems to be human nature these days to pursue the comfort and ignore the pain. Unless we can put more consumer protections in place to slow that response, my gut says we haven't seen the end of this lose-lose scenario.

sigmund
January 02, 2012 at 11:25 am

Though I am sympathetic toward folks that are losing their homes and I also agree that the banks need to "play by the rules" (i.e. follow the law), let's not forget that the banks did lend these homeowner real money and the homeowners defaulted on their mortgages (i.e. they did not pay the money back). Though we no longer accept the old dictum "caveat emptor" (let the buyer beware) in these matters, just how far does a business have to go to protect the buyer against his own stupidity and/or greed in order to avoid accusations of fraud and cheating?

I ask myself a few questions:

Can a reasonably intelligent adult, i.e. someone who has the right to vote and is considered responsible enough to have a driver's license, actually

1) Sign one of these "balloon" mortgages that start off with little or no interest and suddenly jump up to whatever market rates will be a number of years in the future?
2) Believe that property values can only go up when the whole history of real estate markets shows them going down just about as often as up?
3)Think that it is alright to overstate income and assets even if some lender tells him that it's OK?

Go ahead and blame the banks. I believe they deserve a considerable amount of blame. But I hope people learn something about how to handle their finances in the future.

1) Make a budget.
2) Try to estimate what your income is going to be for the next 10 years.
3) Build up some cash reserves before making major committments.
4) Question all "rosy" assumptions. Ask many questions and consider not only best case scenarios but also worst case and two or three intermediate cases.
5) Carefully read everything you sign. If possible get a lawyer to help you with large purchases. But if you cannot afford a lawyer, read carefully, ask questions, and do not sign anything untrue. Ask a trusted friend with more experience to give you advice if you cannot afford a lawyer.
6) Avoid falling behind in your mortgage payments even one time because the problem tends to snowball.

I do not mean to be unduly critical of people who are in economic trouble, but it is not all the fault of the banks.