Federal Regulators Considering Fines For Eight More Mortgage Servicers

Even though the much ballyhooed foreclosure fraud settlement has been a bit of a letdown, it has not stopped federal regulators from suggesting that fines be levied against eight more mortgage lenders/servicers. The Federal Reserve has recommended fining HSBC Bank, SunTrust, MetLife, U.S. Bancorp, PNC Financial Services, Everbank, One West, and Goldman Sachs for their "unsafe and unsound practices in their loan servicing and foreclosure processing."

This is unsurprising to any foreclosure defense attorney currently practicing in the United States. Quite simply, banks have not stopped robosigning documents, nor have they quit using previously robosigned documents in the pursuit of a judgment of foreclosure and sale. The New York Times reports that some judges are holding servicers and their attorneys accountable for facially flimsy or fraudulent documents. Unfortunately, the example of Judge Schack (a New York state Supreme Court judge in Brooklyn) remains the exception, not the rule.

On a daily basis, I handle cases where affidavits, assignments of mortgages, and promissory notes are signed by a cast of familiar names. In some situations, the same individual signs as an officer of both the mortgage servicer and Mortgage Electronic Registration Systems, Inc. This is a tell-tale sign of robosigned foreclosure documents. Even if the foreclosure backlog was magically cleared overnight, it is doubtful that these practices would stop. So long as the mortgage servicing industry's underlying infrastructure remains, the chain of title for real property nationwide will always be in question.

Let's face it. When servicers have difficulty identifying whether a first mortgage was modified via HAMP (a pre-requisite for modifying a second mortgage under the federal Making Home Affordable guidelines), we have a problem. It's not that modern database software cannot handle the flow of information. The problem is that it is less expensive for mortgage servicers to occasionally pay out damages to an injured homeowner than it is to fix the unreliable software.

If the days of borrowing from a local bank, where you know each person involved in the loan underwriting process, are over, then we need to re-evaluate how the industry does business. The only way to force change is to make it more expensive to have bad software than it is to fix the software. No amount of slap-on-the-wrist fines levied by the federal government will change this behavior. Individual homeowners need to hold their mortgage servicers accountable and pursue them in court. When damage awards pile on top of fines levied by federal regulators, servicers may quickly find themselves nibbled to death by ducks.

Consumers have rights. Defending those rights is essential to changing the system for the better. A well-planned foreclosure defense or bankrutpcy can help you protect your rights and hold less-than-scrupulous lenders accountable. If yo'ure interested in learning more, contact us or download our new book.

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