5 Scary Foreclosure Fiascos

Posted by Amanda on June 21, 2011

According to RealtyTrac, the average foreclosure is being sold for $166,830, and there are currently 1,757,899 foreclosed homes around the US flooding the market. Facing so many foreclosures, major lenders such as JPMorgan Chase, Ally Financial’s GMAC Mortgage unit and Bank of America turned to sub-par practices in order to process the sheer volume of paperwork.

One of the most common practices was having robo-signers sign documents without verifying the information. For example, Jeffrey Stephan, a foreclosure specialist with GMAC Mortgage said that he signed about 10,000 foreclosure affidavits per month without personally verifying the documents. You can imagine the type of nightmare scenarios this caused as thousands of homes were wrongly foreclosed on (it should be noted that the fed investigated and found that there have been no wrongful foreclosures).

Foreclosures Gone Wrong

Because of this practice, things got out of hand. Several very weird stories surfaced as a result of robo-signing, and because no one personally reviewed the records involved, the homeowners were often met with confusion and denial when they attempted to work it out with their lender. Here are some examples:  

  1. Foreclosure on a Paid-for Home: Bank of America recently foreclosed on a couple in Naples, FL who had never had mortgage to begin with. In 2009, Warren and Maureen Nyerges purchased a home out of foreclosure from Bank of America and paid $165,000 in cash. The paperwork issue occurred when the Nyerges were not identified as the new owners and were mistakenly thought to be the property’s previous owners. Four months after moving into the home the couple was given a notice of foreclosure from Bank of America. Calls to the bank did not help matters. Finally the couple took BofA to court and won; the judge ordered that BofA pay the couples’ attorney fees. When the bank failed to pay the fees, the couples’ lawyer got permission to seize the bank’s assets (sort of foreclosure in reverse!). The bank finally paid up.
  2. Mortgage Lender Goes Under and Man gets Foreclosed on: Tom Woods in Tampa, Fl faithfully paid his mortgage. When his mortgage bank went under, it was sold to Bank of America. Some of the paperwork was lost in the process, and soon a foreclosure notice was sent to Woods. The bank had no record of anything, and a lawyer had to get involved. The foreclosure was signed by a robo-signer.   
  3. Mistakenly Repossess Home and Belongings, Including Pet Bird: Angela Iannelli came home in 2009 to a ransacked home she had paid her mortgage for on time (except one payment). Furthermore, Bank of America had not sent her a notice of a 60-day deficiency nor given her 30 days to fix it, as required by state law. Bank of America had hired contractors to cut her power lines, padlock her doors, and otherwise winterize her home (pouring antifreeze down her drains, cutting water lines, etc.). The contractors even confiscated her pet parrot (a blue macaw). Her blue macaw was returned to her, but she had to drive 60 miles in order to retrieve him.
  4. Foreclosed on for Modifying Loan: Steve Curtis, the mayor of Layton, Utah, applied for a loan modification in March in 2010. Bank of America agreed to a loan modification trial that lowered their mortgage payment by $350, which would help Curtis who had been underemployed for 9 months. In December 2010, they came home to a notice of foreclosure. Apparently their payments were being sent to escrow because they were under a loan modification program. The departments within BofA did not communicate, and so the payments showed up as delinquent in the system. Crazy enough, even with lawyers involved the the Curtises will have to pay all reinstatement charges and the legal fees Bank of America racked up when they foreclosed on the Curtis’ home in order to save their home.
  5. Bank Takes Cremation Remains in Wrongful Foreclosure: Once again, Bank of America is behind this one. A woman was, admittedly, behind on her payments. She sought a loan modification, and was assured by BofA that her home would not be foreclosed on while seeing this loan modification. After her husband died from a road rage accident, she intended to take over the mortgage (the mortgage ended up in probate court upon his death). She sent in a check for $15,000 to catch up on payments and taxes, as ordered by the judge. She was never given ownership of the house, and then the economy tanked, which led her to ask for a loan modification. Papers were lost, and she was not even notified of the foreclosure sale.

Have any of you experienced a wrongful foreclosure, or do you know of someone else who has?   

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Comments to 5 Scary Foreclosure Fiascos

  1. The housing nonprofit I work for recently had the chance to help a family stop a foreclosure from a local bank. The family didn’t understand that their one late payment caused their money to be applied to the oldest debt first, making them further and further behind even though they were now making their payments.

    The local bank stopped the foreclosure proceedings when they found out we were working with the family to keep from racking up more legal fees.

    The bank was communicative and appreciative that we were able to help which kept their costs down and (best of all) allowed a family to keep their home.

    This story is typical of the care this local lender gives in its business.

    I don’t understand why the same big lenders at the core of the foreclosure business keep getting business. If you heard that an airline had six crashes every week, wouldn’t you take a different airline?

    Pamela

    • Hello Pamela! Thank you for your experience with stopping a foreclosure. I like your analogy to airlines.

      Sounds like in this case it was the right decision by everyone for the family to keep the house and the bank to not have to go through the very costly foreclosure process. Sadly I think there are many cases out there like this but instead of the family getting the little bit of help they need, they are foreclosed on.

      Ofcourse, there are other families who definitely overspent themselves and the banks are completely within their rights to foreclose.

      Amanda L Grossman

    • Pamela,

      Sometimes, when you use a local regional bank, the big national banks buy them up. I got my mortgage from Homes Savings, instead of one of the big banks. Then, WAMU bought them. After WAMU went under, Chase bought them. Luckily, I haven’t had any problems.

      Bret @ Hope to prosper

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