In the past week my eyes have been opened to a disturbing phenomena in the world of home ownership. Beyond that, I now have first hand knowledge of just how quickly a situation can become devastating to an individual family struggling to make ends meet.
I am talking about the reality of Mortgage Servicing Fraud.
Never heard of it? Don’t feel bad. I hadn’t either. And it wasn’t until I spent several hours on the Internet trying to understand our current situation (and it’s legality) that I finally found the term that accurately described what we were going through.
It all started two months ago when I called to make our mortgage payment. Tired of paying an extra $20+ per month to pay by phone, I inquired if there were other ways to pay that did not incur an extra fee. The only option I was given was to mail in my payment. In fact, I was encouraged to do so as this was apparently their “preferred” payment method. At this time I also set up a payment expectation that my next payment would be slightly late, with a double payment being made in October. (3 payments, 2 months.)
I mailed off my payment in September, left for the better part of October to work out of town, and called as soon as I returned to make the double payment that I had promised for the month. Well imagine my surprise when I learned that my home is now in active foreclosure and that my account has been referred to their attorneys for further action.
In essence because I mailed in my payment. Apparently, when a late payment is sent through the mail the servicer can choose not to accept it. What I have learned is that once your payment is late, it can be considered to be a “partial payment.” A mortgage servicer then has the option of refusing partial payments if they feel that no payment arrangement has been made. A payment that is called in can constitute a payment arrangement; one that is mailed in does not.
Now my husband and I are stuck in a situation of trying to pay our mortgage. (We have the money!) But no one is willing to accept payment. The mortgage company points at the attorney while the attorney points at the mortgage company. In the mean time our account remains unpaid and they are moving forward with the foreclosure process. It is like being caught in a real life game of cat and mouse where we are the only ones that can lose.
My question is, how can we be in default when we are willing, and even trying, to pay our debt, but no one is willing to accept the funds? More so, how can we be in default as it was their actions, not ours, that created the situation in the first place?
This reality is what led my search to define the situation and discern its legality.
This situation is what led me to the idea of Mortgage Servicing Fraud.
Your “Mortgage Servicing Company” is, in essence, the middleman between you and the company that holds the note on your mortgage.
Mortgage Servicing Fraud refers to fraudulent behavior on the part of the Mortgage Servicer that is detrimental to the individual homeowner. It can appear in several forms. Such as a forced insurance policy when proof of insurance has been supplied. An insurance policy that is placed without the homeowner’s knowledge. Then, when the policy goes unpaid the home goes into foreclosure.
Or perhaps the servicing company chooses to pay the homeowner’s property taxes late. Then they charge the late fees to the account, forcing it into delinquency and eventually into foreclosure. Again, this is all done without the knowledge of the homeowner.
Or maybe they do something exactly like they have done to me and to my family.
Many of these cases go all the way to the courthouse steps with the homeowner genuinely believing that it is all a simple miscommunication that can easily be rectified.
It may sound farfetched, but the practice of forcing paying customers into foreclosure is alarmingly common.
Because this is how the servicing companies make the their money and this is how they generate profit.
To understand this, you must first understand that servicers generate income in 3 ways.
- · They receive a fixed fee based on loan value.
- · They “float” income from the time a homeowner pays until those funds are dispersed to the holder of the note, various insurance policies or tax bills.
- · They retain most or even all fees related or incurred for late payment.
Looking at these facts it quickly becomes apparent that servicers have no incentive to keep homeowners in their homes. In fact, according to Katherine Porter, an attorney specializing in this field and who has been called to testify, “Servicers have incentives to make it difficult for consumers to cure defaults, rather than engage in loss mitigation.” The longer a customer is in default, the more money their account generates for the servicers and the larger their profit margin. In other words, offering poor customer service can serve to maximize servicer profits.
In my particular case, the Mortgage Servicing Company has an added incentive to act immediately rather than allow me to reinstate my loan into good standing. Their incentive? The PMI insurance on my loan will drop off in the very near future. Meaning that if they are able to force a foreclosure now, then they receive not only the 10’s of thousands of dollars that my husband and I have paid, but also the full value of the loan from the insurance company as well as the ability to buy back the home from the insurer and resell at full market value. In essence, foreclosing now allows them to recoup 3 times the value of my loan. An opportunity they will lose as soon as my mortgage balance reaches the threshold for removing PMI coverage.
Yes, they do have laws that they should and are required to abide by. But the penalty for disobeying those laws is negligible. No more than a slap on the wrist, and it does not end or prevent foreclosure proceedings. Even in a bankruptcy situation.
This means that they can act with practically limitless impunity as the burden of proof is on the homeowner and even when proof is obtained, the outcome is still foreclosure. Therefore, the laws go ignored in many, if not most, cases.
I ask again, how can this situation be legal? It is in direct violation of the concept of a free market society as there is no accountability and no reliable system of checks and balances in place.
The more I research, the more that I find that these types of behaviors are at the heart of the majority of foreclosures taking place in this country today. In fact, the mode, or most common, statistic that I can find points to Mortgage Servicer Fraud playing a role in roughly 70% of foreclosures related to the current housing crisis.
70%! That translates to over 1.2 million American homes in this century alone.
If this number is real, and I believe that it is, then why are we not hearing about it?
THIS is the issue at the heart of the current real estate crisis and THIS is the issue that homeowners need to hear about. The American people need to know that these behaviors are out there and learn ways to combat them BEFORE their home sits on the auction block.
In fact it is Mortgage Servicing Fraud that sits at the heart of the current moratorium on foreclosures in California. It is also Mortgage Servicing Fraud that sits at the heart of the recommendation of a national moratorium by the Leadership Conference on Civil & Human Rights, the National Fair Housing Alliance, the National Council of La Raza and the Center for Responsible Lending.
It is the issue at the heart of the problem, and it is the issue that no one is talking about.
It is time for the American people to band together and fight this injustice as one. Owning your own home is the ultimate symbol of the American Dream. For many it is our true sign of financial security and our one true foothold into the middle class. It is also the one true asset that allows many of us to leave behind a legacy of growth to our children rather than a legacy of debt.
The reality of Mortgage Servicing Fraud is that it is threatening that dream and it is doing so in an illegal and unjust way. It is an issue that crosses party lines, crosses demographic lines and unites us as one people with one goal. By forcing it into the forefront of the mainstream media we might finally force the relevant governing bodies to take action and hold these companies accountable for their decisions and behavior.
We are not asking for radical change. We are simply asking for these organizations to be held to the same standards as the individuals upon which they enforce their will.
For those of you who want to learn more, here are a few links you might want to check out. I promise, it will be eye opening!