Source – allgov.com
– mortgage crisis, an audit out of San Francisco has found that more than 80% of foreclosures broke some kind of law.
City officials requested the audit that examined 382 randomly chosen foreclosures that occurred from January 2009 through October 2011. The findings revealed that 84% of the files involved “what appear to be one or more clear violations of law.” The violations included not giving homeowners warning that they were in default on their loans (6%), not giving homeowners adequate legal warning their property was being sold (10%), backdating of documents (59%) and transfers of loans by entities that had no business doing so (45%).
Another disturbing discovery related to the Mortgage Electronic Registry System (MERS). In 1995 the bigger banks created MERS as a privately owned electronic system for registering mortgage sales that was supposed to replace local county recording. In the words of the New York Attorney General’s Office, they did so “to allow financial institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers, and facilitate the rapid sale and securitization of mortgages.” The San Francisco audit found that in 58% of cases, the loan beneficiary listed on the deed of sale was different from the one listed in the MERS database.
Kathleen Engel, a professor at Suffolk University Law School in Boston, told The New York Times: “If there were any lingering doubts about whether the problems with loan documents in foreclosures were isolated, this study puts the question to rest.”
-David Wallechinsky, Noel Brinkerhoff
To Learn More:
Foreclosure in California: A Crisis in Compliance (by Aequitas Compliance Solutions) (pdf)
Audit Uncovers Extensive Flaws in Foreclosures (by Gretchen Morgenson, New York Times)
Massachusetts Sues Big 5 Banks over Illegal Foreclosures (by Noel Brinkerhoff, AllGov)
California Bill Would Charge Banks $20,000 for Each Foreclosure (by Noel Brinkerhoff, AllGov)