“A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”
— Mark Twain
Reformed Broker: “Inside the Credit Card Robosigning Scandal“
Credit card accounts get charged-off when a customer falls several months behind on payment. The issuer then sends the file to a collection unit, either an internal division or a debt collection company that it’s hired. If the issuer still can’t get the customer to pay up then it might sell the file, along with millions of others, to a debt collection agency. In fact it’s common for the file to be sold on from agency to agency, with each buyer hoping that it can finally make the debtor pay, even if it needs the help of a court to do so. Going to court might actually be part of the agency’s strategy. And that’s where robosigning comes in.
As with judicial foreclosures the card issuer or collection agency usually needs to have records showing that a contract existed with the customer, that the customer breached this contract and that the company suffered damages as a result. Furthermore the “preparer of records” must prove that s/he has actual knowledge of the events recorded – and that’s even harder to do with credit cards than with mortgages. I might have the right documents proving I lent you money to buy a house, but what kind of documents would prove that I lent you money to buy movie tickets or to fill up your car? As one lost court case for JPMorgan reads, “credit card statements contain information that is conveyed from multiple entities, from the reporting merchant through various intermediaries” before actually reaching the issuer. How can an issuer, let alone a collection agency once or multiple times removed, prove that its employees have actual knowledge of these events ? Of course they can’t, but why let a little thing like that stand in the way?
Instead the issuer or agency shows up in court and hopes that the debtors don’t so that it can get a default judgment in its favor. (Which happens a lot since they often send correspondence to the wrong address to begin with.) Or as Peter Holland of the University of Maryland Law School describes, they take the smaller balances to small claims court where rules of evidence are more relaxed and where informal proof, like affidavits, are more readily accepted.
And it turns out that a lot of these affidavits are highly suspect.
Main Street: “Why We Need an Investigation: Alissa’s Story“
In the spring of 2009, just after the federal program to assist homeowners was established by the Obama Administration, my mortgage company sent me a notice saying that I may qualify for home mortgage remodification. I called my bank, and it took them just ten minutes over the phone before they let me know that I qualified for a modification, and they gave me a lower payment.
After following the modification payment plan, to my surprise I received a foreclosure notice in the mail. The bank informed me that my modified payments did not actually apply to my mortgage. I was then “re-modified” several times, each time at a different amount. I again maintained my payment agreements, yet still continued to receive foreclosure notices. None of the payments that I made went to the balance of my mortgage or the interest that I owed, they were applied to “fees” that the bank added to my account for late and missed payments and my tax escrow account.
After receiving my third foreclosure notice I contacted my State Representative who sent me to Community Action Southwest. They assisted me in dealing with the bank to ensure they followed the remodification guidelines they had been ignoring. I was finally refinanced, with no credit check or financial documents.
I am now stuck with a mortgage that is fifteen years longer than it originally was. The bank took all the modification payments I made and, after applying them to escrow, kept the rest as profit. They decided those months were “missed payments” and added that sum to the original mortgage, increasing it by $25,000. My equity is completely gone and my credit is destroyed.
John Reed, former Citi Bank CEO … knows what happened. He knows why it happened. I am certain he knows where the culpability lays. But, as they say in our neck of the woods: He wouldn’t say [σκατά] even if he had a mouthful.
What happened and what these people did was not a benign experience as the word “mistake” implies and as Mr. Reed is using it. It was intentional and wanton action taken on behalf of money.
Gaius Publius: “A Primer on Mortgage Fraud“
The mortgage business, as it evolved during the housing bubble, had two ends and a middle. Fraud related to the mortgage market crash occurred at each end.
The two ends are — (1) The consumer end. Home-buyers contracted with banks and mortgage sellers like Countryside for loans. These are debt contracts. (2) The banking end. Banks sold “securities” using bundles of mortgages as the underlying “thing of value” to its largest (and often, most gullible) customers. There’s fraud at both ends.
Michelle Conlin: “Old mortgages rise from the dead, haunt homeowners“
Diane Thompson, an attorney with the National Consumer Law Center, says she has defended hundreds of foreclosure cases, and in nearly all of them, the homeowner was not in default. “The record-keeping on the part of the mortgage servicers is not to be trusted.”
The problems grew from a lot of sloppy recordkeeping that began during the housing boom, when Wall Street built a quick-and-dirty back-office operation to process mortgages quickly so lenders could sell as many loans as possible. As the loans were later sold to investors, and then resold around the world, the back office system sidestepped crucial legal procedures.
Now it’s becoming clear just how dysfunctional and, according to several state attorneys general, how fraudulent the whole system was. …
No one collects statistics on wrongful foreclosures, or how many people are facing the phantom mortgage debts. But as the industry enters its fifth year of unwinding its mortgage morass, consumer groups, homeowner attorneys and foreclosure-fraud investigators say they are seeing more cases where people who don’t owe the banks a dime are getting ensnared in the same hell as those who have missed payments.
They add that such problems are likely to intensify. Former industry employees have testified that they knowingly pushed through foreclosures on the wrong people.
- Karoli: “Predatory Payday Lenders Threatening Churches in Missouri“
- The Consumerist: “California City Thinking of Closing Wells Fargo Account Over Foreclosure Debacle“
- The Consumerist: “Bank of America Takes Back My Claim Because My Account Was Compromised Twice“
- Binyamin Appelbaum: “How the Fed Presidents’ Assets Stack Up“