The Weekly Walk of Shame: Blaming "Deadbeat" Homeowners for Foreclosure Fraud

This Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled up this week. If something's bugging you, too, go ahead and unload in the comments section below.

Today's subject
Foreclosure fraud is heating up. While bankruptcy judges have chastised Wall Street's lacksidaisical approach to recordkeeping and fabrication of court documents at least as far back as 1999, the foreclosure wave sweeping America has provided a new venue for lawbreaking.

Wall Street has characterized the fraud epidemic as a mere paperwork issue. Various journalists have echoed and expounded the party line, laying the blame thick on "deadbeat " homeowners.

Here's The Wall Street Journal editorial team:

Talk about a financial scandal. A consumer borrows money to buy a house, doesn't make the mortgage payments, and then loses the house in foreclosure -- only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine ...? Welcome to Washington's financial crisis of the week ...

We're not aware of a single case so far of a substantive error. Out of tens of thousands of potentially affected borrowers, we're still waiting for the first victim claiming that he was current on his mortgage when the bank seized the home.

Umm ...

  • Bank of America (NYSE: BAC  ) foreclosed on a Fort Lauderdale home that didn't even have a mortgage .
  • A terrified Orlando woman for whom foreclosure proceedings had not begun dialed 911 when JPMorgan (NYSE: JPM  ) contractors attempted to break into her home.
  • On Wednesday The New York times reported that Deutsche Bank tried to foreclose on a Michigan house that was paid for in cash, a Kentucky couple was foreclosed on by a trust that did not exist, and a Colorado woman is facing foreclosure after her bank told her to skip a payment as compensation after it mistakenly changed her locks.
  • My favorite: Wells Fargo (NYSE: WFC  ) hired a law firm to foreclose on a condo owned by ... Wells Fargo. The bank then hired a separate legal team to defend itself. As business reporter Al Lewis is quoted, "You can't expect a bank that is dumb enough to sue itself to know why it is suing itself."
  • And the list goes on. Wells Fargo alone has found documentation "lapses" in 55,000 current cases, and there's no reason to think they are special among mortgage servicers.

Why you should be indignant
As Cleveland Federal District Court Judge Christopher Boyko wrote in 2007:

Plaintiff's "Judge, you just don't understand how things work" argument reveals a condescending mind-set and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.

It's galling when Wall Street institutions that were bailed out by the public in 2008 still feel they can rip off consumers and investors because they're above the law.

So here's the fraud: In order to foreclose on a house, you need to have the note, the IOU that identifies which homeowner owes money to whom.

But during the housing securitization bonanza, as mortgages were issued, sliced and diced, and traded left-and-right, sketchy mortgage originators appear to have cut corners by failing to supply notes to mortgage-backed security trusts. According to the CEO of a major subprime lender, "We never transferred the paper. No one in the industry transferred the paper."

Many of these contracts were also destroyed -- banking executives told a Florida court in 2009 that it was standard practice to shred them.

Now that Wall Street is without the notes, it may be unclear in many cases who owes money to whom. As law professor Catherine Porter testified yesterday before the Congressional Oversight Panel:

If the trust does not have the loan, homeowners may have been making payments to the wrong party. If the trust does not have the note or mortgage, it may not have standing to foreclose.

Now, Wall Street could agree to negotiate with more homeowners to restructure their loans in an affordable manner, as is common in the corporate world. Or we could create a process that would allow mortgage debt relief to be included in personal bankruptcy proceedings, as Blackrock's (NYSE: BLK  ) Vice Chairman recently argued we should. Such moves would help to clean up consumer debt and move the housing and economic recoveries forward.

They might even be welcomed by investors like PIMCO, Blackrock, Legg Mason's (NYSE: LM  ) Western Asset Management, Annaly Capital (NYSE: NLY  ) -managed Chimera (NYSE: CIM ), taxpayers (via the New York Fed and Freddie Mac), the investors who actually own the mortgages, since foreclosure can be a costly process for them too. (That group, minus Chimera, recently notified Countrywide they were displeased with how it was servicing their investments in mortgage-backed securities.)

But Wall Street, which collects late payment fees and additional fees during foreclosure, has instead resorted to hiring companies to "recover" the documents and paying notaries to "robo-sign" themselves hundreds of times daily. They're even charging investors for the robo-signing tab.

What now?
Honestly, no one knows the full scale of the fraud. But it could be big -- all 50 state attorneys general are investigating. I'll be writing more on the potential fallout this crisis could have on Wall Street and the $2.8 trillion residential mortgage-backed securities market.

This doesn't appear to be a mere "paperwork issue" – we seem to be dealing with bullying and lawbreaking.

The Journal editorial team, whose "About Us" page congratulates itself on "stand[ing] for free trade and sound money; against confiscatory taxation and the ukases of kings and other collectivists; and for individual autonomy against dictators [and] bullies," seems to feel that government is inherently evil, whereas corporate violations of individual rights isn't a major concern.

But sometimes we need laws, regulators, and courts to enforce contracts and protect individuals from corporate bullying. Illegally seizing property or seizing the wrong property, failing to live up to contractual obligations to investors, and lying in court is, yes, illegal -- even when Wall Street does it.

As the facts come out, they are painting a picture of institutional stupidity and greed by Wall Street. Again. This is something that should come as no surprise to Fools. When Wall Street breaks the law and journalists won't let the facts interrupt their prejudged narratives about "deadbeats," it's not surprising -- but it's certainly shameful.

If you'd like me to keep you updated on financial reform and shareholder rights, just shoot a blank email to imoscovitz@fool.com.

Ilan Moscovitz doesn't own shares of any company mentioned. BlackRock is a Motley Fool Inside Value selection. The Motley Fool owns shares of Annaly Capital and Legg Mason. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 02, 2010, at 5:53 PM, KBOKSOFT wrote:

    So, what happens with the home/homeowner in these situations?

    If I stop paying my mortgage, and the bank forecloses, and I find out the bank has no right to do so (because a judge says so), then what?

    I'm certainly not going to start paying to mortgage to someone who I officially don't owe. But doesn't the bank still hold a lien on the house?

    Do I get the house free-and-clear?

    Can I sell the house?

    Can the bank kill my credit rating?

    What happens?

  • Report this Comment On November 02, 2010, at 6:09 PM, FredSmith1234 wrote:

    Nobody has brought up the distinct possibility that the loan servicers may well have bundled and sold each of these loans MORE THAN ONCE to differernt investors via the securitization process. THIS COULD BE THE REAL REASON THAT THERE IS NO DOCUMENTATION / PAPER TRAIL. The non-existent documentation and accounting is entirely consistent with this scenario. This means that the entire plan was a true Ponzi scheme in the worst sense. In other words, rather than selling the loan once to investors, as we have all naively been assuming, there is no reason to believe that they did not double-dip or quintuple-dip and sell the exact same loan to completely new buyers. THIS IS A LEVEL OF FRAUD THAT THE AMERICAN PUBLIC HAS NOT YET CONTEMPLATED.

    There are no new laws that are necessary. All that is necessary is for the states to FOLLOW THE EXISITING LAWS which have been around much longer than any of us, or any of the banks themselves. These laws were devised to deal with all property frauds, including the current foreclosure frauds. No more bailouts. Let the chips fall where they may.

  • Report this Comment On November 02, 2010, at 6:14 PM, ShootNStarz wrote:

    Interesting Interesting... When the investor who didn't buy my condo as promised, and I couldn't make payments, the bank told me they wouldn't talk to me unless I stopped making payments. I did that, found a broker, put the condo on the market, found a buyer at a ridiculous price, the bank never answered my attempts to sell short, thus not approving the sale, lost that buyer because of how long they took to look at his offer that they never did, found another buyer, same thing. Never answered anything, just kept sending me bills. They never actually foreclosed on me, but sold my property for less than my last buyer. Has never foreclosed but did tell me that it was sold. I believe, but cannot prove that they can't find an actual mortgage to forclose on. But they still want me to pay my monthly payment.

    And now somehow, I'm at fault for being an investor, following an investment adviser's advice. The guy who had been making me money for years. I've lost my whole investment, you know.... capital.

    Well, I confess, in hindsight, I'm am guilty of being someone who listened to the adviser, the Bankers who were so great offering me that huge mortgage at a low interest rate. Yep, I'll run out of money at least five years before I planned to and I might just die. I think that's punishment enough. Thanks for your concern.

  • Report this Comment On November 02, 2010, at 7:32 PM, spendley wrote:

    I think the articles "blaming" homeowners are relatively new. It's been "big, bad banks" and "poor, defenseless, misled homeowners" for the last two years. You make some very good points. One of our mortgages was sold twice. I don't deny that some sloppy bookkeeping and bullying goes on in the financial industry. It still doesn't excuse defaulting homeowners who clearly couldn't afford the homes they purchased. Tell me one person who DOESN'T innately know whether or not he can afford a home regardless of what a slick mortgage broker says. Let's see .... it only costs 50% of your monthly income, you have nothing in the bank, you'll have to do a piggyback loan, adjustable mortgage - hmm that sounds interesting; oh, add on the insurance, etc. -- that's workable. Please! I'm a grown up -- I should know when to say when even if the bank is willing to loan me money to hang myself.

    I'm not talking about people who didn't overborrow but who, for whatever reason (e.g., job loss; couldn't unload investment property within a reasonable time frame, etc.), couldn't pay the mortgage anymore. I'm just referring to those who knowingly took on more than they should have. I don't mean to be unkind. While I have a lot of sympathy for them and the situation they find themselves in now, I just wish they had gotten better advice and trusted their own instincts back then.

    ShootNStarz, it sounds like you got the worst advice ever. I'm sorry that happened to you. But you're at the Fool, which is all about empowering us to become great investors ourselves, so hopefully you can make some of it back.

  • Report this Comment On November 02, 2010, at 7:38 PM, TMFDiogenes wrote:

    KBOK,

    I'm not a lawyer, but it's an interesting question. It probably goes to court, and states vary considerably in whether they favor the banks or homeowners. For instance, NY laws are pretty tough on banks, TX not so much.

    There is a movement called produce the note encouraging people facing foreclosure to do just that: http://www.consumerwarningnetwork.com/2008/06/19/produce-the...

    http://rortybomb.wordpress.com/2010/10/18/the-morality-of-re...

  • Report this Comment On November 02, 2010, at 7:50 PM, TMFDiogenes wrote:

    "Nobody has brought up the distinct possibility that the loan servicers may well have bundled and sold each of these loans MORE THAN ONCE to differernt investors via the securitization process. "

    That's certainly an issue that could complicate the process. There's evidence that's happened.

    http://www.nakedcapitalism.com/2010/10/guest-post-how-did-th...

    Ilan

  • Report this Comment On November 02, 2010, at 8:50 PM, yarbtly wrote:

    I totally agree with spendley. I bought my first home during the 1980's oil boom in Texas. Within three years I was 25% underwater. But never once did I consider not making the mortgage payment. So, even after the down payment and ten years of monthly payments I had to write a check when I sold the house.

    I wasn't a victim. If the price of housing had continued to go up, I would have gladly taken the profits. Sure, out of millions of foreclosures you can find examples of egregious conduct on the part of lenders. But don't dismiss the fact that in the vast majority of cases, people have just quit making their payments ; some for years.

    For those who can afford to make their payments but choose not too because it's not in their best financial interest I have just one word, scumbag.

  • Report this Comment On November 02, 2010, at 10:19 PM, xetn wrote:

    "But sometimes we need laws, regulators, and courts to enforce contracts and protect individuals from corporate bullying. Illegally seizing property or seizing the wrong property, failing to live up to contractual obligations to investors, and lying in court is, yes, illegal -- even when Wall Street does it."

    Yeah, thats the ticket. More laws, regulations. That is what we need more of. FWIW, we have laws and regulations for fraud, perjury and contracts. That is the mindset these days. If existing laws and regulations don't do the job, just create some more. I think we have enough examples of that action to prove it does not work. All it really does is add more cost to the economy and create more bureaucracy and expansion to the government.

    What we really need is to eliminate a lot of the regulation we already have. (The 2008 Federal Register was 80,700 pages long.)

  • Report this Comment On November 02, 2010, at 10:27 PM, fay51 wrote:

    This post is important and should be widely seen. Some of the comments such as that of Fred Smith 1234 are also valuable. Send it to the new Congress too!

  • Report this Comment On November 02, 2010, at 10:46 PM, Barbaralawgrace wrote:

    Foreclosure frauds, Foxes, hidden Elephants in Plain Sight, Havoc

    Whether or not foreclosures are halted, not much will be accomplished until authorities take action against the elephant in the room –hiding in plain sight: FORECLOSURE LAWYERS.

    Lawyers (debt collection attorneys, foreclosure mills) for mortgage lenders should be held accountable for foreclosure illegalities and for concealing malpractice against their lender-clients –as well as for committing Unfair Debt Collection Practices, extortion, and fraud against property owners; and deceiving Investors!

    Often foreclosure delays are because of lawyers, but they keep that fact from clients. Lenders –who are not required to know laws, are sometimes unaware that lawyers’ mistakes, errors, and frauds provide reasons, defenses, and basis for owners to attempt negotiating mortgage contracts. As a fundamental matter, injurious acts by such lawyers render the lawyers, as well as their mortgage clients liable for justiciable damages.

    If improper or false pleadings are filed in court by mortgage lenders, it is almost always via lawyers acting on lenders’ behalf. It is he or she (lawyer) who would file bankruptcy "Lift Stay" motions that "lack standing," "proof of claims" different from 'lift stays' “movers”; and record illegal property deeds. And, lawyers, not lenders would be the persons who failed to “effect service” or failed at any substantive Civil Procedure requirement. In those instances, homeowners should not be blamed for refusing to cooperate with taking of their homes via error and fraud; and those lawyers owe $$$$$$ to their clients for fatally botching foreclosure cases.

    But, there’s an abundance of lobbyists, speech makers, “insiders,” straw buyers, and others who apparently benefit from detracting attention away from the unmitigated fact that an intentional false court pleading is tantamount to judicial fraud!

    And despite any crafted statement about “quelling” the matter of fabricated foreclosures, it is impossible to “quell” aftermaths from deliberate fraud. It is moreover impossible, and ridiculous to discount actionable wrongs from attorney-orchestrated real estate swindles. It seems that the primary incentive for silencing defective foreclosures is concealing the actors.

    This scourge might not be so obvious, but glaring are recurrent illegal foreclosures, null property deed recordations, as well as foreclosure and bankruptcy proceedings via non-existent lenders’ names. Even worse, are horrific acts of tyranny inflicted upon people who oppose fraudulent conveyances. These are just samples of foreclosure improprieties which raise flags of lawfulness, and whether entitled lenders ever legally repossessed those properties.

    It is sometimes said that matters such as the foregoing are irrelevant to defaulted homeowners. Yet not enough people realize that there are property owners who have been injured for being interferences to white collar real estate vice.

    As such, glossing over matters of falsified foreclosure is definitely not useful when people have been egregiously wronged from foreclosure frauds. Not only are injured entitled to remedy, their information would equip authorities with more details and evidence critical for reducing crime and corruption. Also, substantive information (which would not be whitewashed, and whistleblowers receive protection) will supply a clearer picture of foreclosure fraud factors that are harmful to homeowners, banks, and investors. Additionally, city revenues across this country will increase because money being used in furtherance of foreclosure and mortgage fraud will return to city coffers. ** “Foreclosure Frauds, Wells Fargo-the Fox in Charge...” @ http://newsblaze.com/story/20101028181052lawg.nb/topstory.ht...

  • Report this Comment On November 02, 2010, at 11:53 PM, BenLMoon wrote:

    The business editor for Atlantic Monthly has said similar things on PBS. She says the large banks inundated Congress with lobbyists to prevent adjustments to loans, saying it would be "too costly"--but their effort was short-sighted for their own welfare. Blackrock is right to suggest similar modifications for individual mortgage debt that are given to corporations in re-negotiating debt terms. And the Supreme Court, in its infinite wisdom, struck down McCain-Feingold; that opened the lobby floodgates. I like the idea of having all elected officials wear NASCAR-style overalls with patches of their sponsors sewn on; the detailed list of donors and gifts should be publicized even more completely. Why don't we formally organize the Independent Party, not offering any candidates but unmercifully grilling those who do run?

  • Report this Comment On November 03, 2010, at 9:03 AM, MikeW92103 wrote:

    It's a real worry that if courts make it difficult for banks that file fraudulent foreclosure papers, people might think they don't have to pay their debts.

    But it also worries me that without due process of law, home "ownership" has no meaning. If a bank can foreclose on a home I own free and clear, or on a mortgage I've been paying on time,

    then my property rights have no value. If it goes that way, the rewards of home ownership will not cover the risks and costs. So all those individual state laws regarding "chain of title" are not quaint inconveniences, they are the essence of property ownership.

    I suppose that if real estate property rights were to be weakened, it could be good for financial assets, since the risk of securities relative to real property would look pretty favorable.

  • Report this Comment On November 03, 2010, at 11:38 AM, rielFool wrote:

    The worry here isn't just about foreclosures. I pay my mortgage every month, but have no guarantee that after I am done paying, there will be anyone with the legal authority to give me a release of mortgage.

    Just think about it - you could pay hundreds of thousands of dollars over a period of several decades, and you still don't get to own your house free and clear, because the paperwork was shredded/lost/fraudulently sold to multiple investors/etc.

  • Report this Comment On November 03, 2010, at 11:54 AM, TheDumbMoney wrote:

    I'm about to irritate people even more than usual.

    This "article" conflates at least three different issues (idea of note, mistakes in foreclose, and modifications), is perhaps deliberately misleading, and is flat out, for whatever reason, the single most factually incorrect thing I have ever seen posted on The Fool. I'm not kidding about that.

    The writer has no clue, absolutely none, what a mortgage loan is. A mortgage loan in some sense a relic of feudal English law, and in some sense a modern contract. In short, it is bi-partite: it consists of A) the promissory note, or note; and B) the mortgage, or in some states, the deed of trust. The "note," which the writer is so exercised about, is the contract by which the borrower obligates him or herself to pay the lender. It is the contemporary, modern contractual aspect of a mortgage loan. By contrast, item B, the mortgage or deed of trust, is the feudal, English law component of the mortgage loan. THAT, not the note, is the "security interest." THAT, not the note, is what authorizes the lender (or, by statute in most states, an agent, such as a servicer) to foreclose when mortgage payments are not made. The note merely authorizes the lender to sue the borrower if the foreclosure of the security interest does not satisfy the debt. The fact is, whatever happens to the note, the mortgage or deed of trust has been recorded, in county records, and it says that X borrower owes Y lender money. Period. And, it is incredibly simple to figure out when X borrower hasn't been paying that, which, every single person being foreclosed upon, with the exception of a very few who have raised a legitimate ruckus about some inadvertent screw-up, have simply not been doing.

    The writer cites to four instances of true screw-ups (and a fifth innuendo paragraph), out of hundreds and hundreds of thousands of foreclosures. Moreover, in these instances, the borrowers immediately went to the news, it became a scandal, and everything was unwound, etc. The fact is, this country has never faced a foreclosure crisis on this scale before. The banks can barely handle it. The courts can barely handle it. It is inevitable that mistakes are going to be made. But it is not fraud on a massive scale. The writer conflates totally legally unfounded ideas of what the "note" signifies (courts based on old, old law have upheld the sanctity of the security interest, the deed of trust or mortgage, and generally not required the note), with foreclosure mistakes that have absolutely nothing to do with that issue, with a totally separate issue of loan modification issue. The writer moshes it all up together as if there is some coherent story of conspiracy to be told. It is nonsense. As to the third of those issues, the law gives lenders a right to foreclose or modify at their discretion; if it were otherwise, it would probably be a Taking (see loan = asset, below) under the Constitution.

    Let me close with three additional facts -- as opposed to innuendo and misinformation:

    1) In a majority of states, including my fair California, anti-deficiency legislation bars lenders (with some rarely-used exceptions, such as when a borrower deliberaly trashes a property) from ever suing on the note if the foreclosure of the security interest fails to satisfy the amount loaned. Thus, borrowers have essentially had an option on their homes, and while they bear significant psychological risks, the banks in these states bear the vast, vast, vast majority of the financial risk (and, in the case of zero down and intrest payment for two years loans, ALL of the financial risk) of the lowering in property values and subsequent foreclosure. This is in large part why the banks had to be bailed out in the first place. It is thus no coincidence that these states have had bigger price declines. Borrowers are not as stupid as the writer thinks they are. Go look at the statistics on the number of people who "walk" from mortgages they can pay, in such states, versus in states where a bank can sue (on the contractual note) for the deficiency....

    2) If, as the writer implies, banks are foreclosing wholesale on properties they do not hold a security interest in, the wronged party is not the borrower who did not pay the mortgage payments, it is the OTHER BANK!! Don't you think, that if that were happening, the banks would be suing each other? Do you think the bank that actually made that loan will or would let that stand for two seconds? And even if the borrower made his or her loan payments and it was a total mistaken foreclosure, do you think the bank that actually made the loan is going to wait more than two seconds before frying the bank that has essentially 'stolen' their loan in such a situation.

    3) Why do I say 'stolen' there? Because the loan is an asset. It is property of the bank. A corrolary to that is that when borrowers put zero down, or even ten (as I did on my house) or even twenty percent down, they never really own their house to begin with. They are essentially living in their layaway item, partially-(at least) renting, until the day they pay off that loan. If people grasped that concept, if there weren't legions of people trying to fool people into thinking they have a "right" to something, a house, even when they put down a tiny percentage of the money, or none, to acquire that asset, there would be a lot less pain.

    THAT's the truth. If it bothers people, if it upsets people, so be it.

  • Report this Comment On November 03, 2010, at 12:45 PM, jrj90620 wrote:

    Why don't we agree that both lender and buyer thought housing could only appreciate and therefore they both took excessive risks.The problem is that govt shouldn't be so involved in housing.There should be no Fannie,Freddie and FHA forcing taxpayers to back these loans.

  • Report this Comment On November 03, 2010, at 1:18 PM, OneLee wrote:

    It reminds me that picture were a piton swallowed an alligator. They both died

  • Report this Comment On November 03, 2010, at 3:19 PM, Thaeger wrote:

    A mortgage isn't a holy union blessed by god. It's just another investment, for both parties.

    To say that a borrower is 'wrong' for exercising their legal right to walk away from a bad investment is ridiculous. This has always been a risk with every loan, big or small. This added protection for the borrower, and added risk for the lender, is in a large way the justification for much of the countless hundreds of billions of pure profit banks have made off of their investments over the decades.

    What is wrong is when the banks decide that merely screwing people over within the confines of the legal system just isn't enough anymore, and intentionally flaunt said laws in their quest to further skew their side of the risk:reward equation.

  • Report this Comment On November 03, 2010, at 4:08 PM, turtle975 wrote:

    I wonder how long before a homeowner who owns their home outright (no mortgage) defends their home from wrongful bank foreclosure with something more than an attorney? Sounds like some good made for TV movies in this story.

    I recently re-financed with one bank who immediately sold the loan to another bank. They sent me letters (that I kept). I wonder how to tell if they did all the paperwork right? Some day, I will either pay off the mortgage or sell the house (and pay off the mortgage). They better be properly recording my payments!

  • Report this Comment On November 03, 2010, at 6:15 PM, wasmick wrote:

    I'm posting a comment because I too know absolutely nothing about this subject.

    Someone should tell dumberthanafool and spendley that their knowledge on this subject is unwelcome here. We're inciting the uninformed here and attempts to educate and illuminate on this issue only gets in the in the way of my pitch fork sharpening.

  • Report this Comment On November 04, 2010, at 12:57 AM, FraudVictim wrote:

    Wells Fargo committed mortgage fraud. I have proof.

    Letter to Wells Fargo Spokeswpman Vickee Adams,

    Dear Ms. Vickee Adams,

    In your recent Wells Fargo's press release, you declared that ""Our records show that Wells Fargo's foreclosure affidavits are accurate, When the company finds employees that don't follow procedure, it takes "corrective action."

    That's a lie. I can say for a fact that Wells Fargo made us fraudulent mortgage loan and

    foreclosed my home based on hugely inflated and fraudulent appraisal and refused to

    correct its mortgage fraud.

    Wells Fargo teamed up with its attorneys and spent last 4 years in Nevada courts

    defending its appraisal and mortgage fraud.

    Wells Fargo and its attorneys knew it’s Category C Felony to make mortgage loan based

    on fraudulent appraisal.

    Wells Fargo and its attorneys knew it’s Category C Felony to foreclose home based on

    fraudulent appraisal.

    Wells Fargo chose to violate the law and chose to defraud us.

    Hold Wells Fargo Accountable! Save American Dream! Restore banking integrity.

    Please sign the Petition at http://www.wellsfargomortgagefraud.com. Let our voice be heard!

  • Report this Comment On November 04, 2010, at 10:56 AM, wasmick wrote:

    fraudvictim,

    So you were current on all your mortgage payments and Wells Fargo still foreclosed on you?

    That is incredible. I hope you've retained a good attorney.

  • Report this Comment On November 04, 2010, at 2:30 PM, Barbaralawgrace wrote:

    The ULTIMATE COST that should not be paid for faulty foreclosure!

    (the 'elephants that hide in plain sight' killed this little boy, destroyed this family, and remains unaccountable!!!!) Miami Herald news story

    http://www.miamiherald.com/2010/11/03/1907758/behind-a-forec...

    *also see: Foreclosure frauds, Foxes, hidden Elephants in Plain Sight, Havoc

    http://open.salon.com/blog/wwwlawgraceorg/2010/11/02/foreclo...

  • Report this Comment On November 04, 2010, at 3:49 PM, MichaelLittleBig wrote:

    Here is another side of the story:

    As I read there have been some 10 million foreclosures this decade.

    Yes in my opinion -99 percent of the time- the lender sues for foreclosure based on breach or default by the borrower-non payment if you will.

    With the majority of foreclosures the default of payment is how the foreclosure came about.

    * The real key is -what was the reason for nonpayment?

    Yes there is a note and a mortgage security agreement. Let’s stipulate that these two instruments represent the contract between the borrower and the lender.

    *Was the contract fair and equitable to both the parties or is the contract weighted in favor of one of the parties? The bank of course submitted their own attorney drafted contract.

    Let suppose that the lender is a federally chartered thrift that was licensed by the regulator -The Office of Thrift Supervision who is mandated under the Federal Code of Regulations Title 12 to administer, supervise, regulate and enforce laws rules and regulations of those banks for which they are responsible.

    Lets say that the borrower with a conventional mortgage pays and is compliant according to the terms and conditions of the contract.

    The borrower after two years requests a refinance for the mortgage balance with the original Bank with no new money advanced strictly to lower the payments.

    The Bank the through their state licensed appraiser that is also the bank’s employee which is certified to appraise residential properties produces a flawed appraisal with a distorted market value. The Bank denies the refinance on the basis of this flawed appraisal stating that the borrower owes more on the home then its is worth. 2 years later the Banker again denies the borrowers second request for refinance to lower the payments based on a current appraisal that was never completed by the Bank.

    The Bank refuses to discuss the issues.

    The borrower on the advice of two different attorneys’ files for Bankruptcy for protection from the Bank since the Bank refuses to discuss the appraisal issues.

    After 4 months the Bank files foreclosure.

    The Borrower files a 44 page complaint with the Office of Thrift Supervision.

    This Bank regulator states in December 16, 2006 that there is nothing they can or will do for the borrower since “there are” No Federal Consumer Banking Regulations”.

    The borrower insists that the OTS perform their responsibilities since this bank has also violated the Fair Credit Reporting Act-The Truth in Lending Act and The Credit Equal Opportunity Act which the OTS does not respond period.

    The State of Ohio Commerce Dept agrees that their was appraiser misconduct which included negligence and violated 5 Ohio appraisal laws. The State of Ohio and the Bank then make deal

    that the punishment for this appraiser will be a mandatory 14 months of real estate report writing classes. The State of Ohio stated that this deal was made “to save Time and Money”

    The borrowers elected federal representatives to the Congress ignored pleas for help and therefore barred the borrower’s access to the Congressional committees investigating foreclosures.

    The borrower had counter sued the foreclosure lawsuit by the bank and after $25000 could no longer financially afford to fight the lies.

    The Bank told the borrower that they would sue the borrower for filing a counter claim to the foreclosure that had harmed the Banks reputation.

    Ironically after the Bank completed the foreclosure the new buyer mortgaged the property with two different banks for $ 20,000 more than the original borrower owed.

    *The point is that the borrower has no rights to object, question or contest their foreclosure within the same regulatory system that the banks lends its money.

    *The Banking Regulators neglected their responsibilities and made malfeasance an art form.

    *The State diminished the integrity of appraisals and violated the rules of federally funded transactions(mortgage loans) .Note The Associated Press August 2008 did investigate States and their appraisal compliance to the Congressional Sub Committee Appraisal requirements and the State of Ohio was one that had most of the violations in this area)

    Yes I would agree the Bankers destroyed the American economy and everyone blames the borrower.

    Yes the Bankers by their own admission gave this decade over a billion dollars to the Congress.

    Could we then say that the Bankers purchased the Congressional legislative gifts to protect themselves from the borrower? After all the Bankers are not afraid of any reprisals from the borrower because simply put the borrower has no rights.

    Yes the proof of deceit by the Bankers is based on the fact that none of them have been or will held responsible or accountable for insatiable appetite for financial domination at any price or at the expense of any citizens at least in this society.

    The point of my piece is:

    It is almost impossible to fight a lie-

    But it is absolutely impossible to hide the truth.

    I cannot speak for the millions of foreclosure victims for I am one of them.

    But we will never forget what they did to us.

    In French- Je Me Souviens

    Michael LittleBig©

    Cleveland Ohio case # 584018

    Note – that my mortgage holder the Goldberg’s Am Trust Bank Cleveland Ohio was seized and sold 12-4-2009 by the FDIC for unsafe and unsound banking practices.

  • Report this Comment On November 05, 2010, at 1:05 PM, alrady wrote:

    The writer thankfully seems to get part of it.... he is taking on the editorial team (which as not totally clear in first quick read) THEY say they have not heard of ONE bonafide case of foreclosure where payments were up to date? Thankfully the author corrects them and is correct: IT IS SHAMEFUL to blame homeowners. I

    AND another point contracts are made with understanding.... These were fraud in inducement (a large majority of them) and NO ONE would sign a contract with bank if they knew what was really happening .... I have blog foreclosures evictions and you and the fraud is common theme.

    CRAZY how the house is paid for 3 x over and yet they still want to foreclose. we need banks to be accountable.

  • Report this Comment On November 05, 2010, at 2:47 PM, RockenD wrote:

    What is amazing to me, no one seems to address the issue that the Wall Street Journal has become just another Fox News outlet. Their stories bias border on outright lies in an effort to promote whatever their agenda is and they are willing to disregard any conflicting facts.

    They now run stories from up to a year old as if they were new when it is politically convienent. As an investor this bad behavior makes the newspaper unreliable, untrustworthy, and I no longer take the time to read it. This once fine newspaper now ranks with the likes of the gossip rags sold at grocery store counters.

    Rocken

  • Report this Comment On November 05, 2010, at 4:59 PM, muddlinthrough wrote:

    dumberthanafool & wasmick,

    Hats off. Loved it.

    How the heck to I recommend a post, nowadays? All I see lately is the little 'talk to the hand' report this comment icon...

  • Report this Comment On November 08, 2010, at 8:14 AM, fug57fug wrote:

    Using a handful of examples to show a trend is lazy journalism. It is dissapointing to see this irresponsible mainstream media tactic being used by Foolish editors.

    In any sample size as large as the forclosure market, there will be examples of bad behavior. You are extrapolating 5 examples to create systematic widespread abuse. What percentage of foreclosures are fraud? 1%? 50%?

  • Report this Comment On November 08, 2010, at 2:09 PM, theHedgehog wrote:

    "What percentage of foreclosures are fraud?"

    Does the percentage matter to the victim when he comes home from a trip and finds his locks changed and his house emptied?

  • Report this Comment On November 17, 2010, at 7:04 PM, morkispaw wrote:

    It is easy to point the finger at homeowners who took out mortgages they could not afford and to have very little sympathy for them, but does anybody remember the pressure they were under when they were buying their home?

    I do. I remember it very well. I managed to resist, but I had to fight my broker, my Realtor, my husband and my own id to keep our mortgage within a reasonable amount.

    It is not as easy as spendley and others would have you believe to refrain from taking out a mortgage for more than you can afford to pay back each month.

    In my case the only reason we did not fall into that trap is because I stubbornly believed my budget math over the mortgage broker's fancy charts and calculators. I did not just have to convince myself. After we were approved for a loan that was FAR above what we could realistically afford, the broker sent the approval to our Realtor. So my personal knowledge that we could only afford $x was now being undermined by a newly energized Realtor who wanted to show us houses in the $x+y+z range.

    My husband was *very excited* about this turn of events and tried to convince me that "they wouldn't loan it to us if they didn't think we could pay it back"! I pointed at the housing crisis that facilitated our ability to take out a loan in the first place, but that did not help. He was sure "they" had learned their lessons by now and certainly wouldn't do that again!

    I had to bore my husband for HOURS with budget projections and explanations of "take-home" versus "gross" and finally had to threaten to turn all of the family finances over to him if he was going to believe a random banker over the person who had been managing the money for the last 15 years. "I mean it! I won't pay a single bill EVER AGAIN. If you want a bill paid then you will have to figure out how to do it!"

    So he went to the Realtor and told him, "Oh MY MEAN WIFE won't let me have a pretty house. SHE says we can't buy anything for more than $x"

    And even then I had to constantly play the part of bad cop to keep the Realtor and my husband in line. It took a lot of the fun out of house-hunting for me. Every time the Realtor called I had to say, "How much is it? I'm not going to go look at a house we cannot afford."

    I honestly don't think my husband really believed me until we went to the signing and he saw how much higher the payments were going to be than the broker's projections. He was ready to point and laugh at me because the payments were going to be ridiculously low only to find that my numbers were the ones that were right because my numbers included interest and insurance, etc.

    My point is: Not every household has a grown-up in it that can effectively stand firm against the onslaught of "Ooh, pretty! Don't you WANT IT?" type of salesmanship the mortgage industry is all about. And not every household has a grown-up who will believe her own budget above the numbers done by a professional.

    We are brought up to be obedient to authority. We are brought up to believe the people in charge. If the people in charge are saying that you can have walk-in closets and a brick patio with a built in fire pit, it is not easy to remain sure that you really, really can't.

    I am pleased with myself for being able to resist temptation and to withstand the constant bullying salesmanship. But I do not blame anyone else for succumbing. How can I? I know how hard it is. I can't be sure that I would have been successful 10 years earlier when I still believed that banks were honorable and my husband understood how money works.

  • Report this Comment On December 23, 2010, at 1:31 PM, Boris1st wrote:

    I read all the posts and I am a little concerned that a large portion of the equation was missed. We've been talking about banks and wormy appraisers but what about mortgage brokers? I bought a house in January 2005. 2008 came and, as a self-employed, my income was cut in half. Needless to say, it has become increasingly more difficult for me to pay my mortgage, not because of something I caused but because the down-turn of the economy has affected everyone and the feds have nothing left to bailout little guys like myself after cutting taxes for the rich, bailing out eveyone. I was denied a HAMP modification by Chase, (the 15th bank to service my mortgage since 2005), as I was unable to prove that my hardship was "permanent". in despair, I consulted one of this nations' top foreclosure-defense attorneys and, after he reviewed my documents (my copies are not signed by anyone), he realized that the broker had declared my income as being $98,000/year (it never was and i still have the original e-mail with tax records attachments showing an income of $38,000) and other misrepresentations I was unaware of and never signed. I did demand the entire copy of my file from the broker who is now telling me that they did not keep any of the documents. I am now preparing myself to fight like I never have in the past and, by golly, I will sue eveyone until I get my house free and clear! Fraud was committed at every level and the mess we have is simply the result of it. There will be a stop to greed and when i have spent my hard-earned money paying attorneys to fight on my behalf, I will consider that I paid my dues. In this mess, it no longer matters whom I pay. I owe 175,000 on the house and if I pay attorneys 175,000 to obtain clear and free title to it, I will have fulfilled my end of the contract. in addition, my case will serve someone else in the process. All along, I played by the rules and it blew up in my face. I will play by the rule and have this entire situation corrected, by hook or by crook.

  • Report this Comment On January 21, 2011, at 9:22 PM, anono wrote:

    I just want to get some answers about what is being done to homeowners committing fraud to the banks. I know someone that stopped paying their mortgage back in 2009, filed two forebearance letters to the bank to stop it from going to sheriff sale. Has lived in the home from 2009 til present rent free. Now has enough money to put down on a new house and will let the house in foreclosure go to sheriff sale. There is alot more detail but to sum it up....Is this right?? I feel homeowners do this knowingly and this is a major part in the housing market crash!!

    howhegetsaway@care2.com

    --------------------------------------------------------------------------------

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