Thursday, July 17, 2014

Are Big Banks Overcharging Foreclosure Fees?

According to a recent article in Reuters, it’s possible that at least five large banks may have “overcharged the government for expenses incurred during foreclosures on federally backed home loans.”  Which banks have been implicated?  Based on filings with the Securities and Exchange Commission (SEC), the banks involved are PNC Financial Services Group Inc., PHH Corp., MetLife Inc., Santander Holdings USA Inc., and Citizens Financial Group Inc.  Citizens is the U.S. “unit” of the Royal Bank of Scotland.  The banks have all received subpoenas that seek to uncover information about the fees at issue.
Foreclosure rates are continuing to wane across the country.  And although Illinois is still near the top of the list of states affected by foreclosures and delinquencies, the market is bouncing back.  However, the fact that the real estate market is in recovery doesn’t mean that banks can get away with fraud or overcharging for expenses related to foreclosures.  Indeed, the recent investigation suggests that the SEC and other organizations continue to investigate lending and foreclosure practices from the peak years of the housing crisis.
If you have questions about foreclosure fees and your rights as a borrower, it’s important to get in touch with an experienced Chicago foreclosure defense lawyer.  An attorney at the Emerson Law Firm can speak to you today.
Details of the Bank Subpoenas and Foreclosure Expenses
Based on information contained in the Reuters article, it looks as though the U.S. Attorney’s office has issued subpoenas to those banks in order to obtain “information on claims on foreclosed loans insured by the Federal Housing Administration or guaranteed by Fannie Mae and Freddie Mac.”
Why are the subpoenas coming now, in a period that Reuters describes as “years after the height of the foreclosure crisis”?  In short, the SEC, along with many different consumer advocacy groups across the country, is attempting to really “clean up” the mortgage-servicing industry.  Given all the problems involving mortgage servicers and consumer fraud over the last six years, it shouldn’t come as a surprise that consumer rights groups continue to look into these matters.
But what is distressing, according to Ira Rheingold, the director of the National Association of Consumer Advocates, is that consumer rights advocates are “seeing the same servicing problems over and over.”  Indeed, Rheingold contends that overcharging is a practice that has been “built into” mortgage-servicing procedures.  As a result, servicers have learned “to charge as many fees as they could.”
The new interest in fee-related practices has also arisen with renewed use of the Financial Institutions Reform, Recovery and Enforcement Act.  As of late, the Justice Department has been relying on that law to “pursue cases against banks.”  And for many advocate groups, it makes sense to take a closer look at these banking practices now that we’re out of the woods with regard to the economic crisis.  Given the extremely high percentage of loans that were delinquent or in foreclosure between 2009 and 2012—a total of approximately 10 percent—between $6 trillion and $7 trillion are connected to loans connected to the economic downturn.  It’s important to know whether those mortgages have been affected by bad banking practices.
Do you have questions about foreclosure or mortgage-servicing practices in Illinois?  Contact an Oak Park foreclosure lawyer today.
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