People have always loved to complain about their banks. The push-button circus that passes for customer service. The larding on of fees. But the false foreclosure cases are hardly the usual complaints. These homeowners paid their mortgages — or loan modifications — on time. Some even paid off their loans. Worse, those on the receiving end of a bad foreclosure claim tell similar stories of getting bounced from one bank official to the next with no resolution while the foreclosure process continues apace.
Many have to resort to paying a lawyer, even after presenting documentation. They say they have to sue not only to stop the wrongful foreclosure but also to attempt to win back their costs.
There are no official statistics for these homeowners, but lawyers, real estate agents and consumer advocates say their ranks are growing. In November, during foreclosure hearings on Capitol Hill, senator after senator scolded the banks about wrongful foreclosures. They said their offices were deluged with complaints from people who had done everything right but were being treated by banks as if they had done everything wrong. And the Florida attorney general’s office is also investigating the issue as part of its foreclosure probe.
“This is the worst I’ve ever seen it,” says Ira Rheingold, an attorney and executive director of the National Association of Consumer Advocates. Diane Thompson, a lawyer with the National Consumer Law Center, has defended hundreds of foreclosure cases. “In virtually every case, I believe the homeowner was not in default when you looked at the surrounding facts. It is a widespread problem throughout the country.”
Homeowners in Florida, Nevada, Texas and Pennsylvania have filed lawsuits alleging that they were victims of mistaken foreclosure. In many of those cases, the bank went so far as to haul away belongings and change the locks on the wrong homes.
Now the class actions are coming. In Kentucky and California, class-action lawsuits have been filed against major lenders on behalf of homeowners in loan modification programs who allege that they made all of their payments but got foreclosed on anyway.
“It is mind-boggling that these large banks accepted billions and billions of TARP money from the government, and they are just committing a fraud on the American people,” says Jack Gaitlin, who filed the Kentucky suit on Oct. 4.
Is it really?