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Improper Foreclosure

Improper foreclosure is something you'll be hearing about a lot. The media is abuzz over bank regulators launching a plan to provide monetary compensation to homeowners whose homes were illegally seized.

Improper foreclosure occurs when banks do not have proper mortgage assignment documents. In recent weeks, much has been publicized about mortgage lenders hiring robo-signers to forge signatures on loan documents; allowing banks to foreclose via fraudulent means.

The term, robo-signers stems from allegations that banks hired employees to sign upwards of 4000 mortgage documents per day which breaks down to roughly 500 documents per hour. Only a robot could perform work that fast!

Recently, CBS aired a report via "60 Minutes" which included interviews with bank employees who stated they were paid $10 per hour to forge signatures so banks could commence with wrongful foreclosure.

Banks have been under investigation by the Federal Reserve since last October. Federal Reserve Chairman, Ben Bernanke announced last week that a plan is in the works to compensate victims of illegal foreclosure, but details have yet to be unveiled.

There are so many elements of the real estate foreclosure mayhem that it would require a book to cover everything. Sadly, chances we're only seeing the tip of the iceberg. Chances are even higher that American homeowners will never know the truth about how the banks are destroying the real estate market.

The bottom line is banks are wrongfully foreclosing on houses at an accelerated pace. Many of the banks under fire include those that are participating in the Making Home Affordable program established by the Obama administration.

I'll be the first to admit I was excited about MHA when it was first announced. The program proclaimed it would help millions of homeowners avoid foreclosure through loan modification. The problem is the program details were far from worked out before the program launch. This led to improper paperwork, lack of recordkeeping, and lack of follow-up.

Distressed homeowners spent hours on the phone with their mortgage lender, filled out forms, and practically begged for mortgage relief through Making Home Affordable. To date, less than 250,000 homeowners have entered into permanent loan modification primarily because banks dropped the ball and didn't adhere to guidelines set forth under the Troubled Asset Relief Program (TARP).

Banks receiving TARP funds are required by law to offer foreclosure alternatives that allow homeowners the opportunity to keep their home by reducing loan installments. In October 2010, a group of California homeowners filed a class action lawsuit against Bank of America. Their complaint was BOA was "acting contrary to intent and spirit of the TARP program."

The complaint also charged Bank of America with intentionally postponing borrowers' requests for loan modifications or mortgage refinance which allowed them to commence with improper foreclosure.

California homeowners aren't the only ones filing suit against banking giants. New Jersey, Massachusetts, Maine, and Florida homeowners have also filed class action lawsuits.

The end result of allegations made against mortgage lenders is yet to be seen. One thing Americans can bank on is that the process of uncovering wrongful foreclosure won't be transparent. The banks appear to have become experts in covering their tracks and leaving behind a paper trail that even the best detectives can't piece together.

While it appears likely that action will be taken against banks for improper foreclosure, the process is certain to be slow-moving. We will continue to keep readers informed of all that transpires from this foreclosure fiasco. If you're not already on our mailing list, take a moment to subscribe so you don't miss out on breaking news.

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Published on May 02, 2011 at 03:38 AM

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