Banks Stop Foreclosures Due to Botched Paperwork – Is this any surprise?

Can anyone honestly not believe that bad processing, customer service and underwriting were going to be the tip of the day given our mortgage fiasco? It comes as no surprise to me that this inexcusable and unprofessional trend rears its rather ugly head again. Besides approving home loans that should never have been given in the first place causing this housing mess, it follows now that lack of fiduciary duty (responsible financial analysis) might also show up in handling the residual effects of our housing disarray. In the foreclosure process, employees have even admitted their neglect in fulfilling all requirements of proper processing within the financial institutions. Possible Notary signing without signers being present, signatures different from document to document, multiple banks declaring primary ownership of the same property due to unclear documents and I’m sure the list goes on is further insult to stressed homeowners. How do you think all these loans were approved in the first place? And it’s not just the homeowners that “shouldn’t have been” but the now victims of rising unemployment who did everything right that I feel sorry for. Nothing has been fixed. “It reflects the hubris that as long as the money was going through the pipeline, these companies didn’t really have to make sure the documents were in order,” said Kathleen C. Engel, dean for intellectual life at Suffolk University Law School and an expert in mortgage law. “Suddenly they have a lot at stake, and playing fast and loose is going to be more costly than it was in the past.”


In my experience negotiating with the mortgage companies on behalf of clients trying to manage one of the government bail-out programs or re-negotiate an in-house mortgage restructuring, the right hand knows nothing of what the left hand is doing or simply could care less. After a long maze of numbers to press on the phone and a significant wait time, Customer Service is often out-sourced to another country or if in the states, is just not efficient, knowledgeable or in the least helpful. You are told on no uncertain terms that there is nothing they can do to help you. They could care less. They are stressed. They read what is written on your account and offer nothing more. They don’t even document conversations as reference points for the next customer service rep/processor. Only when you demand further explanation or want to complain, are you told you either need to fax or write a Customer Relations/Investigations department and wait for them to send you a note saying they got your letter. Sometimes you receive a letter that won’t even address your particular problem/questions as their final answer. No one is accountable. The processors will not speak with the clients to make sure they have everything they need. They simply process and good luck. And here is the rub. If the processors mess up you are basically out of luck. It suggests to me that the same way we “gave” away potentially default mortgages, we are now taking them away.

I would guess that Banks and mortgage companies are so swamped with their first mess, approving improper loans when they shouldn’t have, that they have forced themselves into inefficiencies and are simply trying to clean up their own mess. Gretchen Morgensen of the New York Times columnist on October 3rd, 2010 agrees with me, “There is no doubt that the enormous increase in foreclosures in recent years has strained the resources of lenders and their legal representatives, creating challenges that any institution might find overwhelming. According to the Mortgage Bankers Association, the percentage of loans that were delinquent by 90 days or more stood at 9.5 percent in the first quarter of 2010, up from 4 percent in the same period of 2008.” And who’s fault was that? We are simply now on the back-end of default tsunami and the clean-up isn’t going very well.

There is no frugally financial excuse for this mortgage mess we are in and there is less of an excuse for the poor customer service, loan processing and proper underwriting of a problem now so vast as to fleece the average consumer out of the one basic need under which all other needs can be met, a shelter, a home.