What exactly is wrongful foreclosure?

Recent problems that were brought to light by foreclosure scandals at major banks (including errors or shortcuts with paperwork and the use of rob0-signers), the errors made by many banks caused homeowners undue stress and in some cases, forced them into wrongful foreclosure.

Many banks state that they did not illegally foreclose on anyone, but foreclosure defense attorneys tell a different tale. People faced wrongful foreclosure due to the mistakes and failures to follow procedures at the hands of the banks, and attorneys say the problem is more widespread than a lot of people think. This wrongful foreclosure page on an attorney’s site is a good reference if you want to read more.

Almost everyone believes that an illegal foreclosure occurs if a person faces foreclosure when they were not behind on their payments, and in a few cases, the people had actually already paid off their homes! Errors with processing and miscommunication between the parties involved (lenders, title companies, loan services, and bank contractors) can lead to mistaken errors that put otherwise hardworking property owners in jeopardy. These issues are often resolved quickly, as it is easy to track payments and see that the loans were indeed in good standing.

Homeowners also faced wrongful foreclosure when their lenders told them that they were eligible for loan modifications only if they fell behind on mortgage payments. This advice sent many property owners on the path toward foreclosure.  The fact that the bank issued instructions to homeowners to not make their monthly payments, and then turn around and put them in default and foreclosure, was a shady practice that caused disastrous results for the homeowners in question.

 

Additional fees lumped onto struggling homeowners also put many people into jeopardy. These fees included late fees, inspection fees, attorney’s fees, and other “padded fees” that were included in the mortgages by those who serviced the loans. The FTC even went so far as to warn homeowners to get an itemized list of all of the fees that their loan servicer assessed to them, and ask for explanations of any fees that seem suspicious or illegitimate.

Another way that foreclosure caught up to homeowners was the failure of the banks to track all of the loan modifications and foreclosures. The banks are supposed to find any methods they can to keep from foreclosing on homeowners, but their failure to track and appropriately maintain the paperwork may have pushed some struggling homeowners into foreclosure illegally.

Additionally, the banks could not always prove that they had the proper standing to foreclose on the homeowners. Sometimes, the property loan was sold and changed hands so many times, the bank did not actually still own the property. The banks often found that they could not produce the necessary documentation to prove that they truly owned the home and had the right to foreclose on it. A few notable examples of this came from major banks, like Wells Fargo, and it was definitely a black-eye on the industry for failing to keep track of the essential paperwork proving that they held the loan in the first place!