The New York Times today took a look at the work of Katherine M. Porter, associate professor of law at the University of Iowa, and bankruptcy specialist. She’s been taking a closer look at the fees that some loan servicers are charging homeowners who are in foreclosure. She’s determined that some of the fees are “questionable.”
From the NYT:
Bankruptcy specialists say lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount a borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.
“Regulators need to look beyond their current, myopic focus on loan origination and consider how servicers’ calculation and collection practices leave families vulnerable to foreclosure,” said Katherine M. Porter, associate professor of law at the University of Iowa.
In an analysis of foreclosures in Chapter 13 bankruptcy, the program intended to help troubled borrowers save their homes, Ms. Porter found that questionable fees had been added to almost half of the loans she examined, and many of the charges were identified only vaguely. Most of the fees were less than $200 each, but collectively they could raise millions of dollars for loan servicers at a time when the other side of the business, mortgage origination, has faltered.
In one example, Ms. Porter found that a lender had filed a claim stating that the borrower owed more than $1 million. But after the loan history was scrutinized, the balance turned out to be $60,000. And a judge in Louisiana is considering an award for sanctions against Wells Fargo in a case in which the bank assessed improper fees and charges that added more than $24,000 to a borrower’s loan.
At the risk of sounding paranoid, with an estimated 2 million Americans set to lose their homes before this mortgage crises is over, it’s important to keep an eye on an industry that needs to milk every last penny out of the mess that it has created.