• 05
  • August
    2011

In an effort to root out unethical and sloppy practices by mortgage services, Senators Partick Leahy, D-Vt., and Richard Blumenthal, D-Conn., sent letters to 11 large mortgage servicers for details on their policies and practices regarding foreclosures in bankruptcy courts.

According to the senators, A recent review of bankruptcy filings by mortgage services by the Executive Office for the United States Trustee shows that such facial errors in proofs of claim in bankruptcy courts are likely much larger than was previously reported.

The U.S. Trustee Program, since last fall, has increased efforts to conduct reviews and impose enforcement actions related inaccurate fees and facial deficiencies. According to sources, one-fifth of the Trustee Program's offices are dedicated to reviewing claims and contested motions filed by loan servicers for relief from foreclosure stays in Chapter 13 cases. The U.S. Trustee Program reviews are intended to identify systemic violations.

One example of the underestimation was a review conducted by the Executive Office for the United States Trustee which revealed that the error rate on bankruptcy filings by loan servicer Countrywide, which the company claimed to be around 1 percent back in 2008, was actually 10 times higher than that.

Senators Leady and Blumenthal have also pointed out that lenders often give inconsistent explanations as to how loan balances are calculated. An example of this, taken from an investigation conducted by U.S. Trustee program, was a borrower who was told they owed $54,043, but later was told they owed $3,156 when the borrower requested documentation.

Source: Mortgageorb.com, "Senators Request Info On Servicers' Bankruptcy Practices," August 5, 2011.