Bankruptcy

Gretchen Morgenson On Lender Misconduct

By Scott Riddle

Gretchen Morgenson of the New York Times has an article in tomorrow's Sunday edition about the improper conduct of mortgage lenders.  See Piling On; Borrowers Buried By Fees.  Morgenson discusses several cases in which Bankruptcy Judges have found misconduct on the part of lenders.

As discussed in this post, the United States Trustee has filed an adversary proceeding in the Northern District of Georgia, making similar allegations.

Morgenson discusses these cases -

 The case out of the Eastern District of Louisiana, overseen by Judge Elizabeth W. Magner, is especially depressing. It involves Dorothy Chase Stewart, an elderly borrower and widow whose original loan of $61,200 was serviced by Wells Fargo. Judge Magner cited “abusive imposition of unwarranted fees and charges,” and improper calculation of escrow payments, among other things. She found Wells Fargo negligent and assessed damages, sanctions and legal fees of $27,350.

The heart of the case is that Wells Fargo failed to notify the borrower when it assessed fees or charges on her account. This deepened her default and placed her on a downward spiral that was hard to escape. And Wells Fargo’s practice of not notifying borrowers that they were being charged fees “is not peculiar to loans involved in a bankruptcy,” the court said

....

Finally, borrowers can be cheered by an opinion written this month by Cecilia G. Morris, bankruptcy judge in the Southern District of New York.

The case involved Christopher W. and Bobbi Ann Schuessler, borrowers who had $120,000 of equity in their Burlingham, N.Y., home when their bank, Chase Home Finance, a unit of JPMorgan Chase, moved to begin foreclosure proceedings. The couple had filed for personal bankruptcy protection, which automatically prevents any seizure of their home. ...

The Schuesslers got into trouble because Chase had refused a mortgage payment they tried to make at a local branch. Testimony in the case revealed a Chase policy of accepting mortgage payments in branches from borrowers who are current on their loans but rejecting payments from borrowers operating under bankruptcy protection. ..

“Without informing debtors, Chase Home Finance makes it impossible for JPMorgan Chase Bank branches to accept any payments,” Judge Morris wrote. “It appeared that Chase Home Finance intended to commence an unwarranted foreclosure action, due to ‘arrears’ resulting from Chase Home Finance’s handling of the case in its bankruptcy department, rather than any default of the debtors.”

Full post as published by Georgia Bankruptcy Blog on April 19, 2008 (boomark / email).