Monday, April 29, 2013

Worcester bank "fee" "backfires on struggling homeowners"

In response to Telegram and Gazette article

Worcester bank fee backfires on struggling homeowners

The ordinance requiring banks to register with the City and post a $5000 bond when they file an Intent to Foreclose petition with the State has made a visible difference.  Properties foreclosed in the last few years that are going to ruin now seem less common around town compared to properly secured and weatherized ones. But the practice of passing this deposit on to the borrower needs to be outlawed. City Manager O'Brien deserves applause for his statements and for pursuing the banks on this. 

This is just one more example of an endless litany I hear from people. There often seems to be no logic, rhyme or reason - or decency - to the things these big banks do. Their behavior of toward their borrowers makes a mockery of all of our notions of fair dealing or even what banking is. 

For example, when people run into trouble on their mortgage payments due to some circumstance like a layoff or divorce and go to the bank for help - sometimes just with catching up - many report being told (illegally!) that they need to first be three months behind on their payments. So they let themselves fall three months behind and then find themselves in a nightmare world of negotiations often dragging on for years, leading almost inevitably to foreclosure. Fees and penalties pile up, days spent on hold or re-faxing paperwork the bank couldn't find. 

And just when the borrower thinks they have a deal, the bank invents a new rule - or just forecloses anyway! The example here of a bank foreclosing after having completed the loan modification is typical. 

This is not banking - or even capitalism - as you learned about it in school. These banks are mostly merely servicing loans that have been placed in a trust against which mortgage-backed securities were issued. They notoriously show little concern for recovering the investment. They get handsomely paid out of the trust fund, and their biggest payoff is for the foreclosure! Their victims include the borrowers, the City - and the investors who bought those securities! 

Now we need the City Council to pass Mandatory Mediation next week, which has been highly effective wherever it has been tried. 

By the way, many of those hollowed-out and semi-fraudulant Mortgage Backed Securities have been purchased by the Federal Reserve Banks as part of their Quantitative Easing programs. The Fed is a private institution, fully owned by other mega-banks, but they issue our public money. Their buying of these securities contributes to a growing lack of confidence throughout the world in the stability of the dollar.

In the end we will all pay the price for this vast system of fraud. 
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