The reality of the situation is far different, with $1.4 trillion worth of mortgages being rendered legally unenforceable by the paperwork abuses that were so common during and after the subprime mortgage boom. Foreclosures based on shoddy or forged documents have become commonplace since the financial crisis. These aren’t faceless numbers, either, as reporters have indeed identified individual homeowners who were wronged.
Louise and Ceith Sinclair of Altadena, California might like a word with Kissel. The Sinclairs were current on their modified home loan when a company called Nationstar bought the loan from the original servicer, ignored the finalized loan modification, and foreclosed on the Sinclairs while ducking their repeated inquiries. Nationstar sold the house out from underneath them, and without a local news investigation that shamed the company into reversing the sale, it’s unclear whether the Sinclairs would have a home today.
The Sinclair family are far from the only borrowers to find themselves in such a situation. Etienne Syldor, a bus driver from Orlando, Florida, not only paid fully on a mortgage modification, he overpaid. He submitted the four trial modification payments ahead of their due dates and in amounts exceeding what the modification required. Wells Fargo responded by foreclosing on Syldor’s home.
The 2012 settlement over “robosigning” abuses — a common and fraudulent practice by which financial companies knowingly mishandled millions of mortgage documents in order to facilitate foreclosures of dubious legality — included an independent review of foreclosure practices around the country. That review ended up protecting banks more than it protected homeowners, but before it was shuttered it found evidence that 1.2 million households had faced inappropriate foreclosure efforts in 2009 and 2010 alone. “More than 244,000 of those borrowers eventually lost their homes,” the Huffington Post reported, and “nearly 700 borrowers who faced foreclosure proceedings had actually never defaulted on their loans.”
Wrongful foreclosure is only one form of mortgage servicer abuse, of course. Regulators have fielded tens of thousands of complaints of banks violating the terms of the 2012 settlement in a variety of ways. Companies that were not party to the suit are not generally any better. A Consumer Financial Protection Bureau review found the industry as a whole to be rife with practices built to confuse and bully homeowners.