Foreclosure mess will take years to clean up

Via by John W. Schoen

How long will it take before the American nightmare of home foreclosures is over? Ask Mike Dillon, who’s been fighting to keep his New Hampshire home for most of the past decade.

Though he missed two payments in 2002, Dillon then caught up and was current on his loan by later that year, he said. That’s when his mortgage problems began.

After the company servicing his mortgage failed to properly credit monthly payments to his account, it placed the loan in default. As he worked to straighten out the bookkeeping, with canceled checks in hand, the servicer began adding additional fees for property inspections, insurance and other charges. …

Lenders say part of the problem is that borrowers facing foreclosure are struggling against multiple causes of default. In some cases, they agreed to loan terms they couldn’t afford or didn’t understand. Others were victims of fraud and predatory lending, including onerous interest rate “resets” and prepayment penalties that have since been banned. Many  homeowners who might have otherwise steered clear of default have lost their jobs and been unable to find new employment in the harsh economic climate.

Consumer and bankruptcy lawyers are also uncovering cases, like Mike Dillon’s, where the courts have agreed that the underlying problems were not simply the result of innocent mistakes made in haste or by untrained employees.

“It’s been an extremely widespread problem,” said O. Max Garner, a North Carolina attorney who runs a “boot camp” for bankruptcy lawyers defending homeowners against foreclosure.  “I’ve had cases against every major servicer and minor servicer in the country regarding misapplication of payments, fees and charges that have been added to debtor accounts that weren’t noticed out, or approved or consented to by anybody – especially the bankruptcy court.”