The September 1, 2011 edition of Consumer Bankruptcy News, reports that Senators press mortgage servicers about their proofs of claim processes.
Eleven of the nations's leading mortgage service companies recently received a letter asking for clarification of their policies and procedures regarding mortgage foreclosures as they relate to the filing of proofs of claim and motions for relief from stay in bankruptcy cases. The letter was signed by Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., and Committee Member Richard Blumenthal, D-Conn.
"Evidence has been mounting for some time that loan servicing institutions are unprepared to deal adequately with the complexity of the [foreclosure] crisis in a fair and equitable manner that is consistent for all homeowners. Fraudulent and faulty documents filed in state and bankruptcy courts to facilitate foreclosures have trigered several investigations, including inquiries by federal regulators and state attorneys general, but the problem remains widespread. Clifford J. White, III, director of the Executive Office for the United States Trustee, recently stated publicly that an investigation by his office has revealed that the rate of obvious, facial errors in proofs of claim in the bankruptcy courts may be 10 times higher than previously disclosed. This is a shocking and disappointing statistic, but consistent with what bankruptcy judges, attorneys and homeowners have been experiencing for some time," the letter states.
In a statement, Leahy expressed concern "that homeowers who are compelled to turn to the bankruptcy process far too often face serious misconduct by mortgage servicers. We need a full understanding of the mortgage servicing policies and practices at the heart of these problems. We have a responsibility to ensure that Americans are protected from fraud and other misconduct when they seek relief in our federal bankruptcy courts."
Blumenthal observed that the "ongoing abuses and fraudulent practices by mortgage servicers are needlessly forcing foreclosures on families struggling to stay in their homes - slowing our economic recovery. This investigation will ask the tough questions to bring about real changes to this broken system so that people can no longer be given the run-around when trying to stay in their homes."
In May, Leahy introduced legislation co-sponsored by Blumenthal to strengthen the tools available to the United States Trustee to protect homeowners from creditor fraud in bankruptcy court. The Fighting Fraud in Bankruptcy Act will bolster the ability of U.S. Trustees and bankruptcy courts to fight creditor fraud and protect homeowners in the bankruptcy process.
