Mortgage Frauds and Civil Investigations in Response to Fraudulent Loans
You have probably read a lot about recent class action lawsuits against banks, mortgage companies and credit card companies. But did you know that there are also lawsuits against insurance companies? Well you may be surprised. There are a number of reasons why more people are choosing to file lawsuits against companies instead of going through the formal process of settling a case in a court of law. The main reason is the cost of going to court. It would not be surprising to see many more people choose this option rather than filing a lawsuit in the near future.
Another big story today is the new regulation that will open the door for more class action lawsuits against banks, credit card companies and other financial institutions.
In question are so called arbitration clauses which banks use to prevent clients from joining large class lawsuits against them. It is now illegal for banks to collect “fees” upfront to settle a case. If a bank demands these hidden fees, they can be held in contempt of court.
As stated above, the new regulations also apply to all lenders. If a bank or lender demands an investigation fee, it can be forced to provide this money if the lawsuit was lost.
This makes it very difficult for the banks to avoid being questioned in a lawsuit. Lenders and mortgage companies that are involved with real estate transactions should always be on their guard. They need to have a full investigation to determine the validity of any transaction before they make any commitment.
There are a lot of different reasons that more homeowners are choosing to file lawsuits against banks instead of going through the traditional foreclosure process.
One of the most common reasons is that banks do not want to pay agent fees. It used to be the case that a bank would foreclose on a home and then pay a small-business association that represented the lender until the debt was satisfied. Now that there are lawsuits against banks charging them for this service, many lenders are simply not going to foreclose on homes unless there is reason to believe that a home cannot be properly handled due to the financial problems. This means that even if the homeowner’s credit has suffered in the past, they may be able to still get their house sold.
Another reason that people are filing lawsuits against banks involves misstated loan appraisal estimates.
Some borrowers who obtained mortgage-backed securities from banks did not receive accurate estimates on the value of their property. When these borrowers tried to sell their homes, the value was significantly higher than what the houses sold for on the secondary market. Banks have been found to illegally inflate the value of their mortgage-backed securities either by intentionally undercharging the true value of the property, or by not reporting common problems such as property deterioration that lowers the value of the home. If a bank figures the value of a property incorrectly, it may be held liable for injuries that were caused due to this error.
A civil investigation is not the only thing that is being done in response to mortgage-backed securities fraud.
Since the Financial Fraud Office at the Office of the Comptroller of the Currency sent a civil investigation to Wells Fargo for opening its doors to fake accounts, other banks are now facing lawsuits regarding the same issue. Other than forcing the banks to close accounts, these lawsuits also aim to force the banks to turn over records that would back up their claims that they did not commit any wrongdoing. It is clear that civil investigations and civil suits will continue to increase in response to predatory lending practices.
