Attorney Max Gardner who runs the Bankruptcy Boot Camp, a training ground for attorneys on spotting loan servicing fraud, was quoted recently on ABC’s Nightline as saying that it’s a common practice for loan service companies to charge illegal hidden fees so benign that most never even notice them. He enlists the aid of specialized accountants to search for these illegal fees and he says they have found bogus fees in every account they have investigated so far.
Gardner says “The fees are unreasonable fees, they’re unnecessary fees, they’re improper fees, and I’m saying they’re illegal fees because they’re not approved by the bankruptcy courts. The problem with these fees is that, you know, they’re secret fees, they’re secret charges. These guys are smart and they are playing the odds, And the odds are that 95 percent of the people will have no idea exactly what’s going on. That 95 percent will just go ahead and pay it”.
He warns that it’s not just financially distressed homeowners who find themselves the victims of mortgage servicing fraud and all mortgage holders should be aware. The fees are often just a few hundred dollars but collectively they add up to millions for the servicing companies. He also warns with lenders writing fewer new loans, mortgage service companies will become more aggressive with such tactics.
Katherine Porter, a professor at the University of Iowa, recently did a study of 1,700 bankruptcy cases entitled Misbehavior and Mistake in Bankruptcy Mortgage Claims which found that hidden fees were charged in 50% of the cases. Documentations for the fees were missing from the loan servicing companies making it difficult to know what the extra charges were for.
She says, “The problem is, without that documentation, it is very hard for the homeowner or his bankruptcy attorney or the bankruptcy court to make sure that the debtor is being charged the right amount. The law requires that documentation for a reason, because without that documentation you can’t be sure that you are being charged fairly”.
Our government has knowingly allowed the lending institutions to get away this for such a long time. Then again, our country is better off without the financial institutions in jeopardy but should they be allowed to get away predatory lending practices? Thankfully, there has been legislation introduced in the past few months, namely the Comprehensive Mortgage Reform and Anti-Predatory Lending Act (H.R. 3915), which is a step in the right direction but ultimately I believe the government will side with the lenders mainly for the well being of the economy. I find it hard to believe this legislation will have much of an impact.