By Charlene Crowell – Michigan Chronicle
An old adage teaches that one man’s pain is another’s gain. That adage is a truism when it comes to the debt collection industry.
According to the Federal Trade Commission (FTC), debt buyers pay just 3.1 percent on the dollar for defaulted debts. Additionally, 94 percent of these debts are sold with without documentation.
So why would a business bother with buying old and potentially inaccurate credit claims? The answer is money and lots of it.
After paying pennies on the dollar for old accounts, debt buyers pursue consumers for the full dollar value shown. Ignoring whether the debt is already paid or even actually belongs to someone else, debt collection lawsuits have flooded courts across the country. If an affected consumer is unaware of a legal challenge, default judgments can and have been entered resulting in wage garnishment, bank account seizure and negative items on credit reports.
This fall ProPublica, a nonprofit news organization specializing in investigative journalism published a groundbreaking analysis that documents how debt collection lawsuits hit Black neighborhoods the hardest. Analyzing lawsuits over a five-year period in the metro areas of St. Louis, Chicago and Newark, ProPublica found that the rate of judgments was twice as high in mostly Black neighborhoods in each of these cities. [read more]
By Christine DiGangi – St. Louis Post-Dispatch
Foreclosure rates went down across the country last month, as one in every 1,268 U.S. housing units had a foreclosure filing in November. A monthly report from real estate data company RealtyTrac outlines foreclosure activity in each state and the District of Columbia, considering any property with a notice of default, scheduled auction or bank repossession filing to be in some stage of foreclosure. Last month, one in every 1,147 U.S. housing units had a foreclosure filing.
For the most part, the states with the highest foreclosure rankings maintained their status, even as foreclosure rates declined. In fact, the share of homes entering the foreclosure process for the first time (foreclosure starts) dropped 15% from October, ultimately falling to a nearly 10-year low. Only 12 states saw an increase in foreclosure activity at all, and most of them had pretty low rates to begin with.
Some of the biggest changes occurred in Indiana and Georgia, but for different reasons. In Indiana, the share of homes entering the foreclosure process for the first time (foreclosure starts) increased nearly 132% from October to November, while Georgia had a flood of bank repossessions (foreclosure completions): The share of homes exiting the foreclosure process increased almost 72% from the prior year. These changes bumped both Indiana and Georgia into the 10 states with the highest foreclosure rates in November. [read more]
By Ben Lane – HousingWire
As the government-sponsored enterprises have now done for several years, Fannie Mae and Freddie Mac announced that they will suspend foreclosure evictions during the holiday season.
Beginning on Dec. 18, 2015 and lasting until Jan. 3, 2016, Fannie Mae and Freddie Mac will not conduct any eviction lockouts, allowing families to remain in their homes for the holidays.
The moratorium applies to all foreclosed occupied single-family homes and 2-4 unit properties that had Freddie Mac- or Fannie Mae-owned or guaranteed mortgages.
During this period, legal and administrative proceedings for evictions may continue, but families will be allowed to remain in the home, Fannie Mae said in a release.
“As we have done in past years, we are suspending evictions during the holidays,” said Joy Cianci, senior vice president of credit portfolio management for Fannie Mae.
“We also continue to remind homeowners who may be struggling with their mortgages to reach out for help,” Cianci said. “Options are available to avoid foreclosure, and we want to help pursue those options whenever possible.”
According to Freddie Mac, the holiday suspension will apply to eviction lockouts on Freddie Mac-owned REO homes but will not affect other pre- or post-foreclosure activities. [read more]
By L.M. Sixel – Houston Chronicle
David and Mary Ellen Wolf were several payments behind on their home mortgage and knew that foreclosure loomed.
They were puzzled, though, when a foreclosure notice came early in 2011 from Wells Fargo because they hadn’t done business with that bank.
They asked their West University neighbor, lawyer W. Craft Hughes, for help. After poring over mortgage records, Hughes came to the conclusion that neither Wells Fargo nor its mortgage servicer, Carrington Mortgage Services, had legal claim to the note on the house or the right to foreclose.
A state district court jury in Harris County agreed last month and awarded the Wolfs $5.4 million after a four-day trial.
“It’s very unusual,” said Linda E. Fisher, professor of law at Seton Hall Law School who has testified before Congress on the effect of mortgage fraud on consumers. “Cases like this don’t usually get in front of a jury.”
The situation has its roots in practices that evolved in the years leading to the Great Recession that began in 2007. Wall Street investment houses were eager to generate mortgage-securitized trusts – financial instruments created by bundling thousands of mortgages and selling shares to investors who expected to profit from the combined monthly mortgage payments. [read more]
By Jim Salter, Associated Press – ABC News
Missouri’s attorney general proposed reforms Thursday to curb what he calls abusive debt collection practices that target low-income and minority residents, a concern raised by the commission that examined racial disparities following the 2014 fatal shooting of Michael Brown in Ferguson.
Attorney General Chris Koster said he sent a letter to the Missouri Supreme Court’s Commission on Racial and Ethnic Fairness requesting changes in court rules that he said would help prevent unscrupulous collection practices.
“These proposed regulations would expose these types of debt-collection practices for what they truly are — unfair and deceptive,” Koster said at a news conference in St. Louis. “The problem needs to be fixed.”
The treatment of black and other minority residents in the St. Louis region has come under scrutiny in the 16 months since the fatal shooting of Brown, 18, who was black and unarmed. The white officer who shot Brown, Darren Wilson, was not charged, but the shooting led to an examination of the way the area’s courts, police and others interact with minority residents.
The Ferguson Commission, convened by Gov. Jay Nixon to address those concerns, cited overzealous debt collection as among the issues that needed to be addressed. [read more]
By Michelle Chen – The Nation
A midnight call from a stranger, threatening to ruin your finances, throw you in jail, and make your family’s life hell, if you don’t forfeit a chunk of your bank account. Before you call the cops to report a mob shakedown, beware: the shady voice on the line could actually have the law on its side. The debt-collection industry has, since the 2007 financial crisis, exploded into a massive quasi-legal racket, systematically suing consumers into financial ruin. Now community activists are pushing back against debt collection schemes in the courts, with a major settlement that could clampdown on debt profiteering nationwide.
Under the settlement in Federal District Court, involving various companies colluding in a huge debt-collection scheme, about $59 million will be paid out to individual consumers in a class of roughly 350,000 New Yorkers. They match the profile of typical debt-racket victims: mainly the poor and people of color. Beyond the hefty award, the lawsuit has helped expose what advocates describe as a reign of financial terror, threatening financially distressed consumers with spurious lawsuits to basically coerce people into paying debts they did not owe them.
One target of the suit, a company called Leucadia and its various subsidiaries, was behind a debt-collection network known for so-called “sewer service” practices—essentially trapping victims by filing affidavits falsely claiming they had been served a notice of a lawsuit. The debt collector could then win a default judgment against them, sight unseen. The defendant might only become aware of the charges when they, for example, got rejected for a job due to a freshly ruined credit score, or noticed their paychecks being surreptitiously docked by collectors. [read more]