Homeowners getting hit a second time

You're in debt up to your eyeballs. You can't keep up with the mortgage and you are going to lose your home. It doesn't get any worse than that, right? Wrong.

Lawyers for troubled Staten Island homeowners say they are beginning to see examples of clients who go to the bank to take out money and find that their accounts have been frozen or wiped out by other banks or debt collectors -- the entities holding second mortgages on houses already in default on the first and primary mortgage. Some are learning the lender or debt collector has already gone to court and secured a judgment to garnish paychecks.
It's a move more in line with the traditional debt collection industry, which typically targets credit card debt, and it's dragging the house and what little cash reserves people often have into the foreclosure battleground. Experts say it's an end-run by second lien holders around the traditional foreclosure process, which involves only the first mortgage holder and provides important legal protections for the homeowner.

In the proud American tradition of never giving a sucker an even break, collection agencies are busy sucking the last of the blood from the corpse of the American working class.

George Apolinaris of Graniteville said his longtime companion, Maria Gil, got an unwelcome surprise when Ms. Gil tried to withdraw some money for groceries from two small bank accounts totaling $6,000 that the two maintained. The accounts were frozen and in the red for $250,000 -- twice the $126,000 owed on their second mortgage.
Apolinaris said the couple never received any notice about the court action that froze the bank accounts.

The banks, many of whom have gone out of business, have often sold these second mortgages to collection agencies at pennies on the dollar. The collection agencies have no stake in the original mortgage and therefore see it as good business to see these people lose their homes as long as they can collect on the second mortgage debt.

Getting screwed out of saving your home from foreclosure isn't the worst thing that can happen. Sometimes foreclosure is the best thing.
How is that possible? Consider the example of Mercy James of South Bend, Indiana.

Mercy James thought she had lost her rental property here to foreclosure. A date for a sheriff’s sale had been set, and notices about the foreclosure process were piling up in her mailbox.
Ms. James had the tenants move out, and soon her white house at the corner of Thomas and Maple Streets fell into the hands of looters and vandals, and then, into disrepair. Dejected and broke, Ms. James said she salvaged but a lesson from her loss.
So imagine her surprise when the City of South Bend contacted her recently, demanding that she resume maintenance on the property. The sheriff’s sale had been canceled at the last minute, leaving the property title — and a world of trouble — in her name.
“I thought, ‘What kind of game is this?’ ” Ms. James, 41, said while picking at trash at the house, now so worthless the city plans to demolish it — another bill for which she will be liable.

It's called "bank walkaway", and its happening all over the country. These properties aren't worth the cost of the foreclosure process and maintenance fees. Sometimes it isn't clear who actually owns the deed on the house.

In Buffalo, where officials said the problem had reached “epidemic” proportions in recent months, the city sued 37 banks last year, claiming they were responsible for the deterioration of at least 57 abandoned homes; the city chose a sampling of houses to include in the lawsuit, even though the banks had walked away from many more foreclosures. So far, five banks have settled.

Obviously if you play chicken and wait for the sheriff to show up on your door, then you win. You may never have to pay on your mortgage. But who really wants to do that?
Sometimes people are finding out as much as five years later that they still own the home. And with that property comes all the back taxes and fines, neither of which can be walked away from.
The GAO has opened a study on this problem, but a solution is still a long ways away.

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how can they do this????

I thought to freeze accounts and collect one had to go to court and obtain a judgment, which requires notification to the defendant, plus the opportunity for a hearing.

How can they just go in and raid people's bank accounts?


Something's not right

I suspect that not all the facts are on the table in at least one case. Even the IRS will typically write you again and again before freezing bank accounts. There's a little something in the Constitution called the due process clause, and if the banks have done an end run around it, I suggest these folks get themselves a good lawyer.
Frank T.

Frank T.

They only have to try to get hold of you

Sometimes the debt collectors are simply unethical and don't care if they serve the wrong address. The notice could have been sent to the address in question, rather than the legal property owner, and the renters didn't really care.
And then there is this example from the comments at DKos:

I had a building and construction loan with WaMu. It was designed to roll over into a standard home loan on completion of the construction. When Washington Mutal merged with Bank of California they moved all of that kind down to the California offices and they literally lost my paperwork. Three months after I moved into the completed house I received a foreclosure notice. Not even a phone call or anything else prior to that. No court proceedings, nothing. Just f*ck you, see you in court, deadbeat. I fought it and managed to get the situation reversed and later found out they did a similar thing to over 1000 other people in Washington State. So yeah, I believe it could happen.

People should sue the courts

Firstly this isn't freezing an asset for collections. This is notice of foreclosure on a secured asset.

So, if agencies are somehow able to access people's assets and collect money, without the proper court order, winning a judgment and so on...

then these people need to do a massive class action against the courts.

Every state has rules of procedure and people must be served, notified and the court has to perform a judgment against them in order for a collections agency to go in and seize additional assets.

I'm also shocked because no bank will enable access to an individual's accounts without judgment from the court and one must also file with the court that the intent is to seize additional assets.

It's a fairly intense process and I just cannot believe the states courts just "threw up their hands" and ignored the law, including their states rules of civil procedure to just allow creditors to seize people's assets.

I'm wondering if it's in the mortgage contract that the individual agreed to this to bypass the courts...
still that seems illegal as well.

midtowng is right

Proof of notice is not being properly enforced by courts in these cases. Some states have just posting requirements where notice of filing can be posted on property (oh well, if it gets ripped down).

RebelCapitalist.com - Financial Information for the Rest of Us.

foreclosure filings isn't the same as seizing assets

Notice of foreclosure isn't the same as seizing assets.

That's a secured loan, the collateral is the property. Same with auto loans. Don't pay the car loan, your car is repo'd.

It's usually in the contract and they do not have to go to court, just follow the state law to repo your car if you are in "default", i.e. haven't made payments for x months.

But to go into someone's bank account is a different process. The bank account is not part of a secured loan.

So, either something is funky with some side contract agreement as well as "automatic monthly debit" or something...

or someone is in seriously violation of the law...or both.

Sure but some states allow for deficiency judgements

This is where if the sale of property isn't enough to cover outstanding mortgage balances then lender has the right to go after borrower for the difference. This may entail typical debt collection methods such as garnishments.

RebelCapitalist.com - Financial Information for the Rest of Us.


though require a judgment process, the courts. So do deficiency judgments. So, in other words, you cannot just be foreclosed on and then without any further notice, suddenly have your bank account seized.

So, how exactly can these banks/collections agencies just run in and seize people's bank accounts without some serious notification?

And that is the problem - the lack of serious notification

Most of time the only thing required is an affidavit that proper notice was given and court takes that at face value. Proof of notice in many courts has become way too perfunctory.

RebelCapitalist.com - Financial Information for the Rest of Us.

process serve

well, that means the defendants should sue because it's under affidavit that a process serve claims they served in person.

They are also licensed so their license should be revoked.

In other words, violating the Rules of Civil Procedure, including process service are a major black and white sue issue as well as a nullification of a judgment.

In other words, the bottom line one cannot just seize bank accounts and if they are violating the law, each of these people has huge legal recourse, even if they act Pro Se to not only get that money back but also sue for a host of damages, much higher than the original amount.

Debt is debt

Don't pay the car loan, your car is repo'd.

One of the things I didn't quote from those articles was where they mentioned people's cars being repo'd...for credit card debt. Unrelated assets being grabbed and notifications not being stringent.
You are right Bob that this doesn't seem kosher. Yet that also appears to be the state of America today.

Personally, I don't like rigged games. If I think a game is rigged I don't play. The game of debt looks like a rigged game to me.

let's get down to specifics

and the reason is this is major violations of civil rules of procedure.

If this is happening with the specifics, clear violations of the law, then all of these people can sue and they will have a black and white case.

Since people read EP for info, I think we should get to the bottom on specifically what is going on and how this is possible and note where it is a major violation of the rules of civil procedure and/or civil law.

If that was me, you can bet I would not only be filing motions I would be putting together a very large lawsuit.

You cannot just go into someone's bank account without a judgment as well as a court order.

there is such a thing as a secured credit card

Take Wells Fargo (turning into a complete, predatory payday type of lender!) terms.

So, when obtaining secured debt(credit), it's possible that the applicant signs away their rights and assigns the right for Wells Fargo (in this example) to seize collateral. That collateral may be a car, might be a home, might be their bank accounts.

But if someone did not sign away their rights via contract, there should not be anything collectors can do beyond intense harassment and going to court to obtain a judgment, which is where the process service and hearing as well as another motion to seize an account starts.

Remember that Dickensian Bankruptcy Bill?

That vile Bankruptcy Bill that was passed, I think it was the second four years, during the Bush Administration?

The one clearly unconstitutional, which penalized those in the lower 90% while exempting the upper 1%?

This (the above excellent blog) is the reason it was passed. When the Bush Administration, working through the Office of the Comptroller of the Currency, and colluding with Standard & Poor (and perhaps the other rating agencies), interfered with those state attorneys general from utilizing their anti-predatory loan laws and consumer-protection laws. (S&P threatened to lower the ratings on their bonds, etc.)

Eliot Spitzer was leading the charge on that one. Then, coincidentally, he was found out for cheating on his wife (I would still recommend him for Secretary of the Treasury, or at least head of the SEC instead of the corrupt and useless Schapiro.)

I think Spitzer will be back

eventually. While he had some opinions, policies that were just nutso, in terms of being the state attorney general and going after financial corruption, he's one of the best.

So, do you have any more details on this? I know about the bankruptcy law change of 2004, which enabled credit card companies to collect, made it extremely difficult for people to shed their unsecured debt even in Ch. 7, but I don't know about this collusion, shutting down states with threat of a credit ratings downgrade.