Lenders Continue to Rein in the “Burger King Kids”

Who is responsible for deciding if your home will be foreclosed on? At JP Morgan Chase, according to yesterday’s New York Times, the bureaucrats in charge of foreclosure paperwork were called the “Burger King kids” because they had so little experience in banking. At Citigroup and GMAC Mortgage, foreclosure paperwork was not always done by the lender itself -- instead, lenders outsourced the paperwork to workers in Guam and the Philippines. Inexpert workers sometimes threw needed paperwork in the trash, the Times reported. The charges were just the latest in a round of criticisms of the mortgage industry’s “robo-signers,” bank employees who were in charge of checking foreclosure documents prior to a repossession by the bank.

As the foreclosure crisis deepens, attorney generals in all 50 states have announced that they will work together on a joint investigation. At least six major lenders are reviewing their own foreclosure procedures internally, while four lenders have announced a moratorium on foreclosures until they can complete an internal review. Self storage industry experts have watched the crisis unfold with concern, as self storage companies step in to help Americans who have lost their homes and need a place to put their possessions. Several self storage companies offer discounts or free rent for the first month, partially in an attempt to offer some relief to new tenants who may be facing foreclosure, unemployment, or who are recovering from other crises.

The four lenders who have stopped their foreclosure processes, at least temporarily, are GMAC Mortgage, JP Morgan Chase, Bank of America, and PNC Financial Services Group.

According to Tammie Lou Kapusta, a former foreclosure specialist for a Florida law firm, who was deposed by the Florida Attorney General’s office last month, and quoted in The New York Times yesterday, “The girls would come out on the floor not knowing what they were doing...Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to the original documents.”

The firm that Kapusta worked for (David J. Stern) was used by firms such as Citigroup, GMAC Mortgage, and several others, before the foreclosure paperwork crisis began to be reported on by the media.

Despite the crisis, foreclosures reached a record high in September, passing the 100,000 mark for the first time in a single month, according to statistics reported by Realty Trac. Almost one third of September home sales in the United States were of foreclosed-upon homes. The states with the highest foreclosure rates were Nevada (for the 45th month in a row), Arizona, Florida, California, and Idaho. Some analysts, however, predict that foreclosure rates will drop while the mortgage industry’s foreclosure process and procedures are investigated.

Sources used:

Chiu, Kevin. “Fourth lender halts foreclosures in robo signing storm.” Housing Predictor: Real Estate News & Forecasts in the Public Interest. Oct. 8, 2010.

Chiu, Kevin. “Prosecutors in all 50 states launch mortgage foreclosure investigation.” Housing Predictor: Real Estate News & Forecasts in the Public Interest. Oct. 14, 2010.

Daly, Corbett B. “September home foreclosures top 100,000 for first time.” Reuters. Oct. 14, 2010.

Dash, Eric and Schwartz, Nelson D. “Bankers ignored signs of trouble on foreclosures.” The New York Times. Oct. 13, 2010.

Riley, Charles. “Foreclosure auctions hit record as document crisis unfolds.” CNN Money. Oct. 14, 2010.

Robinson, Holly. “Are foreclosures fair? ‘Robo-signers’ confess amid mortgage company investigations and fraud, forgery allegations.” Self Storage Industry News. Sept. 23, 2010.

Ross, Kathy. “Foreclosures reach new record in September.” Housing Predictor: Real Estate News & Forecasts in the Public Interest. Oct. 14, 2010.