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Detroit News: ‘cottage industry of debt collection’ pursuing the foreclosed

Foreclosure protest Minneapolis Fibonacci Blue

Protesters rally against the foreclosure of the home of Leslie Parks in Minneapolis in 2009. Photo by Flickr user Fibonacci Blue.

Just when I thought the mortgage crisis had been covered from all angles, Brian J. O’Connor, finance editor at the Detroit News, found that the heartache may not be over for some people who’ve lost their homes to foreclosure. He writes:

“Until a few years ago, when someone lost a home to foreclosure in Michigan, the owner walked away embarrassed and financially battered, but owing nothing more on the property

Now, because of dropping property values, mortgage lenders are engineering foreclosures so they can pursue a borrower for the unpaid balance of a home loan for years to come. With added fees and interest, this phantom debt — called a ‘mortgage deficiency’ — could swell to become more than the homeowner paid for the property.”

That caught my attention – and Brian’s — when a bankruptcy lawyer told him about people being confronted with this debt by bill collectors.

Today’s Tip: Know bankruptcy and foreclosure laws and how they intersect, Brian says.

For example, in Michigan, lenders only have to file legal notices and auction the properties in foreclosure – there are no hearings, Brian says. Because of falling values, lenders usually buy the properties at auction for less than what the borrowers owed. The difference, called a deficiency, becomes an asset on the books that the banks sell to collection firms who can wait until the homeowners’ financial pictures improve to go after the debt.

Brian J. O'Connor, personal finance editor and columnist, Detroit News

Brian J. O'Connor

“It’s a new cottage industry of debt collection,” Brian says.

Brian’s story has an informative sidebar on some states’ laws. To get a better sense of what’s happening in your area, talk with bankruptcy lawyers and trustees, as well as consumer-debt attorneys, he says.

“Don’t be afraid to ask an expert to walk you through it step by step,” Brian says. “When you hear something that doesn’t add up, be like Columbo: Ask ‘what do you mean?’”

In Featured, Investing | Banking, Real estate | Econ development, Story ideas.

Comments (1)

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  1. Anonymous says:

    Whether or not anyone from Wall Street becomes prosecuted for financial frauds, certainly there needs to be jail time and reformation for the ELEPHANT in the room u2013judicial collusion! Moreover, people responsible for tortious conduct, and deliberate engagement in manifest egregious Constitutional illegalities associated with foreclosures and mortgages need to pay $$$$$$$$$$$$$$$$$$$$$$$$$$$$$.

    At nakedcapitalism, @ http://t.co/9bXCrpF Yves Smith was correct to decry an Alabama foreclosure court ruling, and Attorney Paul Jacksonu2019s commendation of it. Mr. Jacksonu2019s housingwire website contains much applause for Alabamau2019s ruling which upheld blatant foreclosure fraud, as well as praise for foreclosure lawyers. However, praise for foreclosure illegalities and fraud is an affront to homeless families because of foreclosure fraud and greed.
    Untrue to what Alabama and other courts, as well as Attorney Jackson (whose business is foreclosures) communicated, lenders are not always the ones who are foreclosing on their security interests! There are foreclosures that NEVER became returned to lenders or banks, but were fraudulently u201ccredit bidu201d by u201cStraw Buyersu201d and judicial insiders. Thus, blight is a telltale sign! [example: http://bit.ly/i5z3Py]

    Foreclosure lawyer are catalysts for the goal of getting property deeds recorded out of homeownersu2019 names; or maneuvering homeowners to believing theyu2019ve lost ownership of their homes, so they move out. If people donu2019t move u2013some an eviction writ will be filed in some lenderu2019s name. For decades, courtrooms in furtherance of real estate fraud has been the means for various participants to get slices of the u201cforeclosure pie.u201d

    None other than lawyers who file foreclosures and record property deeds after purported foreclosures have capacity to defraud Bankruptcy Courtrooms and homeowners by filing FALSE u201cLift Automatic Stayu201d motions and u201cProof of Claims.u201d

    It is an appallingly unfair when lawyers file fabricated Bankruptcy court motions to unlawfully and deceptively defeat Bankruptcy Law provisions. Often, on behalf of lenders that have NO u201cstanding,u201d lawyers quickly, fraudulently file u201clift stayu201d and u201cdismissalu201d motions that defeat a u201cdebtoru2019su201d bankruptcy case. Through u201cAdversaryu201d proceedings u201cdebtorsu201dmight uncover information about lenders and servicers; and possibly debtors have been cheated out of u201cunsecuredu201d debt u201cavoidanceu201d u2013but for some lawyer illegitimately utilizing courtrooms to get people cases dismissed!

    COURTS HAVE NO JURISDICTION over pleadings which LACK u201cSTANDING.u201d Lawyers should NEVER be granted u201cLift Stayu201d or u201cdismissalu201d motions when courts have no authority to preside!!!

    IT IS NOT AGAINST THE LAW TO OWE A DEBT, BUT IT IS AGAINST THE LAW TO COLLECT THE DEBT VIA FRAUD AND EXTORTION. **Request for Congressional Foreclosure Panel to Examine Foreclosure Lawyers @ http://chn.ge/eU2zAm

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