I-Team: The Secret Truth About Foreclosures

86-year old Collis McDuffie chokes back tears when he thinks about losing the home that he bought back in 1963, to foreclosure.

“When you go through what I’m going through. Lord have mercy,”  McDuffie said, as he questioned his future.

“At my age, where am I going to go?”

His daughter Zella is blunt.

“And this is where the banks are making money. They’re making money off of people. It doesn’t matter. Who cares if you’re living on the streets,” said Zella McDuffie-Smith.

Making money off of people? Big banks profiting from foreclosures? That news stunned many South Floridians who responded to questions from the CBS4 I-Team.

“I think it’s wrong,” said one man.

“Well, appalled of course,” was a woman’s reaction.

Another woman told us, “I think it’s disgraceful. That’s what I think.”

This shopper in South Dade was very pointed, “That’s criminal.”

In fact, it just might be criminal.

Fifty state attorneys general are currently investigating the foreclosure fiasco.

Legal Services of Greater Miami’s Jaqueline Ledon is helping Collis McDuffie, fight to keep his home.

“The practical thinking is, why would a bank want to own a property, maintain it, pay the taxes… all that,” said Ledon.

According to some critics, the practical or old way of thinking doesn’t hold up anymore. Why? It’s estimated that 95% of all mortgages are not even owned by the bank that loaned you the money. Most banks have sold them off.

In the most simplistic terms… banks bundled mortgages much like a gift is boxed, wrapped and tied up with a bow.

That way, they looked safe to conservative investors, such as the people who buy long-term investments for pension funds.

But when the housing market unraveled, much like a bow comes untied, it left the investors holding, in essence, a nicely wrapped empty box worth very little.

In many cases… nobody even knows who really owns the mortgages anymore.

“They’re worthless,” said Ledon. “They’re worthless. The mortgage itself is worthless.”

Since the bank that originally made the loan sold it off, foreclosure is not even a risk to them anymore, according to Weston attorney Roy Oppenheim.

“Typically the way the servicers were compensated, they would receive more compensation through a foreclosure than through a modification,” Oppenheim explained.

So what is a servicer? It’s a bank or financial company that handles your mortgage, doing such things as collecting your monthly payment.

As a servicer, they get to collect fees, fines and penalties. Servicers are also the first in line to collect even more money once a property is repossed.

“And therefore, it was in their interest to have the foreclosure go through the process versus a modification,” Oppenheim told CBS4’s Chief Consumer Investigator Al Sunshine.

Basically, you, the borrower are asking for a modification from the very same people who can make more money from your foreclosure, than if they offered you a cheaper, or modified mortgage, in order to keep you in your home.

Isn’t that an inherent conflict of interest?” Al Sunshine asked attorney Oppenheim.

“The whole process is wrought with conflicts of interest. It’s just a rotten bag of apples,” Oppenheim concluded.

More from CBS4 Investigates
  • He can help

    I heard candidate for Miami Dade Mayor Dr Khavari speak about this situation and he says that we must make the banks produce the original note and the sales history of that note to the courts before a resident is served a notice to foreclose and if those documents turn out to be forged the presenter of the docs to the court shall go to jail.

    Also with his Public bank proposal, local credit would be available to help people either stay in their home or acquire a home.

    I read a report showing 4 out of 10 homes in Hialeah more than 90 days behind on their mortgage, a lot more foreclosures coming if we do not take action ourselves.

    Add creating 150,000 jobs, eliminating property taxes and making it possible for property owners to be able to install solar energy equipment for less than paying an electric bill,

    I say he is the only candidate that has a clue of what to do

    Dr Khavari the economist for mayor

  • Marty Jegers

    It is not surprising that the process has many potential conflicts of interest. But what can people do and what is out there to help and protect them? The NACA thing can help some, but not all, that is for sure. Even with NACA’s help, there are many people who cannot get a loan modification because the ratio of their income to expenses is too low. For example, those are the people who have mortgages but lost their jobs and can’t get a new job because their industry has left the area or because of their age (though no one is allowed to discriminate against age…, bah!!!), or have become disabled.
    The American Dream went out the window with this last economic crash, and there are people who are too old to get a new job but too young to retire. I believe there are plenty of people who were not speculative and are not upside down on their mortgages, but still can’t find a new job to pay enough to cover the mortgage and living expenses even after having radically reduced their spending to the bare minimum.
    The country needs to re-invent itself so that the job market domestically can compete against what is outsourced. We have the natural resources within our borders for almost anything we need, and we have an honest and hard working workforce. How do we create more good jobs in this country so that people can earn an honest living? It almost seems like we need some level of protectionism to make it so the workforce can be competitive against the outsourcing. The government can’t keep printing more money either.
    I believe everyone in the USA needs to look more inside our borders to bring back the middle class. Instead, it seems like we are headed to a society of the “haves” and “have nots” with not much in the middle.
    As a last thought, what about implementing a “flat tax”? Isn’t it a simple solution which could be designed to be easier to enforce? That way everyone pays their fair share, and those who cheat by not reporting their total income should be penalized. We have the technology to manage something like that now, don’t we? The flat tax rate should be easy to determine because we know how much money the government needs and we know approximately how much total income is realized by the public. Similarly, we can determine the total income for all the corporations, and we should have rules to keep corporations from hiding their income outside our system. So we figure out the gross income collected and divide that into the gross tax revenue needed, and voila, we have a tax rate for everyone. We can still have free enterprise under this structure because those entities who want to increase their income simply need to save for investment/expansion and/or research and development and avoid taking loans.
    This brings me to the idea that perhaps the root of our evil is that we are built on a system of loans. We have loans because we are used to the lifestyle of buying now and paying later. Can this ever change? Would it be possible for the society to bite the bullet for a relatively short period of time to bring in a new era in which people and businesses will save and buy instead of living on loans? There has to be sacrifice no matter what, so how about bringing back the basic values our parents or grandparents grew up on?
    How is it that China was able to lend us the trillions of dollars our government has added to our national debt? Can we learn something from them? Wars are based on one entity wanting what the other entity has, and thus they attack to take their land and “spoils” of war. Is our relationship with China more insidious and are they taking us over without waging an open military war? We brought down the Iron Curtain because the USSR could not afford its military. Is our great country going to borrow itself to death?
    At the end of the day, I believe we should strive to keep things simple, and re-establish the processes to be without conflicts of interest.
    Thanks for allowing me this rant which went well beyond the scope of Al Sunshine’s report. I hope I made some sense, and more importantly, I hope our leadership can define and communicate the key actions and values we need to keep our country great. This is still the best country in the world.



  • Answers

    We may be able to go from the bottom of the economic list to the top of the country.

    Dr, Khavari is an economist that is running for mayor of Miami Dade, his proposal includes creating 150,000 private sector jobs in the county.

    Creating a Citizen Owned Bank like the very successful North Dakota Bank (This state has the strongest economy, lowest unemployment and lowest foreclosures in the country because their banks profits stay in the community to promote more prosperity for its residents)

    He proposes to set the stage for possible solar energy for all residential, businesses and government buildings.

    With energy loans the equipment would be installed and the payment would be less than the current energy bill and in a few years energy would be free.

    He would require that banks produce the original mortgage note before a foreclosure could be filed.

    He would first roll back the tax increase, remove the raises and set in motion a plan that would reduce property taxes each year and totally eliminate them in four years.

    With lower energy costs, lower interest costs and no property taxes on top of strong employment all residents would have more money.

    With business have these costs reduced, products and services would cost less.

    With county and city governments, transit, hospital, ect.. having reduced costs would reduce budgets.

    As an economist you can bet, waste and fraud would be dealt with.

    To MARTY, previously retired that may have to return to work, would have work, have reduced mortgage or rent payments, less to eventually no energy costs, no property taxes, lower product and service costs which would be a big help.

    Anyway the list goes on and on.

    Best news I have heard any where.

  • KYC

    I think the reporter needs to dig a bit deeper. The story presented is very one-sided. While I agree that the banks are doing a lot of things that are at a minimum very questionable, what about digging more into the story of borrowers themselves? For example, Mr McDuffie lost the home he bought in 1963. The typical mortgage is 30 years, so in 48 years he has not paid it off? How much did he pay in 1963? If he had been serious in paying the balance down, there should be very little balance left (in fact none). Despite all the home price declines, even in Florida, is it conceivable that the home is worth less than the original purchase price almost fifty years ago?

    There’s definitely additional back story there. Perhaps Mr McDuffie had a health issue or other emergencies over the years that required some equity extraction. On the other hand, it’s also possible that as home prices were increasing he took cash out to live a more affluent life style. There’s clearly more than one side to this story, it could be that both borrower and lender are at fault, or it could be the lender/servicer not being compassionate to a victim of unfortunate circumstances. Please tell us, which is it?

  • Custerluck

    The bank that is servicing your loan has been paid in full for the original loan (with a loan involving MERS). Your Note was supposed to have been turned over to the “investors” that provided the real cash at the closing. Your note was never endorsed over to the investors because the note risk could not be determined (a requirement of the investors – risk could not be determined until a default occurred). A huge flaw existed with all MERS loans because New York trust law required that the notes be transferred within 90 days, or the investors would lose their tax advantages. This means your note can never be transferred to the “real” investors. Following your default, your servicing bank now takes your loan and usually through a forged assignment (through MERS), commits purjury and tells the court that they (the servicer) is authorized to foreclose on you.

    Not having an attorney that understands what is going on is the first problem most homeowners must overcome. Paying these uninformed attorneys is the next problem. Getting a judge that is willing to actually listen to your defense is the final problem.

    After you prove that the pretender Lender is lying, you must apply for “quiet title”.

    If you lose, your servicer (pretender lender) will sell your home and pocket the money. It will never be sent to the actual investors, because THEY DON’T KNOW WHO THEY ARE!

    It is just a matter of time before all MERS associated loans will be declared illegal (broken chain of title) and uncollectible.

  • Jim Davey

    A bank told me a property was worth x amount and I put down 25% and bought the property (it was THEIR appraisal, not mine) in 2005. Later to make improvements on the home (not vacations or credit card debt) in 2006, I borrowed more money from a second bank that said the totality of the loan to value was below 80% (THEIR appraisal). I TRUSTED THOSE TWO BANKS. I lost my job in rural Nevada, 75 miles outside Las Vegas in 2007. In the process I learned BofNY owns the note, BofA services the loan on the 1st mortgage. WaMu then Chase owned the 2nd mortgage. BofNY has publicly stated they do NOT support HAMP, and paid back TARP to keep the heat off their hugh bonuses. BofA also does not support HAMP. Banks lobbied Congress and caused HAMP to be a voluntary program, so it could never work. NACA helped me get a modification on the 1st (BofA & BofNY RAISED my interest rate, but allowed only interest only payments for 60 months), and I asked Chase for a mod on the 2nd, but before the process was completed or denied, another Chase office sold my 2nd to a FLORIDA FORECLOSURE MILL ATTORNEY that threatens to foreclose while racking up interest and fees.

    Here is my question: If Chase wrote off the 2nd (which their letter said), AND TOOK A TAX WRITE-OFF for the full value plus fees, etc, and then they sold it …. receiving cash from the attorney, and he also gets the full amount by foreclosing on me or waiting for me to sell and he gets paid because he has a lien, ISN’T THIS LIKE PRINTING MONEY? THE FULL AMOUNT OF THE SECOND IS CREATED AND PAID AFTER A COMPLETE AND FULL VALUE WRITE-OFF? What am I missing here?

    I’m 64 with a small pension; I have a totally disabled wife on social security disability; medical bills are pilling up so we are behind again, so I asked for another mod from BofA (which must be approved by BofNY), and they sent me HAMP forms …. it is a forgone conclusion I will be denied another modification in spite of living in Clark County Nevada where values have gone down 58% since 2006.

    When the end comes and we are on the street, I am moving out of the country. No, I am not joking. I no longer believe in capitalism as it is being practiced by Wall Street; the disconnect from Main Street has gotten beyond repair; total financial collapse is the only mechanism that will restore a workable balance. I no longer believe in American democracy as it is being practiced; banks and corporations write laws only for their benefit, the common man essentially no longer counts. MERS is a disgrace to any rational mind. It is an ongoing criminal enterprise at the highest levels of American society fostering a fraud on the world through unbacked CDOs.

    • KYC

      Quick answer to your question. Chase wrote off the 2nd, taking a tax write-off for that amount. When they sold the loan, they would have been paid “market value” for the loan. Loans in foreclosure are valued well below the stated balance, for example a $100,000 loan in foreclosure could be worth only $1,000 if it’s a second lien and there is no equity. Whatever Chase got paid for the sale of the loan, they would pay taxes on those proceeds. Your comments after the question suggest that you are assuming they got paid the full balance of the loan as part of the sale. That is most definitely not the case.

  • They did it

    This is not going to help you but, the bank never loaned you any money, only newly created credit based on your promise to repay under the terms of your signed note.

    The are a lot of places to start the story the story we could go back to the creation of the Un-American Federal Reserve and note that Jp Morgan & JD Rockefeller were major players and discuss how they cashed the crash in 1929 – even Bernacke agrees, of course he says it was an accident – we can trace these kind of manipulations through out the decades – also note now that JP Morgan and the Rockefellers are knee deep in causing this one – Chase and Manhattan are Rockefeller banks – When JP Morgan, Chase Manhattan merged this group be came the controlling party of the remaining group of financial terrorist that are causing this mess.

    Robin Ruben stepped down from CEO of Goldman Sachs to be a government employee ( Secretary of Treasurer for Clinton ) his perpose was to remove the laws and regulations put in place to keep someone from replaying the Morgan 29 playbook.. After doing his dirty work he went over to CITI Group and became Derivative Man – Larry Summers took over the SOT position to run cover up –

    The word was put out that Ruben needed lots of mortgages to build his derivatives with. The idea was to make loans that were subject to fail, even good customers were encouraged to over buy or agree to exploding terms, knowing that when this blew up even more people would default.

    So money was made on high fees and high interest.

    Money was made from collecting mortgage payments toward newly formed credit

    Then rating agencies were paid to lie about the investment value of the derivatives

    Then more was made on conning pension & hedge fund managers and state and municipal fund managers into trading their cash for this junk

    Then the defaults and more money was made because the banks had made insurance bets that the mortgages would fail – these bets often times paid three times what the mortgage was, but to collect they had to foreclose

    Then they got the house and made money selling it – it did not matter what they got for it – in fact the lower prices just meant more people would foreclose

    Then they placed their lien against the borrow for more taking later

    Remember when Bush’s liar SOT Paulson who had also just left his Goldman CEO position gave hundreds of billion to the banks? We must remember that the money was really just more newly created credit by the Federal Reserve that was given to the banks that own the Federal Reserve.

    We are suppose to pay the feds for money given to the banks plus interest, while they use the money to by assets around the world and speculate on commodities end up making necessities more expensive for you.

    Then Obama’s liar Geithner continues the program as SOT that came from the New York FED ( Notice how this part of the game just kept going without skipping a beat ( Two parties my 8-( )

    A lot of this other stuff going on is just to keep us busy while the thieves finish their game of owning the world. Obama is as much of a treasonist as Bush is..

    Sir I would leave the country with you except that these boys are playing this game worldwide, just ask Greece.

    Odious Debt – I did not borrow the money – I did not receive the money – I did not receive benefit of the money – the money was dispersed among cronies and to bribe people from doing their job – The lender is responsible to do due diligence and he should have seen most of America screaming ” do not bail these punks out” –

    Greece, iceland and Ireland and others are filing law suites against all parties involved. Pension & hedge funds are filing lawsuits against these thieves.

    But how does this help you? In my first line I said that it wouldn’t.

    I only tell these so that I can also tell you this: You did nothing wrong, you are a victim, you are a good person, god loves you, the pain will get easier

    The best opportunity that I see is to adopt Dr Khavari’s plan of being self reliant as a county, including handling our own credit. It is easier to hang people locally.

    In a public bank the interest payments re-circulate in the local economy much like the blood of the human body – if you bled a system such as money leaving the local economy it will weaken and then die.

    We do not need to be under the control of thieves that are bribing everyone. Local control and local accountability.

    Then there are all of those cost of living reductions in his plan, check his website

    And lastly, you must demand to see the original note and the sales history of that note from the person that claims to own it back to the one that you closed with. You can start those demands now, they are required to respond within 30 days – a copy is like a copy of a hundred dollar bill – worthless – try to transfer a car with a photo copied title.

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