Have Banks Wrongly Evicted Millions?

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More bad paperwork (Lucy Nicholson/REUTERS)

Michael and Pamela Negrea, of Cleveland suburb Eastlake, Ohio, have never missed a mortgage payment. Yet their mortgage company, GMAC, has tried to foreclose on their house, not once, but three times. And GMAC is still trying to haul the couple out of their house.

It’s one of the incredible stories in the past few weeks that have come out of Foreclosure-gate that just makes you shake your head in disbelief. The question, though, that is rapidly emerging is this: Are stories like the Negreas the anecdotes that prove banks regularly kick people wrongly out of their homes, or are these just the exceptions in a clearly bungled process that still generally ends up evicting the correct folk?

The reporters at the Cleveland Plain Dealer, who uncovered the Negrea’s story, seem to think that it is the former:

Indeed, the possibility that bank employees illegally “robo-signed” thousands of foreclosures without even reading the information shows the production-line mentality not just of foreclosures, but of the entire mortgage process. It’s as simple as this: Many banks during the last decade or so have approved, closed, bought, sold and traded mortgages like baseball cards at a pace so dizzying that they couldn’t keep up with their customers, payments or foreclosures.

Now, it’s possible that thousands or even millions could have lost their homes in error.

So have “millions” of people lost their house “in error?” Will you come home one day to a foreclosure note and changed locks? Probably not. Bank executives including JP Morgan’s Jamie Dimon have said that no one has been kicked out of their house that shouldn’t have. That may still be technically true. Even the Negreas are still in their house. But it seems increasingly clear that the banks have put a lot of people in foreclosure process that didn’t deserve to be. And while that may have not cost them their house, it fighting to keep their house has certainly cost them time, money and pain.

I’m still not sure that category would get include thousands, let alone millions. That depends on your definition of “in error.” It is quite possible that there have been millions of loan documents lost. So in all of those cases where the bank tries to foreclose there are going to have been some errors made. But even the lawyers who have been fighting to help people keep their homes say that most of their clients are delinquent on their mortgage. In the case that started the current foreclosure mess, the homeowner hadn’t payed her mortgage for more than two years. And like the Negreas that homeowner is still in her house.

That’s not to say Foreclosure-gate is not a huge scandal where banks have acted wildly improper. Saying that banks have kicked millions out of there houses in error, though, probably not too proper either.

More on the amazing story of the Negreas here.