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The Shady Ways People Are Losing Their Homes--Even If They Don't Have Mortgages

"Wrongful" foreclosures, foreclosures for back taxes or late condo fees -- people are getting thrown out of their homes, and someone else is profiting.

Millions of American homeowners owe more to their bankers than their properties are worth. With incomes stagnating and unemployment pushing higher, foreclosures are projected to hit a record high this year.

But some are learning the hard way that you don't have to stop paying your mortgage to lose your home. In fact, in some cases you don't need to have a mortgage in the first place – people are losing properties they own free and clear to the foreclosure process.

Some Americans are losing their homes to screw-ups on the part of banks and loan servicers. In March, an exhaustive investigation by the Federal Reserve was, incredibly, unable to come up with a single example of a "wrongful foreclosure." According to the Huffington Post, consumer advocates “criticized the central bank's examiners for narrowly defining what constitutes a 'wrongful foreclosure,'” and warned that “the public would not take the Fed's findings of improper practices seriously.”

And why should they? The Orlando Sun-Sentinel reported on just such an “error”:

“When Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.”

He didn't learn about the action until his title was transferred to another lender. BofA, the bank that had foreclosed, eventually acknowledged the error and promised to correct it at their expense, but not before putting Grodensky through months of anguish. "I feel like I'm hanging in the wind and I'm scared to death," he told the Sun Sentinel. "How did some attorney put through a foreclosure illegally?"

According to The Week, A jury punished Countrywide Home Loans in January 2009 for failing to notice that it was repossessing and selling the wrong Las Vegas condo back in 2003. Sgt. Gerald Thitchener and his wife, Katrina, absent at the time, were awarded $3.4 million in damages. '[Countrywide] never even said they were sorry,' noted one juror.”

Another anecdote from The Week:

Dr. Alan Schroit claims he got a "putrid" surprise when he arrived at his Galveston, Texas, vacation home last October after Bank of America ("with which he has neither a relationship nor a mortgage") allegedly repossessed his home and turned off the utilities, leaving 75 pounds of frozen salmon and halibut to rot in the fridge. Schroit, who'd been planning to grill the fish for 30 guests the next night, is suing the bank. (For its part, BoA does "not believe the case will show merit.”)

According to ProPublica, a significant number of homeowners have been in for another nasty surprise when they lost their homes while the banks were telling them they were in the process of modifying their loans. In fact, some companies misinformed borrowers struggling to keep up with their payments that in order to be eligible for a loan modification, they first had to go into default on their mortgages. Lenders then added all sorts of late fees and penalties, then recouped those fattened balances by foreclosing.

Regulators have done little to stop the practice, and the "problem appears to be getting worse," said Kevin Stein, associate director of the nonprofit California Reinvestment Coalition.

Last month, the coalition surveyed 55 foreclosure-avoidance counselors throughout the state. Collectively they serve thousands of borrowers every month. Almost all of the counselors, 94 percent, reported having worked with clients who'd lost their homes while under review for a modification. About half of the counselors reported this happened "often."

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