Antoine Morris

Exploiting Borrowers Amidst the Foreclosure Crisis

On Tuesday, May 6th, a Senate Judiciary subcommittee held a hearing on abusive practices perpetuated by mortgage lenders in the bankruptcy court system. Businesses and consumers often turn to bankruptcy courts as they liquidate their assets in an effort to workout reasonable payment plans with their creditors. For families on the brink of losing their homes, bankruptcy courts play a key role in allowing at-risk homeowners one last chance to keep their homes.

In recent months, however, some mortgage services such as Calabasas, California based Countrywide Financial Corporation have come under intense scrutiny for foreclosing homes prematurely only to pile on unnecessary and costly fees on borrowers during bankruptcy proceedings.

Steve Bailey, the Chief Executive for Loan Administration at Countrywide, however, disputed those allegations. In a prepared statement before the Senate Judiciary Committee’s Subcommittee on Administrative Oversight and the Courts, he said, "Countrywide is committed to helping our borrowers avoid foreclosure whenever they have a reasonable source of income and a desire to remain in the property."

He also claimed, "Recent media reports alleging that mortgage servicers are systematically charging excessive fees and using the bankruptcy process to push borrowers into foreclosure or abusing the process more generally are inaccurate." Bailey attributed any perceived abuses to no more than run of the mill "individual employee errors."

Countrywide's track record of overcharging borrowers facing foreclosure and during bankruptcy proceedings, however, suggests otherwise. One New Jersey couple who owned their home for the last 10 years were served with foreclosure papers by Countrywide and were inexplicably charged expensive flood insurance that they could not afford and did not need. It took months to resolve the error. Meanwhile, they fell behind on her mortgage payments.

In several other instances, the mortgage company has also been accused by attornerys representing borrowers and U.S. Trustees in bankruptcy courts of inflating overdue mortgage payments and fabricating documents to bolster their claims and collect more money in bankruptcy court.

Ledbetter is Fair Warning for Liberals

Last week, Republicans blocked a fair pay bill that would effectively overturn a flawed ruling by the Supreme Court in a wage discrimination case, Lilly Ledbetter v. Goodyear Tire and Rubber Co. The measure was designed to bring the law in line with Congressional intent of Title VII of the 1964 Civil Rights Act, the Court's own precedents, and restore fairness to the workplace.

For nearly 20 years, Lilly Ledbetter was paid less than men with less seniority than her as a supervisor at a Goodyear plant in Alabama for doing the same job. But as soon as she received an anonymous note that made her aware of the discrimination, Ms. Ledbetter filed a complaint with the Equal Employment Opportunity Commission. A federal court agreed Ms. Ledbetter was being discriminated against and a jury awarded her more than $3 million in damages and back pay before the judge reduced the amount to $360,000 due to a damages cap prescribed by the law. But the Supreme Court in a 5-4 decision ruled that Lilly Ledbetter filed her claim too late and was not entitled to compensation.

The 1964 Civil Rights Act prohibits workplace discrimination on the basis of race, sex, creed, disability, age, but also requires that a plaintiff file a complaint within the 180 days “after the alleged unlawful employment practice occurred.” For decades, the Supreme Court and other courts understood this provision to mean that employees could sue within 180 of receiving from their last - not just their first - discriminatory paycheck, since each check represented a related yet distinct instance of discrimination.

Justice Samuel Alito, however, disagreed with that interpretation.

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