Official Quits FDIC to Fight Illegal Foreclosures
Despite the opposition of huge banks and many judges, a former Federal Deposit Insurance Corporation official continues to fight mortgage fraud in court. Eric Mains' legal battles pertain to stopping a lender from seizing his house, but they have the potential to prevent illegitimate foreclosures across the nation. He has even quit his job to avoid a conflict of interest.
Mains' quest is based on the concept that banks cannot actually prove their ownership of countless mortgages. As lenders entered a frenzy of originating loans, selling them and converting them into investments, they failed to properly document mortgage transfers. The former regulator contends that this completely undermines banks' legal basis to seize the associated real estate.
Based on a Supreme Court decision, Mains believes that Americans have the right to cancel their home loans until lenders can deliver proof that they actually own the mortgages. Ironically, he once worked for a bank. During this time, Mains used a high-interest loan to buy a house at an inflated price. He couldn't afford the monthly payments after the recession began and the home's value plummeted.
Mains wasn't eligible for refinancing, so he requested a mortgage modification. The bank repeatedly denied his applications, claiming that he had filled them out incorrectly. Many homeowners faced similar problems. In 2013, CNBC reported that Bank of America employees said they were encouraged to deny modifications. They even received substantial bonuses for boosting foreclosure rates.
Eric Mains defaulted on his mortgage in early 2009. Several months later, he began working for the FDIC. He took part in projects that involved closing failed financial institutions and selling their assets. Meanwhile, his mortgage lender collapsed and Chase notified him that it would be responsible for servicing the loan.
Although Chase had notified him of his mortgage default, a 2010 foreclosure warning came from Citigroup. It became unclear who actually held the loan or the associated debt. Banks argue that mortgages can have separate originators, servicers and trustees. Nonetheless, Mains contends that his lender lacks the paperwork to document multiple changes in ownership. This is why many banks have resorted to fabricating foreclosure papers.
In February 2012, Reuters reported that studies had revealed widespread foreclosure fraud in many locales. The city of San Francisco audited nearly 400 property foreclosure actions and determined that more than four out of five were illegal. Likewise, about 61 percent of mortgages in Essex County, Massachusetts had unclear ownership.
Lenders frequently transferred loans to trusts so that investors could purchase mortgage-backed derivatives. However, investor lawsuits have revealed that banks like Barclays and JPMorgan-Chase handled 99 to 100 percent of these transfers improperly. This suggests that the lenders not only sold deceptive investments in subprime mortgages but supplied investors with legally worthless securities.
To take legal action against someone else for violating a contract, an individual or entity must have signed the contract. This concept prevents more than one lender from attempting to seize one property. Eric Mains believes that it's vital to uphold this principle and ensure that banks follow the law. In 2010, Citigroup recognized its error and canceled the foreclosure action on his home.
The lender did not try to seize his property again for 30 months. In its second attempt, Citigroup produced questionable documents that Mains disputed. They referred to a mortgage transfer that is prohibited in his state, and one important document was purportedly approved by a Washington Mutual employee who quit working for the company before the paper's signing date.
Despite Citigroup's use of fabricated documents and robo-signers, two Indiana courts decided against Mains. The state's supreme court refused to review his case. Meanwhile, regulators were penalizing major banks for their wrongdoings but allowing them to pay fines by modifying mortgages and making investors fund the principal adjustments. Many judges continue to find excuses to overlook falsified documents.
Nonetheless, Eric Mains has not given up on his lengthy legal fight. Although he lost his job and spouse in the process, the former official remains committed to stopping illegal foreclosures and homelessness. Mains has launched a new lawsuit that accuses major lenders of violating several state and federal laws. He hopes it will bring justice to the banks that have destroyed so many lives through greedy and reckless behavior.