New York State Turns A Blind Eye To Systematic Fraud By Lenders In New York Foreclosure Auctions
Most people move on after losing their home to foreclosure. They are unaware they are entitled to potential surplus funds after the sale. Surplus funds are the funds are the difference between the foreclosure sale amount and what the homeowner owes. Homeowners ignorance is what allows a multi-billion systematic fraud by lenders to flourish at New York foreclosure auctions.
Here’s How Lenders Pull Off Their Systematic Foreclosure Auction Fraud In New York
Let’s say you owe $250,000 on your Bronx home when it goes to a post-foreclosure auction. However, a bunch of amateur investors get into a bidding war and the lucky winner buys it for $750,000. This means the could expect to get a check from your lender for roughly $450,000 to $500,000. However, lenders use a different methodology in New York.
Mortgage servicers use a disputed method for tabulating interest in New York. The methodology used by lenders increases the amount they take from homeowners by tens of thousands of dollars. They do this by applying interest to a higher overall dollar amount. Collectively, the result has also deprived New Yorkers of millions of dollars.
However, there are multiple problems with this. First, it contradicts the court system’s own guidance for referees. Second, it potentially violates New York law.
Attorneys for the lenders and the law firms say the court system permits their calculation method. They also say court-appointed referees have signed off on the math.
However, findings reveal widespread inconsistencies in how lenders and their lawyers determine unpaid balances. In addition, findings point to a lack of oversight by the court andattorneys appointed as referees.
What Does A Referee Do?
The presiding judge in a foreclosure case will appoint a referee. The court does this to ensure the sale is conducted fairly and openly. However, six referees stated in interviews that they never received formal training before handling foreclosures.
Court records show referees routinely rubber stamp figures submitted by lenders’ attorneys. Why? Well, there’s asimple explanation. The court only pays referees $750 to handle a foreclosure.
The Systematic Fraud By Lenders Is Based On Subtle And Complicated Math
Normally,the math for determining surplus funds is normally quite simple. It begins with how debt is calculated after a home is sold at auction. A state foreclosure judge rules that you nearly $300,000 in interest and legal fees. In addition to the amount still left on her mortgage.
Court considers this the judgment amount.
However, this is where lenders begin complicating things. The lender then applies additional interest after the home is sold at foreclosure. The lender claims this is incurred interest amount tallied at filing to when the judge ruled on the foreclosure. The foreclosure process can take months or even years if a homeowner attempts to fight the foreclosure. As a result, the
Yet, court records show foreclosure mill lawyers in New York calculate the additional interest.
Using the judgment amount to tally charge extra interest contradicts the NYS court system’s guidance for referees. Thus, it is prohibited by New York law, which bars lenders from adding interest on interest.
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