Story of stealing homes by foreclosure

The story of foreclosure fraud and the underlying fraud that sits on fraud. 15 U.S. Code § 1692e - False or misleading representations.

Protecting Your Home from Foreclosure Fraud: Understanding Mortgage Servicer Misconduct

As a homeowner, you may face foreclosure by a mortgage servicer—a company collecting your mortgage payments but often not the loan’s owner. Some servicers use illegal tactics, like fraudulent foreclosures, unauthorized debt collection, and issuing tax forms without proving they own your loan. Many claim to operate under Fannie Mae or Freddie Mac Deeds of Trust, but in cases of fraud, your loan may not even exist in the Fannie Mae or Freddie Mac database, meaning they have no legitimate claim. This guide explains how servicers exploit homeowners, the laws they break, and how you can fight back, backed by court cases where homeowners won.

How Mortgage Servicers Exploit Homeowners

Mortgage servicers may use deceptive practices to seize your home for profit, not because they want the property. Here’s how they may harm you:

Fraudulent Fannie Mae/Freddie Mac Claims:

Many servicers collect payments or foreclose, claiming your loan is backed by a Fannie Mae or Freddie Mac Deed of Trust. However, in fraudulent cases, your loan may not be in the Fannie Mae or Freddie Mac database, meaning no loan exists with these government-sponsored enterprises (GSEs). This misrepresentation violates the Truth in Lending Act (TILA), 15 U.S.C. § 1601, and breaches GSE contracts, as loans must meet strict criteria to be GSE-eligible.
Without a valid GSE loan, servicers lack the authority to enforce Fannie Mae/Freddie Mac terms or foreclose.

Illegal Debt Collection:

Servicers may harass you for payments or fees they’re not entitled to, violating the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692, which prohibits deceptive or abusive debt collection.
Example: Demanding payments for a loan not verified in the Fannie Mae/Freddie Mac database.

Fraudulent Foreclosures:

Servicers may foreclose without a valid mortgage note or proper documentation, often creating fake documents (e.g., assignments or “lost note” affidavits) to justify their actions. This is especially common when loans are falsely claimed to be GSE-backed.
These actions violate 15 U.S.C. § 1692e (FDCPA) for false representations and the False Claims Act, 31 U.S.C. § 3729, if fraudulent documents are submitted to courts.

No Proof of Corporate Ownership:

Servicers often can’t prove they or their client (e.g., a bank or trust) own your mortgage note, as required by the Uniform Commercial Code (UCC) § 3-301. Without ownership, they can’t legally foreclose or issue a Form 1099-C (for canceled debt).
If you retain your home, they can’t issue a 1099-C to tax you for any debt deficiency.

No National Bank Authority to Foreclose:

Many servicers lack authorization from a national bank, regulated by the Office of the Comptroller of the Currency (OCC). This is common with securitized loans (bundled into mortgage-backed securities), where servicers act without permission from the note’s true owner.
Without national bank authority, their foreclosure actions are invalid.

Mortgage Insurance Fraud:

Servicers may secretly take out multiple insurance policies (e.g., Private Mortgage Insurance, Lender-Paid Mortgage Insurance) and file fraudulent claims when foreclosing, even on invalid or non-GSE loans. This violates TILA, 15 U.S.C. § 1601, by concealing these policies.
They foreclose to keep these payouts, often backed by taxpayer-funded insurers like AIG.

Tax Evasion and 1099-C Abuse:

Servicers may wrongly issue a Form 1099-C to report canceled debt, triggering tax liability for you, despite not owning the note. This violates 26 U.S.C. § 6050P, which restricts 1099-C issuance to note owners.
Keeping your home prevents this tax liability.

Violating Fannie Mae/Freddie Mac Rules:

When loans are legitimately backed by Fannie Mae or Freddie Mac, their Deeds of Trust prohibit servicers from charging attorneys’ fees or pursuing deficiency judgments (extra debt after foreclosure). Servicers often ignore these rules, illegally demanding payments.
If your loan isn’t in the Fannie Mae/Freddie Mac database, any claim to these terms is fraudulent.

Racketeering and Organized Fraud:

Some servicers collaborate with law firms (“foreclosure mills”) and reconveyance companies to fabricate documents and steal homes, violating the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1961-1968, through fraud, extortion, and insurance scams.

Federal Laws Protecting You

Servicers violating these laws face legal consequences, and you can use these statutes to challenge them:

FDCPA, 15 U.S.C. § 1692-1692p: Prohibits servicers from lying about loan ownership (e.g., claiming GSE backing), harassing you, or collecting unverified debts.
RICO, 18 U.S.C. § 1961-1968: Targets servicers and foreclosure mills for organized fraud, like faking GSE loan status or profiting from insurance scams.
TILA, 15 U.S.C. § 1601: Requires disclosure of insurance policies and loan terms, including GSE status.
False Claims Act, 31 U.S.C. § 3729: Punishes servicers for submitting fake foreclosure or GSE-related documents.
Bankruptcy Code, 11 U.S.C. § 502(b): Allows courts to reject fraudulent servicer claims, including those lacking proof of ownership or GSE backing.
26 U.S.C. § 6050P: Limits 1099-C issuance to note owners, protecting you from improper tax liabilities.
Consumer Financial Protection Act (CFPA): Enforced by the Consumer Financial Protection Bureau (CFPB), it bans unfair or deceptive servicer practices, like misrepresenting GSE loans.

Court Cases Where Homeowners Won

These cases show how homeowners successfully fought servicers by demanding proof of authority and exposing fraud, including issues with GSE loans:

U.S. Bank Nat’l Ass’n v. Ibanez, 458 Mass. 637 (2011):

What Happened: U.S. Bank tried to foreclose but couldn’t prove it owned the mortgage note, lacking recorded assignments.
Outcome: The Massachusetts Supreme Court ruled the foreclosure invalid due to no proof of ownership.
How It Helps You: Demand servicers show the original note and chain of title, especially if they claim GSE backing without database proof.

In re Veal, 450 B.R. 897 (Bankr. D. Ariz. 2011):

What Happened: Wells Fargo sought to foreclose but couldn’t prove it had authority from the note owner.
Outcome: The bankruptcy court blocked the foreclosure, requiring the note or a valid servicing agreement.
How It Helps You: Challenge servicers to prove national bank or GSE authorization, particularly if your loan isn’t in the Fannie Mae/Freddie Mac database.

In re Smoak, 461 B.R. 510 (Bankr. S.D. Ohio 2011):

What Happened: A homeowner disputed a servicer’s claim in bankruptcy, arguing it lacked note ownership documentation.
Outcome: The court rejected the foreclosure attempt, demanding the note, assignments, or authority proof.
How It Helps You: Use bankruptcy to force servicers to verify GSE loan status or ownership, especially for securitized loans.

In re Minbatiwalla, 424 B.R. 104 (Bankr. S.D.N.Y. 2010):

What Happened: A servicer tried to foreclose but failed to show the note or assignment from the original lender.
Outcome: The court stopped the foreclosure, requiring evidence of the noteholder’s identity and authority.
How It Helps You: Insist on seeing transfer documents to expose fraudulent GSE claims or lack of ownership.

Goodin v. Bank of America, N.A., 114 F. Supp. 3d 1197 (M.D. Fla. 2015):

What Happened: A homeowner sued Bank of America for falsely claiming they owed money after a Chapter 13 discharge, violating the FDCPA.
Outcome: The court ruled the servicer’s false claims were illegal, lacking proof of authority or debt validity.
How It Helps You: Fight servicers demanding payments post-bankruptcy, especially if they falsely claim GSE backing.

How You Can Fight Back

Here are practical steps to protect your home and challenge servicer misconduct:

Verify Fannie Mae/Freddie Mac Loan Status:

Check if your loan is in the Fannie Mae or Freddie Mac database (fanniemae.com/loanlookup, freddiemac.com/mymortgage). If it’s not, the servicer’s claim to GSE backing is likely fraudulent, weakening their foreclosure case.
Demand proof the loan meets GSE criteria (e.g., conforming loan limits, proper documentation).

Demand Proof of Ownership and Authority:

Under FDCPA § 1692g, send a Qualified Written Request (QWR) asking for:

The original promissory note with endorsements.
Recorded assignments showing the chain of title.
Proof of corporate ownership (e.g., corporate registration, servicing agreement).
National bank authorization (e.g., from an OCC-regulated bank).
Confirmation of Fannie Mae/Freddie Mac loan status or database entry.
Disclosure of all mortgage insurance policies and claims.
Any Form 1099-C issued or planned.

If they can’t provide these, their actions may be illegal.

Keep Your Home:

Retaining ownership prevents servicers from issuing a 1099-C, which could tax you for canceled debt (26 U.S.C. § 6050P).

File for Bankruptcy:

In Chapter 13 bankruptcy, the automatic stay (11 U.S.C. § 362) halts foreclosure. You can:

Classify the mortgage as unsecured if the servicer can’t prove ownership or GSE backing (11 U.S.C. § 506).
Demand proof of claim (Federal Rule of Bankruptcy Procedure 3001(c)), forcing servicers to show the note, assignments, and GSE status.
Challenge fraudulent claims under 11 U.S.C. § 502(b).

Seek Quiet Title:

After bankruptcy, file a state court action to clear your property’s title, voiding fraudulent deeds of trust, especially if the loan isn’t GSE-backed.

Use Fannie Mae/Freddie Mac Protections:

If your loan is legitimately GSE-backed, cite Deed of Trust terms prohibiting attorneys’ fees or deficiency judgments to block illegal demands.
If it’s not in the database, argue the servicer’s use of GSE terms is fraudulent.

File Complaints:

Report misconduct to:

CFPB (consumerfinance.gov) for FDCPA or CFPA violations.
IRS for improper 1099-C issuance (use Form 982 for tax exemptions).
U.S. Trustee (justice.gov/ust) for bankruptcy fraud.
State insurance regulators for fraudulent insurance claims.
State bar associations for attorney misconduct (e.g., foreclosure mill lawyers).

Pursue Legal Action:

File a RICO lawsuit (18 U.S.C. § 1962) against servicers and foreclosure mills for fraud, like faking GSE loan status or insurance scams.
Cite cases like Ibanez or Veal to argue the servicer lacks standing.

Verify Securitized Loans:

Request CUSIP numbers for securitized loans to check ownership via the SEC’s EDGAR database. Mismatched CUSIP numbers or absent GSE records indicate the servicer isn’t the rightful collector.

Why This Matters to You

Servicers may foreclose to profit from fraudulent insurance payouts or avoid repaying insurers, often claiming Fannie Mae/Freddie Mac backing when no such loan exists. Without proof of corporate ownership, national bank authority, or GSE database entry, their actions are illegal. By verifying your loan’s status, demanding documentation, filing for bankruptcy, or reporting violations, you can stop foreclosures, avoid tax liabilities, and keep your home.

Resources

Fannie Mae Loan Lookup: fanniemae.com/loanlookup
Freddie Mac Loan Lookup: freddiemac.com/mymortgage
DIY Bankruptcy Help: securitizedbankruptcysystems.com
CFPB Complaints: consumerfinance.gov
IRS Form 982: Claim tax exemptions (irs.gov)
U.S. Trustee: Report bankruptcy fraud (justice.gov/ust)
Fannie Mae/Freddie Mac Guide Lines: fanniemae.com, freddiemac.com

Conclusion

Mortgage servicers may try to foreclose using illegal tactics, like claiming Fannie Mae or Freddie Mac backing when your loan isn’t in their database, faking documents, or collecting debts without ownership proof. Federal laws like the FDCPA, RICO, and Bankruptcy Code, along with cases like Ibanez, Veal, and Smoak, empower you to fight back. Verify your loan’s GSE status, demand proof, work with a lawyer, and take action to protect your home from foreclosure fraud.

Last Updated: May 11, 2025