Banks Prey on Distressed Homeowners

Some of the nation’s largest banks including Bank of America (NYSE: BAC), JP Morgan Chase (NYSE: JPM) and Citigroup’s Citi Mortgage division (NYSE: C) have been accused of finding unethical ways of making money from distressed homeowners who are trying to avoid foreclosure, including allegations that banks are making illegal requests for up-front cash payments from buyers and real estate agents as part of their agreement to close the deal on short sales.

Short sales require banks to accept less than the full amount due on the mortgage.

Industry-insider, Jeremy Brandt, recently said in an interview with CNBC that “at least 200 real estate agents said they have had these requests made by representatives of Citi Mortgage, JP Morgan Chase, Bank of America and other large banks.”

Since the cash that lenders receive is not listed on the final HUD settlement statement as mandated by the Real Estate Settlement Practice Act (RESPA), the cash payments are illegal.

Brandt said that this type of fraud appears to be more prevalent in the case of banks that hold a second mortgage on a homeowner, which often end up with nothing in short sales.

JP Morgan Chase was recently questioned about the practice by the Examiner and declined to comment. Bank of America and Citigroup’s Citi Mortgage division denied that the practice was happening. Source>

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