Lending ‘Victims’ Avoiding Repossession
A series of court cases is helping to expose widespread improper lending practices involving some of the nation's biggest financial institutions. The rulings from those cases could allow thousands of struggling homeowners to walk away from their mortgages. It is believed several mortgage providers and mortgage brokers engaged in improper lending practices in the years before the global financial crisis hit in 2008, including inflating borrowers' income and ability to repay debts to secure so-called "low-doc" loans.
Courts in several states have sided with homeowners who have defaulted on their loans, extinguishing their mortgages. Such rulings are encouraging other lenders to reach settlements with borrowers that are saving homeowners hundreds of thousands of dollars. Denise Brailey, who runs the Banking and Finance Consumers Support Association, said victims of improper lending who were struggling to pay off their home may not be forced to hand over their keys if the bank came knocking.