​Big banks falsely reported bankruptcy, foreclosure for thousands of borrowers -- lawsuit

by Ryan Smith02 Oct 2014
The mortgage units of Wells Fargo and Citigroup will have to face allegations that they falsely notified credit reporting agencies that thousands of homeowners were bankrupt or in foreclosure.

The banks had sought to dismiss a lawsuit involving the short sale of homes, according to a Reuters report. According to the lawsuit, Wells and Citi reported thousands of short sales – in which a home is sold for less than the mortgage is worth and the bank agrees to accept the proceeds as settlement – as foreclosures or bankruptcies.

The inaccurate reports damaged borrowers’ credit, and the banks failed to correct the reports when notified of the error, according to the lawsuit. The suit also seeks damages from credit reporting agency Experian, which plaintiffs claim failed to ensure the accuracy of the reports and didn’t investigate properly when notified of errors by borrowers.

Both Citi and Wells had asked that the suit be dismissed, saying the case was without merit, according to Reuters. However, U.S. District Judge Janis Sammartino said the plaintiffs had offered enough facts to lend credence to their claim.

COMMENTS

  • by Steven W. Stutman - Foreclosure Defense Attorney | 10/2/2014 12:52:43 PM

    What else is new…

  • by TeriG | 10/3/2014 6:56:49 AM

    I see this all the time on credit....I think they should go after them for mis-information. I'm a broker, and I have a 72 yr old Veteran trying to get a mortgage, and the new lender see's a previous mortgage in BK on credit....of course they want his first born as proof it didn't happen. HE STILL LIVES IN THE HOME AND THE BK WAS 6 YRS AGO. The previous mortgage company reported to all 3 bureaus that the account was included in BK. He has repeatedly tried to dispute the info, and it's still there....even though there is zero proof that the creditor could have provided the credit agencies that his home was discharged in the BK. I see mis-information everyday. While we are on the subject of credit agencies...I may as well throw in my 2 cents about the credit scoring models....WHY CAN'T WE JUST HAVE 1 MODEL? I get customers' all the time who check their own credit online, think they are good....I pull it and their score is 30 pts lower...they get mad at me for that! There should be 1 model for all mortgage types and all people...makes MUCH MORE SENSE TO ME and there is just no logic to it at all the way it is now.

  • by Griff | 10/3/2014 8:28:10 PM

    Lenders should have to report the facts. When a person files bankruptcy even a Chapter 13 the lender reports all debt in the bankruptcy EVEN if it is being paid on time and a borrower never missed a beat. Reports read "in bankruptcy" and they report no payments. I am working on this now where the borrower was prevented from refinancing because of this reporting. However, having filed a dispute the lender is now reporting no lates since 2010, but the borrower had to go thru he!! and back to get it done. We'll try again to get it done.

    I think, but I'm not an expert, Congress has the power to change the b/r rules. If so, they need to make it accurate. File a Ch 13, and continue to pay some stuff, then it should report that way!

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