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Facing foreclosure, Therese Masson filed for bankruptcy last year and is seeking a loan modification. Property records in her case were signed by a ReconTrust employee who has been accused of robosigning in at least a half-dozen wrongful foreclosure lawsuits. NBC Bay Area

Some homeowners have a hard time figuring out who owns the legal right to their home. Complicated paperwork makes it easier for banks and their mortgage servicers to cut corners on loan documents.

In a recent investigation, CIR and NBC Bay Area found that Bank of America and some subsidiaries, including foreclosure trustee ReconTrust, skirted proper procedures in foreclosure filings. 

In one case, CIR and NBC Bay Area found that Bank of America lost a $27,777.85 cashier’s check mailed in by a San Ramon homeowner; his payment was never credited and he lost his house. In another case, the investigation found that an Oakland woman faced foreclosure after Bank of America’s trustee improperly substituted its name on a loan document, taking over the loan.

Bank of America says it has made significant improvements to its foreclosure process since 2010 and has helped nearly 300,000 California customers avoid foreclosure.

Bank of America spokeswoman Jumana Bauwens said ReconTrust obeys all applicable laws. The bank and its subsidiaries, she said, provide homeowners who ask with written proof that the bank has the right to foreclose.

The accuracy of these filings is particularly important in the Bay Area, where 184,000 properties went into default in the past five years. 

This map shows the number of foreclosures for each of the nine Bay Area counties. Click on a county to see foreclosure information.
Source: RealtyTrac Inc., 2010 U.S. Census
Credit: Agustin Armendariz/Center for Investigative Reporting

The value of defaulted loans in 2012 alone exceeded $11.6 billion. Bank of America plays the biggest role of any bank in Bay Area foreclosures. 

Here is a timeline of key events:

1997: A centralized database

The mortgage banking industry creates the Mortgage Electronic Registration System, or MERS, a private, centralized registry that makes it easier for banks to track servicing transactions and ownership of home loans. This online database holds an estimated 26 million active mortgages nationwide but receives little government oversight.

2001-2006: Growth of the housing bubble

Lax loan requirements make it easier for homeowners to borrow more than they could pay back, leading to more defaulted loans than the mortgage banking system can handle – especially in California.

January 2008: Bank of America takes over Countrywide

Bank of America acquires Countrywide Financial, one of the nation’s largest lending and servicing giants. It pays $40 billion for Countrywide in a bid to expand its mortgage arm.

Late 2008: Housing bubble pops

The country’s housing bubble bursts as the national housing market hits rock bottom, sending millions of homeowners into default. 

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Between July 2008 and October, 184,000 Bay Area properties went into default. One in five were handled by ReconTrust. NBC Bay Area

June 2010: Countrywide pays settlement to FTC

Countrywide, now a division of Bank of America, pays $108 million to settle a lawsuit with the Federal Trade Commission, in which the company is accused of routinely marking up servicing fees to offset losses from delinquent homeowners, the commission said. Countrywide admits no wrongdoing in the settlement. Bank of America later says it regrets the acquisition of Countrywide.

YouTube video

Credit: Video courtesy of Washington’s attorney general’s office

August 2011: Washington state sues ReconTrust

Washington Attorney General Rob McKenna sues ReconTrust for filing false documents in thousands of foreclosure cases, saying the company’s “illegal practices make it difficult­ – if not impossible – for borrowers who might have a shot at saving their homes to stop foreclosures.”

October 2011: Nevada adopts law to protect borrowers

Nevada, which like California was among the hardest hit by the foreclosure crisis, enacts a law that prohibits any bank from acting as a lender, trustee and servicer for a loan. This means that ReconTrust cannot initiate foreclosures on behalf of Bank of America in the state.

February 2012: Major lenders agree on $25 billion settlement

Bank of America and four other mortgage servicers agree to a $25 billion settlement with the Department of Justice and 49 states’ states attorneys general for allegedly falsifying loan documents and misleading homeowners.

February 2012: San Francisco audit finds apparent legal violations in most foreclosures.

The San Francisco assessor-recorder releases an audit that finds banks filed documents that appeared to violate the law in 84 percent of foreclosures filed in the city between 2009 and 2011. The report concludes:

If there is one lesson to take away from this report it is that, with so many homes being foreclosed and with so little oversight, California’s foreclosure process appears utterly broken.

July 2012: California enacts law to help homeowners

California lawmakers pass the Homeowner Bill of Rights, which attempts to address systemic problems in foreclosure but does not address banks filing fraudulent foreclosure documents. The law takes effect Jan. 1, 2013.

August 2012: ReconTrust settles in Washington

ReconTrust pays $1.1 million to settle a lawsuit brought by Washington’s attorney general.  

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Bank of America reported earning .7 billion in servicing fees last year, according to its most recent U.S. Securities and Exchange Commission filing.NBC Bay Area

April 2013: Countrywide agrees to $500 million settlement in class-action suit

Countrywide agrees to pay $500 million to resolve claims that it misled investors in mortgage-backed securities. If the deal is approved, it will be the largest settlement in a national class-action lawsuit filed by mortgage-backed securities investors.

Since 2011 more than 15,000 Bank of America customers have filed mortgage-related complaints with the Consumer Financial Protection Bureau.

For more on why foreclosures remain a problem in the Bay Area, read CIR’s latest investigation.

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Kelly Chen is a news engagement specialist at The Center for Investigative Reporting. She manages the day-to-day social media strategies and online engagement for CIR. In addition, she works to break down complex issues and ideas and create content for CIR's online communities. Kelly also works to increase engagement on and on other online platforms. Previously, she produced discussion segments for PBS NewsHour and oversaw social media and engagement efforts for the American Graduate project, a public media initiative on the high school dropout crisis. She's also worked at Southern California Public Radio and National Geographic TV. A native of Los Angeles, she studied international relations and English at UC Davis.