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Uncle Sam investigating some banks over foreclosure expenses

The housing crisis a few years ago costs thousands of families their homes and their sense of security. Now, it seems that it may have also taken a bite out of Uncle Sam's pocket, which ultimately means the citizens' wallets in the form of higher taxes. Several banks have been ordered to respond to questions concerning foreclosure fees. Those who have lost or purchased homes in Washington may be interested in the outcome of this current investigation.

One U. S. Attorney's office has recently sent out subpoenas to several banks in order to seek more information relating to the actual costs that they incur when foreclosing on properties. The foreclosures in question were those that were under the government programs of Fannie Mae and Freddie Mac. The action comes under the heading of the Financial Institutions Reform, Recovery and Enforcement Act, a tool that was enacted during the 1980s in order to allow the government the ability to investigate the banking industry.

One option a distressed homeowner may consider when faced with a possible default is a Chapter 13 reorganizational filing. This legal filing may forestall a bank effort to reclaim the property while the mortgagee seeks to restructure their debts and possibly remain in their home. In the end this may be best for both parties as foreclosures are estimated to cost the banks between $1,000 and $3,000, depending on the location of the property and other particulars. It is estimated that Freddie and Fannie are the guarantors of well over half of the mortgages in this country. Any efforts to prevent these types of bank actions may save both the consumer and the government excessive costs.

One consumer advocacy organization has stated that the system in place seeks to generate as many fees as possible during the foreclosure process, the costs of which are later paid by buyers in the future. Understandably the thought that banks and other institutions may have profited from the misfortune of beleaguered homeowners may raise the ire of those dispossessed from their homes. Washington residents who may be struggling to make their mortgage payments may have debt relief options such as a Chapter 13 that may allow homeowners the chance to retain the property. There are resources that may be able to provide information that could possibly avoid the loss of their home and security.

Source: Reuters, "U.S. probes possible overcharging by banks on foreclosure fees", Nate Raymond and Aruna Viswanatha, May 29, 2014

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