In May of 2010 our family lost own home after our mortgage company, GMAC (dba ditech) pushed our payment up by $1000/mo, forcing us into foreclosure.
Question: How were they able to push our payments up?
Answer: Because of a particularly challenging month on our budget, right about when our property tax was due, we called the County of Riverside and asked for an extension on our tax bill. The county said they could issue an extension but only AFTER the tax is due and that I should call back then to request the extension. But as soon as the tax was overdue, GMAC paid the tax for us. We were told that they were obligated by law to do so (even though I still haven't been able to find that law.) They also told us that they were obligated to modify the loan to include an escrow account for the purpose of paying future tax bills on the property. Our property tax was roughly $5,000 a year but the loan modification increased our monthly payment by $1000, so they were charging us $12,000 a year to pay $5,000 in taxes.
Question: Why would they want to foreclose?
Answer: GMAC hasn't been very upfront with us. In fact they sold our house without even telling us. So we will probably never know specifically why they wanted to foreclose on our house, but given their unwillingness to work with us it seemed that foreclosure was certainly not something they were trying to avoid. The recent congressional investigations into the Goldman Sachs scam gives us some insight into possible motives. Goldman Sachs is charged with selling investment products that they themselves designed to fail without disclosing the risk to the investors and then short betting against the product by taking out insurance. So when the product failed, money that investors lost on the product went to the insiders with the insurance policies. The products were based on mortgages that needed to fail for the plan to work. I am not suggesting that GMAC is in anyway connected with the Goldman Sachs scam, I am only providing one example of why banks might want to actually encourage foreclosures.
