Failed Mortgage Companies Are Dumping Your Files
By Stephen Otto, Pennsylvania Bankruptcy Attorney on Oct 28, 2007 in Chapter 13 Bankruptcy
On October 23, 2007, the Wall Street Journal broke news which should be alarming to predatory lending victims and their attorneys. Mortgage Companies are intentionally dumping files. The files include the documentation which consumers provided to these mortgage companies and/or mortgage brokers in order to qualify for loans. This might include original, signed mortgage documentation like the TILA disclosures or the Promissory Note. It may also include, as was discovered by one individual interviewed by the WSJ, medical information of sufficient sensitivity to be covered by HIPPA.Â
The Wall Street Journal interviewed Bob Segall, a reporter at WTHR-TV in Indianapolis. Mr. Segall undertook an exercise in investigative journalism by exploring the contents of 40 dumpsters behind loan branches and title companies. He found sensitive documents in 18 of the dumpsters.
Ameriquest appears to be one of the worst offenders. Ameriquest was a company which offered subprime loans, many of which were predatory in nature, using its own brokers at retail mortgage shops throughout the country during the boom in careless lending earlier this decade. Earlier this year, Ameriquest announced that it would no longer be accepting new loan applications — a fact which is currently reflected on its website. A sale of the assets of Ameriquest is pending.
Evidently, former Ameriquest employees are dumping documents as its retail branches are shutdown. According to the Wall Street Journal, a maintenance worker at an apartment complex located in Atlanta stumbled upon 40 boxes full of loan files “containing Social Security numbers, credit reports and other data on customers of Ameriquest Mortgage Co.”
Some regulators are beginning to take action. The WSJ found at least two examples. In one case, the North Carolina Attorney General fined two mortgage companies for disposing documents in an insecure fashion. In another case, Hawaii fined a defunct mortgage-escrow firm $10,000 for improperly disposing of mortgage documents.
In the Hawaii case, a concerned citizen who also happened to be an editor for an Hawaiian newspaper, Jim Kelly, “stumbled upon 39 boxes of mortgage documents as he was dropping newspapers at a recycling center.” Mr. Kelly reported the documents to a stage agency which took custody of them and shredded them.
The unauthorized and unsafe disposal of mortgage documents are of grave concern to consumers, not just due to the potential for identity theft, but also due to the fact that some of the underlying loans are now being subjected to legal scrutiny due to the predatory character of the loans. The original documentation can be useful to consumers who are trying to prove their cases. For example, the WSJ cites the fact that attorneys for a class of consumers who were taken advantage of by Ameriquest and who are currently litigating their case in federal court in Illinois are seeking the discarded mortgage files which were discovered in the apartment complex dumpster in Atlanta.
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