Witnesses: Mortgage lenders abusing court system

Mortgage lenders are abusing the bankruptcy court system by pursuing unjustified foreclosures against struggling homeowners, piling on questionable fees and misstating the amounts owed, witnesses alleged at a congressional hearing on Tuesday.

The result is a systemic breakdown that increases foreclosures, raises the number of families losing their homes and threatens the integrity of the legal system, the witnesses told the Senate Subcommittee on Administrative Oversight and the Courts.

"While bankruptcy is supposed to offer families one last chance to save their homes from foreclosure, the reality is that bankruptcy gives mortgage servicers new opportunities to engage in abusive practices," Katherine Porter, a University of Iowa law professor who has analyzed the system, testified.

Porter said her review of 1,700 recent Chapter 13 bankruptcy cases found mortgage lenders regularly disobey laws and rules as they try to collect thousands of dollars more than homeowners feel is owed.

Robin Atchley, ...