Big banks accused of ‘systematic fraud’ in New York foreclosure auctions

Today's newsletter is curated by James Ramsay

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In 2005, Barbara Small purchased a narrow, three-story brick home in Flatbush with her father, a former transit worker who’d emigrated from Barbados via London in the 1970s. The house was both a place for him to live out his retirement and an investment for Small and her children. 

Fourteen years later, her father was dead and the property had been sold at a foreclosure auction after a series of financial setbacks, including a tenant who stopped paying rent. 

Like most homes sold at foreclosure auctions, it went in just a few minutes. The price: a little more than $1.3 million. After creditors and attorneys took their cut, Small said she was left with around $100,000, a fraction of the property’s true market value. 

“ My dad tried to help me create a legacy for myself and my kids, and now I have nothing really to give them,” Small said in an interview. “Generational wealth, it’s not for me.” 

But Small could have been entitled to more money. Her lender and their lawyers used a disputed method for tabulating the interest she owed, increasing the amount they took from her by tens of thousands of dollars. 

The practice is widespread. An analysis by Gothamist and New York Focus found that, out of over 7,400 foreclosure reports drafted by 14 prominent law firms since 2013, over 95% used the method that increases interest costs. 

Here’s what we learned about these foreclosure auctions — and what some say is a lack of oversight by the state’s court system.

Read the full story on Gothamist and listen to the NYC NOW podcast episode.

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