Foreclosures seem to be on the rise, but mortgage companies don't always get a slam dunk when it comes to taking your home from you. In order to foreclose, they've got to have their paperwork in order, something that's not always a given. With mortgages being sold over and over, sometimes companies don't have sufficient documentation to succeed with the foreclosure.

Countrywide Financial Corporation found a way to solve this problem, but it didn't make a judge too happy. The company created false documentation in an effort to prove it had sent certain letters to a homeowner, when in fact Countrywide hadn't sent her those letters.

After successfully completing a Chapter 13 bankruptcy period of 60 months, Countrywide accused the homeowner of having unpaid fees from that bankruptcy period. No dice. Countrywide didn't bring it up during the bankruptcy, so it can't now try to get extra money from her.

Countrywide's solution was to create fake letters that made it look like it did bring up those fees during the bankruptcy period. It got caught, and company attorneys ended up admitting that the letters they produced to the court were "recreated." In plain terms, they were phony.

And apparently this isn't the only case that Countrywide is having trouble with. 300 bankruptcy cases in Pittsburgh involving Countrywide are currently being examined because of documentation the company lost or destroyed. I have no objection to mortgage companies foreclosing on those who don't pay their mortgages. But the mortgage companies must play by the rules.

Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.

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