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STEVE INSKEEP, host:

It's MORNING EDITION, from NPR News. Good morning. I'm Steve Inskeep. Renee Montagne is away this week. One of our national political correspondents, Don Gonyea, is with us.

Don, welcome.

DON GONYEA: Good to be here. The commute's easy.

(Soundbite of laughter)

INSKEEP: There you go. There you go.

GONYEA: We're going to report this morning on the foreclosure practices of the country's largest banks. Prosecutors are, in fact, examining banks in all 50 states. The question is whether banks improperly took away Americans' homes.

INSKEEP: The banks say they do not seize people's houses without justification. But NPR uncovered a case where a homeowner facing foreclosure was actually the victim of a scam run by a bank employee.

NPR's Chris Arnold has the story.

CHRIS ARNOLD: The banks say that they've been doing all that they can to work with homeowners to avoid foreclosures. But don't tell that to Rachel Keyser from Deerfield, New Hampshire.

Ms. RACHEL KEYSER: I can't tell you the emptiness. I mean, my knees started to shake; my stomach got into a knot.

ARNOLD: Keyser's been on the verge of losing her home for years now. And she says the reason is that one of Countrywide's own employees ran a scam on her, and stole a lot of money.

This all started way back in 2004, before Bank of America bought Countrywide. Keyser says that just a few months after she bought her house, a loan officer at the local Countrywide office called her and pushed her to refinance.

Ms. KEYSER: He didn't ask for me to go to the office, or anything like that. We had a couple of phone calls, and he came to the house. And so this guy walked in with another, very nervous-looking fellow who was supposedly a real estate person.

ARNOLD: Keyser's a single mom and an art teacher. She'd been a homeowner before, and she put down a $100,000 down payment when she bought the house. But she readily admits that she's not very sophisticated with legal paperwork, and was probably too gullible. But she says that this guy got her to sign a bunch of papers and basically, it turns out he was running what's called an equity-stripping scheme - where he got her to borrow more money, and he put it in his own pocket.

This guy was basically running a scam?

Ms. KEYSER: A scam.

ARNOLD: Yeah?

Ms. KEYSER: Yeah.

ARNOLD: How much money did they take from you that way?

Ms. KEYSER: One hundred and sixty-five thousand dollars - the entire equity of the house.

ARNOLD: Keyser's story is backed up by documents from a State of New Hampshire Banking Commission investigation. Keyser called the authorities, and the state eventually barred these con artists from doing business in New Hampshire. NPR spoke with three other homeowners who fell victim to the same scam.

While this was going on, Keyser made payments to a bogus shell company, so Countrywide never actually got the money, and she wound up way behind on her legitimate mortgage. And, she says, she's been trying to explain all this for years now - to first Countrywide, and then Bank of America after Countrywide collapsed and Bank of America bought it.

Did you talk to Bank of America and say hey, look. I'm a victim of fraud?

Ms. KEYSER: They don't want to hear it. They don't want to hear it. They don't believe me. They don't want to hear it.

ARNOLD: So Keyser and her daughter have been living in limbo, not knowing if they're about to be put out of their house. Sydney, her daughter, says that that went on the whole time that she was in high school, dealing with debt collectors, her mom being anxious about it.

Ms. SYDNEY KEYSER: That's how it's been for years - just constant stress and then, you know, you try not to talk about it. And then eventually, some phone call comes up and it's just like, OK - time to cry now, time to get angry. That's just been life.

ARNOLD: Rachel Keyser says her life savings is tied up in this house. And you would think that since the bank's own employee ran this scam, Keyser might be at the front of the line for people deserving to get some help avoiding foreclosure. But she hasn't been able to get that help. This summer, in July, Bank of America finally moved to foreclose and seize her home.

Ms. KEYSER: It literally was like a black hole opened up from under my feet, and if I were the kind of woman that would crumble, I would have crumbled.

ARNOLD: Instead, Keyser decided to fight the bank, with the help of a local attorney. The lawyer, B.J. Branch, says he literally ran to the courthouse this summer, the day before the house was to be auctioned off, and persuaded a judge to grant an emergency injunction.

Mr. B.J. BRANCH (Attorney): If I hadn't, her house would have been sold. And undoing it - undoing a foreclosure, once it's occurred, is a nightmare, even worse than trying to get it stopped.

ARNOLD: Bank of America says it is now working on a loan modification for Rachel Keyser to keep her in her home. But NPR actually first contacted Bank of America about Keyser's case more than eight months ago, and bank representatives said then that they would look into it. And Keyser says the bank contacted her.

Ms. KEYSER: People who were concerned with how this looked started to look into it.

ARNOLD: Keyser signed an agreement with the bank that temporarily lowered her payments while she tried to work out a permanent fix. But it was in the middle of that - when she was making those payments, and when the bank had pledged in writing not to take her house - that's when Bank of America moved to foreclose on her, anyway.

B.J. Branch.

Mr. BRANCH: It was very crazy. The bottom line is that no one - no one - could answer any questions here. Here's my - see this here.

ARNOLD: In his office, Branch started showing me his file on the case: bank checks proving that Keyser was making those payments as agreed. He's even saved phone messages from the bank, telling him that the house was not going to be foreclosed on.

Voice Recording: Old messages.

Unidentified Man: Hi, Mr. Branch. I'm calling form Bank of America Home Loans. I'm just calling to let you know that the foreclosure has been postponed. There's no new foreclosure sale date set.

Mr. BRANCH: That was not an accurate statement.

ARNOLD: Because Branch has documents showing that a new foreclosure date had been set, and the bank then moved ahead to foreclose.

Mr. BRANCH: I mean, this is pretty impressive in terms of the incompetence.

ARNOLD: For its part, Bank of America says that it is investigating what happened in this case. The bank also says that during the foreclosure crisis, it has hired more staff and now has thousands of employees working with homeowners to help them try to avoid foreclosure.

And the bank stresses that it is working with Rachel Keyser to modify her loan so she can keep her house.

Chris Arnold, NPR News, Boston.

GONYEA: And Chris Arnold joins us now to talk about this story. Hi, Chris.

ARNOLD: Hi, Don.

GONYEA: So it sounds like this one woman, Rachel Keyser, had this really, really awful experience. But how does this relate to the bigger picture regarding foreclosures?

ARNOLD: Well, yeah. This particular woman was the victim of a scam, and that's dramatic and unfortunate for her. But I think what's actually more interesting here is that even after NPR contacted the bank and they pledged to this homeowner and her lawyer on the phone and in writing - they said look, we're not about to foreclose on you - then somebody at the bank apparently made a mistake, and moved to foreclose on her anyway. And that, obviously, raises a question: If they made this mistake in just this one case that we happened to be watching, how many more mistakes like that are banks making?

GONYEA: So beyond this particular case, these are the sorts of problems that state prosecutors all over the country are digging into right now?

ARNOLD: Actually, yes. Yes, they are. And first of all, before we get into that, we shouldn't single out Bank of America here too much. Many banks appear to be having big problems handling all of these foreclosures. And some of that's understandable - that the scale of this problem is huge, and the banks have been hiring thousands of people to help them do this. But there are still lingering problems, and there are a bunch of different problems.

For example, one issue is that there's a potentially really powerful program available from the federal government to help people avoid foreclosure, and it lowers their mortgage payments, to make their loans more affordable. But that program isn't reaching that many people. And some regulators are concerned that banks are, for some reason - they appear to just be inexplicably rejecting people from that program when it appears that they really should qualify for help. So, there are all kinds of problems like that.

GONYEA: Chris, it's been a couple of months since we heard about that controversy involving the so-called robo-signing of foreclosure documents. Do these investigations grow out of that issue?

ARNOLD: That's exactly right, yeah. And there are now prosecutors from all 50 states who are looking into most of the major U.S. banks now. Those investigations, like you said, started with this robo-signing issue, which basically involved paperwork that wasn't being done right. It's more serious than that. People get upset when you call it paperwork. I mean, these were legal documents that were not being prepared properly, and submitted to courts.

But that issue was limited. And from what I gather, the investigations are growing in scope. And investigators are now looking into pretty much every aspect of the way that banks manage home loans, the way they foreclose on people, the way they try to prevent foreclosures.

I think, basically, a lot of state prosecutors feel like we're now several years into this foreclosure crisis, and the banks are still basically foreclosing on more people than they really should be. And these investigations seem broadly aimed at trying to find out why, and trying to make some changes to the way banks deal with foreclosures.

GONYEA: That's NPR's Chris Arnold. Chris, thanks a bunch.

ARNOLD: Thanks, Don.

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GONYEA: You're listening to MORNING EDITION, from NPR News.

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