In New York, several big banks have been accused of systematic fraud, depriving people who have lost their homes to foreclosure of millions of dollars, and saddling them with extra debt.

It's a complex story, but it boils down to the way in which lenders are charging interest on loans during a foreclosure process.

The central question: Are homeowners getting a smaller share from a home sold in foreclosure because banks are overcharging on interest?

“Marketplace Morning Report” host Sabri Ben-Achour spoke with David Brand, who is investigating this at WNYC and Gothamist. The following is an edited transcript of their conversation.

Sabri Ben-Achour: So, let's get specific about these allegations. This all has to do with a disputed method for calculating interest. It's a little complicated. Can you explain how it works?

David Brand: Sure. So, before a home can be foreclosed on and sold at an auction, a judge has to actually approve that. Prior to that, the financial institution and the loan servicer handling the mortgage hire attorneys who calculate the debts, and they submit a proposed judgment amount, and then, when the judge approves that amount, the foreclosure sale can move forward. But what we found is that the time period between that motion and the judge actually issuing a ruling can be many months or even many years. And so, during that time period, the financial institution, the lender, can legally charge interest because interest is accruing. So, the question is, should that interest accumulate on that judgment amount, or should it accumulate on the unpaid principal balance?

Ben-Achour: This has hit some New Yorkers pretty hard. Can you share some examples of what you found?

Brand: Sure. So, we focused on one homeowner in particular. She had a three-family home in Flatbush, Brooklyn. Her father was living in the building and taking care of things. They had a tenant renting two units. Her father was diagnosed with Alzheimer's. His capacities were slipping. She said she didn't realize that the tenant wasn't paying rent. Ultimately, she lost the home to foreclosure at an auction sale. She did receive some money from the sale, but her attorney says because of the method of interest calculation, she should have received about $24,000 more than she did get. So, we saw that, and we started looking at thousands of other cases to see how these disputed interest calculations, how often they were being used. And we found 7,400 instances.

Ben-Achour: Is this ultimately a story about big institutions kind of squashing the little guy, or is the picture more murky than that?

Brand: Well, what we found is that many more times often than not, the calculation method that favors the big institution is the one that's being used. So, we're not prosecutors. We're not saying whether that's illegal or not. That's up to a judge. That's up to the state. But what we do see is these two contradictory methods happening at the same time, often in the same courthouse, maybe on the same day: one that favors the financial institution, one that favors the former homeowner. And the state court system is allowing this to proceed despite evidence that one of the ways might be wrong.

Ben-Achour: There has been a government response to your reporting. New York State Senator Zellnor Myrie, he's introduced new legislation. What do you think of that?

Brand: You know, in our reporting, we heard that that would go a long way to just kind of standardize this process throughout the state. The other portion of the bill is to actually standardize what amount they're calculating interest on. And he says that he thinks it's illegal to calculate interest on a judgment amount prior to judgment, and that they should be calculating interest on the unpaid principal balance, and he says that's what he hopes his legislation will accomplish.