Ally, previously GMAC, got $17.2 Billion in bailouts. They packaged loans sold to pools/trusts that posted a 2Nd quarter loss of $100 million. (by Joe Vera)
Ally gets subpoenas from U.S. investigators on mortgage loansBradley Keoun and Donal Griffin/ Bloomberg News
Ally Financial Inc., the auto and home lender that got a $17.2 billion bailout, said it received subpoenas from the U.S. Department of Justice and the Securities and Exchange Commission relating to how it handled home loans.
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The Justice Department is seeking information for an investigation of potential fraud related to “the origination and/or underwriting of mortgage loans,” Ally said today in a filing. The SEC subpoena is in connection with mortgages placed in securitization trusts, the Detroit-based lender said. The subpoenas were received this month, the company said.
Ally, 74 percent owned by the U.S. Treasury Department also said it will record a second-quarter cost of about $100 million to cover losses suffered by trusts that bought its mortgages. A separate April settlement with federal regulators investigating shoddy mortgage practices will also cost between $30 million and $40 million each year through 2013, according to the filing.
Ally, run by former Citigroup Inc. executive Michael Carpenter, is among the five largest U.S. mortgage originators and servicers.
“We are working closely with the Department of Justice and the SEC to deliver the requested information within the required timeframes,” Gina Proia, a spokeswoman for Ally, said in an e- mailed statement.
The disclosures were in an update to the prospectus, initially filed in March, for the company’s planned public share offering. The share sale has been delayed until equity markets improve, a person familiar with the plans said earlier this month.
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The $100 million cost will help cover losses on insured mortgages where guarantors later canceled the policies because “they believe certain loan underwriting requirements have not been met,” according to the filing. The mortgages had been sold to trusts, which packaged them into securities to sell to bond investors.
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“These payments resulted from a review of securitized mortgages as to which mortgage insurance was rescinded, although no claims have been made against us to date with respect to these mortgages,” Ally said in the filing. Proia said the firm doesn’t expect further charges related to the matter.
The majority of costs linked to Ally’s settlement with federal regulators in April are for “additional servicing, vendor management, legal, compliance, and internal audit personnel,” the firm said in the filing.
State attorneys-general are conducting a nationwide probe into allegations that the largest U.S. loan servicers used sloppy documentation during home seizures.
“We continue to cooperate with the ongoing investigations of various regulators,” Ally said. “Any additional results of these investigations are uncertain, but we expect that Ally or its subsidiaries will become subject to additional penalties, sanctions, or other adverse actions, including monetary fines, that could be substantial and have a material adverse impact on us.”
From The Detroit News: http://detnews.com/article/20110629/BIZ/106290392/Ally-gets-subpoenas-from-U.S.-investigators-on-mortgage-loans#ixzz1QgQzRDWZ
Wednesday, June 29, 2011
Tuesday, June 28, 2011
High School kids were Hired at $10/hr to sign Fraudulent Foreclosure Documents
One company, DocX, alone created at least 2 million mortgage documents nationwide. High School kids were hired at $10/hr to sign fraudulent foreclosure documents.
Sunday, Jun. 19, 2011
Mortgage papers raise Myrtle Beach real estate fraud claims
Signatures on documents used in foreclosure cases under review
By David Wren – dwren@thesunnews.com
Anthony Wise has been selling real estate in the Myrtle Beach area for nearly three decades, but he had never heard of Linda Green until after his home went into foreclosure.
Now, just like hundreds of thousands of people nationwide, Wise is finding that the biggest investment he will ever make – his home – is closely tied to Green … or someone pretending to be her.
Green was a shipping clerk for an automobile parts company before taking a job in the signature room at a mortgage document company called DocX in Alpharetta, Ga., according to news reports.
Myrtle Beach real estate agent Anthony Wise hopes to cancel his home loan based on what he considers a fraudulent document and improper securitization of his mortgage. His home on Haskell Circle in Myrtle Beach is in danger of foreclosure.
DocX helped banks create documents – such as mortgage assignments, which transfer ownership of a home loan from one entity to another – in cases where the documents were missing from the original loan file or never existed in the first place. Those documents then were used in foreclosure proceedings all across the country.
In Horry County, DocX documents have been used in at least 46 foreclosures since 2008.
There are nearly 100 DocX mortgage assignments filed at Horry County’s register of deeds office for homes with loans totaling more than $17 million.
Green’s purported signature is on many of those documents.
And many of those documents are suspected of being fraudulent, according to government regulators.
Questionable signatures
The Federal Reserve Board and a trio of banking oversight groups issued a consent order in April against DocX and its parent company, Lender Processing Services Inc. of Jacksonville, Fla.
Although no fine was issued and the regulators said more study is needed to determine what wrongdoing – if any – occurred, the order has sparked investigations of DocX, which shut down last year, in at least four states and more attorneys general are expected to join the probe.
The regulators’ action took place after a “60 Minutes” television news broadcast on April 3 that showed DocX hired high school students and others for $10 an hour to sit in a sweatshop-like setting and sign thousands of mortgage documents every day, without checking to see if the documents were accurate.
DocX workers signed the documents as if they were vice presidents of national banks. Green, for example, claimed to be the vice president of 20 banks at the same time.
And when the real Linda Green wasn’t signing the mortgage documents, other DocX workers were signing them in her name, according to the report. DocX documents, including those filed in Horry County, show numerous variations of Green’s purported signature.
DocX workers told “60 Minutes” that Linda Green’s name was chosen as the one they all would sign because it is short and easy to spell.
DocX also had public notaries sign the documents, attesting that Linda Green was the vice president of various banks and that they saw her sign the paperwork. Jasmin Bennett, the notary who signed Wise’s document, did not return a telephone call seeking comment.
Green, however, was not the vice president of 20 banks and the documents she and other DocX workers signed as if they were bank executives are coming under fire in legal proceedings – including Wise’s foreclosure.
Linda Green could not be reached for comment. A spokeswoman for Lender Processing Services did not respond to a request for comments.
“From what I can tell, everything DocX did was fraudulent,” Wise, the owner of Exit Elite Realty in Myrtle Beach, told The Sun News last week. “They were just robo-signing these documents, in my opinion, and Linda Green was the one who did that.”
Wise has hired a Myrtle Beach company called New South Financial to help him fight the foreclosure. He says the allegedly fraudulent mortgage assignment Green signed – in this case, pretending to be the vice president of American Home Mortgage Servicing Inc., the successor to Option One Mortgage – means the lender that is trying to take his home doesn’t really have clear title or rights to the property.
“At this point, with what we’ve discovered so far, I want my loan negated,” Wise said. “That’s what I’m going for.”
Game of cat and mouse
The allegations aren’t limited to DocX.
“If you look through your local land documents, they’re full of trash,” said Lynn Szymoniak, a Palm Beach Gardens, Fla., lawyer who made it her mission to raise courts’ awareness of fraudulent mortgage documents after her own home went into foreclosure. “It is incredibly widespread.”
Bob and Christine Dorrie moved to Myrtle Beach from the Bronx in New York in 1998. Like many people during the economic boom, the Dorries used their credit cards to finance a lifestyle beyond their means. So, in September 2007, they decided to refinance their home in the Island Green East neighborhood to pay off some of their bills.
“When we went to closing, the woman handling it said, ‘Well, we couldn’t get as much money as we thought’,” Bob Dorrie said, adding that none of the credit card bills wound up getting paid in full. “We ended up with all the charge cards still open with money still on them and a new home loan at a much higher price.”
The Dorries’ mortgage payment, which had been $987 a month, soared to $1,340 a month after the refinance.
As the economy grew worse, the Dorries quickly fell behind on their house payment.
Wells Fargo Bank, the new owner of the Dorries’ loan, filed a foreclosure lawsuit against the couple on Sept. 2, 2009. Bob Dorrie’s emergency bankruptcy filing three days before the house was to be sold at auction has put everything in limbo.
The Dorries now are questioning how Wells Fargo came to own their loan.
Ace Funding – the company that gave the Dorries their loan in 2007 – filed for bankruptcy protection and went out of business the following year, never officially assigning the Dorries’ loan over to Wells Fargo.
Wells Fargo didn’t file the assignment on behalf of the defunct Ace Funding until more than three weeks after the foreclosure lawsuit was filed. A lawyer representing Wells Fargo in the foreclosure lawsuit signed the document for Ace Funding, even though he “really has no authority to assign this mortgage,” according to Terry Walden, an audit originator and attorney liaison for New South Financial.
When Dorrie pushed Wells Fargo for more information about the ownership of his mortgage, the bank told him in November that Fannie Mae owned the mortgage and that Wells Fargo was only the loan servicer.
Then, in April, Wells Fargo told Dorrie that the real owner of his mortgage is Freddie Mac.
“Given this information, only Freddie Mac has the authority to enforce this note and foreclose on this property,” Walden said.
Wells Fargo spokesman Jim Hines disagrees, saying the Dorries’ loan documents were handled appropriately and that the bank’s contract as a loan servicer gives it “the authority to take action on the loan to protect the investor’s interests, including foreclosure.”
Hines said Wells Fargo is working with the Dorries and hopes to “reach a solution that would help them keep their home.”
Linda Green’s signature appears on DocX paperwork used with thousands of Wells Fargo mortgages – although not in the Dorries’ case – since the real estate boom.
Even so, Hines said Wells Fargo has reviewed mortgage documentation for all of its loans and “has not found any foreclosure that should not have taken place.”
Wells Fargo sees foreclosure as a last resort, Hines said, and has worked with 673,000 borrowers to modify their loans since January 2009.
Bob Dorrie said Wells Fargo has repeatedly thrown up road blocks while he has tried to modify his loan. He hopes the perceived chain of title issues will give him some additional leverage in court proceedings and force his lender to modify his loan on terms he and his wife can live with.
“This is supposed to help force the bank’s hand, instead of them playing this game of cat and mouse with me,” Bob Dorrie said. “I’m still in the home, and I’d like to keep it.”
Who is at fault?
Ballery Skipper, the director of Horry County’s Register of Deeds office, said her staff is not responsible for investigating whether or not a document is legitimate. As long as fraud is not suspected, Skipper said, she is legally required to file the documents.
In the few cases where Skipper or her staff suspects fraud, the case is referred to the state attorney general’s office. Skipper said she has not referred any of the DocX filings to law enforcement.
Register of Deeds offices in other states, however, are starting to do their own investigations. A review of filings in Guilford County, N.C., for example, found 1,920 DocX loan documents for property worth $255 million and 15 variations of Linda Green’s signature.
Some mortgage executives say the documentation problems are overblown, and that homeowners are looking for any reason to stop a foreclosure.
“The homeowners have defaulted on their loans, and a flaw in the documentation does not mean the foreclosure was a wrongful foreclosure,” said Janis Smith, vice president of Mortgage Electronic Registration Systems, or MERS, the nation’s largest mortgage loan registration service.
“Foreclosure is a very emotional situation, and people will try all angles in an attempt to stop the process,” Smith said. “At the end of the day, though, you still have a situation where the borrower didn’t make their payments.”
Walden, however, says that kind of response is disingenuous. While the courts are set up to determine whether a homeowner has defaulted on a loan, he said, they are also responsible for ensuring the banks’ paperwork is legitimate and that due process is followed.
“The banks just made up the paperwork they needed to get the deal done,” Walden said. “We want to hold the banks accountable for that.”
Where it all began
To better understand how this mortgage mess occurred, one has to look back to the home-buying frenzy that took place between 2005 and 2007.
During the real estate boom, some of the nation’s largest banks bought home loans from all over the country and packaged them together in mortgage-backed securities that were sold to investors – including many 401(k) programs and pension funds.
Each security that was issued included thousands of mortgage loans worth a combined $1 billion to $1.5 billion – and the Wall Street banks sold hundreds of those securities to investors who believed the rise in home values would never end.
As the hunger for mortgage-backed investments grew, banks had to find more and more people to take on new loans that could be packaged into new securities. Before long, home loans were being given to nearly everyone that applied – regardless of income or credit score.
Many banks didn’t even require documentation of a person’s income or employment before giving them a loan. And some bankers looked the other way when an obviously fraudulent application crossed their desks, recent investigations show.
“If you had a heartbeat, you could get a loan,” said Walden, a former mortgage broker.
When the millions of people who never should have been given credit in the first place started to default on their home loans, the mortgage-backed securities house of cards imploded and the real estate bust began.
Those securities also are at the root of today’s mortgage documentation debacle.
The trust companies that issued those securities – usually a large bank such as Bank of New York or Deutsche Bank – were required by law to have a copy of the mortgage note and every mortgage assignment showing a clear chain of title for each of the thousands of loans included in each investment offering.
The trust companies were required to obtain those documents no later than 90 days after the security was issued.
There were so many securities being issued so quickly, however, that the trust companies were not able – or didn’t bother – to collect all the required documents.
That didn’t cause problems as long as the mortgages were being paid. But when a homeowner stopped paying and a bank decided to foreclose, the needed documentation wasn’t there.
That is why many banks turned to “document mills,” which charged a small fee to create the documentation banks needed to proceed with foreclosure. It is estimated DocX alone created at least 2 million mortgage documents nationwide, many of them allegedly forged and fraudulent, over a two-year period.
“Instead of doing things the right way, the banks chose to go into court and lie,” Szymoniak said.
Foreclosure lawsuit
Anthony Wise refinanced his Myrtle Beach home in February 2006 and he thinks his lender started to recreate his mortgage paperwork after he missed a payment in late 2008.
For example, a mortgage assignment transferring the loan from Option One to Deutsche Bank National Trust – the company that oversaw the mortgage-backed security that purportedly includes Wise’s loan – was recorded Jan. 23, 2009, in Horry County. That document was prepared by DocX and includes Green’s signature.
“They were trying to get all of their paperwork in a row just in case,” Wise said.
A Deutsche Bank spokesman did not respond to a request for comments.
Deutsche Bank filed a foreclosure lawsuit against Wise in April 2010, and that case is still pending.
In addition to allegations that the DocX mortgage assignment is fraudulent, Wise says Deutsche Bank missed the deadline for documenting his loan and has no right to foreclose on his home.
Wise’s mortgage was placed into a security called Soundview Home Loan Trust 2006-OPT2, which had a closing date of April 7, 2006. That means all of the documents for all of the loans in that security had to be obtained by Deutsche Bank within 90 days of that closing or, by law, they could not be included.
Wise’s mortgage assignments – including the one giving the loan to Deutsche Bank – weren’t filed until more than two years after the Soundview security closed, according to county property records.
Help for homeowners
There are dozens of instances in Horry County where DocX hastily created mortgage assignments to help banks foreclose on residents’ homes. In most cases, those documents were not created until after a foreclosure lawsuit had been filed. And in some cases, DocX back-dated the documents to make it appear as if they took effect just days before the foreclosure filing.
Most of the DocX paperwork filed in Horry County bears the signature of Linda Green.
Richard Lovelace, a Conway lawyer who specializes in real estate and banking law, said the banks who used DocX – or similar document mills – have put themselves at risk if homeowners can prove the paperwork is fraudulent.
That is true even if a home has already been lost to foreclosure.
“Any flaw that is discovered post-hearing, if it’s brought to the court’s attention in a timely manner, the judge will set aside the judgment and reopen the hearing,” said Lovelace, who is not involved in any of the foreclosure cases where DocX documents were used.
If the court proceedings – and the paperwork those proceedings were based on – are proven to be defective, Lovelace said, the bank can’t take the property.
“The court would declare the loan void,” he said. “The judgment would have to be set aside and the homeowner would be restored as the owner of the property. That’s the only remedy in such a case.”
Szymoniak, the Florida lawyer, envisions another solution.
“A fund should be set up, kind of like the BP oil spill fund, that will reimburse people who’ve lost their homes because of these fraudulent loan documents,” she said.
The banks who contributed to the problem would contribute money to the fund, and an independent third party would determine which homeowners qualify for reimbursement.
That is an idea that is being discussed by federal regulators and the attorneys general in all 50 states, who have initiated a widespread investigation into shoddy mortgage documentation by banks and document mills.
Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., has estimated that such a fund would need billions of dollars.
Mark Plowden, a spokesman for S.C. Attorney General Alan Wilson, said his office is active in the national investigation but is not targeting any specific company, such as DocX.
He said the multi-state group is “reviewing the larger issue, which includes these entities and their actions.”
Owners fight back
Some homeowners aren’t waiting for a federal investigation to be completed – they are fighting back by taking the banks to court. And in some recent cases, the homeowners are winning.
In Russell County, Ala., for example, Phyllis Horace obtained a summary judgment in March against LaSalle Bank National Association after alleging the bank did not have the proper paperwork needed to foreclose on her home.
Judge Albert Johnson, in ordering LaSalle to stop foreclosure proceedings against Horace, said he was “surprised to the point of astonishment” that the bank did not comply with its own regulations regarding documentation of loans.
The Dorries say they also plan to file a counterclaim in their foreclosure lawsuit based on information they have discovered in recent months.
New South Financial is helping Myrtle Beach area residents review mortgage documents to determine whether flaws or fraud exist that could help force banks into negotiating new loan terms.
The company also has agreements with area lawyers who will file complaints on behalf of New South clients. The service isn’t cheap – an audit of documents costs $3,000 and lawyer fees total $500 a month – but Walden said it is less expensive than hiring a law firm to defend a foreclosure action.
Experts say such services can be useful, but homeowners can do much of the needed investigation on their own for free by visiting the local register of deeds office or searching securities filings on the Internet.
Homeowners also can take advantage of an S.C. Supreme Court order that halted all foreclosures as of May 9 until after banks and borrowers have a chance to try and negotiate a modified loan. That order was not directly related to mortgage documentation issues, and if negotiations fail the banks can proceed with foreclosure.
Szymoniak, whose foreclosure is based in part on DocX paperwork signed by Linda Green, said she understands the resentment some people feel against those who haven’t been able to pay their mortgages yet are fighting foreclosure based on what some might consider a technicality.
In many cases, though, that’s the only way to get banks to work with borrowers, she said.
“We have a wholesale deterioration of neighborhoods across the country because of these foreclosures,” she said. “And that’s doing nothing but making the housing crisis even worse.”
Sunday, Jun. 19, 2011
Mortgage papers raise Myrtle Beach real estate fraud claims
Signatures on documents used in foreclosure cases under review
By David Wren – dwren@thesunnews.com
Anthony Wise has been selling real estate in the Myrtle Beach area for nearly three decades, but he had never heard of Linda Green until after his home went into foreclosure.
Now, just like hundreds of thousands of people nationwide, Wise is finding that the biggest investment he will ever make – his home – is closely tied to Green … or someone pretending to be her.
Green was a shipping clerk for an automobile parts company before taking a job in the signature room at a mortgage document company called DocX in Alpharetta, Ga., according to news reports.
Myrtle Beach real estate agent Anthony Wise hopes to cancel his home loan based on what he considers a fraudulent document and improper securitization of his mortgage. His home on Haskell Circle in Myrtle Beach is in danger of foreclosure.
DocX helped banks create documents – such as mortgage assignments, which transfer ownership of a home loan from one entity to another – in cases where the documents were missing from the original loan file or never existed in the first place. Those documents then were used in foreclosure proceedings all across the country.
In Horry County, DocX documents have been used in at least 46 foreclosures since 2008.
There are nearly 100 DocX mortgage assignments filed at Horry County’s register of deeds office for homes with loans totaling more than $17 million.
Green’s purported signature is on many of those documents.
And many of those documents are suspected of being fraudulent, according to government regulators.
Questionable signatures
The Federal Reserve Board and a trio of banking oversight groups issued a consent order in April against DocX and its parent company, Lender Processing Services Inc. of Jacksonville, Fla.
Although no fine was issued and the regulators said more study is needed to determine what wrongdoing – if any – occurred, the order has sparked investigations of DocX, which shut down last year, in at least four states and more attorneys general are expected to join the probe.
The regulators’ action took place after a “60 Minutes” television news broadcast on April 3 that showed DocX hired high school students and others for $10 an hour to sit in a sweatshop-like setting and sign thousands of mortgage documents every day, without checking to see if the documents were accurate.
DocX workers signed the documents as if they were vice presidents of national banks. Green, for example, claimed to be the vice president of 20 banks at the same time.
And when the real Linda Green wasn’t signing the mortgage documents, other DocX workers were signing them in her name, according to the report. DocX documents, including those filed in Horry County, show numerous variations of Green’s purported signature.
DocX workers told “60 Minutes” that Linda Green’s name was chosen as the one they all would sign because it is short and easy to spell.
DocX also had public notaries sign the documents, attesting that Linda Green was the vice president of various banks and that they saw her sign the paperwork. Jasmin Bennett, the notary who signed Wise’s document, did not return a telephone call seeking comment.
Green, however, was not the vice president of 20 banks and the documents she and other DocX workers signed as if they were bank executives are coming under fire in legal proceedings – including Wise’s foreclosure.
Linda Green could not be reached for comment. A spokeswoman for Lender Processing Services did not respond to a request for comments.
“From what I can tell, everything DocX did was fraudulent,” Wise, the owner of Exit Elite Realty in Myrtle Beach, told The Sun News last week. “They were just robo-signing these documents, in my opinion, and Linda Green was the one who did that.”
Wise has hired a Myrtle Beach company called New South Financial to help him fight the foreclosure. He says the allegedly fraudulent mortgage assignment Green signed – in this case, pretending to be the vice president of American Home Mortgage Servicing Inc., the successor to Option One Mortgage – means the lender that is trying to take his home doesn’t really have clear title or rights to the property.
“At this point, with what we’ve discovered so far, I want my loan negated,” Wise said. “That’s what I’m going for.”
Game of cat and mouse
The allegations aren’t limited to DocX.
“If you look through your local land documents, they’re full of trash,” said Lynn Szymoniak, a Palm Beach Gardens, Fla., lawyer who made it her mission to raise courts’ awareness of fraudulent mortgage documents after her own home went into foreclosure. “It is incredibly widespread.”
Bob and Christine Dorrie moved to Myrtle Beach from the Bronx in New York in 1998. Like many people during the economic boom, the Dorries used their credit cards to finance a lifestyle beyond their means. So, in September 2007, they decided to refinance their home in the Island Green East neighborhood to pay off some of their bills.
“When we went to closing, the woman handling it said, ‘Well, we couldn’t get as much money as we thought’,” Bob Dorrie said, adding that none of the credit card bills wound up getting paid in full. “We ended up with all the charge cards still open with money still on them and a new home loan at a much higher price.”
The Dorries’ mortgage payment, which had been $987 a month, soared to $1,340 a month after the refinance.
As the economy grew worse, the Dorries quickly fell behind on their house payment.
Wells Fargo Bank, the new owner of the Dorries’ loan, filed a foreclosure lawsuit against the couple on Sept. 2, 2009. Bob Dorrie’s emergency bankruptcy filing three days before the house was to be sold at auction has put everything in limbo.
The Dorries now are questioning how Wells Fargo came to own their loan.
Ace Funding – the company that gave the Dorries their loan in 2007 – filed for bankruptcy protection and went out of business the following year, never officially assigning the Dorries’ loan over to Wells Fargo.
Wells Fargo didn’t file the assignment on behalf of the defunct Ace Funding until more than three weeks after the foreclosure lawsuit was filed. A lawyer representing Wells Fargo in the foreclosure lawsuit signed the document for Ace Funding, even though he “really has no authority to assign this mortgage,” according to Terry Walden, an audit originator and attorney liaison for New South Financial.
When Dorrie pushed Wells Fargo for more information about the ownership of his mortgage, the bank told him in November that Fannie Mae owned the mortgage and that Wells Fargo was only the loan servicer.
Then, in April, Wells Fargo told Dorrie that the real owner of his mortgage is Freddie Mac.
“Given this information, only Freddie Mac has the authority to enforce this note and foreclose on this property,” Walden said.
Wells Fargo spokesman Jim Hines disagrees, saying the Dorries’ loan documents were handled appropriately and that the bank’s contract as a loan servicer gives it “the authority to take action on the loan to protect the investor’s interests, including foreclosure.”
Hines said Wells Fargo is working with the Dorries and hopes to “reach a solution that would help them keep their home.”
Linda Green’s signature appears on DocX paperwork used with thousands of Wells Fargo mortgages – although not in the Dorries’ case – since the real estate boom.
Even so, Hines said Wells Fargo has reviewed mortgage documentation for all of its loans and “has not found any foreclosure that should not have taken place.”
Wells Fargo sees foreclosure as a last resort, Hines said, and has worked with 673,000 borrowers to modify their loans since January 2009.
Bob Dorrie said Wells Fargo has repeatedly thrown up road blocks while he has tried to modify his loan. He hopes the perceived chain of title issues will give him some additional leverage in court proceedings and force his lender to modify his loan on terms he and his wife can live with.
“This is supposed to help force the bank’s hand, instead of them playing this game of cat and mouse with me,” Bob Dorrie said. “I’m still in the home, and I’d like to keep it.”
Who is at fault?
Ballery Skipper, the director of Horry County’s Register of Deeds office, said her staff is not responsible for investigating whether or not a document is legitimate. As long as fraud is not suspected, Skipper said, she is legally required to file the documents.
In the few cases where Skipper or her staff suspects fraud, the case is referred to the state attorney general’s office. Skipper said she has not referred any of the DocX filings to law enforcement.
Register of Deeds offices in other states, however, are starting to do their own investigations. A review of filings in Guilford County, N.C., for example, found 1,920 DocX loan documents for property worth $255 million and 15 variations of Linda Green’s signature.
Some mortgage executives say the documentation problems are overblown, and that homeowners are looking for any reason to stop a foreclosure.
“The homeowners have defaulted on their loans, and a flaw in the documentation does not mean the foreclosure was a wrongful foreclosure,” said Janis Smith, vice president of Mortgage Electronic Registration Systems, or MERS, the nation’s largest mortgage loan registration service.
“Foreclosure is a very emotional situation, and people will try all angles in an attempt to stop the process,” Smith said. “At the end of the day, though, you still have a situation where the borrower didn’t make their payments.”
Walden, however, says that kind of response is disingenuous. While the courts are set up to determine whether a homeowner has defaulted on a loan, he said, they are also responsible for ensuring the banks’ paperwork is legitimate and that due process is followed.
“The banks just made up the paperwork they needed to get the deal done,” Walden said. “We want to hold the banks accountable for that.”
Where it all began
To better understand how this mortgage mess occurred, one has to look back to the home-buying frenzy that took place between 2005 and 2007.
During the real estate boom, some of the nation’s largest banks bought home loans from all over the country and packaged them together in mortgage-backed securities that were sold to investors – including many 401(k) programs and pension funds.
Each security that was issued included thousands of mortgage loans worth a combined $1 billion to $1.5 billion – and the Wall Street banks sold hundreds of those securities to investors who believed the rise in home values would never end.
As the hunger for mortgage-backed investments grew, banks had to find more and more people to take on new loans that could be packaged into new securities. Before long, home loans were being given to nearly everyone that applied – regardless of income or credit score.
Many banks didn’t even require documentation of a person’s income or employment before giving them a loan. And some bankers looked the other way when an obviously fraudulent application crossed their desks, recent investigations show.
“If you had a heartbeat, you could get a loan,” said Walden, a former mortgage broker.
When the millions of people who never should have been given credit in the first place started to default on their home loans, the mortgage-backed securities house of cards imploded and the real estate bust began.
Those securities also are at the root of today’s mortgage documentation debacle.
The trust companies that issued those securities – usually a large bank such as Bank of New York or Deutsche Bank – were required by law to have a copy of the mortgage note and every mortgage assignment showing a clear chain of title for each of the thousands of loans included in each investment offering.
The trust companies were required to obtain those documents no later than 90 days after the security was issued.
There were so many securities being issued so quickly, however, that the trust companies were not able – or didn’t bother – to collect all the required documents.
That didn’t cause problems as long as the mortgages were being paid. But when a homeowner stopped paying and a bank decided to foreclose, the needed documentation wasn’t there.
That is why many banks turned to “document mills,” which charged a small fee to create the documentation banks needed to proceed with foreclosure. It is estimated DocX alone created at least 2 million mortgage documents nationwide, many of them allegedly forged and fraudulent, over a two-year period.
“Instead of doing things the right way, the banks chose to go into court and lie,” Szymoniak said.
Foreclosure lawsuit
Anthony Wise refinanced his Myrtle Beach home in February 2006 and he thinks his lender started to recreate his mortgage paperwork after he missed a payment in late 2008.
For example, a mortgage assignment transferring the loan from Option One to Deutsche Bank National Trust – the company that oversaw the mortgage-backed security that purportedly includes Wise’s loan – was recorded Jan. 23, 2009, in Horry County. That document was prepared by DocX and includes Green’s signature.
“They were trying to get all of their paperwork in a row just in case,” Wise said.
A Deutsche Bank spokesman did not respond to a request for comments.
Deutsche Bank filed a foreclosure lawsuit against Wise in April 2010, and that case is still pending.
In addition to allegations that the DocX mortgage assignment is fraudulent, Wise says Deutsche Bank missed the deadline for documenting his loan and has no right to foreclose on his home.
Wise’s mortgage was placed into a security called Soundview Home Loan Trust 2006-OPT2, which had a closing date of April 7, 2006. That means all of the documents for all of the loans in that security had to be obtained by Deutsche Bank within 90 days of that closing or, by law, they could not be included.
Wise’s mortgage assignments – including the one giving the loan to Deutsche Bank – weren’t filed until more than two years after the Soundview security closed, according to county property records.
Help for homeowners
There are dozens of instances in Horry County where DocX hastily created mortgage assignments to help banks foreclose on residents’ homes. In most cases, those documents were not created until after a foreclosure lawsuit had been filed. And in some cases, DocX back-dated the documents to make it appear as if they took effect just days before the foreclosure filing.
Most of the DocX paperwork filed in Horry County bears the signature of Linda Green.
Richard Lovelace, a Conway lawyer who specializes in real estate and banking law, said the banks who used DocX – or similar document mills – have put themselves at risk if homeowners can prove the paperwork is fraudulent.
That is true even if a home has already been lost to foreclosure.
“Any flaw that is discovered post-hearing, if it’s brought to the court’s attention in a timely manner, the judge will set aside the judgment and reopen the hearing,” said Lovelace, who is not involved in any of the foreclosure cases where DocX documents were used.
If the court proceedings – and the paperwork those proceedings were based on – are proven to be defective, Lovelace said, the bank can’t take the property.
“The court would declare the loan void,” he said. “The judgment would have to be set aside and the homeowner would be restored as the owner of the property. That’s the only remedy in such a case.”
Szymoniak, the Florida lawyer, envisions another solution.
“A fund should be set up, kind of like the BP oil spill fund, that will reimburse people who’ve lost their homes because of these fraudulent loan documents,” she said.
The banks who contributed to the problem would contribute money to the fund, and an independent third party would determine which homeowners qualify for reimbursement.
That is an idea that is being discussed by federal regulators and the attorneys general in all 50 states, who have initiated a widespread investigation into shoddy mortgage documentation by banks and document mills.
Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., has estimated that such a fund would need billions of dollars.
Mark Plowden, a spokesman for S.C. Attorney General Alan Wilson, said his office is active in the national investigation but is not targeting any specific company, such as DocX.
He said the multi-state group is “reviewing the larger issue, which includes these entities and their actions.”
Owners fight back
Some homeowners aren’t waiting for a federal investigation to be completed – they are fighting back by taking the banks to court. And in some recent cases, the homeowners are winning.
In Russell County, Ala., for example, Phyllis Horace obtained a summary judgment in March against LaSalle Bank National Association after alleging the bank did not have the proper paperwork needed to foreclose on her home.
Judge Albert Johnson, in ordering LaSalle to stop foreclosure proceedings against Horace, said he was “surprised to the point of astonishment” that the bank did not comply with its own regulations regarding documentation of loans.
The Dorries say they also plan to file a counterclaim in their foreclosure lawsuit based on information they have discovered in recent months.
New South Financial is helping Myrtle Beach area residents review mortgage documents to determine whether flaws or fraud exist that could help force banks into negotiating new loan terms.
The company also has agreements with area lawyers who will file complaints on behalf of New South clients. The service isn’t cheap – an audit of documents costs $3,000 and lawyer fees total $500 a month – but Walden said it is less expensive than hiring a law firm to defend a foreclosure action.
Experts say such services can be useful, but homeowners can do much of the needed investigation on their own for free by visiting the local register of deeds office or searching securities filings on the Internet.
Homeowners also can take advantage of an S.C. Supreme Court order that halted all foreclosures as of May 9 until after banks and borrowers have a chance to try and negotiate a modified loan. That order was not directly related to mortgage documentation issues, and if negotiations fail the banks can proceed with foreclosure.
Szymoniak, whose foreclosure is based in part on DocX paperwork signed by Linda Green, said she understands the resentment some people feel against those who haven’t been able to pay their mortgages yet are fighting foreclosure based on what some might consider a technicality.
In many cases, though, that’s the only way to get banks to work with borrowers, she said.
“We have a wholesale deterioration of neighborhoods across the country because of these foreclosures,” she said. “And that’s doing nothing but making the housing crisis even worse.”
After ruling halted N.J. foreclosures, experts fear deluge of filings
We just have to remember that behind the Banks’ crimes, numbers, and paperwork are humans who are at risk of unjustly losing their homes. (by Joe Vera)
After ruling halted N.J. foreclosures, experts fear deluge of filings
Published: Monday, June 27, 2011, 7:30 AM
By Sarah Portlock / The Star-Ledger
Experts are concerned that a current logjam of foreclosures in New Jersey could forecast a storm when major mortgage lenders are able to resume filing notices.
In the past six months, an eerie feeling has settled in the offices of housing counselors and attorneys who confront the foreclosure crisis head-on and help distressed homeowners in New Jersey. The phone hasn’t been ringing any less than it did at the height of the storm, but what is about to hit may be greater than anything the group has seen so far.
Foreclosure filings are down 86 percent so far this year from last, owing in part to a December crackdown by the state’s chief justice that effectively halted proceedings by the country’s biggest mortgage lenders and service companies, according to court data. But lenders are waiting to file an estimated 28,500 foreclosures, and another 55,000 mortgage loans are currently more than 90 days delinquent, according to LPS Applied Analytics, a real estate data firm that tracks mortgage performance. At the current rate, it would take 49 years for banks to clear the logjam of mortgage loans that are currently in the foreclosure process or are more than 90 days delinquent, LPS found.
Those figures are a sign of what is to come when lenders are able to begin filing again, and the pipeline speeds up.
“It’s what keeps me awake at night,” said Peggy Jurow, who leads Legal Service of New Jersey’s Foreclosure Defense Initiative. “It’s what keeps my colleagues and me strategizing all the time.”
“What are we going to do,” she asked, when these cases get filed?
The work is taking its toll on those trying to help homeowners. Last week, housing counselors, attorneys, community leaders and county officials gathered at the Bloustein School of Planning and Public Policy at Rutgers University to share what they have learned battling the foreclosure crisis. The goal was to let the stakeholders discuss what has worked and what hasn’t, said Kathe Newman, an urban planning professor who studies the foreclosure issue and hosted the conference.
During one of the discussions, the question posed to the group was straight and to the point. What do you do to stay motivated in the face of this daunting and challenging problem? The consensus came quickly: We just have to remember that behind the numbers and paperwork are humans who are at risk of losing their homes.
A SUDDEN HALT
The foreclosure process came to a halt on Dec. 20, when Chief Justice Stuart Rabner announced an initiative to address fears homeowners were unnecessarily put into foreclosure and judges had inadvertently “rubber-stamped” files that had inaccurate or inadequate paperwork.
In March, six of the country’s biggest financial institutions — Bank of America, JP Morgan Chase, GMAC Mortgage, Citibank, OneWest Bank and Wells Fargo — agreed to submit extensive documentation of their foreclosure processes and outline any revisions they have made. A court-appointed special master, retired Superior Court Judge Richard Williams, is reviewing the material and will report on whether the banks have satisfied a number of changes.
Rabner’s order also addressed the concern that employees of the lender or servicer had signed thousands of foreclosure claims without any personal knowledge of their contents, a process known as “robo-signing.” As of June 9, foreclosure paperwork for pending and future cases is required to include an affidavit certifying that either an employee of the lender or an employee of the lender’s servicer has personally reviewed the case and confirmed its accuracy.
The court’s actions have slowed foreclosures in the state. And because there is no deadline for Williams to submit his findings, the storm can start at any point, advocates fear. There is one heartening fact, they said. Williams will issue his report regarding each bank as he finishes it rather than waiting, said court spokeswoman Winnie Comfort.
Bankers in New Jersey have told John McWeeney Jr., president and CEO of the New Jersey Bankers Association, that the time it now takes to complete a foreclosure has stretched to nearly three years.
“The reaction of the Supreme Court certainly delayed a large volume of foreclosures that otherwise would have been put in process, so I would expect that that will eventually hit and increase the number of foreclosure filings,” McWeeney said.
BRACING FOR ONSLAUGHT
When the foreclosure filings start winding their way through courts again, the influx will affect everyone in the industry.
“There are going to be very substantial numbers of foreclosures that are going to hit the market, all of which is problematic and obviously has a negative impact on housing values,” said Robert Levy, executive director of the Mortgage Bankers Association of New Jersey.
Asked what the financial institutions are doing now, representatives of Wells Fargo and GMAC said their attorneys are working closely with the court and documenting their improved and enhanced foreclosure procedures. The other financial institutions declined to comment.
In the interim, there is no shortage of homeowners seeking mortgage assistance. There is a three-month waiting list at some of the offices of New Jersey Citizen Action, said Executive Director Phyllis Salowe-Kaye. Some clients are coming in later in the foreclosure process, claiming they had not received earlier notification from their lenders. Others are borrowers who can’t afford to pay their mortgages because someone lost a job or as a result of another financial change. Activity could also pick up in mid-2012, Salowe-Kaye said, when homeowners with predatory loans begin facing ballooning payments.
The delays have done nothing to relieve homeowners’ stress. The process of finding a workable resolution can take longer, and it is difficult to try to sell or refinance a home that is worth less than its mortgage, said Jurow, the Legal Services foreclosure point person.
What homeowners who are either in foreclosure or late on payments should be doing now is organizing their finances and preparing for when activity picks back up again, Salowe-Kaye advised. That goes for homeowners who may have just lost their job and could face problems with their mortgage down the road.
When the wave hits, advocates said, they will have a plan. For its part, attorneys at Legal Services are studying defenses they can use to promote their clients’ abilities to get a loan modification, and, Jurow said, plan to reach out within the legal community for help.
“We’re happy that the court took the action that it took,” she said. “But, coupled with what we know is coming, it’s like bus-bunching — there hasn’t been a bus for an hour, but now five are going to come at once.”
Monday, June 27, 2011
Illinois Fines First Company in Foreclosure Document Probe
IL found docs with “… the same PHH employee’s name in “no less than five distinctly different signatures …” … IL levied fines & the judge stopped the foreclosures.
Illinois fines first company in foreclosure document probe
Department of Financial and Professional Regulation finds evidence of ‘negligence or incompetence’ by New Jersey-based PHH Mortgage
By Mary Ellen Podmolik, Tribune reporter
8:03 p.m. CDT, June 22, 2011
The state of Illinois said it found evidence of “negligence or incompetence” in PHH Mortgage Corp.’s foreclosure procedures and levied a fine of $290,000.
The order, issued late Wednesday, comes eight months after the state’s Department of Financial and Professional Regulation began investigating 20 state-licensed mortgage companies. It is the first disciplinary action taken.
Mount Laurel, N.J.-based PHH, along with 16 other companies, remains under investigation by the department. PHH did not return phone calls seeking comment.
The state, which asked PHH for 10 complete foreclosure case files, also looked at 20 cases that foreclosure law firm Fisher & Shapiro LLC admitted in Cook County Circuit Court may contain faulty foreclosure documents. In 19 of those cases, state investigators found evidence that PHH had submitted signed but incomplete paperwork to Fisher and Shapiro, with notations that other relevant facts would later be added.
The state also found that 16 of the 19 cases contained prove-up affidavits, used to verify the amount owed by the borrower, that contained the same PHH employee’s name in “no less than five distinctly different signatures, leading the department to conclude that at least four affiants used a person’s name other than their own to sign the affidavits.”
“We’re not at the point of calling it forgery, because forgery is a crime, and we’re not a law enforcement agency,” Brent Adams, head of the state agency, said Wednesday. “We do allege that there was something illegal here. It is not a safe and sound mortgage practice for different people to be signing someone’s name in an prove-up” affidavit.
In March, following Fisher and Shapiro’s admission of altered documents, Cook County Circuit Court Presiding Judge Moshe Jacobius temporarily halted more than 1,700 foreclosure cases. Jacobius said Tuesday that the number had grown to 2,127 on hold.
In its order, the state said PHH’s conduct “at the very least rises to the level of negligence or incompetence.”
A maximum fine of $25,000 can be levied for each violation of the Residential Mortgage License Act. The state fined PHH $10,000 for each of the 19 files with faulty paperwork and $25,000 for four instances in which an employee used a name other than his or her own to sign the documents. PHH, which was served with the order Wednesday, has 10 days to request a hearing on the action.
The state’s actions are separate from a national probe by state attorneys general into faulty foreclosure procedures and allegations that foreclosures were processed without being reviewed, an activity that has come to be known as robo-signing.
Adams said the state continues to review its own cases for those potential problems.
“As the glut of foreclosures became more intense, that is the backlog became more intense, there were more fill-in-the-blanks,” he said. “We have not completed our investigation into any company.”
Illinois fines first company in foreclosure document probe
Department of Financial and Professional Regulation finds evidence of ‘negligence or incompetence’ by New Jersey-based PHH Mortgage
By Mary Ellen Podmolik, Tribune reporter
8:03 p.m. CDT, June 22, 2011
The state of Illinois said it found evidence of “negligence or incompetence” in PHH Mortgage Corp.’s foreclosure procedures and levied a fine of $290,000.
The order, issued late Wednesday, comes eight months after the state’s Department of Financial and Professional Regulation began investigating 20 state-licensed mortgage companies. It is the first disciplinary action taken.
Mount Laurel, N.J.-based PHH, along with 16 other companies, remains under investigation by the department. PHH did not return phone calls seeking comment.
The state, which asked PHH for 10 complete foreclosure case files, also looked at 20 cases that foreclosure law firm Fisher & Shapiro LLC admitted in Cook County Circuit Court may contain faulty foreclosure documents. In 19 of those cases, state investigators found evidence that PHH had submitted signed but incomplete paperwork to Fisher and Shapiro, with notations that other relevant facts would later be added.
The state also found that 16 of the 19 cases contained prove-up affidavits, used to verify the amount owed by the borrower, that contained the same PHH employee’s name in “no less than five distinctly different signatures, leading the department to conclude that at least four affiants used a person’s name other than their own to sign the affidavits.”
“We’re not at the point of calling it forgery, because forgery is a crime, and we’re not a law enforcement agency,” Brent Adams, head of the state agency, said Wednesday. “We do allege that there was something illegal here. It is not a safe and sound mortgage practice for different people to be signing someone’s name in an prove-up” affidavit.
In March, following Fisher and Shapiro’s admission of altered documents, Cook County Circuit Court Presiding Judge Moshe Jacobius temporarily halted more than 1,700 foreclosure cases. Jacobius said Tuesday that the number had grown to 2,127 on hold.
In its order, the state said PHH’s conduct “at the very least rises to the level of negligence or incompetence.”
A maximum fine of $25,000 can be levied for each violation of the Residential Mortgage License Act. The state fined PHH $10,000 for each of the 19 files with faulty paperwork and $25,000 for four instances in which an employee used a name other than his or her own to sign the documents. PHH, which was served with the order Wednesday, has 10 days to request a hearing on the action.
The state’s actions are separate from a national probe by state attorneys general into faulty foreclosure procedures and allegations that foreclosures were processed without being reviewed, an activity that has come to be known as robo-signing.
Adams said the state continues to review its own cases for those potential problems.
“As the glut of foreclosures became more intense, that is the backlog became more intense, there were more fill-in-the-blanks,” he said. “We have not completed our investigation into any company.”
Sunday, June 26, 2011
Government guarantee preserves 30-year mortgage
Look closely & see a weird COMMUNISM. Democrat or Republican, sell outs to the Banks are just plain sell outs. (by Joe Vera)
Lawmakers: Government guarantee preserves 30-year mortgage
by JACOB GAFFNEY
Tuesday, June 21st, 2011, 5:39 pm
The prevalence of the 30-year mortgage in the housing market will rapidly diminish and eventually disappear without a government guarantee for related mortgage-backed securities.
Two members of the House Financial Services Committee, Reps. Gary Peters (D-Mich.) and John Campbell (R-Calif.) told attendees at the American Securitization Forum’s annual meeting in Washington that this is precisely what will happen if legislation they plan to introduce is not passed into law.
“How many of you are going to be excited to buy a package of 30-year, mortgage-backed securities in the TBA market that’s not government guaranteed?” Campbell asked the crowd of secondary market issuers and investors. “Let the record show, the hands showing up are zero.”
Campbell said the insurance program will be on bonds and not on institutions. It’s an idea that holds bipartisan support and is supported by the Federal Insurance Deposit Corp., as well, he added.
“Thirty-year mortgages will need to be securitized. The FDIC will not allow banks to hold them. And the banks want to do it privately,” Campbell said. “We don’t like to call it a GSE bill, because we aren’t going to have GSEs. If we are going to have housing recover, we need housing finance to recover.”
In May, Campbell told HousingWire the proposed bill had already garnered support from around the industry.
Campbell and Peters are pushing to create guarantee associations. These will be private entities, which hold 5% risk retention on mortgage bonds, and regulated by FHFA.
“We are not doing (Fannie and Freddie) all over again. Fannie Mae and Freddie Mac are guaranteed entities. This will guarantee the performance of the loans, not the entities itself,” he said.
Campbell said the legislation will create five such associations, at least as a start. In the future, he hopes these associations will increase in number and specialize in different operations. This way an entity can fail, but the mortgage markets will be diverse enough to absorb the blow.
“Americans don’t want hedging strategies based on changing mortgage rates,” added Peters. “They want 30-year, fixed-rate mortgages with no surprises.”
During the question and answer portion of the panel, one observer wondered why the GSEs shouldn’t become the first two such guarantee firms. It would be easier, he posited, to wind down GSE issuance and transform the firms into insurers. This would save an enormous amount of taxpayer money, he said.
Campbell countered that Fannie and Freddie are now too political for such a solution.
Peters quickly added: “The system of private gains and socialized loss is a moral hazard and needs to end.”
Lawmakers: Government guarantee preserves 30-year mortgage
by JACOB GAFFNEY
Tuesday, June 21st, 2011, 5:39 pm
The prevalence of the 30-year mortgage in the housing market will rapidly diminish and eventually disappear without a government guarantee for related mortgage-backed securities.
Two members of the House Financial Services Committee, Reps. Gary Peters (D-Mich.) and John Campbell (R-Calif.) told attendees at the American Securitization Forum’s annual meeting in Washington that this is precisely what will happen if legislation they plan to introduce is not passed into law.
“How many of you are going to be excited to buy a package of 30-year, mortgage-backed securities in the TBA market that’s not government guaranteed?” Campbell asked the crowd of secondary market issuers and investors. “Let the record show, the hands showing up are zero.”
Campbell said the insurance program will be on bonds and not on institutions. It’s an idea that holds bipartisan support and is supported by the Federal Insurance Deposit Corp., as well, he added.
“Thirty-year mortgages will need to be securitized. The FDIC will not allow banks to hold them. And the banks want to do it privately,” Campbell said. “We don’t like to call it a GSE bill, because we aren’t going to have GSEs. If we are going to have housing recover, we need housing finance to recover.”
In May, Campbell told HousingWire the proposed bill had already garnered support from around the industry.
Campbell and Peters are pushing to create guarantee associations. These will be private entities, which hold 5% risk retention on mortgage bonds, and regulated by FHFA.
“We are not doing (Fannie and Freddie) all over again. Fannie Mae and Freddie Mac are guaranteed entities. This will guarantee the performance of the loans, not the entities itself,” he said.
Campbell said the legislation will create five such associations, at least as a start. In the future, he hopes these associations will increase in number and specialize in different operations. This way an entity can fail, but the mortgage markets will be diverse enough to absorb the blow.
“Americans don’t want hedging strategies based on changing mortgage rates,” added Peters. “They want 30-year, fixed-rate mortgages with no surprises.”
During the question and answer portion of the panel, one observer wondered why the GSEs shouldn’t become the first two such guarantee firms. It would be easier, he posited, to wind down GSE issuance and transform the firms into insurers. This would save an enormous amount of taxpayer money, he said.
Campbell countered that Fannie and Freddie are now too political for such a solution.
Peters quickly added: “The system of private gains and socialized loss is a moral hazard and needs to end.”
Saturday, June 25, 2011
New York Courts Still At It
Justice John M. Leventhal, “the law must not yield to expediency and the convenience of lending institutions.” “Proper procedures … ensure … chain of ownership.” (by Joe Vera)
More on MERS: New York Courts Still At It
Posted by Carole VanSickle on Wednesday, June 22nd 2011
A New York appeals court has thrown out another MERS foreclosure proceeding, this one on a delinquent $479,000 mortgage with no note in evidence not just in MERS, but anywhere. “They’ve had three years to find it [the note],” said the homeowner’s lawyer, “and they haven’t.” The trustee for the trust allegedly containing the mortgage, the Bank of New York (BONY), could not produce the note and, according to the courts, since MERS “couldn’t give BONY the authority to foreclose because it didn’t possess the underlying note,” the homeowners will not face foreclosure. “A transfer of the mortgage without the debt is a nullity, and no interest is acquired by it,” the court ruled[1].
While this might appear at first to be a big deal, even the homeowners’ lawyer believes that the situation may be unusual enough that it will not impact most homeowners because BONY actually admitted that it did not have the note. However, other analysts are not willing to say that the judges making rulings like this one are not opening up the door to potentially massive lawsuits if the MERS model is ultimately deemed invalid. “We know that MERS is a problem; we don’t know exactly what that’s going to mean,” explained Adam Levitin, a professor of law at Georgetown University[2]. However, judges ruling against MERS are standing firm, saying that “the law must not yield to expediency and the convenience of lending institutions,” in the words of Justice John M. Leventhal. “Proper procedures must be followed to ensure the reliability of the chain of ownership,” he added.
More on MERS: New York Courts Still At It
Posted by Carole VanSickle on Wednesday, June 22nd 2011
A New York appeals court has thrown out another MERS foreclosure proceeding, this one on a delinquent $479,000 mortgage with no note in evidence not just in MERS, but anywhere. “They’ve had three years to find it [the note],” said the homeowner’s lawyer, “and they haven’t.” The trustee for the trust allegedly containing the mortgage, the Bank of New York (BONY), could not produce the note and, according to the courts, since MERS “couldn’t give BONY the authority to foreclose because it didn’t possess the underlying note,” the homeowners will not face foreclosure. “A transfer of the mortgage without the debt is a nullity, and no interest is acquired by it,” the court ruled[1].
While this might appear at first to be a big deal, even the homeowners’ lawyer believes that the situation may be unusual enough that it will not impact most homeowners because BONY actually admitted that it did not have the note. However, other analysts are not willing to say that the judges making rulings like this one are not opening up the door to potentially massive lawsuits if the MERS model is ultimately deemed invalid. “We know that MERS is a problem; we don’t know exactly what that’s going to mean,” explained Adam Levitin, a professor of law at Georgetown University[2]. However, judges ruling against MERS are standing firm, saying that “the law must not yield to expediency and the convenience of lending institutions,” in the words of Justice John M. Leventhal. “Proper procedures must be followed to ensure the reliability of the chain of ownership,” he added.
Friday, June 24, 2011
Get Ready for the Great MERS Whitewash Bill
Congress may pardon MERS retroactively. Don’t say it won’t happen. Doesn’t any politician care about the rule of law. (by Joe Vera)
Get Ready for the Great MERS Whitewash Bill
By: John Carney Senior Editor, CNBC.com
Congress comes back into session next week, it may consider measures intended to bolster the legal status of a controversial bank owned electronic mortgage registration system that contains three out of every five mortgages in the country.
The system is known as MERS, the acronym for a private company called Mortgage Electronic Registry Systems. Set up by banks in the 1997, MERS is a system for tracking ownership of home loans as they move from mortgage originator through the financial pipeline to the trusts set up when mortgage securities are sold.
The system has come under scrutiny by critics who charge MERS with facilitating slipshod practices. Recently, lawyers have filed lawsuits claiming that banks owe states billions of dollars for mortgage recording fees they avoided by using MERS.
If courts rule against MERS, the damage could be catastrophic. Here’s how the AP tallies up the potential damage:
Assuming each mortgage it tracks had been resold, and re-recorded, just once, MERS would have saved the industry $2.4 billion in recording costs, R.K. Arnold, the firm’s chief executive officer, testified in 2009. It’s not unusual for a mortgage to be resold a dozen times or more.
The California suit alone could cost MERS $60 billion to $120 billion in damages and penalties from unpaid recording fees.
The liabilities are astronomical because, according to laws in California and many other states, penalties between $5,000 and $10,000 can be imposed each time a recording fee went unpaid. Because the suits are filed as false claims, the law stipulates that the penalties can then be tripled.
Perhaps even more devastatingly, some critics say that sloppiness at MERS—which has just 40 full-time employees—may have botched chain of title for many mortgages. They say that MERS lacks standing to bring foreclosure actions, and the botched chain of title may cast doubts on whether anyone has clear enough ownership of some mortgages to foreclose on a defaulting borrower. The problems with MERS system led JPMorgan Chase CEO Jamie Dimon to stop using MERS for foreclosures in 2008.
Now it appears that Congress may attempt to prevent any MERS meltdown from occurring. MERS is owned by all the biggest banks, and th the value of their bonds sink because of doubts about the ownership of the underlying mortgages.
So it looks like the stage may be set for Congress to pass a bill that would limit MERS exposure on the recording fee issue and perhaps retroactively legitimate mortgage transfers conducted through MERS private database.
Self-styled consumer advocate Neil Garfield says the legislation is already being drafted:
After years of negative judicial decisions about the use of a straw-man on mortgages, MERS was about to lose its existence as well as its credibility. But now all of that is set to change as Wall Street money is pouring into the coffers of those who are receptive (i.e., almost everyone in Congress). The legislation is already being drafted under the interstate commerce clause to ratify MERS and everything it did retroactively. It appears that the Obama administration is ready to pardon all the securitization deviants by signing this bill into law. This information is corroborated by several people who are in sensitive positions — persons who would be the first to know such proposals. Fortunately, there are some people in Washington who have a conscience and do not want to see this happen.
Garfield is overstating things a bit. In truth, the results of the legal challenges to MERS have been mixed. But it is very plausible that the banks might want to put to rest any ongoing uncertainty about the legality of MERS. I wouldn’t be at all surprised if Congress manages to pass a bill that bails MERS out of its legal issues.
Get Ready for the Great MERS Whitewash Bill
By: John Carney Senior Editor, CNBC.com
Congress comes back into session next week, it may consider measures intended to bolster the legal status of a controversial bank owned electronic mortgage registration system that contains three out of every five mortgages in the country.
The system is known as MERS, the acronym for a private company called Mortgage Electronic Registry Systems. Set up by banks in the 1997, MERS is a system for tracking ownership of home loans as they move from mortgage originator through the financial pipeline to the trusts set up when mortgage securities are sold.
The system has come under scrutiny by critics who charge MERS with facilitating slipshod practices. Recently, lawyers have filed lawsuits claiming that banks owe states billions of dollars for mortgage recording fees they avoided by using MERS.
If courts rule against MERS, the damage could be catastrophic. Here’s how the AP tallies up the potential damage:
Assuming each mortgage it tracks had been resold, and re-recorded, just once, MERS would have saved the industry $2.4 billion in recording costs, R.K. Arnold, the firm’s chief executive officer, testified in 2009. It’s not unusual for a mortgage to be resold a dozen times or more.
The California suit alone could cost MERS $60 billion to $120 billion in damages and penalties from unpaid recording fees.
The liabilities are astronomical because, according to laws in California and many other states, penalties between $5,000 and $10,000 can be imposed each time a recording fee went unpaid. Because the suits are filed as false claims, the law stipulates that the penalties can then be tripled.
Perhaps even more devastatingly, some critics say that sloppiness at MERS—which has just 40 full-time employees—may have botched chain of title for many mortgages. They say that MERS lacks standing to bring foreclosure actions, and the botched chain of title may cast doubts on whether anyone has clear enough ownership of some mortgages to foreclose on a defaulting borrower. The problems with MERS system led JPMorgan Chase CEO Jamie Dimon to stop using MERS for foreclosures in 2008.
Now it appears that Congress may attempt to prevent any MERS meltdown from occurring. MERS is owned by all the biggest banks, and th the value of their bonds sink because of doubts about the ownership of the underlying mortgages.
So it looks like the stage may be set for Congress to pass a bill that would limit MERS exposure on the recording fee issue and perhaps retroactively legitimate mortgage transfers conducted through MERS private database.
Self-styled consumer advocate Neil Garfield says the legislation is already being drafted:
After years of negative judicial decisions about the use of a straw-man on mortgages, MERS was about to lose its existence as well as its credibility. But now all of that is set to change as Wall Street money is pouring into the coffers of those who are receptive (i.e., almost everyone in Congress). The legislation is already being drafted under the interstate commerce clause to ratify MERS and everything it did retroactively. It appears that the Obama administration is ready to pardon all the securitization deviants by signing this bill into law. This information is corroborated by several people who are in sensitive positions — persons who would be the first to know such proposals. Fortunately, there are some people in Washington who have a conscience and do not want to see this happen.
Garfield is overstating things a bit. In truth, the results of the legal challenges to MERS have been mixed. But it is very plausible that the banks might want to put to rest any ongoing uncertainty about the legality of MERS. I wouldn’t be at all surprised if Congress manages to pass a bill that bails MERS out of its legal issues.
Wednesday, June 15, 2011
Viewpoint: Five Key Tasks to Make FDIC Loss-Sharing Work
Why? Every day a court in the USA stops a bank from wrongfully foreclosing. Failed Bank executives walk away keeping bonuses based on bad loans. Then …
Why? Every day a court in the USA stops a bank from wrongfully foreclosing. Failed Bank executives walk away keeping bonuses based on bad loans. “After all, there is a reason why these banks failed. Oftentimes, financial statements are old,
appraisals are out of date, and file memos chronicling the loan’s current status are missing.” Then the government insures the buyer of a failed Bank against losses. The thinking seems to be if the government keeps hiding theft and charging it to our children and their children, maybe they (the bankers and the politicians that received “contributions) can continue to get away with skimming.
This article is written by an expert recommending that expert investors who intend to acquire a failed bank with an guarantee against loss should get more experts to counsel on the loss sharing agreement.
So, if the experts have to get experts, how are decent Americans, whether a cook, fireman, truck driver, doctor, or Ph.D. going to understand what is taking place behind closed doors. Yes, closed doors.
A county recorder in Utah said of MERS, “… if looked like a scam from hell.” You will be hearing more about Loss Sharing Agreements. What you won’t hear or read is how by starting a new bank, it might be possible to actually end up with profit by foreclosure on a American. This looks like another “scam from hell” to me.
Viewpoint: Five Key Tasks to Make FDIC Loss-Sharing Work
American Banker | Tuesday, January 12, 2010
By Charles B. Wendel
Entering into shared-loss transactions appears to be the Federal Deposit Insurance Corp.’s preferred approach for
dealing with failed banks. More than 60% of last year’s 140 bank failures were resolved using this approach.
Shared-loss transactions let banks build market share or move into new markets with minimal risk. They also let
private-equity players (led by a team of bankers) take advantage of current industry discontinuities.
Much of the attractiveness of these transactions centers on the “guarantee” the FDIC offers buyers. Typically, the
agency remits 80% of “dollar one” loan losses to buyers and increases its payments to 95% for losses beyond an
agreed upon threshold. In turn, the FDIC benefits from recoveries during the 10-year life of these deals.
Though these deals are attractive strategically and economically, they are also complex.
My company’s work with banks and private-equity players points to five key elements that should be addressed in
order to structure and manage a transaction appropriately.
Conducting a focused due diligence process and negotiating the FDIC shared-loss deal. Though many players
are experienced in due diligence, the FDIC window is short, with no more than two weeks between reviewing an offer
package to bidding. Time with the target is also limited (two to three days), requiring a focused approach. Buyers
should assemble a team of internal and external resources and set clear priorities for their review process.
As for negotiating an agreement, the FDIC has standardized the general structure of its purchase-and-assumption
and shared-loss agreements. However, no two agreements are alike, given evolving requirements by the FDIC (for
example, a “true-up” provision added in the fourth quarter) and buyer-negotiated amendments. Management should
view these agreements as a bible that will be revisited many times. Bank buyers should consult the handful of legal,
valuation and related advisers with expertise in the shared-loss world, leveraging their knowledge rather than relying
solely on internal controllers, general counsels or other internal resources.
Addressing key accounting-related priorities. Accounting regulations to be addressed include FAS 141R, SOP
03-3 and IRC Section 593. Many tax and accounting issues stem from the need to determine the tax basis of assets
subject to the shared-loss agreement and the rules related to deferred tax gains. A bank’s auditor is conflicted out
from offering these services, since it would be reviewing and passing judgment on its own work. This requires bank
buyers to obtain the services of an independent firm with appropriate accounting and valuation capabilities.
Ensuring strong portfolio support. The FDIC expects buyers to make regular claim submissions related to loan
losses, usually monthly for residential loans and quarterly for commercial and consumer loans.
Residential submissions are relatively straightforward because of the objective loss criteria outlined by the FDIC,
namely, “actual losses incurred due to modifications, foreclosures, short sales, deeds-in-lieu or bulk sales.” However,
commercial submissions are more subjective and require greater evaluation.
The state of commercial loan files in failed banks is often inadequate for portfolio management or for making “audit-
proof” submissions. (After all, there is a reason why these banks failed.) Oftentimes, financial statements are old,
appraisals are out of date, and file memos chronicling the loan’s current status are missing.
Owners should select a team of internal and/or external resources to triage, in effect, the portfolio, uncovering the
low-hanging fruit that can be submitted earliest while establishing a process to assess the entire portfolio. Every loan
in the portfolio must be reviewed against the acquirer’s risk rating system and managed within policy guidelines.
Commercial bankers at the acquired bank should undergo a sea change in how they look at their loans. Before
failure, many banks avoided taking losses because their reserves could not support a realistic view of a borrower’s
position. Under shared-loss agreements, management wants bankers to accurately assess transaction risk as quickly
as possible in order to identify loans subject to FDIC claims.
Making accurate and complete certificate submissions. The FDIC has developed a three-page certificate that
requires buyers to tap multiple internal databases and in some cases provide manual inputs as well. Systematizing
this process is crucial to increased accuracy and productivity.
Using technology to track and monitor loan submissions and recoveries during the life of the FDIC agreement.
While residential mortgage loans usually involve one submission, both CRE and C&I loans may require multiple
submissions based upon declining values and continuing expenses related to asset preservation, legal and appraisal
costs.
In addition, recoveries occur across the portfolio. Buyers need to develop an inclusive information management
system or “portal” to track these ins-and-outs. Tying the portal to the bank’s core systems allows for the “automatic”
generation of certificates, eliminating much of the manual activity that dominates bank staffers’ time in the early
stages of integrating an acquisition.
Shared-loss transactions can be very attractive and beneficial to all stakeholders, including the customer and the
FDIC. However, making them work requires senior management focus, clear priorities, and a bankwide
understanding of the unique opportunity these transactions offer.
Charles B. Wendel is the president of Financial Institutions Consulting Inc.
Why? Every day a court in the USA stops a bank from wrongfully foreclosing. Failed Bank executives walk away keeping bonuses based on bad loans. “After all, there is a reason why these banks failed. Oftentimes, financial statements are old,
appraisals are out of date, and file memos chronicling the loan’s current status are missing.” Then the government insures the buyer of a failed Bank against losses. The thinking seems to be if the government keeps hiding theft and charging it to our children and their children, maybe they (the bankers and the politicians that received “contributions) can continue to get away with skimming.
This article is written by an expert recommending that expert investors who intend to acquire a failed bank with an guarantee against loss should get more experts to counsel on the loss sharing agreement.
So, if the experts have to get experts, how are decent Americans, whether a cook, fireman, truck driver, doctor, or Ph.D. going to understand what is taking place behind closed doors. Yes, closed doors.
A county recorder in Utah said of MERS, “… if looked like a scam from hell.” You will be hearing more about Loss Sharing Agreements. What you won’t hear or read is how by starting a new bank, it might be possible to actually end up with profit by foreclosure on a American. This looks like another “scam from hell” to me.
Viewpoint: Five Key Tasks to Make FDIC Loss-Sharing Work
American Banker | Tuesday, January 12, 2010
By Charles B. Wendel
Entering into shared-loss transactions appears to be the Federal Deposit Insurance Corp.’s preferred approach for
dealing with failed banks. More than 60% of last year’s 140 bank failures were resolved using this approach.
Shared-loss transactions let banks build market share or move into new markets with minimal risk. They also let
private-equity players (led by a team of bankers) take advantage of current industry discontinuities.
Much of the attractiveness of these transactions centers on the “guarantee” the FDIC offers buyers. Typically, the
agency remits 80% of “dollar one” loan losses to buyers and increases its payments to 95% for losses beyond an
agreed upon threshold. In turn, the FDIC benefits from recoveries during the 10-year life of these deals.
Though these deals are attractive strategically and economically, they are also complex.
My company’s work with banks and private-equity players points to five key elements that should be addressed in
order to structure and manage a transaction appropriately.
Conducting a focused due diligence process and negotiating the FDIC shared-loss deal. Though many players
are experienced in due diligence, the FDIC window is short, with no more than two weeks between reviewing an offer
package to bidding. Time with the target is also limited (two to three days), requiring a focused approach. Buyers
should assemble a team of internal and external resources and set clear priorities for their review process.
As for negotiating an agreement, the FDIC has standardized the general structure of its purchase-and-assumption
and shared-loss agreements. However, no two agreements are alike, given evolving requirements by the FDIC (for
example, a “true-up” provision added in the fourth quarter) and buyer-negotiated amendments. Management should
view these agreements as a bible that will be revisited many times. Bank buyers should consult the handful of legal,
valuation and related advisers with expertise in the shared-loss world, leveraging their knowledge rather than relying
solely on internal controllers, general counsels or other internal resources.
Addressing key accounting-related priorities. Accounting regulations to be addressed include FAS 141R, SOP
03-3 and IRC Section 593. Many tax and accounting issues stem from the need to determine the tax basis of assets
subject to the shared-loss agreement and the rules related to deferred tax gains. A bank’s auditor is conflicted out
from offering these services, since it would be reviewing and passing judgment on its own work. This requires bank
buyers to obtain the services of an independent firm with appropriate accounting and valuation capabilities.
Ensuring strong portfolio support. The FDIC expects buyers to make regular claim submissions related to loan
losses, usually monthly for residential loans and quarterly for commercial and consumer loans.
Residential submissions are relatively straightforward because of the objective loss criteria outlined by the FDIC,
namely, “actual losses incurred due to modifications, foreclosures, short sales, deeds-in-lieu or bulk sales.” However,
commercial submissions are more subjective and require greater evaluation.
The state of commercial loan files in failed banks is often inadequate for portfolio management or for making “audit-
proof” submissions. (After all, there is a reason why these banks failed.) Oftentimes, financial statements are old,
appraisals are out of date, and file memos chronicling the loan’s current status are missing.
Owners should select a team of internal and/or external resources to triage, in effect, the portfolio, uncovering the
low-hanging fruit that can be submitted earliest while establishing a process to assess the entire portfolio. Every loan
in the portfolio must be reviewed against the acquirer’s risk rating system and managed within policy guidelines.
Commercial bankers at the acquired bank should undergo a sea change in how they look at their loans. Before
failure, many banks avoided taking losses because their reserves could not support a realistic view of a borrower’s
position. Under shared-loss agreements, management wants bankers to accurately assess transaction risk as quickly
as possible in order to identify loans subject to FDIC claims.
Making accurate and complete certificate submissions. The FDIC has developed a three-page certificate that
requires buyers to tap multiple internal databases and in some cases provide manual inputs as well. Systematizing
this process is crucial to increased accuracy and productivity.
Using technology to track and monitor loan submissions and recoveries during the life of the FDIC agreement.
While residential mortgage loans usually involve one submission, both CRE and C&I loans may require multiple
submissions based upon declining values and continuing expenses related to asset preservation, legal and appraisal
costs.
In addition, recoveries occur across the portfolio. Buyers need to develop an inclusive information management
system or “portal” to track these ins-and-outs. Tying the portal to the bank’s core systems allows for the “automatic”
generation of certificates, eliminating much of the manual activity that dominates bank staffers’ time in the early
stages of integrating an acquisition.
Shared-loss transactions can be very attractive and beneficial to all stakeholders, including the customer and the
FDIC. However, making them work requires senior management focus, clear priorities, and a bankwide
understanding of the unique opportunity these transactions offer.
Charles B. Wendel is the president of Financial Institutions Consulting Inc.
Tuesday, June 14, 2011
Oregon Foreclosure Filings up 236 percent in April
BoA file 236 new foreclosures. Attorney Phil Querin , “They’re doing the same thing they were before. “They’ve not recorded successive assignments.”
Oregon foreclosure filings up 236 percent in April
The Associated Press, Published Monday, June 6, 2011
PORTLAND, Ore. — PORTLAND, Ore. (AP) – Oregon is bucking a declining national trend in new foreclosure filings with a big increase in April, all of it from one loan servicer, The Oregonian reported.
The surge in “notices of default” by Bank of America Corp.’s foreclosure arm, ReconTrust Co., boosted the number of notices in Oregon by 236 percent, to 3,700 from 1,100, according to figures from ForeclosureRadar.com.
Another foreclosure data tracker, Realty Trac Inc., showed 3,200 notices in Oregon. Nationally, Realty Trac said the number declined by 14 percent in April.
The increase in April filings follows a jump in cancelled foreclosures filed by ReconTrust in late February and March. Those came after rulings by federal judges halting out-of-court foreclosures in Oregon, saying lenders failed to follow state recording law.
The judges said documents showing the successive chain of mortgage ownership had not been publicly filed in county recorders’ offices.
Bank of America spokesperson Jumana Bauwens said the withdrawals and new filings resulted from a review late last year of its foreclosure process when it halted sales in all 50 states.
“We wanted to provide our customers with every opportunity for home retention as well as ensure all foreclosure filing were completed with our improved process,” Bauwens said in an email to The Oregonian last week.
“As we entered April, we began initiating filings with that improved process. The filings in April may or may not be those held back in February and/or March,” Bauwens said.
But real-estate experts say little changed with the new filings.
Phil Querin, a real-estate attorney and critic of the finance industry’s handling of foreclosures, say ReconTrust’s new foreclosure starts are no different.
“They’re doing the same thing they were before,” Querin said. “They’ve not recorded successive assignments.”
The bank also might have been running up against a legal deadline that limits postponed foreclosures to six months, he said.
“We don’t really know too much because the banks aren’t talking,” Querin said.
Last month, the rate of new foreclosure starts slowed but remained higher than in February, according to recorders’ offices in two Portland metro area counties.
In Clackamas County, new foreclosure filings totaled 151 in March, with only 17 from ReconTrust. In April, filings spiked to 560, with 432 filed by ReconTrust. The trend was similar in Washington County, where new foreclosure starts jumped from 208 in March to 656 in April.
Attorneys say it’s not clear when Oregon judges will rule definitively on the legality of mortgage recordings, many of which involve the Mortgage Electronic Registration System, or MERS.
Title insurance attorneys have suggested that lenders might start foreclosing in court, but other real estate attorneys say lenders don’t want to spend that much money and will face a formidable fight from borrowers.
Oregon foreclosure filings up 236 percent in April
The Associated Press, Published Monday, June 6, 2011
PORTLAND, Ore. — PORTLAND, Ore. (AP) – Oregon is bucking a declining national trend in new foreclosure filings with a big increase in April, all of it from one loan servicer, The Oregonian reported.
The surge in “notices of default” by Bank of America Corp.’s foreclosure arm, ReconTrust Co., boosted the number of notices in Oregon by 236 percent, to 3,700 from 1,100, according to figures from ForeclosureRadar.com.
Another foreclosure data tracker, Realty Trac Inc., showed 3,200 notices in Oregon. Nationally, Realty Trac said the number declined by 14 percent in April.
The increase in April filings follows a jump in cancelled foreclosures filed by ReconTrust in late February and March. Those came after rulings by federal judges halting out-of-court foreclosures in Oregon, saying lenders failed to follow state recording law.
The judges said documents showing the successive chain of mortgage ownership had not been publicly filed in county recorders’ offices.
Bank of America spokesperson Jumana Bauwens said the withdrawals and new filings resulted from a review late last year of its foreclosure process when it halted sales in all 50 states.
“We wanted to provide our customers with every opportunity for home retention as well as ensure all foreclosure filing were completed with our improved process,” Bauwens said in an email to The Oregonian last week.
“As we entered April, we began initiating filings with that improved process. The filings in April may or may not be those held back in February and/or March,” Bauwens said.
But real-estate experts say little changed with the new filings.
Phil Querin, a real-estate attorney and critic of the finance industry’s handling of foreclosures, say ReconTrust’s new foreclosure starts are no different.
“They’re doing the same thing they were before,” Querin said. “They’ve not recorded successive assignments.”
The bank also might have been running up against a legal deadline that limits postponed foreclosures to six months, he said.
“We don’t really know too much because the banks aren’t talking,” Querin said.
Last month, the rate of new foreclosure starts slowed but remained higher than in February, according to recorders’ offices in two Portland metro area counties.
In Clackamas County, new foreclosure filings totaled 151 in March, with only 17 from ReconTrust. In April, filings spiked to 560, with 432 filed by ReconTrust. The trend was similar in Washington County, where new foreclosure starts jumped from 208 in March to 656 in April.
Attorneys say it’s not clear when Oregon judges will rule definitively on the legality of mortgage recordings, many of which involve the Mortgage Electronic Registration System, or MERS.
Title insurance attorneys have suggested that lenders might start foreclosing in court, but other real estate attorneys say lenders don’t want to spend that much money and will face a formidable fight from borrowers.
Michigan County approves Funding to Help Homeowners fight MERS, DocX cases
Michigan county approves funding to help homeowners fight MERS, DocX cases
by JON PRIOR
Wednesday, June 8th, 2011, 5:42 pm
A committee for the Ingham County Board of Commissioners in Michigan approved up to $60,000 in Legal Aid funding to represent borrowers affected by allegedly improper foreclosures and possible documentation fraud.
The full board is scheduled to approve the resolution June 14.
The county’s Register of Deeds Curtis Hertel Jr. uncovered potential fraudulent documents in his office calling into question hundreds of foreclosures. Hertel told HousingWire Wednesday he found 400 cases with possible fraudulent documentation involving Mortgage Electronic Registration Systems and another 100 involving DocX, a division of Lender Processing Services (LPS: 24.54 +0.41%).
According to the resolution adopted by Ingham County, the alleged wrongful foreclosures by MERS resulted in more than 400 people losing their homes over the last two years.
The legal assistance provided to affected homeowners will be made available between July 1, 2011, and June 30, 2012.
Both MERS and LPS signed consent orders with federal regulators in April as a result of a robo-signing scandal that engulfed multiple mortgage industry firms. Regulators required the two companies to “address significant weaknesses in, among other things, oversight, management supervision and corporate governance.”
MERS declined to comment on the Michigan subsidies. LPS did not immediately reply to requests for comment.
The Michigan Attorney General launched his own investigation into legacy DocX affidavits after Bill Bullard, the Register of Deeds in Oakland County uncovered questionable signatures and improper documentation as well.
The Michigan Court of Appeals required MERS in April to pursue foreclosures through the courts, even when the state normally uses a nonjudicial process.
Consumer advocates lobbied Washington for a federal funding program to help homeowners in these cases. Thad Bartholow, a foreclosure defense attorney for Armstrong Kellett Bartholow in Dallas, said such a program sounds like a good idea but could cause more harm in the long run.
“In particular, I would have concerns about creating a parallel to the already horrible problem with ‘foreclosure rescue’ scams by incentivizing shoddy or unscrupulous attorneys with little experience in this highly technical area of the law to take these cases, perhaps even on a volume basis, and absorbing the settlement funds without adequately serving their clients,” Bartholow said.
Hertel said other patterns cropped up in his investigation, which the courts are looking into. Bartholow said the issues arising out of these and federal probes seems unending in scope.
“Calling the problem of robosigning ‘epidemic” is a gross understatement,” Bartholow said. “Virtually industry-wide, it was the norm, with very few exceptions.”
by JON PRIOR
Wednesday, June 8th, 2011, 5:42 pm
A committee for the Ingham County Board of Commissioners in Michigan approved up to $60,000 in Legal Aid funding to represent borrowers affected by allegedly improper foreclosures and possible documentation fraud.
The full board is scheduled to approve the resolution June 14.
The county’s Register of Deeds Curtis Hertel Jr. uncovered potential fraudulent documents in his office calling into question hundreds of foreclosures. Hertel told HousingWire Wednesday he found 400 cases with possible fraudulent documentation involving Mortgage Electronic Registration Systems and another 100 involving DocX, a division of Lender Processing Services (LPS: 24.54 +0.41%).
According to the resolution adopted by Ingham County, the alleged wrongful foreclosures by MERS resulted in more than 400 people losing their homes over the last two years.
The legal assistance provided to affected homeowners will be made available between July 1, 2011, and June 30, 2012.
Both MERS and LPS signed consent orders with federal regulators in April as a result of a robo-signing scandal that engulfed multiple mortgage industry firms. Regulators required the two companies to “address significant weaknesses in, among other things, oversight, management supervision and corporate governance.”
MERS declined to comment on the Michigan subsidies. LPS did not immediately reply to requests for comment.
The Michigan Attorney General launched his own investigation into legacy DocX affidavits after Bill Bullard, the Register of Deeds in Oakland County uncovered questionable signatures and improper documentation as well.
The Michigan Court of Appeals required MERS in April to pursue foreclosures through the courts, even when the state normally uses a nonjudicial process.
Consumer advocates lobbied Washington for a federal funding program to help homeowners in these cases. Thad Bartholow, a foreclosure defense attorney for Armstrong Kellett Bartholow in Dallas, said such a program sounds like a good idea but could cause more harm in the long run.
“In particular, I would have concerns about creating a parallel to the already horrible problem with ‘foreclosure rescue’ scams by incentivizing shoddy or unscrupulous attorneys with little experience in this highly technical area of the law to take these cases, perhaps even on a volume basis, and absorbing the settlement funds without adequately serving their clients,” Bartholow said.
Hertel said other patterns cropped up in his investigation, which the courts are looking into. Bartholow said the issues arising out of these and federal probes seems unending in scope.
“Calling the problem of robosigning ‘epidemic” is a gross understatement,” Bartholow said. “Virtually industry-wide, it was the norm, with very few exceptions.”
Friday, June 10, 2011
THIGPEN WANTS TO TAKE ON MORTGAGE GIANTS:
A Greensboro, NC Guilford County Register of Deeds is going after MERS for $1.3 million in fees for mortgage assingment. I wish him luck.(Joe Vera)
FOR IMMEDIATE RELEASE:
Greensboro, NC
March 2, 2011
Contact:
Jeff Thigpen, Guilford County Register of Deeds
Ph. 336-451-5300
Ph. 336-641-3239
jthigpe@co.guilford.nc.us
THIGPEN WANTS TO TAKE ON MORTGAGE GIANTS:
SEEKS INVESTIGATION OF “MERS” FOR REIMBURSEMENT OF $1.3 MILLION IN LOST
REVENUE TO GUILFORD COUNTY
Guilford County Register of Deeds Jeff Thigpen announced today that he will be conferring with County
Attorney Mark Payne, NC Attorney General and Secretary of State as to whether the Mortgage Electronic
Registration Service (MERS) owes Guilford County fees estimated at $1.3 million in lost revenue from
mortgage assignments. Thigpen also wants to review pending legal actions against MERS and consider
options to protect the integrity of public land recordation offices.
“As Register of Deeds, I have two primary responsibilities in land records: a sworn duty to protect the
chain of title and a fiduciary responsibility to collect recording fees. Quite frankly, MERS has
undermined both. Through their own “private for-profit” Register of Deeds mortgage tracking office,
MERS has created a dangerous centralization of power whose sole purpose is to protect and serve the
interests of major banking conglomerates and undermine public recording offices,” said Thigpen.
“For me, the question is clear. Do we want land records in America to be governed by major banking
conglomerates on Wall Street or the people and laws of the United States of America?”
MERS has an electronic registry and database system that tracks more than 65 million mortgages for its
paid membership throughout the country and aides the mortgage backed securities trade in the secondary
market. MERS is reportedly involved in 60% of US mortgage loans. It was established by some of the
largest mortgage lenders in the United States including Wells Fargo, Chase Mortgage, Citi Mortgage,
Countrywide Home Loans, Inc. and Bank of America among others in 1997. A number of class action
lawsuits and civil racketeering suits have arisen against MERS recently, including a suit alleging its
members owe California $60-120 billion for circumventing land recording fees. MERS has also been at
the center of recent foreclosure chaos.
Since the founding of America, counties in the United States have maintained public records of land,
mortgages and deeds of trust, by maintaining indexes of grantors and grantees. Register of Deeds offices
ensure transparency and an important check and balance in private property ownership. County recording
practices have been in place for 300 years. “It is interesting that the first fundamental change in public
land title recording systems was not initiated by publicly elected leaders, but a small group of mortgage
industry insiders. Now it’s coming back to bite all of us- homeowners and taxpayers. MERS creates a
system where only certain eyes see the data and what’s going on. I have a real problem with that as a
Recorder.
Thigpen is asking for clarity on the California suit and others surrounding MERS business practices in
packaging and repackages home owner loans through securitization. MERS has saved larger financial
firms millions of dollars while avoiding recordation and payment of fees related to mortgage transfers.
Since 2005 there were 47,553 deeds of trust that list MERS as a beneficiary filed in the Guilford County
Register of Deeds office. Experts have indicated that those kinds of loans are repackaged and sold two
and four times on average under the MERS system. “One repackaging of MERS documents would have
generated $665,742 if documentation had been filed in our office. Two repackaged loans would have
generated $1,331,484. And that’s conservative estimate.”
Thigpen maintains the lost recording fees would help local elected officials reduce budget deficits and
maintain core services such as public education and public safety in this time of fiscal crisis.
Thigpen’s primary concern relates to recent court rulings in Arkansas, Kansas, Maine and Missouri
questioning MERS legal standing in home foreclosures and suits challenging that MERS filings may be
fraudulent. “If MERS filings are false statements, there are laws that say if you decrease the money that
you pay for a service through using those false statements then you can get damages. The legal term is
“unjust enrichment”. Thigpen wants to explore unjust enrichment and other options related to recovery of
lost revenue.
Thigpen acknowledges that NC General Statutes do not currently require assignments to be filed in local
Register of Deeds offices which allow the public to know the rightful owner of a mortgage. “That may
need to change among other things”, says Thigpen. Thigpen points to a major policy change from
MERS in the past two weeks conceding that assignments should be filed in public registries across the
country even if the state law does not require it and instructed members not to foreclose in MERS name.
“It indicates to me that they know they need to fix this.”
“It used to be that if you bought a house, the mortgage would stay at a single bank until you paid it off.
Times have changed. Through securitization, mortgages are all put in a blender and sold off to Wall
Street investors and Fannie and Freddie among others. MERS has its finger on the spin button. At the
end of the day with MERS, Susie Homeowner can’t keep track of who owns her loan and if she’s going to
get hit with new fees or even foreclosure.
“This type of unregulated greed is giving charity to all the people who should be giving it and undermines
good business practices.” says Thigpen. Thigpen points out those local credit unions like State
Employees Credit Union who didn’t participate in sub-prime lending have avoided legal difficulties.
“This is a mess and the MERS system impacts millions of homeowners across the country in danger of
having their homes foreclosed”, said Thigpen. He wants a review of the lawsuits and investigations into
MERS by state attorney generals and others and believes it will take a coordinated at the local, state and
federal level to resolve it. “To me these issues with MERS are simple. Are major banking conglomerates
going to tell the truth or not; and are we going choose to have two standards of justice in America: one for
Big Money and the other for the rest of us?
Thigpen will also join Southern Sussex Massachusetts Register of Deeds John O’Brian, Jr. in urging
national organizations such as the International Association of Clerks, Recorders, Election Officials and
Treasurers (IACREOT) to address MERS in the coming weeks.
Thursday, June 9, 2011
Los Angeles, fighting blight, goes after Deutsche Bank
The Federal Government is not going to bring the Banks to justice. It will be left to the local and state governments. (Joe Vera)
Los Angeles, fighting blight, goes after Deutsche Bank
6/7/2011 COMMENTS (0)
June 7 (Westlaw Journals) – The city of Los Angeles is suing financial giant Deutsche Bank for allegedly letting many of the 2,000 houses it obtained through foreclosures to fall into disrepair, leading to crime and lower neighborhood property values.
The city says it has repeatedly notified the company about the poor condition of the properties but the bank has not taken action to fix them.
By neglecting the properties, Deutsche Bank has violated state law and city ordinances, according to the complaint filed in the Los Angeles County Superior Court.
“We must fight blight by holding banks accountable when they create vacant nuisance properties that pose threats to our residents and destroy the quality of life in our neighborhoods,” City Attorney Carmen Trutanich said in a statement.
Deutsche Bank did not respond to a request for a comment on the suit.
In its lawsuit, the city says the foreclosure crisis caused the bank to change from a mortgage investor to a property owner when homeowners could not make their loan payments.
As a result of foreclosures, Deutsche Bank has taken title to more than 2,000 homes and buildings in Los Angeles, many of which are in low-income neighborhoods, according to the suit.
The city says the bank is obligated as a property owner to maintain its houses and buildings in good condition.
However, the company has not taken any measures to keep vacant houses in good condition, the suit says. The bank has not complied with a Los Angeles ordinance requiring that uninhabited properties be cleaned and barricaded, according to the complaint.
The city says the vacant properties are a public nuisance because they attract crime and have caused neighborhood property values to decline.
Los Angeles also says Deutsche Bank has neglected many foreclosed properties that are still inhabited, where the residents are living in substandard and dangerous conditions.
Many of the bank’s inhabited buildings do not meet the requirements of the city’s building, electrical, plumbing, mechanical, and health and safety codes, according to the suit.
Los Angeles says that by failing to properly maintain the foreclosed properties Deutsche Bank has engaged in unfair and fraudulent business practices in violation of the state Business and Professions Code.
In addition, the city says the bank has violated the same law by illegally evicting people from their homes following foreclosure actions in order to sell the properties.
Deutsche Bank has improperly forced people out of their homes through threats and by paying them small amounts of money, the complaint says.
The city is asking the court to order Deutsche Bank to bring all the foreclosed homes into a habitable condition and to stop improper eviction practices.
The suit seeks the imposition of civil monetary penalties against the bank for each violation of the law that is found by the court.
People et al. v. Deutsche Bank National Trust Co. et al., No. BC460878, complaint filed (Cal. Super. Ct., L.A. County May 4, 2011).
(Reporting by Catherine Tomasko, Westlaw Journal Bank & Lender Liability)
Treasury To Temporarily Penalize Mortgage Companies, Making Good On Old Threat
Big Banks were fined $23 million for violating agreements to help homeowners. But, the money will be returned. What about the homeowners who lost? (Joe Vera)
Treasury To Temporarily Penalize Mortgage Companies, Making Good On Old Threat
Shahien Nasiripour
WASHINGTON — The Treasury Department will temporarily withhold payments to the nation’s three largest mortgage companies for failing to comply with the Obama administration’s signature foreclosure-prevention effort, perhaps finally making good on a 19-month-old threat, officials announced Thursday.
Bank of America, Wells Fargo and JPMorgan Chase, which collectively service about half of all home loans, abused homeowners and violated the rules of the Making Home Affordable (MHA) program, Treasury said. The initiative aims to lower monthly payments, reduce loan balances or enable distressed borrowers to sell their homes before they’re seized by awarding a series of incentive payments to banks, investors and homeowners when foreclosures are averted. Treasury is only withholding pay to the three banks.
The three were found to need “substantial improvement,” the agency said in a statement. Cumulatively, they received $24 million in government incentive payments last month. Last quarter, the three financial behemoths collectively reported about $11.4 billion in net income. (Another firm came in for criticism, but it was spared the momentary financial penalty because its results were skewed due to an acquisition.)
The remaining six of the 10 largest mortgage companies that were audited were found to need “moderate improvement.” None passed with flying colors.
Bank of America, the worst performer, was found to have poor internal controls for identifying and contacting homeowners. Its error rates were also more than four times Treasury’s benchmark when calculating borrowers’ income. JPMorgan improperly calculated the incomes of nearly a third of borrowers when it was trying to determine their eligibility for the program — more than six times the limit. And Wells Fargo had poor processes for determining borrowers’ eligibility. Its income error rates were also more than five times Treasury’s max.
Treasury first identified potential mass non-compliance in November 2009, warning the participating companies that those failing to meet their obligations to homeowners under their contracts with the federal government “will be subject to consequences which could include monetary penalties and sanctions.” The Obama administration spent the next year and a half defending itself against accusations levied by federal auditors, members of Congress and consumer groups that it was soft on the big banks’ abusive behavior due to its reluctance to follow through on that threat.
But the punishment that has been so long in coming may prove to be short-lived: Treasury will return the money they’re withholding from the three banks once they make the needed improvements.
“If they fix the problem, they will get the money,” said Tim Massad, Treasury’s acting assistant secretary for financial stability, during a conference call with reporters. He added that Treasury had conducted 400 compliance reviews. Massad declined to answer questions over why the administration waited 19 months to make good on its threat.
News that Treasury would temporarily withhold payments to the three companies was first reported by the Washington Post.
More homeowners have been kicked out of the program than are receiving assistance, Treasury data show. Nearly half of them either face foreclosure proceedings, are in foreclosure, or have lost their homes. The initiative will fail to keep President Barack Obama’s promise of helping 3 million to 4 million homeowners avoid foreclosure, auditors have concluded.
Potentially “thousands” of troubled homeowners were denied opportunities to lower their monthly mortgage payments under the administration’s program due to servicer errors and inadequate oversight by Treasury, according to a June 2010 audit by the Government Accountability Office (GAO).
“All this appears to be is that, after the servicers seemingly violated their agreements with Treasury with impunity, Treasury’s sole response is to give them a temporary time-out before paying them in full,” said Neil M. Barofsky, the former special inspector general for the Troubled Asset Relief Program. His critical reports on the bailout earned him plaudits in Congress for looking out for taxpayers, but enemies at Treasury, which administered the TARP.
“It further reaffirms Treasury’s long-running toothless response to the servicers’ disregard of their contract with Treasury, and by extension, the American taxpayer,” added Barofsky, who now serves as a senior research scholar and fellow at New York University School of Law.
In statements, Bank of America said it’s working to improve its results while JPMorgan said it disagrees with Treasury’s conclusions. Wells Fargo went a step further, and said it is “formally disputing” the government’s findings.
Like other companies, Wells has been in constant communication with Treasury and its auditors. Massad said government watchdogs have long been inside the companies’ offices, keeping tabs on their activities. But Wells Fargo said Thursday’s report “contradicts previous written assessments shared with us by the Treasury.”
The withholding of incentives “mean very little to this company,” said Teri A. Schrettenbrunner, a senior vice president at Wells Fargo’s mortgage unit in Des Moines, Iowa. “We’re really in this to get the housing market stabilized. It’s in the best interest of everyone.”
Most experts in and out of government agree that the MHA program has been a dismal failure. Home prices today are lower than when the initiative was launched. Home repossessions continue at a near-record pace. And Americans’ equity in their homes is at a two-year low, Federal Reserve data show.
A substantial portion of them blame the Obama administration — rather than the mortgage industry — for its failure to police the mortgage companies, structure a program that dealt with the biggest drivers of default like negative equity and commit enough money.
Indeed, government auditors have long faulted Treasury for its lack of oversight.
An October 2009 report by the Congressional Oversight Panel, another federal watchdog created to keep tabs on the bailout, recommended that the administration develop “strong, appropriate sanctions to ensure that all participants follow program guidelines.”
In its last report before disbanding, the panel noted that Treasury had yet to take any action.
“There’s no way to help those who have already been harmed by this program,” Barofsky said. “The damage has been done.”
More than three of every four housing counselors surveyed by the GAO said borrowers had either a “negative” or “very negative” experience with the administration’s primary initiative, the Home Affordable Modification Program, better known as HAMP. Just 9 percent described borrowers’ overall experience as “positive” or “very positive,” according to the May report.
The counselors’ most popular recommendation to improve HAMP was for Treasury to enforce sanctions on mortgage companies for noncompliance.
“In many ways, Treasury’s shameful enablement of servicer misconduct has contributed to this program’s abysmal failure,” Barofsky said.
Shahien Nasiripour is a senior business reporter for The Huffington Post. You can send him an email; bookmark his page; subscribe to his RSS feed; follow him on Twitter; friend him on Facebook; become a fan; and/or get email alerts when he reports the latest news. He can be reached at 917-267-2335.
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