Trial Objections in Foreclosures

 

NOTE: This post is for attorneys only. Pro se litigants even if they are highly sophisticated are not likely to be able to apply the content of this article without knowledge and experience in trial law. Nothing in this article should be construed as an acceptable substitute for consultation with a licensed knowledgeable trial lawyer.

If you need help with objections, then you probably need our litigation support, so please call my office at 850-765-1236.

It is of course impossible for me to predict how the Plaintiff will attempt to present their case. The main rule is that objections are better raised prematurely than late. The earliest time the objection can be raised it should be raised. In these cases the primary objections are lack of foundation and hearsay.

As to lack of foundation, the real issue is whether the witness is really competent to testify. The rules, as you know, consist of four elements — oath, personal perception, independent recall, and the ability to communicate. The corporate representative should be nailed on lack of personal knowledge — if they had nothing to do with the closing, the funding of the loan, the execution of the documents, delivery of the note, delivery of the mortgage etc., or processing of payments or even the production of the reports or the program that presents the data from which the report populates the information the bank is attempting to present. Generally they fail on any personal knowledge.
The only thing that could enable them to be there is whether they can testify using hearsay, which is generally barred from evidence. If that is all they have, then the witness is not competent to testify. The objection should be made at the moment the attorney has elicited from the witness the necessary admissions to establish the lack of personal perception, personal knowledge.
On hearsay, their information is usually obtained from what they were told by others and what is on the computers of the forecloser like BofA which based on the transcript from cases run on at least 2 server systems and probably a third, if you include BAC/Countrywide. All of such testimony and any documents printed off the computers are hearsay and therefore are barred — unless the bank can establish that the information is credible because it satisfies the elements of an exception to hearsay. The only exception to hearsay that usually comes up is the business records exception. Any other testimony about what others told the witness is hearsay and is still barred.
The business records exception can only be satisfied if they satisfy the elements of the exception. First the point needs to be made that these records are from a party to litigation and are therefore subject to closer scrutiny because they would be motivated to change their documents to be self serving. If you have any documentation to show that they omitted payments received in their demand or that there are other financial anomalies already known it could be used to bolster your argument as an example of how they have manipulated the documents and created or fabricated “reports” strictly for trial and therefore are not regular business records created at the or close to the time of an event or payment.
The business records exception requires the records custodian, first and foremost. Since the bank never brings their records custodian to court, they are now two steps removed from credibility — the first being that they are not some uninterested third party and the second that they are not even bringing their records custodian to court to state under oath that the report being presented is simply a printout of regular business records kept by bank of America.
So the exception to business records under which they will attempt to get the testimony of their witness in will be that the witness has personal knowledge of the record keeping at Bank of America and this is where lawyers are winning their cases and barring the evidence from coming in. Because the witnesses are most often professional witnesses who actually know nothing about anything and frequently have reviewed the file minutes before they entered the courtroom.
The usual way the evidence gets in is by counsel for the homeowner failing to object. That is because failure to object allows the evidence in and once in it generally can’t be removed. It is considered credible simply because the opposing side didn’t object.
TRAPDOOR: Waking up at the end of a long stream of questions that are all objectionable for lack of foundation (showing that the witness has any personal knowledge related to the question) or because of hearsay, the objection will then be denied as late. So the objection must be raised with each question before the witness answers, and if the witness answers anyway, the response should be subject to a motion to strike.
THE USUAL SCENARIO: The lawyer will ask or the witness will say they are “familiar” with the practices for record keeping. That is insufficient. On voir dire, you could establish that the witness has no knowledge and nothing to recall and that their intention is to testify what the documents in front of him say. That is “hearsay on hearsay.” That establishes, if you object, that the witness is not competent to testify.
The bottom line is that the witness must be able to establish that they personally know that the records and everything on them are true. In order for the records to be admitted there must be a foundation where the witness says they actually know that the printouts being submitted are the same as what is on the BofA computers and what is on the BofA computers was put there in the regular course of business and not just in preparation for trial. And they must testify that these records are permanent and not subject to change. If they are subject to change by anyone with access they lack credibility because they may have been changed for the express purpose of proving a point in trial rather than a mere reflection of regular business transactions.
There is plenty of law nationwide on these subjects. Personal knowledge, “familiarity with the records,” and testifying about what the records say are all resolved in favor of the objector. The witness cannot read from or testify from memory of what the records say. The witness must know that the facts shown in those records are true. This they usually cannot do.

The Truth Keeps Coming: When Will Courts Become Believers?

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The selection of an attorney is an important decision  and should only be made after you have interviewed licensed attorneys familiar with investment banking, securities, property law, consumer law, mortgages, foreclosures, and collection procedures. This site is dedicated to providing those services directly or indirectly through attorneys seeking guidance or assistance in representing consumers and homeowners. We are available to any lawyer seeking assistance anywhere in the country, U.S. possessions and territories. Neil Garfield is a licensed member of the Florida Bar and is qualified to appear as an expert witness or litigator in in several states including the district of Columbia. The information on this blog is general information and should NEVER be considered to be advice on one specific case. Consultation with a licensed attorney is required in this highly complex field.

Editor’s Comments and Practice Suggestions: On the heels of AG Eric Holder’s shocking admission that he withheld prosecution of the banks and their executives because of the perceived risk to the economy, we have confirmation and new data showing the incredible arrogance of the investment banks in breaking the law, deceiving clients and everyone around them, and covering it up with fabricated, forged paperwork. And they continue to do so because they perceive themselves as untouchable.

Practitioners should be wary of leading with defenses fueled by deceptions in the paperwork and instead rely first on the money trail. Once the money trail is established, each part of it can be described as part of a single transaction between the investors and the homeowners in which all other parties are intermediaries. Then and only then do you go to the documentation proffered by the opposition and show the obvious discrepancies between the named parties on the documents of record and the actual parties to the transaction, between the express repayment provisions of the promissory note and the express repayment provisions of the bond sold to investors.

Practitioners should make sure they are up to speed on the latest news in the public domain and the latest developments in lawsuits between the investment banks, investors and guarantors like the FHA who have rejected loans as not conforming to the requirements of the securitization documents and are demanding payment from Chase and others for lying about the loans in order to receive 100 cents on the dollar while the actual loss was incurred by the investors and the government sponsored guarantors.

Another case of the banks getting the money to cover losses they never had because at all times they were mostly dealing with third party money in funding or purchasing mortgages. It was never their own money at risk.

Three “deals” are now under close scrutiny by the government and by knowledgeable foreclosure defense lawyers. For years, Chase, OneWest and BofA have taken the position that they somehow became the owner of mortgage loans because they acquired a combo of WAMU and Bear Stearns (Chase), IndyMac (OneWest), and a combo of Countrywide and Merrill Lynch (BofA).

None of it was ever true. The deals are wrapped in secrecy and even sealed documents but the truth is coming out anyway and is plain to see on some records in the public domain as can be easily seen on the FDIC site under the Freedom of Information Act “library.”

The naked truth is that the “acquiring” firms have very complex deals on those mortgage loans that the acquiring firm chooses to assert ownership or authority. It is  a pick and choose type of scenario which is neither backed up by documentation nor consideration.

We have previously reported that the actual person who served as FDIC receiver in the WAMU case reported to me that there was no assignment of loans from WAMU, from the WAMU bankruptcy estate, or the FDIC. “if you are looking for an assignment of those loans, you are not going to find it because there was no assignment.” The same person had “accidentally” signed an affidavit that Chase used widely across the country stating that Chase was the owner of the loans by operation of law, which is the position that Chase took in litigation over wrongful foreclosures. Chase and the receiver now take the position that their prior position was unsupportable. So what happens to all those foreclosures where the assertions of Chase were presumed true?

Now Chase wants to disavow their assumption of all liabilities regarding WAMU and Bear Stearns because it sees what I see — huge liabilities emerging from those “portfolios” of foreclosed properties that were foreclosed and sold at auction to non-creditors who submitted credit bids.

You might also remember that we reported that in the Purchase and Assumption Agreement with the FDIC, wherein Chase was acquiring certain operations of WAMU, not including the loans, the consideration was expressly stated as zero and that the bid price from Chase happened to be a little lower than their share of the tax refund to WAMU, making the deal a “negative consideration” deal — i.e., Chase was being paid to acquire the depository assets of WAMU. Residential loans were not the only receivables on the books of WAMU and the FDIC receiver said that no accounting was ever done to figure out what was being sold to Chase.

Each of the deals above was complicated by the creation of entities (Maiden Lane LLCs) to create an “off balance sheet” liability for the toxic loans and bonds that had been traded around as if they were real.

Nobody ever thought to check whether the notes and mortgages recorded the correct facts in their content as to the cash transaction between the borrower and the originator. They didn’t, which is why the investors and the FDIC both now assert that not only were the loans not subject to underwriting rules compatible with industry standards, but that the documents themselves were not capable of enforcement because the wrong payee is named with different terms of repayment to the investors than what those lenders thought they were buying.

In other words, the investors and the the government sponsored guarantee organizations are both asserting the same theory, cause of action and facts that borrowers are asserting when they defend the foreclosure. This has been misinterpreted as an attempt by borrowers to get a free house. In point of fact, most borrowers simply don’t want to lose their homes and most of them are willing to enter into modifications and settlements with proceeds far superior to what the investor gets on foreclosure.

Borrowers admit receiving money, but not from the originator or any of the participants in what turned out to be a false chain of securitization which existed only on paper. The Borrowers had no knowledge nor even access to the knowledge that they were actually entering into a loan transaction with a stranger to the documents presented at the loan “closing.” This pattern of table funded loans is branded by the Truth in Lending Act and Reg Z as “predatory per se.” The coincidence of the money being received by the closing date was a reasonable basis for assuming that the originator was not play-acting, but rather actually acting as lender and underwriter of the loan, which they were certainly not.

The deals cut by Chase, OneWest and BofA are models of confusion and shared losses with the FDIC and other investors who participated in the Maiden Lane excursion. The actual creditor is definitely not Chase, OneWest nor BofA. Bank of America formed two corporations that merely served as distractions — Red Oak Merger Corp and BAC Home Loans and abandoned both after several foreclosures were successfully concluded by BAC, which owned nothing.

As we have previously shown, if the mortgage securitization scheme had been a real financial tool to reduce risk and increase lending, the REMIC trust would have ended up on the note and mortgage, on record in the office of the County Recorder. There would have been no need to establish MERS or any other private database in which trades were made and “trading profits” were booked in order to siphon off a large chunk of the money advanced by investors.

The transferring of paper does not create a transaction wherein a loan is proven or established in law or in fact. There must be an actual transaction in which money exchanged hands. In most cases (nearly all) the actual transaction in which money exchanged hands was between the borrower and an undisclosed third party entity.

This third party entity was inserted by the investment bankers so that the investment bank could claim ownership (when legally the loans already were owned by the investors) and an insurable interest in the loans and bonds that were supposedly backed by the loans. This way the banks could assert their right to proceeds of sale, insurance, and credit default swaps leaving their investor clients out in the cold and denying the borrowers the right to claim a reduction in the liability for their loan.

In litigation, every effort should be made to force the opposition to prove that the investor money was deposited into the a trust account for the REMIC trust and that the REMIC trust actually paid for the loans. Actually what you will be doing is forcing an accounting that shows that the REMIC was never funded and was never the buyer of the loans. Hence nobody in the false securitization chain had any ownership of the debt leading to the inevitable conclusion that for them the note was unenforceable and the mortgage was a nullity for lack of consideration and a lack of a meeting of the minds.

Once you get to the accounting from the Trustee of the Trust, the Master Servicer and the subservicer, you will uncover trades that involve representations of the investment bank that they owned the loans and in fact the mortgage bonds which were clearly pre-sold to investors before the first application for loan was ever received.

Thus persistent borrowers who litigate for the actual truth will track the money and then show that the cash transactions differ from the documented transactions and that the documented transactions lacked consideration. The only way out for the banks is to claim that they embraced this convoluted route as agents for the investors, but then that still means that money received in federal bailouts, insurance and credit default swaps would reduce the receivable of the actual creditors (investors) and thus reduce the amount payable by the actual borrowers (homeowners).

The unwillingness of the Department of Justice to enforce long standing laws regarding fraud and deceit, identity theft and other crimes, tends to create an atmosphere of impunity a round the banks and a presumption that the borrowers are merely technical objections of a certain number of documents not having all their T’s crossed and I’s dotted.

From a public policy perspective, one would have to concede that protecting the banks did nothing for liquidity in the marketplace and nothing for the credit markets in particular. Holder’s position, which I guess is also Obama’s position, is that it is better to allow average Americans to sink into poverty than to hold the banks and bankers accountable for their white collar crimes.

Legally, if the prosecutions ensued and the cases were proven, restitution would be ordered based not on some back-room deal but on approval of the Court. Restitution would clawback much of the capital of the mega banks who are holding that money by virtue of illegal transactions. And restitution would provide the only stimulus to the economy that would be fundamentally sound. Investors and borrowers would both share in the recovery of at least part of the wealth lost to the banks during the mortgage maelstrom.

I have no doubt that the same defects will appear in auto loans, student loans and other forms of consumer loans especially including credit card loans. The real objection of the banks is that after all this effort of stealing the money and the homes they might be forced to give it all back. The banks perceive that as a “loss.” I perceive it as simple justice applied every day in the courtrooms of America.

JPM: The Washington Mutual Story
http://www.ritholtz.com/blog/2013/03/jpm-wamu/

Bear Stearns, JPMorgan Chase, and Maiden Lane LLC
http://www.federalreserve.gov/newsevents/reform_bearstearns.htm

Mistakenly Released Documents Reveal Goldman Sachs Screwed IPO Clients
http://news.firedoglake.com/2013/03/12/mistakenly-released-documents-reveal-goldman-sachs-screwed-ipo-clients/

MERSCORP Shell Game Attacked by Kentucky Attorney General Jack Conway

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, Tennessee, Georgia, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

EDITOR’S NOTES AND COMMENTS: My congratulations to Kentucky Attorney General Jack Conway and his staff. They nailed one of the key issues that cut revenues on transfers of interests in real property AND they nailed one of the key issues in perfecting the mortgage lien.

As we all know now MERSCORP has been playing a shell game with multiple corporate identities, the purpose of which, as explained in Conway’s complaint, was to add mud to the waters already polluted by predatory loan practices and outright fraud in the appraisal and identification of the lender. This of course is in addition to the very gnarly issue of using a nominee that explicitly disclaims any interest in the property or loan.

The use of MERS, just like the use of fabricated, forged, robo-signed documents doesn’t necessarily wipe out the debt. The debt is created when the borrower accepts the money, regardless of what the paperwork says — unless the state’s usury laws penalize the lender by eliminating the debt entirely and adding treble damages.

But the use of a nominee that has no interest in the loan or the property creates a problem in the perfection of the mortgage lien. The use of TWO nominees doubles the problem. It eliminates the most basic disclosure required by Federal and state lending laws — who is the creditor?

By intentionally naming the originator as the lender when it was merely a nominee and by using MERS, as nominee to have the rights under the security interest, the Banks created layers of bankruptcy remote protection as they intended, as well as the moral hazard of stealing or “borrowing” the loan to create fictitious transactions in which the bank kept part of the money intended for mortgage funding. Since the mortgage or deed of trust contains no stakeholders other than the homeowner and the note fails to name any actual creditor with a loan receivable account, the mortgage lien is fatally defective rendering the loan unsecured.

When you take into consideration that the funding of the loan came from a source unrelated (stranger tot he transaction) then the debt doesn’t exist either — as it relates to any of the parties named at the “closing” of the mortgage loan. So you end up with no debt, no note, and no mortgage. You also end up with a debt that is undocumented wherein the homeowner is the debtor and the source of funds is the creditor — in a transaction that neither of them knew took place and neither of them had agreed.

The lender/investors were expecting to participate in a REMIC trust which was routinely ignored as the money was diverted by the banks to their own pockets before they made increasingly toxic over-priced loans on over-valued property. The borrower ended up in limbo with no place to go to settle, modify or even litigate their loan, mortgage or foreclosure. This is not the statutory scheme in any state and Conway in Kentucky spotted it. Besides the usual “dark side” rhetoric, the plan as executed by the banks creates fatal uncertainty that cannot be cured as to who owns the loan or the lien or the debt, note or mortgage. The answer clearly does not lie in the documents presented to the borrower.

Now Conway has added the hidden issue of the MERS shell game. Confirming what we have been saying for years, the Banks, using the MERS model, have made it nearly impossible for ANY borrower to know the identity of the actual lender/creditor before during and even one day after the “closing” of the loan (which I have postulated may never have been completed because the money didn’t come from MERS nor the other nominee identified as the “lender”).

The Banks are trying to run the clock on the statute of limitations with these settlements, like the the last one in which Bank of America would have owed tens of millions of dollars had the review process continued, and instead they cancelled the program with a minor settlement in which homeowners will get some pocket change while BofA walks off with the a mouthful of ill-gotten gains.

The plain truth is that in most cases BofA never paid a dime for the funding or purchase of the loan. That is called lack of consideration and in order for the rules of negotiable paper to apply, there must be transfer for value. There was no value, there was no cancelled check and there was no wire transfer receipt in which BofA was the lender or acquirer of the loan. Now add this ingredient: more than 50% of the REMIC trusts BofA says it “represents no longer exist, having been long since dissolved and settled.

The same holds true  for US Bank, Mellon, Chase, Deutsch and others. Applying basic black letter law, the only possible conclusion here is that the mortgages cannot be foreclosed, the notes cannot be enforced, the debt can be collected ONLY upon proof of payment and proof of loss. This is how it always was, for obvious reasons, and this is what we should re turn to, providing a degree of certainty to the marketplace that does not and will never exist without the massive correction in title corruption and the wrongful foreclosures conducted by what the reviewers in the San Francisco audit called “strangers to the transaction.”

See Louisville Morning Call here

See Bloomberg Article here

Chorus of Whistles as the Blowers Get Ignored or Shutdown

CHECK OUT OUR EXTENDED DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editors Comment and Analysis: Chorus of whistles around the country and indeed around the world is going over the administration’s handling of the wrongful foreclosure claims and the outright bullying, intimidation and lying that lies at both the root of the false securitization scheme for residential mortgages and the false foreclosure review process supposedly designed to correct the problem. The plain truth, as pointed out in the article below and the Huffington Post, is that the reviews were never intended to work.

Take a step back for perspective. The news is being carefully managed by Wall Street just as Congress is being carefully manipulated by Wall Street. But for the inquiring mind, the data is right there in front of everyone and is being ignored at the peril of the future of the real estate industry which depends upon certainty that the title intended in the transaction is actually conveyed without undisclosed or “unknown” liabilities. The title companies are greasing the rails with their
“Guarantee of Title” but that doesn’t fix the corrupted title records.

We know that every study done shows collectively that

  1. Strangers to the transaction dominate the foreclosure activity — i.e.,  entities that are not injured or even involved with eh funding of the original loan or the payment of the price of the loan on assignment, endorsement or transfer of the alleged loan.
  2. In virtually ALL cases of securitization, regardless of whether the securitization started at the origination of the loan, or later, the use of nominees rather than actual parties was the rule, and the documents misrepresent both the parties and terms of repayment.
  3. The Banks are slowly prolonging the process to be able to assert the statute of limitations on criminal or civil prosecution but that wouldn’t protect them if law enforcement would dig deeper and find that there was nothing but fraud at the origination and all the way up the “Securitization” chain — all of which transactions were unsupported by consideration.
  4. We know the Banks know that they are exposed to awesome liability equaling the whole of the mortgage market from 1996 to the present. If that were not true they would be announcing settlements every day where some bank is paying hundreds of millions or billions or tens of billions of dollars “without admitting liability.”
  5. We know that in ALL foreclosures where a loan was claimed to be securitized or even where it was hidden tactically (like Chase does), the “credit bid” at auction was not submitted by an injured party. Thus the party who submitted the credit bid was not a creditor and everyone of those foreclosures — millions of them — can be and should be overturned.
  6. We know that at origination the money came from a controlled entity not of the originator but of the aggregator. The originator was not permitted to touch the money nor did the originator ever have any risk of loss. Hence the originator was a nominee with no more rights or powers than MERS. The borrower was left with the fact that he was dealing with unknown parties whose “underwriting process” was designed to get the deal done and allow the originator to proceed.
  7. We know that without the approval from the aggregator, the originator would not have announced approval of the loan. At no time did the Borrower know that they were actually dealing with Countrywide or other aggregators and that the money was coming through an entity (credit warehouse) set up by Countrywide for the origination of loans, with the caveat being that the money for funding would NOT go through the hands of the originator.
  8. We know that the mortgage liens were not perfected.
  9. We know that the note describes a transaction that never occurred — wherein the originator loaned money to the borrower. (No consideration) and that the originator never had any risk of loss.
  10. We know that the actual transaction was from an aggregate fund in which investments from multiple investors in what the investors thought were discreet accounts for each REMIC trust but where the Trust was ignored just as the requirements of state law or ignored by using nominees without disclosure of the principal on the note, mortgage or deed of trust.
  11. We know the losses on the bogus mortgage bonds were taken by the injured parties — the investors (pension funds) who put up the money.
  12. We know that the investment bank, aggregator and Master Servicer were in control of all transactions and that the subservicers were nominees for the Master Servicer whose name is kept out of litigation.
  13. We know the despite the loss hitting the investors because it was after all their money that funded this PONZI scheme, it was the banks who were allowed to take the insurance, proceeds of credit default swaps and federal bailouts leaving the investors twisting in the wind.
  14. We know that the investment bank, Master Servicer and aggregators were in privity, owed duties and were agents of the investors when they received the insurance and bailout money.
  15. We know that the banks kept the money from insurance and bailouts instead of paying the investors and reducing the balance due to the investors.

We know all these things, and much more, with whistle-blowers stepping up every day. The day of reckoning is coming and the announcement of BofA about another hidden earnings hit is only 2-3% of the actual number as shown on their own statements and probably more like 1/10 % of their real liability.

The term “Zombie” is being used to describe many features of our financial landscape. Truth be told it ought to be used to describe our entire financial system. If the actual corrections were made in accordance with existing law and existing equitable doctrines applied in hundreds of millions of other individual cases, we would be working on plans to wind down the mega banks, wind down household debt, falsified by the banks, and wind down the efforts to derail appropriate lawsuits by real injured parties.

The more you understand about what REALLY happened, the more you will see the opportunity for relief. I can report to you that I am receiving daily reports of multiple cases in which the borrower is winning motions. Even a year ago that was unthinkable.

The Judges are starting to catch on and some lawyers are realizing that this is just like any other case — their client is subject to enforcement of an alleged debt or foreclosure action and their answer is to deny the allegations, the documents and make them prove up their status as injured party on a perfected mortgage lien securing the promises on a valid note for a debt created by actual payment of the named party to the borrower.

The assumption by Judges and lawyers that there wouldn’t be a foreclosure if the facts didn’t support it is going down fast. Judges are realizing that title is being corrupted by bad presentations made by pro se litigants and many lawyers in which they admit the essential elements of the foreclosure and then try to get relief. Deny and Discover covers that. Deny anything you can deny as long as you have no reason to believe it to be true beyond a reasonable doubt. Let them, force them to prove their case. They can’t. If you press discovery you will be able to show that to be true.  File counter motions for summary judgment with your own affidavits and attack the affidavits of the other side in support of their motions.

More Whistleblower Leaks on Foreclosure Settlement Show Both Suppression of Evidence and Gross Incompetence

No wonder the Fed and the OCC snubbed a request by Darryl Issa and Elijah Cummings to review the foreclosure fraud settlement before it was finalized early last week. What had leaked out while the Potemkin borrower reviews were underway showed them to be a sham, as we detailed at length in an earlier post. But even so, what actually took place was even worse than hardened cynics had imagined.

We are going to be reporting on this story in detail, since we are conducting an in-depth investigation. But this initial report by Huffington Post gives a window on a good deal of the dubious practices that took place during the foreclosure reviews. I strongly suggest you read the piece in full; there is a lot of nasty stuff on view.

There are some issues that are highlighted in the piece, others that are implication that get somewhat lost in the considerable detail. The first, as stressed by Sheila Bair and other observers, is that the reviews were never designed to succeed. This is something we and others pointed out; this was all an exercise in show. The OCC had entered into these consent orders in the first place with the aim of derailing the 50 state attorney general settlement negotiations. This was all intended to be diversionary, but to make it look like it had some teeth, borrowers who were foreclosed on in 2009 and 2010 who thought they were harmed were allowed to request a review. If harm was found, they could get as much as $15,000 plus their home back if they had suffered a wrongful foreclosure, or if they home had already been sold, $125,000 plus any equity in the home. Needless to say, the forms were written at the second grade college level, making them hard to answer. A whistleblower for Wells Fargo reported that of 10,000 letters, harm was found in none because the responses were interpreted in such a way as to deny harm (for instance, if the borrower did not provide dates of certain incidents, those details were omitted from the assessment).

But the results were even worse than that, hard as it is to believe. For instance, even though the OCC stipulated that the banks hire supposedly independent reviewers, they were firmly in control of the process. From the article, describing the process at Bank of America, where a regulatory advisory firm Promontory was supposed to be in charge:

Bank of America contractors were reviewing Bank of America loans at a Bank of America facility under the management of full-time Bank of America employees. They were reporting those results to Promontory, the outside independent consultant, whose employees started their reviews based on what Bank of America contractors had concluded.

As the auditor, Promontory had authority to overrule any conclusion drawn by a Bank of America contractor. Promontory has defended its work as independent from influence by Bank of America. But the Bank of America contractors said it was clear to them that what they noted during their reviews was integral to the process. They continued to do substantive, evaluative review work until a few months ago, they said, when they were told that their job going forward was simply to dig up documents for Promontory.

Of course, Promontory protests that it was in charge. It is hard to take that seriously when no one from Promontory was on premises. And the proof is that the Bank of America staff suppressed the provision of information:

Another contract employee recounted the time he noted in a file that he couldn’t find vital documents, such as notice supposedly sent to a homeowner that a foreclosure was pending. “Change your answer,” he said he was told on several occasions by his manager.

Second is that the OCC was changing the goalposts as the reviews were underway. But was that due to OCC waffling or pushback by the consultants acting in the interest of the banks to derail the process by making the results inconsistent over time? If you do the first month of reviews under one set of rules and then get significant changes in month two, that implies you have to revise or redo the work in month one. That serves the consultants just fine, their bills explode. And the banks get to bitch that the reviews are costing too much, which gives them (and the OCC) a pretext for shutting them down, which is prefect, since they were all intended to be a PR rather than a substantive exercise from the outset.

Consider this section:

From the the consultants’ point of view, it was the government regulators who had some explaining to do. First there was the constant change in guidance, throughout at least the first eight months of the process, as to what they wanted the auditors to do and how they wanted them to do it, they said. The back-and-forth was so constant, one of the consultants involved with the process said that specific guidelines for determining if a mortgage borrower had been harmed by certain kinds of foreclosure fraud still weren’t in place as late as November 2012.

Huh? Tell me how hard it is to determine harm. If a borrower was charged fees not permitted by statue or the loan documents, there was harm. If the fees were in excess of costs (not permitted) there was harm. If the fees were applied in the wrong order, there was harm. If a borrower was put into a mod, made the payments as required in the mod agreement, but they weren’t applied properly and they were foreclosed on despite following bank instructions, there was harm. Honestly, there are relatively few cases where there is ambiguity unless you are actively trying to throw a wrench in the process, and it is not hard to surmise that is exactly what was happening. That is not to say there might not have been ambiguity on the OCC side, but it is not hard to surmise that this was contractor/bank looking to create outs, not any real underlying problem of understanding harm v. not harm.

It looks that some of the costly process changes were also due to the consultants being caught out as being in cahoots with their clients rather than operating independently:

The role of the Bank of America contract employees did not change to simply doing support work for Promontory until near the end of last year. That happened after ProPublica reported that Promontory’s employees were checking over Bank of America’s work, rather than conducting a fully independent review.

Finally, the article mentions (but does not dwell on) the fact that there was considerable evidence of borrower harm:

The reviewer said she found some kind of bogus fee in every file she looked at, ranging from a few dollars to a few thousand dollars. Another who looked for errors that violated state statutes estimated that 30 to 40 percent of loan files contained mistakes.

One reviewer who provided a comment that we elevated into a post was far more specific:

…in one case I reviewed the borrower paid approximately 25K to reinstate his mortgage. Then he began to make his mortgage payments as agreed. Each time he made a payment the payment was sent back stating he had to be current for the bank to accept a payment. He made three payments and each time the response was the same. Each time he wrote and called stating he had sent in the $25K to reinstate the loan and had the canceled check to prove it. After several months the bank realized that they had put the 25K in the wrong account. At that time that notified him that they were crediting his account, but because of the delay in receiving the reinstatement funds into the proper account he owed them more interest on the monies, late fees for the payments that had been returned and not credited and he was again in default for failing to continue making his payment. The bank foreclosed when he refused to pay additional interest and late fees for the banks error. I was told that I shouldn’t show that as harm because he did quit making his payments. I refused to do that.

There was another instance when there was no evidence that the bank had properly published the notice of sale in the newspaper as required by law. The argument the bank made when it was listed as harm to the borrower was “here is the foreclosure sale deed, obviously we followed proper procedure, and you should change your answer as to harm.”

Often there is no evidence of a borrower being sent a proper notice of intent to accelerate the mortgage. When these issues are noted in a file we are told to ignore them and transfer those files to a “special team” set up to handle that kind of situation. You choose whatever meaning you like for that scenario.

To add insult to injury, the settlement fiasco was shut down abruptly without the OCC and the Fed coming with a method for compensating borrowers. So the records have been left in chaos. That pretty much guarantees that any payments will be token amounts spread across large number of borrowers, which insures that borrowers that suffered serious damage, such as the case cited above, where the bank effectively extorted an extra $25,000 from a borrower before foreclosing on him, will get a token payment, at most $8,000 but more likely around $2,000. Oh, and you can be sure that the banks will want a release from private claims as a condition of accepting payment. $2,000 for a release of liability is a screaming deal, and it was almost certainly the main objective of this exercise from the outset. Nicely played indeed.

Read more at http://www.nakedcapitalism.com/2013/01/more-whistleblower-leaks-on-foreclosure-settlement-show-both-suppression-of-evidence-and-gross-incompetence.html#m7aM5FACevivJMRf.99

U.S. Attorney Continues to Prosecute Despite Settlements

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What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s Note: Preet Bharara, the U.S. Attorney for the Southern District of New York. He is unfazed by the tangle of “settlements” and will not let up on prosecuting Bank of America for fraud. He gets it and is methodically working his way through the maze set up by the mega banks.

BofA settled a civil claim that it had lied when they “sold” mortgages advertised as meeting government standards. We all know by now that the loans “lacked documentation and underwriting.” But what is still to come out is WHY they lacked documentation and WHY the loans lacked underwriting.

The documentation was absent simply to hide the fact that the bank was pretending to have ownership or an insurable interest in the loans and mortgage bonds. The true transaction was between the investor/lenders and the homeowner/borrowers. BofA stole or misused the identities of both the lender and the borrowers so that it could sell the loans many times under guise of exotic derivative instruments called mortgage backed bonds.

If fully documented, the lender would have shown up as the investors, which is as it should have been. BofA never put up a dime for the funding or acquisition of any of the loans. Its claim of ownership and an insurable interest was a blatant lie, inasmuch as they actually had no risk of loss, which is why there was no underwriting standards applied either.

I would suggest you track the pleadings of this U.S. Attorney and pick up some pointers along the way. He is definitely on the right track. As for now, the focus is on the bad mortgage bonds, bad loans, and lack of documentation up at the lender level.

Once that veil is penetrated it will be revealed that the borrower was defrauded using the same misdirected documentation using appraisal fraud as the principal leverage point.

But the real stuff is going to hit the fan as more and more people realize that this standard practice in the industry allegedly to “protect” the investors, invalidated the chain of title and there has been no effort to correct the problem. When it is revealed that the investors were cheated out of their money by a use of proceeds that crosses the borders of fraud, and that the terms of the bonds were never intended to be satisfied, just as the terms of the loan were never meant to be satisfied or secured, then we will have justice peeking its head out over the mess.

In the end, legally, there will be privity or a relationship only between the investor/lenders and the borrowers and that there transaction was supposed to be documented and recorded. Instead the banks documented and recorded a different transaction in which the intermediaries looked like the principals and were therefore able to do “proprietary trading” in which they took investor money from one pocket and put it into another.

That is what opened the door to huge “profits” (actually theft proceeds) on the way up and on the way down. These banks are now buying the same houses from themselves (using another affiliate entity) and then reporting the results to the investors so they can write off the loss. They are going to be the largest landowners in history as a result of this PONZI scheme.

The investors were duped into thinking that all the intermediary entities were being used to protect them from liability from claims of deceptive and predatory lending practices. In actuality the investors were already protected because their agents committed intentional acts of malfeasance and crimes that were specifically prohibited in the documents and other representations the investors received.

Just like the Too Big to Fail Myth, the investors are operating under the myth that if they assert themselves as lenders, they are going to get sued. That too is untrue. If they assert themselves as lenders, then they are going to show proof of payment, something the megabanks can’t do because they used investor money instead of their own.

If the investors assert themselves as lenders they will see that money is missing from the investment pools and that in fact the investment pools were never funded at all. They will realize that they have a legitimate claim for repayment of loans, and a legitimate claim for civil or criminal theft against the banks who intentionally diverted the documentation and the money from the investors and from the borrowers.

That will leave the investors and borrowers with (1) an obligation that is mostly undocumented and (2) unsecured. But the borrowers are more than happy to allow a mortgage if it reflects fair market value. This is what will give the investors far more than the current process in which the banks have a stranglehold on the mortgage modification process (for mortgages that are invalid from the start).

If you pierce through the veil of PR and utter nonsense flowing out of the banks and their planted articles in every periodical around the country, you will find your lender and you will find out the balance due because both of you (homeowner and investor) are going to want to know what happened to all the insurance money, credit default swaps and Federal bailouts that were promised, paid, but not delivered.

Because the mega banks were mere intermediaries pretending to be lenders the entire current scenario is going to turn upside down. Ultimately, the insurance, CDS and bailouts were in fact bailouts of the homeowners and investors. When they are applied correctly according to common sense and the contracts that were executed, practically none of the mortgages will have the balance demanded by the intermediary banks who claim but do not own the mortgages or rights to foreclose. Thus practically no foreclosure was correct by any standard, no credit bid was valid at auction, and no eviction was legal.

As these facts are revealed and accepted by a critical mass of people, the Too Big to Fail Myth will be put to the test. The nonexistent assets on their balance sheets will be reduced to zero. What will really happen is simply that the mega banks will collapse inward and the thousands of other banks that are unfairly under the thumb of the bank oligarchy will be able to pick up the pieces that are left and return to normal banking, with normal profits and normal bonuses.

Allowing the mega bank to retain the money they stole is like throwing a steak to a dog. Now that they have a taste of unlawful profits driving their profitability upward, they will only want more. Our job is to make sure they don’t get it. The Obama administration was surprised by the quick recovery by the banks. The truth, as it will be revealed in the coming months and years, is that there was no bank recovery because there were no bank losses. THAT is why the banks grew while the rest of the economy tanked.

Theoretically it is impossible for the bank profits to go up while the stock market and the economy is going down the drain. Their profits are supposed to come from being intermediaries in commerce, not principals.

Thus the higher the commercial activity, the better it is for the banks. But here, the relationship was twisted. The banks sucked the money out of the economy in “off balance sheet” transactions, secreted the money around the world, and are now able to report higher and higher profits every year simply because that is the way that they can repatriate their ill-gotten gains. By doing that they drive up the apparent value of their stocks and their stockholders are happy. What the stockholders do not realize is that this is a powder keg that will, at some point, implode. Yes, Warren Buffet is wrong.

See the story and Links Here

Despite a settlement with an alleged victim, U.S. District Attorney Preet Bharara will continue to prosecute Bank of America for selling allegedly fraudulent loans to Fannie Mae and other government-sponsored enterprises, his office told the Charlotte Business Journal.

Bharara, U.S. attorney in the Southern District of New York, charged BofA with fraud in a $1 billion federal lawsuit in October. He alleged in court documents that BofA had sold government agencies such as Fannie Mae billions of dollars in mortgages that were advertised as meeting government standards. However, the suit contends the loans actually lacked proper documentation and underwriting.

UTAH AG “Midnight Pardon”! Settles BofA Case and Joins Firm Representing BofA

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What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

In classic style, The revolving door between regulators, law enforcement and the Banks just keeps turning. The money is too good for the people to turn down, and it isn’t illegal to prosecute Bank of America, get into a winning position that will cost the Bank billions and give tens of thousands of homeowners relief they deserve, and then enter into a settlement agreement with BofA for pennies on the dollar and leaving homeowners in the dust. And it’s all because the Utah AG is stepping down from his official position and taking a position in a the private sector with a law firm that regularly represents Bank of America.

But maybe it it IS illegal if someone takes a closer look. If the new position is a bribe, the AG should be prosecuted criminally, removed from office now and disbarred.

“Just days before leaving office, Attorney General Mark Shurtleff has reversed the state’s position and personally signed on to a settlement in a foreclosure lawsuit that Bank of America appeared to be losing.

The practical effect of Shurtleff’s move, according to an attorney who filed the lawsuit, is to weaken Utah’s ability to enforce state law. It also weakens the state’s position in other lawsuits challenging foreclosures carried out by ReconTrust Co., Bank of America’s foreclosure arm, Abraham Bates said.”

“U.S. District Judge Bruce Jenkins, who presides over the case, issued a strong ruling in favor of the homeowners’ and the state’s position. The assistant attorneys general conducting the state’s case hoped to keep it alive for a final ruling by Jenkins before a likely appeal to the 10th Circuit Court of Appeals for a definitive decision that would guide other similar lawsuits.”

Midnight Pardon for Bank of America

Hat Tip to Home Equity Theft Reporter

 

Who’s on First?

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What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Editor’s comment: In a classic Abbott and Costello routine (look it up for those who are too young) the banks are playing “who’s on First” and winning because of the dizzying pace with which they move the goalpost.

I wrote the following comments (see below) on a case I was assisting in which Quicken Loans  purportedly originated the loan but immediately informed the borrower to start paying Countrywide. Countrywide in turn disappeared into what now appears as RED OAK MERGER CORP and the borrower was told to start making the payments to BAC. BAC claimed ownership of the loan until they didn’t at which point they admitted that the loan belonged to some REMIC trust. The REMIC trust turned out not to exist and was never funded.

Then Bank of America informed the borrower that it was BofA that owned the loan despite all evidence and admissions to the contrary. Then BAC disappeared and a little drilling gave up the name Red Oak Merger Corporation which was planned to be the entity that would take over Countrywide. But apparently, like the REMICS, it was set up but never used.

Now the borrower is seeking a short-sale. BofA has performed its usual circus of “errors”in which it loses or purges files for important sounding reasons but which have not one grain of truth. During this time the borrower has lost sales because BofA tried to pawn off the loan servicing to another entity which produced conflicting notices to the borrower that the loan had been transferred for servicing and that the loan had NOT been transferred for servicing.

The borrower has property that is easily salable. BofA came back with a counter-offer for the short-sale. The HUD counselor located in Phoenix and who is extremely savvy about these loans and the legalities of the false moves by the banks finally asked “Who’s on First” by asking who was making decisions and what guidelines they were using.

BofA responded that the trustee BNY Mellon was the only one with that information. So the HUD counselor asked the same questions to BNY Mellon as trustee or the supposedly fully funded trust that included the borrower’s loan. BNY Mellon responded with the same answer Reynaldo Reyes at Deutsch Bank did — we are the trustee in name only.  All decisions regarding short-sales, modification and foreclosure are made by “the servicer.” Of course they didn’t distinguish between the subservicer and the Master Servicer.

The question asked of me was whether this was meaningless double talk and my answer is that it is very meaningful doubletalk providing admissions that the real loan is undocumented, unsecured and leaves the investors (pension funds) holding the bag, while the investment banks were rolling in a redaction of 1/3 of the world’s wealth. Borrowers don’t matter because they are deadbeats anyway and don’t deserve discussion.

Here is my response to the information we had at hand:

How could it be the responsibility of the servicer unless it was the servicer that was acting not as a bookkeeping and collection agent but as the trustee for the investors? If BNY Mellon claims to be the trustee then by definition (look it up) they ARE the investors and they would be the only ones who had the power to make the decision. If they are saying (just like DeutschBank does) that the servicer  makes the decisions then they are saying that  they have delegated(?) the trustee function to the subservicer (usually just referred to as the “servicer”). So like Reynaldo Reyes at Deutsch bank admitted, he is not a trustee for anything and the whole thing is, as he put it, very “Counter-intuitive.”

None of this makes sense until you consider the possibility that nobody ever started a trust, a trust account or gave any powers to a trustee, established beneficiaries of the trust or funded the trust. It makes perfect sense if you consider the alternative: that the investment banks sold bogus mortgage bonds to investors pretending that REMIC trusts were funded and issued the bonds. Read carefully: they are attempting avoid criminal liability and civil liability for the insurance, Federal bailouts and hedge proceeds the banks received on behalf of the investors but which they never reported much less paid the investors. The amount is in the trillions.

By telling you that the trustee has no power they are telling you that the trustee is not a trustee. By telling you that the power to make decisions is in the hands of the servicer, the correct question is which servicer? — the subservicer who dealt only with the borrower or the Master Servicer that dealt with ALL transactions directly or indirectly on behalf of the investment bank that did the selling and underwriting of the bogus mortgage bonds? Assuming either one actually has that power, the next question is how the “servicer” was appointed the manager and why, since they already had a trustee? The answer is what they are avoiding, so far successfully, but which at the end of the day will come out:

NO REMIC trust was used and none of the parties with whom we are dealing ever spent one penny of their own money, capital or deposits (if they were a depository institution) on funding or buying a loan. The true money trail generally looks like this: Investor—> Investment banker- who sold the bonds–> aggregator or intermediary affiliate of investment banker—> closing agent —> payoff seller and prior mortgage (probably paying a non-creditor in exchange for a fabricated release of lien and satisfaction of note which is never given back to borrower marked “PAID).”

The important thing is not who is in the money trail but who is not in the money trail. If you track the wire transfer receipts and wire transfer instructions and are able to track any compensation after closing that was not disclosed but nonetheless paid to undisclosed parties you will NOT find the loan originator whose name, as nominee (but they never said so) was used as the lender and the possessor of the loan receivable.

That is, you won’t find the originator as a funding source but you will find the originator as a paid servicer for the undisclosed aggregator in an illegal and predatory pattern of table-funded loans. In Discovery: PRACTICE TIP: Demand copies of the bookkeeping records that shows that the originator booked the transaction with the borrower as a loan receivable.

You will find that most of the loans were not booked at all on the balance sheet of the originator which means that their own records contain an admission against interest, to wit: that they were not the lender because they did not add the loan receivable to their assets, nor a reserve for bad debt to their liabilities, because they had not funded the loan and were not exposed to any risk of loss. The originator, especially those originators without any financial charter as a depository institution, was merely a paid nominee to ACT as though it was the lender and take the blame if there were findings in court that the closing was illegal or irregular. But there again the originator has no risk because of the corporate veil which shields the operators of the nominee pretender lender leaving the borrower with an empty shell possibly declaring bankruptcy like First Magnus or Century.

The money came from the investors through the investment banker through the aggregator in which the investors’ money was used to create the appearance of an asset consisting of only part of the investor’s money and then sold back to the investor “pool” which turns out not to exist because it was neither funded nor were the conditions of the pool ever followed.  This sale was booked by the investment banker as a “trading profit.” In other words, they took the money of the investor into one pocket and while transferring it from pocket to pocket took out their trading profit on transactions that were a complete illusion.

The documents use the nominee originator (like Quicken Loans) for the note to create “evidence” of an obligation that does not exist because Quicken Loans and its aggregator never funded the loan or the purchase of the loan — but that didn’t stop them from selling the loan several times, insuring it for the benefit of the investment banker and aggregator, and getting paid Federal bailout money and proceeds from credit default swaps all without deducting the amount promised as repayment to the investor, which is why the investors are suing.

The investors are saying there was a false closing based upon no underwriting standards and a fake bond based upon the backing of a mortgage and note that didn’t exist or was never enforceable.

When you boil it all down there was nobody at closing on the lender side. The named payee was a nominee for an undisclosed party and the named secured party was the nominee of an undisclosed party and the consideration came neither from the nominee nor the undisclosed principal. This is what leaves investors holding the bag.

The foreclosures are a grand scheme of cover-up for what was a simple PONZI scheme whose survival depended not upon borrower payments on legitimate loans but rather on the sale of more bogus mortgage bonds. There were no funded REMIC trusts, there were no active trustees, and the job of managing the flood of money fell to the Master Servicer who instructed the subservicer and all other parties what to do with their new found wealth.

The investors are saying they are left with a pile of money owed to them, documented by fake bonds, and no documentation on what was actually done with their money.

That leaves them in a position where they can NEVER claim that the loan money they advanced (and which was commingled beyond recognition) was never secured with a perfected lien or mortgage. The foreclosures that have taken place are based upon an illusion of a transaction that was never consummated — namely that the named payee on the note would loan the borrower money. They didn’t loan the money so the transaction lacks consideration.

Lacking consideration they have nonetheless fabricated, used, executed and recorded papers procured under false pretenses and they are taking the position in court that the borrower may not inquire as to the internal workings of the scheme that defrauded him  and which the investors  (Pension funds) corroborated with their lawsuits.

If you went to the originator and asked to payoff or rescind they would have had to go to the investment banker or aggregator to find out what to do instead of simply following the federal statute (TILA) and returning the documents in exchange for the money. By contract the originator agrees and the wire transfer instructions the originator agrees, just like MERS, to not take, claim or keep any money from the transaction.

PRACTICE TIP: Getting the cancelled check of the borrower to see who cashed the check in which account owned by which party might be helpful in determining the truth about the so-called closing. A good question to ask in discovery is how the”servicer” accounted for each payment it received or disbursed and what notes or notations were used. Then the next question to the subservicer, Master Servicer and investment banker is to whom did you disburse money and why?

Notice of Violation Under California Bill of Rights

“If we accept the Bank’s argument, then we are creating new law. Under the new law a borrower would owe money to a non-creditor simply because the non-creditor procured the borrower’s signature by false pretenses. The actual lender would be unable to retrieve money paid to the fake lender and the borrower would receive credit for neither his own payments nor any payment by a third party on the borrower’s behalf.” Neil F Garfield, livinglies.me

CHECK OUT OUR DECEMBER SPECIAL!

What’s the Next Step? Consult with Neil Garfield

For assistance with presenting a case for wrongful foreclosure, please call 520-405-1688, customer service, who will put you in touch with an attorney in the states of Florida, California, Ohio, and Nevada. (NOTE: Chapter 11 may be easier than you think).

Barry Fagan submitted the Notice below.

Editor’s Notes: Fagan’s Notice gives a good summary of the applicable provisions of the Bill of Rights recently passed by California. The only thing I would add to the demands is a copy of all wire transfer receipts, wire transfer instructions or other indicia of funding or buying the loans. everything I am getting indicates that in most cases they can’t come up with it.

If you went into Chase and applied for a loan and they approved your application but didn’t fund it, you wouldn’t expect Chase to be able to sue you or start foreclosure proceedings for a loan they never funded. It’s called lack of consideration.

If you actually got the loan from BofA but they forgot to have you sign papers, you would still owe the money to them but it wouldn’t be secured because there was no mortgage lien recorded in their name. And BofA would have a thing or two to say to Chase about who is the real creditor — either the one or advanced the money or the one who got documents fraudulently or wrongfully obtained.

So then comes the question of whether Chase could assign their note and lien rights to BofA. If TILA disclosures had been made showing the relationship between the two banks, it might be possible to do so. But in these closings, the actual identity of the creditor (source of funds) was actively hidden from the borrower.

Thus we have a simple proposition to be decided in the appellate and trial courts: can a party who obtains signed loan documentation including a note and mortgage perfect the lien they recorded in the absence of any consideration. The floodgates for fraud would open wide if the answer were yes.

If the answer is NO, then the origination documents and all assignments, indorsements, transfers and allonges emanating from the original transaction without consideration are void. AND if each assignment or transfer recites that it is for value received, and they too had no money exchange hands thus producing lack of consideration, then they cannot even begin to assert themselves as a BFP (Bona Fide Purchaser for value without notice). The part about “without notice” is going to be difficult to sustain in proof since this was a pattern of table funded loans deemed “predatory per se” by Reg Z.

The reason they diverted the document ownership away from the creditor who actually advanced the money was to create the appearance of third party ownership (and transfers, which was why MERS was created) in the documentary chain arising out of the original of the non-existent loan (i.e., no money exchanged hands pursuant to the recitals on the note and mortgage as between the payor and payee). They needed the appearance of ownership was to create the appearance of an ownership and insurable interest.

Thus even though the money did not come from the originator, the aggregator or even the Master Servicer or Trustee of the pool, affiliates of the investment bank who underwrote and sold bogus mortgage bonds, were able (as “owners”) to purchase insurance, credit default swaps, and receive bailouts because they could “document” that they had lost money even though the reality was that the the third party source of funding, and the real creditors were actual parties suffering the loss.

Had those windfall distributions been applied to balances due to the owners of the mortgage bonds, the balance due from the bond would have been correspondingly reduced. AND if the balance due to the creditor had been reduced or paid in full, then the homeowner/borrower’s obligation to that creditor would have been extinguished entitling the homeowner to receipt of a note paid in full and a release of the mortgage lien (or at least cooperation in nullification of the imperfect mortgage lien).

PRACTICE TIP: Don’t just go after the documents that talk about the transaction by which they claim a liability exists from the borrower to one or more pretender lenders. Push for proof of payment in discovery and don’t be afraid to deny the debt, the note or the mortgage.

In oral argument before the Judge, when he or she asks whether you are contesting the note and mortgage, the answer is yes. When asked whether you are contesting the liability, the answer is yes – and resist the temptation to say why. The less said the better. This is why it is better preempt the pretender lenders with your own suit — because all allegations in the complaint must be taken as true for purposes of a motion to dismiss.

Don’t get trapped into disclosing your evidence in a motion to dismiss. If it is set for a motion to dismiss the sole question before the court is whether your lawsuit contains a short plain statement of ultimate facts upon which relief could be granted and all allegations you make must be assumed to be true. When opposing counsel starts to offer facts, you should object reminding the Judge that this is a motion to dismiss, it is not a motion for summary judgment and there are no facts in the record to corroborate the proffer by opposing counsel.

From Barry Fagan:

Re:  Notice of “Material Violations” under California’s Newly Enacted Homeowners Bill of Rights pursuant to California Civil Code sections, 2923.55, 2924.12, and 2924.17.
See attached and below

Reference is made to Wells Fargo’s (“Defendant”) December 13, 2012 response to Barry Fagan’s (“Plaintiff”) October 25, 2012 request for copies of the following:

(i)           A copy of the borrower’s promissory note or other evidence of indebtedness.

(ii)         A copy of the borrower’s deed of trust or mortgage.

(iii)       A copy of any assignment, if applicable, of the borrower’s mortgage or deed of trust required to demonstrate the right of the mortgage servicer to foreclose.

(iv)        A copy of the borrower’s payment history since the borrower was last less than 60 days past due.

Please be advised that I find Defendant’s response to be woefully defective. This letter is being sent pursuant to my statutory obligation to “meet and confer” with you concerning the defects before bringing an action to enjoin any future foreclosure pursuant to Civil Code § 2924.12.

Defendant’s are in violation of both the notice and standing requirements of California law, and the California newly enacted Homeowner Bill of Rights (“HBR”). In July 2012, California enacted the Homeowner Bill of Rights (“HBR”). Among other things, the HBR authorizes private civil suits to enjoin foreclosure by entities that record or file notices of default or other documentsfalsely claiming the right to foreclose. Civil Code § 2923.55 requires a servicer to provide borrowers with their note and certain other documents, if the borrowers request them.

Civil Code § 2924.17 requires any notice of default, notice of sale, assignment of deed of trust, or substitution of trustee recorded on behalf of a servicer in connection with a foreclosure, or any declaration or affidavit filed in any court regarding a foreclosure, to be “accurate and complete and supported by competent and reliable evidence.” It further requires the servicer to ensure it has reviewed competent and reliable evidence to substantiate the borrower’s default and the right to foreclose.

Civil Code § 2924.12 authorizes actions to enjoin foreclosures, or for damages after foreclosure, for breaches of §§ 2923.55 or 2924.17. This right of private action is “in addition to and independent of any other rights, remedies, or procedures under any other law.  Nothing in this section shall be construed to alter, limit, or negate any other rights, remedies, or procedures provided by law.” Civil Code § 2924.12(h). Any Notice of Default, or Substitution of Trustee recorded on Plaintiffs’ real property based upon a fraudulent and forged Deed of Trust shall be considered a “Material Violation”, thus triggering the injunctive relief provisions of Civil Code § 2924.12 & § 2924.17(a) (b).

I therefore demand that Wells Fargo Bank, N.A. provide Barry Fagan with the UNALTERED original Deed of Trust along with the ORIGINAL Note, as the ones provided by Kutak Rock LLP on October 13, 2011 to Ronsin Copy Service were both photo-shopped and fraudulent fabrications of the original documents, thus not the originals as ordered to be produced by Judge Tarle under LASC case number SC112044. Attached hereto and made a part hereof is the October 13, 2011 Ronsin Copy Service Declaration with copies of the altered and photo-shopped Note and Deed of Trust concerning real property located at Roca Chica Dr. Malibu, CA 90265.

Judge Karlan under LASC case number SC117023 “DENIED” Wells Fargo’s Request for Judicial Notice of the very same Deed of Trust, Notice of Default, Substitution of Trustee and the Notice of Rescission concerning real property located at Roca Chica Dr. Malibu, CA 90265.
Attached hereto and made a part hereof is the relevant excerpt of Judge Karlan’s October 23, 2012 Court Order along with a copy of Wells Fargo’s Request for Judicial Notice of those very same documents. Court Order: REQUEST FOR JUDICIAL NOTICE “DEFENDANT’S REQUEST FOR JUDICIAL NOTICE IS DENIED AS TO EXHIBITS A, B, C, D, K, L, & M.” 

As a result of the above stated facts, please be advised that the fraudulently altered deed of trust and photo-shopped Note that you claim to have been previously provided to Barry Fagan shall not be considered in compliance with section 2923.55 and therefore Wells Fargo Bank, N.A. has committed a “Material Violation” under California’s Newly Enacted Homeowners Bill of Rights pursuant to Civil Code sections, 2923.55, 2924.12, and 2924.17 (a) (b).

Please govern yourselves accordingly.

Regards,

/s/Barry Fagan

Barry S. Fagan Esq.

Thank you.

Barry S. Fagan Esq.
PO Box 1213, Malibu, CA 90265-1213
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BOA Facing Fraud Suit from FHFA

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BOA lost in a bid to dismiss a lawsuit based upon the lies it told the Fannie and Freddie about the loans it was seeking guarantees for sale into the secondary securitization market. This follows closely my prior post about why the obligations, notes and mortgages should all be considered a nullity — worthless.

Unfortunately, Judge Cote said that the FHFA (Federal Housing Finance Agency) failed to state a strong enough case about loan to value ratios. Perhaps the agency will take another crack at that because appraisal fraud was an essential ingredient in this PONZI scheme.

If you read the complaint, it will give you a few ideas on how to frame your own complaints. Obviously it would be wise to beef up the allegations regarding loan to value ratios and the relationship of those to appraisal fraud. FHFA_v_BoA_Other

Bank of Arrogance Claims Insurer Knew What It Was Getting Into

WHERE ARE THE TRIALS?

Editor’s Analysis: There are only two choices here: either the insurer knew that the loans were bad or was misled into thinking the loans were good. Or to be more specific, it knew that the mortgage BONDS were bad or it was misled into thinking the BONDS were as GOOD as represented.

It’s not hard to envision a grand conspiracy in which the insurers were paid extra money to issue contracts on pools knowing full well they might fail and that the government would bail them out.

That actually might be the case, but either way they paid and that means the principal and interest due back to the investors should be reduced. If the principal and interest due to the creditor is reduced it is simple logic that the principal and interest due from the debtor would be correspondingly reduced. The creditor is only entitled to repayment, not multiple payments.

Multiple payments would lead to the conclusion that there was an overpayment and they owe the money back to the homeowner; like it or not, if the homeowner’s aunt made the payment there would be no question that the creditor could not still make the claim. It should not be any different if the Aunt turns out to be an insurance company.

But it seems more likely that the convoluted style with which the securitization scheme was drafted and pitched to investors, rating agencies and insurers, as well as Fannie and Freddie pretty much leads to the conclusion that the banks were at least probably consistent: they lied.

BofA attorneys are getting creative and blaming the victims starting with the homeowner right up to the insurance company. Soon they will blame the regulatory agencies and then the government itself for forcing them to underwrite bad loans, divert the paperwork from the REMIC, cheat the investor out of an enforceable loan and then steal the money too. That is in fact more or less the claim when blame is laid at the doorstep of Fannie and Freddie. And there is more truth to that since the executives at the GSE’s were in bed with Wall Street.

Still I find it more likely that Fannie and Freddie did not know how bad this situation was, that the ratings were a complete farce and the insurance was issued under false pretenses.

If the mortgages were really valid liens, if the notes were really valid evidence of the obligation and matched up with the creditor’s expectation of repayment, if the mortgage bonds were real, if the REMICs were actually funded, then there would have been a few actual trials instead of settlements. What bank would settle such cases if it had done everything right? Where are the trials?

The entire foreclosure controversy would be over if there were real trials with real evidence and real witnesses with real personal knowledge providing the foundation for real documents with proof of payment and the current status of the loan.

10-20 such trials would have ended the controversy —– the banks would be right and the borrowers all deadbeats. Instead, when trial approaches the banks all settle every case.

Why would they do that unless they were afraid of losing a very simple case where the facts were not in doubt? The answer is simple: the lawyers won’t go so far as to go to trial because they won’t  subject themselves to discipline and criminal charges for fraud, forgery, and perjury.

 

Lawyers for Bank of America ($9.32 0.11%) claim insurer MBIA knew what it was getting when it agreed to insure mortgage bonds containing subprime loans originated by Countrywide.

The whole concept behind MBIA’s major suit against Countrywide and BofA, which acquired Countrywide in 2008, is that the lender was fraudulent in representing the quality of loans that the insurer ended up facing losses on by agreeing to insure the mortgages in case of default.

In a motion for the court to rule in favor of Countrywide, BofA alleges that MBIA once had a practice of performing due diligence on mortgage loans, but failed to do so in this case.

“[D]espite its own past practices, and the well-known risks associated with the underlying loans, MBIA made a business decision to stop conducting any loan-level due diligence prior to insuring the securitizations,” Countrywide (BofA) said in its motion.

BofA also claims that MBIA never took note of input from third-party due diligence providers.

MBIA, on the other hand, asked the court for summary judgment in its favor and says the test of whether BofA has to repurchase Countrywide loans is based on whether it can be proven “there was a material and adverse impact on MBIA’s interests.”

MBIA says this should be the standard used whether or not the loans actually defaulted or became delinquent.

“Defendant Countrywide Home Loans breached representations and warranties with respect to at least 56% of the loans in the 15 securitizations of residential mortgages at issue in this action and that such breaches had a material and adverse impact on MBIA’s interests in the affected mortgage loans,” MBIA said in its own motion with the court.

In both motions, the parties are asking the court to rule in their favor on fraud claims, breach of contract and indemnification claims originally filed against Countrywide by MBIA.

kpanchuk@housingwire.com

BOA Preparing For Something? 150,000 second liens are released.

150,000 people are receiving letters now telling them that their second tier mortgages are “eliminated.” Whether BOA has the authority to do this depends upon whether they are the creditor in those loans. They may be the creditor in some of them but I suspect that the loans cannot be proven in any chain of title, chain of documents or chain of money transfers.

It eliminates, the possibility that the second tier mortgage holder could move into first position — if this is really effective — in the event that the first tier mortgage is shown to have been defective —- i.e., that the mortgage lien was never perfected. It also clears the way for short-sales that might leave the short-seller handing with one lender saying yes and the other saying no.

The announcement says that the entire unpaid principal balance will be eliminated from their BofA owned OR SERVICED second tier mortgage. It is a strange announcement. If they are only the servicer, and they do not reference getting authority from the creditor, there is the probability that this is an admission that at least the second tier mortgages were somehow satisfied through other means — insurance, credit default swaps or federal bailouts.

The second strange thing is the statement from BofA that if the first mortgage is in foreclosure, then the foreclosure activities MAY continue. This should put all 150,000 homeowners on notice that BofA has some doubts about whether they can prove up a foreclosure using any means or the names of any parties.

We already know that there are tens of thousands of mortgages, notes and obligations that the megabanks cannot track. They have no idea who owns the loans. This is one of the steps taken to try to clean up the mess and stay ahead of regulators who might force a write-down of all mortgage related “assets” on their balance sheet.

And the third thing about this is the argument that only “deserving” homeowners should be getting relief. The preliminary estimate is that this amounts to more than $4.5 billion in mortgages being extinguished. This attempt to potentially ward off a tidal wave of strategic defaults may work in part, but it puts the homeowners on notice that the bank doubts that they can hold into the obligation given the facts that are now in the public domain. Strategic defaulters might just turn into strategic fighters smelling blood. And maybe lawyers will finally get the notion that these cases are winnable if presented correctly and by strictly adhering to the rules of evidence.

Bank of America to Extinguish up to 150,000 Second Liens,” HousingWire (Oct. 1, 2012)

Illinois case demonstrates failure to follow the money trail.

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Editor’s Notes and Analysis:  

This is the type of decision that can be expected almost every time when the homeowner or counsel focuses on the documentation rather than the money.  By not alleging the absence of a transaction with the foreclosing party and the absence of a transaction with any predecessor to the foreclosing party, the property owner essentially conceded its case before it began.

I agree that the Bassman case represents a problem, but only in the same sense as all other negative cases present problems, to wit: bad law arises out of bad lawyering.

Lawyers tend to skip through a decision until there is a discussion of the law.  They should be reading the facts.  This court assumed the existence of the subject mortgages and assumed the existence of a default.  in its discussion regarding choice of laws between one state and another, it assumed from the record that an obligation or debt existed.  Litigants are just not getting the message–the courts are not going to provide any substantial relief to borrowers on the grounds that there are defects in the documents upon which the fore closer relies.  Most judges and most appellate courts essentially subscribe to the view that the only way to discharge a debt or attack it in bankruptcy is by a) alleging facts supporting an allegation that the mortgage lien was never perfected and that therefore the obligation is unsecured–an argument which is unlikely to be accepted without the second part which is b) the borrower denies any financial transaction with the forecloser and further denies any default, debt, obligation, lien or any other right to enforce an obligation that does not exist.  This usually should be accompanied by some statement that the borrower denies the signature on the note, mortgage or other “closing documents” unless it was procured by deceit and trickery in which the borrower was unaware of the true facts of the transaction.

Borrower’s counsel must take control of the narrative with objections even to preliminary argument.  And the question which frequently comes form the judge as to whether or not counsel or the borrower will concede that the borrower accepted the benefits of a loan should be met with an answer sounding something like this: “The borrower has had many loans in the course of his or her life, but has never entered into a transaction nor accepted any funds from the party seeking to collect on a nonexistent debt.  The borrower denies accepting any money from the named originator of the loan.  Further borrower denies that any intervening assignments were supported by either facts or payment.”

The lawyers in the Bassman case got stuck in the rabbit hole of standing and other technical issues while the real rabbit scampered away.  Unless the forecloser can plead and prove the elements required as the foundation for the documents upon which they rely, which means proving that the financial transaction recited in those documents actually took place, they are precluded from proceeding any further.  As an alternative, even the most doubtful judge could be persuaded to allow discovery to proceed and for the borrower to survive preliminary motions based solely on the denial of the debt, denial of the default, and denial of the foreclosers right to collect or enforce through foreclosure.

Bassman-ILL APP Bof A vs Bassman

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DELAY Is the Name of the Game

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Editor’s Notes:  

It comes as no surprise that BofA, now the unproud owner of Countrywide, would repeatedly appeal a judgment in which a moral man tried to avoid moral hazard at Countrywide and was fired for it. Corporations do that all the time to gain the advantage of achieving a smaller settlement or to dissuade others from doing the same thing. I feel appalled that this guy in Gretchen’s story is still waiting for his compensation and that if BofA has its way, he will be deprived of it altogether. BofA of coruse says that when they acquired CW there just wasn’t a job left for him. Bullcrap:

“But a juror in the case rejected this argument. “There was no doubt in my mind that the guys at Countrywide had not only done something wrong legally and ethically, but they weren’t very bright about it,” said that juror, Sam Usher, a former human resources executive at General Motors who spoke recently about the officials who testified. “If somebody in an organization is a whistle-blower, then you not only treat him with respect, you also make sure that whatever he was concerned about gets taken care of. These folks went in the other direction.” (e.s., see full article below and link).

“These folks went in the other direction” is an understatement. And while most of the media is stepping back from foreclosure stories except for reporting the numbers, this story brings back the raw, mean, lawless intent of Countrywide and other leaders of the securitization scam. Let me first remind you that for the most part, the “securitization” never occurred. Any loan declared to be part of a pool that was “securitized” or otherwise transferred into the pool is a damn lie. Very few people understand how that even COULD be true, much less believe that it is an accurate statement. But it is true. There was no securitization in most cases.

If a loan was securitized it would have been underwritten by a bona fide lender and then sold to an aggregator, and from there sold to a REMIC “trust” or special purpose vehicle. Certificates of ownership of the loan together with a promise to pay the owner of the loan a sum of money with interest would have been issued to qualified investors like pension funds and other institutional investors upon which our society depends for social services and a safety net (which in the case of pension funds is largely funded by the workers themselves). Of course the investors would have paid the investment banker for those loans including a small fee for brokering the transaction. And everyone lives happily ever after because Tinker Bell certified the transactions.

So if the loan was securitized, then both the document trail and the money trail would show that the loan was properly owned and funded by the “lender,”, the lender assigned the loan in exchange for payment from the aggregator and the aggregator assigned the loan in exchange for payment into the pool (REMIC, trust, or whatever you want to call it). The problem for the banks is that none of that happened in most cases. And their solution to that problem, instead of acting like trustworthy banks, is to delay and fabricate and forge and intimidate. (PRACTICE NOTE: THESE ARE THE DOCUMENTS AND PROOF OF PAYMENT YOU WANT IN DISCOVERY)

The real story is that the loan was not underwritten by a bona fide lender whose role involved any risk of loss on the loan. In fact, in most cases there was no financial transaction between the lender named on the note and mortgage and the borrower. The financial transaction actually occurred between the borrower and an undifferentiated commingled group of investors who THOUGHT they were buying into REMICs but whose money was used for anything BUT the REMICs. Their money was in an account far from the securitization chain described above controlled by an investment bank who was taking “trading profits” and fees out of the money as though it was their own private piggy bank.

The “assignment” (sometimes erroneously referred to as an allonge or endorsement) was offered and accepted between the named lender (who was not the real lender) and the mortgage aggregator WITHOUT PAYMENT. The assignment says “for value received” but the value was received by the borrower and the investment bank and so there was no payment by the aggregator for an assignment from a “lender” that wasn’t the lender anyway and who never had one penny in the deal, nor any legal right to declare that they were the owner of the loan.

The “aggregator” was a fictitious entity meant to deceive any inquiring eyes. My eyes were inquiring and for a long while I believed in the existence of the aggregator — but then I was late on getting the real scoop on Santa and tooth fairy too. But it misdirects the attention of the audience like any illusionist. Meanwhile various “affiliates of the investment bank are busy creating “exotic instruments” that make believe that the bank owns the loan and thus has the power to sell it, when in fact we all know that the investors own the note but even they don’t quite understand how they own the note — a fact complicated by the fact that the “aggregator” was a fiction and the money came from a Superfund escrow account in which ALL the money from ALL the investors was commingled and the moment of funding of each loan was a different moment in the SuperFund account because money was coming and going and so were investors. This is what enabled the banks to (a) sell something they didn’t own (they called it selling forward, but it wasn’t selling forward, it was fraud) (b) sell it over and over again, by calling the “exotic instrument” something else, changing a few pieces of information about the loan data and presto!, Bear Stearns had “leveraged” the loan 42 times.

Translation: They sold something they didn’t have 42 times. And the risk of loss was that if someone in the chain of sales ever demanded delivery, they needed to go out and buy the loans which they figured was a sure thing because in all probability the loans were not worth the paper they were written on and in the open market, they could be purchased for pennies while Bear Stearns et al was selling the loans 42 times over at 100 cents on the dollar.

The last “assignment” for “value received” into the “pool” also had similar problems. First, the aggregator was a fictitious entity, second there was no value paid, and third they had already sold the loan 42 times. Add to that the assignment simply never took place to either the aggregator or the pool unless there was litigation and you have a real mess on your hands, which is where distraction and delay and illusion and raw intimidation come into play — all present in the case of one Michael Winston, a former executive at Countrywide Financial.

The repeated sales of the loans, the repeated collection of insurance for losses that never occurred, and repeated collection of proceeds of credit default swaps (a/k/a sales with a different name) means quite simply that the loan was paid in full from the start and that there is no balance due and probably never was any balance due and even if there was a balance due it was never due to the people who are now foreclosing. So why are they foreclosing? Because if they get to complete a foreclosure it completes the illusion that the investors were owed the money from the borrower instead of the bank that stole their money in the first place. So they pursue foreclosures while their PR machines grind out the illusion of modifications and mediation and short-sales. Nobody is getting good title or a title policy worth the paper it is written upon, but who cares?

He Felled a Giant, but He Can’t Collect

By GRETCHEN MORGENSON

“TAKING on corporate Goliaths for their wrongdoing should not be so daunting.”

That’s the view of Michael Winston, a former executive at Countrywide Financial, the subprime lending machine that was swallowed up by Bank of America in 2008. Mr. Winston won a wrongful-dismissal and retaliation case against the company in February 2011, but is still waiting to receive his $3.8 million award. Bank of America is fighting back and has appealed the jury verdict twice.

After hearing a month of testimony from a parade of top Countrywide officials, including the company’s founder, Angelo Mozilo, a California state jury sided with Mr. Winston. An executive with decades of expertise in management strategy, he contended that he was pushed out for, among other things, refusing to follow questionable orders from his superiors.

But for the last year and a quarter, Mr. Winston, 61, has been in legal limbo. Bank of America lost one appeal in the court that heard the case and has filed another that is pending in state appellate court.

Mr. Winston, meanwhile, has been unable to find work that is commensurate with his experience. “The devastation caused by Countrywide to me, my family, my team, the work force, customers, shareholders, taxpayers and citizens around the world is incalculable,” he said.

Before joining Countrywide, Mr. Winston held high-powered strategy posts at Motorola, McDonnell Douglas and Lockheed. He was global head of worldwide leadership and organizational strategy at Merrill Lynch in New York but resigned from that post in 2003 to care for his parents, who were terminally ill.

At Countrywide, he said, one of his problems was his refusal in fall 2006 to misrepresent the company’s corporate governance practices to analysts at Moody’s Investors Service. The ratings agency had expressed concerns about succession planning at Countrywide and other governance issues that the company hoped to allay.

Mr. Winston says a Countrywide executive asked him to write a report outlining Countrywide’s extensive succession planning for use by Moody’s. He refused, noting that he had no knowledge of any such plan. The company began to diminish his duties and department shortly thereafter. He was dismissed after Bank of America took over Countrywide.

Of course, it is not unusual for big corporate defendants to appeal jury awards. Bank of America argues in its court filings that the jury erred because Mr. Winston’s battles with his Countrywide superiors had nothing to do with his dismissal. Bank officials testified that he was let go because there was no job for him at the acquiring company.

“We believe that the jury’s finding of liability on the single claim of wrongful termination in retaliation is not supported by any evidence, let alone ‘substantial evidence’ as is required by law,” a Bank of America spokesman said.

In court filings, the bank also said that the jury appeared to be “swayed by emotion and prejudice, focusing on unsubstantiated and unsupported statements by plaintiff and his counsel slandering Countrywide and its executives.”

But a juror in the case rejected this argument. “There was no doubt in my mind that the guys at Countrywide had not only done something wrong legally and ethically, but they weren’t very bright about it,” said that juror, Sam Usher, a former human resources executive at General Motors who spoke recently about the officials who testified. “If somebody in an organization is a whistle-blower, then you not only treat him with respect, you also make sure that whatever he was concerned about gets taken care of. These folks went in the other direction.”

The credibility of all testimony in the case was central to jurors’ deliberations, Mr. Usher said. Instructions to the jury went into great detail on this point, advising them that they were “the sole and exclusive judges of the believability of the witnesses and the weight to be given the testimony of each witness.” The instructions added: “A witness, who is willfully false in one material part of his or her testimony, is to be distrusted in others.”

Mr. Usher said that those who testified against Mr. Winston “didn’t have a lot of credibility.”

That’s putting it mildly, said Charles T. Mathews, a former prosecutor in the Los Angeles County district attorney’s office who represented Mr. Winston. He said he was so disturbed by what he characterized as persistent perjury by various Countrywide officials that he forwarded annotated copies of court transcripts to Steve Cooley, the Los Angeles district attorney, for possible investigation.

“We won a multimillion-dollar verdict against Countrywide, but it sticks in my guts that they lied through their teeth and continue to escape accountability,” Mr. Mathews wrote to Mr. Cooley, urging him to investigate.

Whether perjury or not, the testimony ran into withering challenges.

Countrywide’s top human resources executive testified that Mr. Winston was a problematic employee and not a team player. But a performance evaluation she had written shortly before the company started to reduce his duties was produced in the case. It said Mr. Winston had “done well to build relationships with key members of senior management and continues to do so.”

The evaluation went on: “Michael strives to be a team player,” and “is absolutely focused on process improvement in his areas and has been working tirelessly to do so since he’s been on board.”

Mr. Mathews also contends that Mr. Mozilo, in a rare courtroom appearance, misrepresented his views of Mr. Winston. First, Mr. Mozilo testified that he did not know Mr. Winston, even though testimony and documents showed that he had attended presentations with him, personally given Mr. Winston a pair of Countrywide cuff links and told another employee that Mr. Winston’s leadership programs were “exactly what Countrywide needs.”

Mr. Mozilo’s testimony that he was unimpressed with Mr. Winston and his work was also refuted by another Countrywide executive who said that Mr. Mozilo was enthusiastic enough about Mr. Winston’s programs to suggest that he present them to the company’s board.

Asked about Mr. Mozilo’s testimony, David Siegel, a lawyer who represents him, said in an e-mail that there was no merit to the accusation that Mr. Mozilo was not truthful.

A spokeswoman for Mr. Cooley’s office confirmed last week that it had received the court transcripts and said that one of its prosecutors was reviewing them. She declined to comment further.

“God forbid our system continues to ignore these people and their acts,” Mr. Mathews said in an interview last week. “I am optimistic but the price of justice can be different depending on what your wallet says.”


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Arizona Foreclosure Mediation Considered

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Editor’s Notes:  

Mediation dropped Nevada foreclosures to much lower levels. That was especially true when the lawmakers put in provisions that made clear that this wasn’t a game. In order to foreclose you had to mediate first. And in order to mediate you had to have a decision maker present. AND if you are saying that the party showing up is a decision maker, you better have proof — which just another way of saying “standing.”

In the article below, it is clear that progress is slow but the proponents of mediation in Arizona are moving forward with a small pilot. Mediation is, after all, what nearly all the distressed homeowners want — a fair chance after some correction for the excesses of inflated appriasals and unaffordable loans foisted on the American public. Most homeowners are actually willing to accept mortgages where the principal due is still higher than the value of the property just so they can stay in the property. It is an unprecedented opportunity for the lender to get out of the mess they are finding themselves with all their REO proeprty subject to title challenges.

But the REAL problem is that strangers to the loan transaction are going to lose money unless the foreclosure goes through. So they are posing as lenders (pretender lenders) and pushing hard on fraudulent foreclosures because that results in a judicial or legal event in which the property was deemed to be in the REMIC pool (even if it wasn’t) and the loss falls on the investors instead of these strangers. These strangers are well known to us — BofA, Citi, JPM, Wells Fargo etc. They are fighting mediation because it threatens to expose the farce — that none of the foreclosures before were real and that the current ones are no more valid, legal or just than the old ones.

Homeowners simply do not owe money to these people posing as foreclosers, and they never did. There is no basis for foreclosure because the money came from investor lenders with whom the borrower never had the opportunity to make a deal because the real facts were withheld from both the investor lenders and the homeowner borrowers. That leaves the banks holding the bag, legally, if the law is applied and that is exactly what should happen. The obligations arising from the funding by pension funds should be settled through mediation and modification. Foreclosures would and should end, and our national nightmare would be over.

Hat tip to DR Blog

Arizona Foreclosure Mediation – Part 1

Last week at the Arizona Bar meeting my colleague Timothy Burr  presented a progress report for the Foreclosure Mediation Unit of ASU’s Lodestar Dispute Resolution Program. The program was well attended and has generated some buzz in the legal community. In some sense this was the FMU’s coming out party as we’ve been keeping a low profile because we’re in its pilot program phase. In my mind there’s nothing worse than rolling out a new program and touting it as a big deal before actually doing anything and then watching it die a humiliatingly public death.

Before talking about the program, a little background. Arizona is a state where almost every foreclosure is a non-judicial foreclosure, although judicial foreclosure is an option it is very rarely used. Non-judicial foreclosures tend to be short and sweet (or bittersweet as the case may be) because they are purely contractual as noted in the deed to the property.  Here’s a link to the best online primer on trustee’s sales I’ve found, and here’s the shorthand version. If you fall behind in your payments and the creditor decides to go forward with a trustee’s sale, a notice is placed on the house’s door announcing a trustee’s sale will occur 90 days from the posting, and the sale occurs on that day unless there’s a serious problem (like fraud or other similarly egregious claims brought in court) or there’s a last minute agreement between the creditor and debtor(s).

In 2009 I worked with others to create an Arizona Foreclosure Mediation Task force, and after several meetings it was clear that we didn’t have the clout to get anything off the ground so we disbanded. However, in late 2010/early 2011 the state was part of a nationwide settlemen with some of the big banks related to mortgage issues, and the Attorney General’s Office set aside part of those settlement monies for grants to assist with the state’s mortgage crisis.  Through this granting source the law school was able to obtain the funds to get foreclosure mediation off the ground. And, once the funds came in we hired Tim to direct and build the program.

Our initial question was – how do we even get into the game?  In judicial foreclosure states it’s pretty easy to know how to do this.  Other non-judicial foreclosure states such as Nevada, Washington, Oregon, and Hawaii have created statutory schemes requiring mediation before the trustee’s sale. Such legislation has been proposed in Arizona since 2008 or so, but it hasn’t gone anywhere. Thinking that the only sure fire mediation referral source would be a court, I spoke with the Pro-Se Clerk at the Bankruptcy Court and asked if a foreclosure mediation program might benefit the court. To my surprise he happened to be looking into ways to deal with pro-se bankruptcy filers who were filing for bankruptcy simply to hold up trustee’s sales. While bankruptcy can slow down the trustee’s sale process, the creditors typically are allowed to go forward with the sale when the court finds there’s no legal reason to keep it from going forward (again, the handy primer).  So far that’s been the vast majority of cases in the bankruptcy court. At the end of last summer we presented a foreclosure mediation proposal to the court. In this meeting the judges talked about the numerous cases where there clearly was a communication problem between the debtor and the mortgage servicers and/or holders, and they liked the idea. So, we entered into an agreement to report back after 25 referrals, at which time the court and the FMU would decide whether we should go forward with another 75 referrals.

My next post will present data about our first 25 referrals, which formed the basis of Tim’s presentation last week. And just so you know, we are going forward with the next 75 referrals.

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AP Fannie, Freddie and BOA set to Reduce Principal and Payments

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Editor’s Comment:

Partly as a result of the recent settlement with the Attorneys General and partly because they have run out of options and excuses, the banks are reducing principal and offering to reduce payments as well. What happened to the argument that we can’t reduce principal because it would be unfair to homeowners who are not in distress? Flush. It was never true. These loans were based on fake appraisals at the outset, the liens were never perfected and the banks are staring down a double barreled shotgun: demands for repurchase from investors who correctly allege and can easily prove that the loans were underwritten to fail PLUS the coming rash of decisions showing that the mortgage lien never attached to the land. The banks have nothing left. BY offering principal reductions they get new paperwork that allows them to correct the defects in documentation and they retain the claim of plausible deniability regarding origination documents that were false, predatory, deceptive and fraudulent. 

Fannie, Freddie are set to reduce mortgage balances in California

The mortgage giants sign on to Keep Your Home California, a $2-billion foreclosure prevention program, after state drops a requirement that lenders match taxpayer funds used for principal reductions.

By Alejandro Lazo

As California pushes to get more homeowners into a $2-billion foreclosure prevention program, some Fannie Mae and Freddie Mac borrowers may see their mortgages shrunk through principal reduction.

State officials are making a significant change to the Keep Your Home California program. They are dropping a requirement that banks match taxpayers funds when homeowners receive mortgage reductions through the program.

The initiative, which uses federal funds from the 2008 Wall Street bailout to help borrowers at risk of foreclosure, has faced lackluster participation and lender resistance since it was rolled out last year. By eliminating the requirement that banks provide matching funds, state officials hope to make it easier for homeowners to get principal reductions.

The participation by Fannie Mae and Freddie Mac, confirmed Monday, could provide a major boost to Keep Your Home California.

Fannie Mae and Freddie Mac own about 62% of outstanding mortgages in the Golden State, according to the state attorney general’s office. But since the program was unveiled last year, neither has elected to participate in principal reduction because of concerns about additional costs to taxpayers.

Only a small number of California homeowners — 8,500 to 9,000 — would be able to get mortgage write-downs with the current level of funds available. But given the previous opposition to these types of modifications by the two mortgage giants, housing advocates who want to make principal reduction more widespread hailed their involvement.

“Having Fannie and Freddie participate in the state Keep Your Home principal reduction program would be a really important step forward,” said Paul Leonard, California director of the Center for Responsible Lending. “Fannie and Freddie are at some level the market leaders; they represent a large share of all existing mortgages.”

The two mortgage giants were seized by the federal government in 2008 as they bordered on bankruptcy, and taxpayers have provided $188 billion to keep them afloat.

Edward J. DeMarco, head of the federal agency that oversees Fannie and Freddie, has argued that principal reduction would not be in the best interest of taxpayers and that other types of loan modifications are more effective.

But pressure has mounted on DeMarco to alter his position. In a recent letter to DeMarco, congressional Democrats cited Fannie Mae documents that they say showed a 2009 pilot program by Fannie would have cost only $1.7 million to implement but could have provided more than $410 million worth of benefits. They decried the scuttling of that program as ideological in nature.

Fannie and Freddie last year made it their policy to participate in state-run principal reduction programs such as Keep Your Home California as long as they or the mortgage companies that work for them don’t have to contribute funds.

Banks and other financial institutions have been reluctant to participate in widespread principal reductions. Lenders argue that such reductions aren’t worth the cost and would create a “moral hazard” by rewarding delinquent borrowers.

As part of a historic $25-billion mortgage settlement reached this year, the nation’s five largest banks agreed to reduce the principal on some of the loans they own.

Since then Fannie and Freddie have been a major focus of housing advocates who argue that shrinking the mortgages of underwater borrowers would boost the housing market by giving homeowners a clear incentive to keep paying off their loans. They also say that principal reduction would reduce foreclosures by lowering the monthly payments for underwater homeowners and giving them hope they would one day have more equity in their homes.

“In places that are deeply underwater, ultimately those loans where you are not reducing principal, they are going to fail anyway,” said Richard Green of USC’s Lusk Center for Real Estate. “So you are putting off the day of reckoning.”

The state will allocate the federal money, resulting in help for fewer California borrowers than the 25,135 that was originally proposed. The $2-billion program is run by the California Housing Finance Agency, with $790 million available for principal reductions.

Financial institutions will be required to make other modifications to loans such as reducing the interest rate or changing the terms of the loans.

The changes to the program will roll out in early June, officials with the California agency said. The agency will increase to $100,000 from $50,000 the amount of aid borrowers can receive.

Spokespeople for the nation’s three largest banks — Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. — said they were evaluating the changes. BofA has been the only major servicer participating in the principal reduction component of the program.

FRAUD: The Significance of the Game Changing FHFA Lawsuits

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FHFA ACCUSES BANKS OF FRAUD: THEY KNEW THEY WERE LYING

“FHFA has refrained from sugar coating the banks’ alleged conduct as mere inadvertence, negligence, or recklessness, as many plaintiffs have done thus far.  Instead, it has come right out and accused certain banks of out-and-out fraud.  In particular, FHFA has levied fraud claims against Countrywide (and BofA as successor-in-interest), Deutsche Bank, J.P. Morgan (including EMC, WaMu and Long Beach), Goldman Sachs, Merrill Lynch (including First Franklin as sponsor), and Morgan Stanley (including Credit Suisse as co-lead underwriter).  Besides showing that FHFA means business, these claims demonstrate that the agency has carefully reviewed the evidence before it and only wielded the sword of fraud against those banks that it felt actually were aware of their misrepresentations.”

It is no stretch to say that Friday, September 2 was the most significant day for mortgage crisis litigation since the onset of the crisis in 2007.  That Friday, the Federal Housing Finance Agency (FHFA), as conservator for Fannie Mae and Freddie Mac, sued almost all of the world’s largest banks in 17 separate lawsuits, covering mortgage backed securities with original principal balances of roughly $200 billion.  Unless you’ve been hiking in the Andes over the last two weeks, you have probably heard about these suits in the mainstream media.  But here at the Subprime Shakeout, I like to dig a bit deeper.  The following is my take on the most interesting aspects of these voluminous complaints (all available here) from a mortgage litigation perspective.

Throwing the Book at U.S. Banks

The first thing that jumps out to me is the tenacity and aggressiveness with which FHFA presents its cases.  In my last post (Number 1 development), I noted that FHFA had just sued UBS over $4.5 billion in MBS.  While I noted that this signaled a shift in Washington’s “too-big-to-fail” attitude towards banks, my biggest question was whether the agency would show the same tenacity in going after major U.S. banks.  Well, it’s safe to say the agency has shown the same tenacity and then some.

FHFA has refrained from sugar coating the banks’ alleged conduct as mere inadvertence, negligence, or recklessness, as many plaintiffs have done thus far.  Instead, it has come right out and accused certain banks of out-and-out fraud.  In particular, FHFA has levied fraud claims against Countrywide (and BofA as successor-in-interest), Deutsche Bank, J.P. Morgan (including EMC, WaMu and Long Beach), Goldman Sachs, Merrill Lynch (including First Franklin as sponsor), and Morgan Stanley (including Credit Suisse as co-lead underwriter).  Besides showing that FHFA means business, these claims demonstrate that the agency has carefully reviewed the evidence before it and only wielded the sword of fraud against those banks that it felt actually were aware of their misrepresentations.

Further, FHFA has essentially used every bit of evidence at its disposal to paint an exhaustive picture of reckless lending and misleading conduct by the banks.  To support its claims, FHFA has drawn from such diverse sources as its own loan reviews, investigations by the SEC, congressional testimony, and the evidence presented in other lawsuits (including the bond insurer suits that were also brought by Quinn Emanuel).  Finally, where appropriate, FHFA has included successor-in-interest claims against banks such as Bank of America (as successor to Countrywide but, interestingly, not to Merrill Lynch) and J.P. Morgan (as successor to Bear Stearns and WaMu), which acquired potential liability based on its acquisition of other lenders or issuers and which have tried and may in the future try to avoid accepting those liabilities.    In short, FHFA has thrown the book at many of the nation’s largest banks.

FHFA has also taken the virtually unprecedented step of issuing a second press release after the filing of its lawsuits, in which it responds to the “media coverage” the suits have garnered.  In particular, FHFA seeks to dispel the notion that the sophistication of the investor has any bearing on the outcome of securities law claims – something that spokespersons for defendant banks have frequently argued in public statements about MBS lawsuits.  I tend to agree that this factor is not something that courts should or will take into account under the express language of the securities laws.

The agency’s press release also responds to suggestions that these suits will destabilize banks and disrupt economic recovery.  To this, FHFA responds, “the long-term stability and resilience of the nation’s financial system depends on investors being able to trust that the securities sold in this country adhere to applicable laws. We cannot overlook compliance with such requirements during periods of economic difficulty as they form the foundation for our nation’s financial system.”  Amen.

This response to the destabilization argument mirrors statements made by Rep. Brad Miller (D-N.C.), both in a letter urging these suits before they were filed and in a conference call praising the suits after their filing.  In particular, Miller has said that failing to pursue these claims would be “tantamount to another bailout” and akin to an “indirect subsidy” to the banking industry.  I agree with these statements – of paramount importance in restarting the U.S. housing market is restoring investor confidence, and this means respecting contract rights and the rule of law.   If investors are stuck with a bill for which they did not bargain, they will be reluctant to invest in U.S. housing securities in the future, increasing the costs of homeownership for prospective homeowners and/or taxpayers.

You can find my recent analysis of Rep. Miller’s initial letter to FHFA here under Challenge No. 3.  The letter, which was sent in response to the proposed BofA/BoNY settlement of Countrywide put-back claims, appears to have had some influence.

Are Securities Claims the New Put-Backs?

The second thing that jumps out to me about these suits is that FHFA has entirely eschewed put-backs, or contractual claims, in favor of securities law, blue sky law, and tort claims.  This continues a trend that began with the FHLB lawsuits and continued through the recent filing by AIG of its $10 billion lawsuit against BofA/Countrywide of plaintiffs focusing on securities law claims when available.  Why are plaintiffs such as FHFA increasingly turning to securities law claims when put-backs would seem to benefit from more concrete evidence of liability?

One reason may be the procedural hurdles that investors face when pursuing rep and warranty put-backs or repurchases.  In general, they must have 25% of the voting rights for each deal on which they want to take action.  If they don’t have those rights on their own, they must band together with other bondholders to reach critical mass.  They must then petition the Trustee to take action.  If the Trustee refuses to help, the investor may then present repurchase demands on individual loans to the originator or issuer, but must provide that party with sufficient time to cure the defect or repurchase each loan before taking action.  Only if the investor overcomes these steps and the breaching party fails to cure or repurchase will the investor finally have standing to sue.

All of those steps notwithstanding, I have long argued that put-back claims are strong and valuable because once you overcome the initial procedural hurdles, it is a fairly straightforward task to prove whether an individual loan met or breached the proper underwriting guidelines and representations.  Recent statistical sampling rulings have also provided investors with a shortcut to establishing liability – instead of having to go loan-by-loan to prove that each challenged loan breached reps and warranties, investors may now use a statistically significant sample to establish the breach rate in an entire pool.

So, what led FHFA to abandon the put-back route in favor of filing securities law claims?  For one, the agency may not have 25% of the voting rights in all or even a majority of the deals in which it holds an interest.  And due to the unique status of the agency as conservator and the complex politics surrounding these lawsuits, it may not have wanted to band together with private investors to pursue its claims.

Another reason may be that the FHFA has had trouble obtaining loan files, as has been the case for many investors.  These files are usually necessary before even starting down the procedural path outlined above, and servicers have thus far been reluctant to turn these files over to investors.  But this is even less likely to be the limiting factor for FHFA.  With subpoena power that extends above and beyond that of the ordinary investor, the government agency may go directly to the servicers and demand these critical documents.  This they’ve already done, having sent 64 subpoenas to various market participants over a year ago.  While it’s not clear how much cooperation FHFA has received in this regard, the numerous references in its complaints to loan level reviews suggest that the agency has obtained a large number of loan files.  In fact, FHFA has stated that these lawsuits were the product of the subpoenas, so they must have uncovered a fair amount of valuable information.

Thus, the most likely reason for this shift in strategy is the advantage offered by the federal securities laws in terms of the available remedies.  With the put-back remedy, monetary damages are not available.  Instead, most Pooling and Servicing Agreements (PSAs) stipulate that the sole remedy for an incurable breach of reps and warranties is the repurchase or substitution of that defective loan.  Thus, any money shelled out by offending banks would flow into the Trust waterfall, to be divided amongst the bondholders based on seniority, rather than directly into the coffers of FHFA (and taxpayers).  Further, a plaintiff can only receive this remedy on the portion of loans it proves to be defective.  Thus, it cannot recover its losses on defaulted loans for which no defect can be shown.

In contrast, the securities law remedy provides the opportunity for a much broader recovery – and one that goes exclusively to the plaintiff (thus removing any potential freerider problems).  Should FHFA be able to prove that there was a material misrepresentation in a particular oral statement, offering document, or registration statement issued in connection with a Trust, it may be able to recover all of its losses on securities from that Trust.  Since a misrepresentation as to one Trust was likely repeated as to all of an issuers’ MBS offerings, that one misrepresentation can entitle FHFA to recover all of its losses on all certificates issued by that particular issuer.

The defendant may, however, reduce those damages by the amount of any loss that it can prove was caused by some factor other than its misrepresentation, but the burden of proof for this loss causation defense is on the defendant.  It is much more difficult for the defendant to prove that a loss was caused by some factor apart from its misrepresentation than to argue that the plaintiff hasn’t adequately proved causation, as it can with most tort claims.

Finally, any recovery is paid directly to the bondholder and not into the credit waterfall, meaning that it is not shared with other investors and not impacted by the class of certificate held by that bondholder.  This aspect alone makes these claims far more attractive for the party funding the litigation.  Though FHFA has not said exactly how much of the $200 billion in original principal balance of these notes it is seeking in its suits, one broker-dealer’s analysis has reached a best case scenario for FHFA of $60 billion flowing directly into its pockets.

There are other reasons, of course, that FHFA may have chosen this strategy.  Though the remedy appears to be the most important factor, securities law claims are also attractive because they may not require the plaintiff to present an in-depth review of loan-level information.  Such evidence would certainly bolster FHFA’s claims of misrepresentations with respect to loan-level representations in the offering materials (for example, as to LTV, owner occupancy or underwriting guidelines), but other claims may not require such proof.  For example, FHFA may be able to make out its claim that the ratings provided in the prospectus were misrepresented simply by showing that the issuer provided rating agencies with false data or did not provide rating agencies with its due diligence reports showing problems with the loans.  One state law judge has already bought this argument in an early securities law suit by the FHLB of Pittsburgh.  Being able to make out these claims without loan-level data reduces the plaintiff’s burden significantly.

Finally, keep in mind that simply because FHFA did not allege put-back claims does not foreclose it from doing so down the road.  Much as Ambac amended its complaint to include fraud claims against JP Morgan and EMC, FHFA could amend its claims later to include causes of action for contractual breach.  FHFA’s initial complaints were apparently filed at this time to ensure that they fell within the shorter statute of limitations for securities law and tort claims.  Contractual claims tend to have a longer statute of limitations and can be brought down the road without fear of them being time-barred (see interesting Subprime Shakeout guest post on statute of limitations concerns.

Predictions

Since everyone is eager to hear how all this will play out, I will leave you with a few predictions.  First, as I’ve predicted in the past, the involvement of the U.S. Government in mortgage litigation will certainly embolden other private litigants to file suit, both by providing political cover and by providing plaintiffs with a roadmap to recovery.  It also may spark shareholder suits based on the drop in stock prices suffered by many of these banks after statements in the media downplaying their mortgage exposure.

Second, as to these particular suits, many of the defendants likely will seek to escape the harsh glare of the litigation spotlight by settling quickly, especially if they have relatively little at stake (the one exception may be GE, which has stated that it will vigorously oppose the suit, though this may be little more than posturing).  The FHFA, in turn, is likely also eager to get some of these suits settled quickly, both so that it can show that the suits have merit with benchmark settlements and also so that it does not have to fight legal battles on 18 fronts simultaneously.  It will likely be willing to offer defendants a substantial discount against potential damages if they come to the table in short order.

Meanwhile, the banks with larger liability and a more precarious capital situation will be forced to fight these suits and hope to win some early battles to reduce the cost of settlement.  Due to the plaintiff-friendly nature of these claims, I doubt many will succeed in winning motions to dismiss that dispose entirely of any case, but they may obtain favorable evidentiary rulings or dismissals on successor-in-interest claims.  Still, they may not be able to settle quickly because the price tag, even with a substantial discount, will be too high.

On the other hand, trial on these cases would be a publicity nightmare for the big banks, not to mention putting them at risk a massive financial wallop from the jury (fraud claims carry with them the potential for punitive damages).  Thus, these cases will likely end up settling at some point down the road.  Whether that’s one year or four years from now is hard to say, but from what I’ve seen in mortgage litigation, I’d err on the side of assuming a longer time horizon for the largest banks with the most at stake.

Article taken from The Subprime Shakeout – www.subprimeshakeout.com
URL to article: the-government-giveth-and-it-taketh-away-the-significance-of-the-game-changing-fhfa-lawsuits.html

EMAILS SHOW BofA’s Force-Placed Insurance Unit Hid Foreclosure Information

BofA’s Force-Placed Insurance Unit Hid Foreclosure Information, Say E-Mails Released By Hacker Group

The New York Times reports:

  • A hacker organization known as Anonymous released a series of e-mails on Monday provided by a former Bank of America employee who claims they show how a division of the bank sought to hide information on foreclosures.
  • The bank unit, Balboa Insurance, was acquired by Bank of America when it bought the mortgage lender Countrywide Financial in 2008. Balboa deals in so-called force-placed insurance coverage on mortgages. The e-mail messages concern the removal of information linking loans to other documentation.

***

  • The e-mails dating from November 2010 concern correspondence among Balboa employees in which they discuss taking steps to alter the record about certain documents “that went out in error.” The documents were related to loans by GMAC, a Bank of America client, according to the e-mails.

***

  • A member of Anonymous told DealBook on Monday that the purpose of his Web site was to bring attention to the wrongdoing of banks. “The way the system is, it’s made to cheat the average person,” he said.

For more, see Bank of America Unit Tried to Hide Foreclosure Information, Hackers Say.

Go here for the Balboa e-mails.

See also Zerohedge.com: Hacker Collective Anonymous To Release Documents Proving Bank Of America Committed Fraud This Monday.

Thanks to Mike Dillon(1) at GetDShirtz.com for the heads-up on the story.

(1) According to Dillon, he attempted to bring the loan servicer racket revolving around force-placed insurance and kickbacks to the attention of 45+ Senators and Congresspeople almost two years ago through a GAO Review request of the FTC in connection with the USA v. Fairbanks litigation. No one was interested. Exhibit T, Exhibit U, and Exhibit V may be of interest. They will show that HUD-OIG and, therefore, the FTC, US AG, etc knew about force placed insurance, alleged kickbacks, etc. at least as far back as 2003. And have apparently done nothing about it.

posted by Home Equity Theft Reporter

BANK OF AMERICA SUED BY GODDARD (AZ) AND MASTO (NV) FOR BANK FRAUD AGAINST CONSUMERS

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YOU CAN’T PICK UP ONE END OF THE STICK WITHOUT PICKING UP THE OTHER

MORE MODIFICATIONS MEANS HIGHER LIABILITY TO INVESTORS

The Arizona case is Arizona v Bank of America, CV2010- 33580, Maricopa County Superior Court (Phoenix). The Nevada case is Nevada v. Bank of America, Eighth Judicial District Court, Clark County (Las Vegas).

“The main purpose of the training is to teach us how to get customers off the phone in less than 10 minutes.” BOA employee

“When checking on a borrower’s status, I often found that the modification request had not been dealt with or was so old that the request had become inactive. Yet, I was instructed to inform borrowers that they were ‘active and in status.’ One time I complained to a supervisor that I felt I always was lying to borrowers.” – BOA employee

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EDITOR’S ANALYSIS: The first thing to say about this is that these lawsuits give voice to the hundreds of thousands of homeowners who in good faith attempted a work-out on their mortgage without looking to get a “free house.”

The second thing to say is that the lawsuits miss the essential point — the homeowners were talking to the wrong people (BofA, BAC et al), who had no authority, no financial interest in a performing loan and no ownership of the obligation, note or mortgage. The plain truth is that the payments and/or proceeds arising out of obligations related to the originated loan transaction represents money that is not and never was owed to the Bank.

Even if the Bank could conjure up a cause of action against the homeowner, it would only be for the amounts that the Bank actually lost and it would be an unsecured claim because they do not now nor will they ever have a valid note and mortgage in which they are the creditor. It would be a cause of action in equity for unjust enrichment or some such thing. They couldn’t claim that they were subrogated to the claim of the real creditor without disclosing the identity of the real creditor.

So they are stuck between a rock and a hard place only in the sense that they are being blocked from ill-gotten gains. BOA never lent the money for the loan and so there never was any obligation owed to BOA when the loan transaction was originated. BOA was not the payee on the note so they have no action on that either. BOA is not named on the mortgage, but even if they were, they still would have no rights under the mortgage because the mortgage secures the note, on which BOA is NOT the payee. BOTTOM LINE: THESE OBLIGATIONS ARE UNSECURED AND UNLIQUIDATED UNLESS AND UNTIL A FULL ACCOUNTING IS MADE OF ALL PAYMENTS RECEIVED FROM THE BORROWER, AND ALL PAYMENTS MADE FROM THIRD PARTIES ON NON-SUBROGATED CLAIMS.

If they modified the terms of a valid mortgage they would be changing the deal with the investors without their consent. If they modified the terms of a valid mortgage they would need signatures not only from the homeowners, but from the creditor, whose identity is now hopelessly obscured by the dissolution and repackaging of the “pools” of “loans” into other vehicles. (Of course the problems get deeper when upon analysis a title examiner would discover that neither the note nor the mortgage were valid when executed and that the “pools” were and remain empty if they still exist).

And THAT is why these attorney generals are saying that it was fraud to tell borrowers that they had to be in default to get a modification.

Virtually ANY meaningful modification would change the deal that was sold to investors. Such modifications would be construed as an admission that the loans were defective in the first instance.

The ONLY interest the Bank had was to keep people defaulting on their mortgages so that the Bank would receive higher fees for servicing a non-performing loan, and, more importantly, to trigger the provisions in the securitization documents that would allow them to make the payments otherwise due from the borrower and then collect the extra fees, costs and payments through foreclosure — using a self serving accounting to the investors that showed that the proceeds were zero or close to zero, thus entitling a servicer to obtain ownership of a home by way of a foreclosure on a loan it never made.

And THAT is why the credit bid at the auction is not made in the name of anyone with even a colorable right to claim creditor status and why the credit bid is void. And THAT is why the title ends up in yet another layer of bankruptcy remote vehicles. AND THAT is why virtually ALL sales in all states — judicial and non-judicial — resulted in defective and clouded titles.

If BOA wanted to bid on the property and they had a right to do so, they would have no need to use various sham corporations to bid and take title. But they wanted to buy the property without using or spending any money. So they invented a procedure whereby they show up at the auction where nobody seems to know what they are doing, and they submit the only bid, which is deemed a credit bid because the auctioneer is not sophisticated enough to realize that the bid is coming from a non-creditor, or the auctioneer is in on the game.

But, in order for all that to work, the loans had to be treated as though they were in default even though they were not — the creditor was getting paid according to the distribution reports, with the payment coming from the servicer, just as it was set forth in the securitization documents (whether the borrower was paying or not). So they needed an organized procedure to make certain that as many loans as possible were declared in default, and with most borrowers not contesting the procedure, they got away with it most of the time.

In the small number of cases where the borrower secured the services of a knowledgeable attorney, there were extravagant settlements to both the borrower and the lawyer under agreements of confidentiality. But those confidentiality agreements are not enforceable because it was an agreement to commit an illegal act — which resulted in corrupting the chain of title.

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Two States Sue Bank of America Over Mortgages

By ANDREW MARTIN and MICHAEL POWELL

The attorneys general of Arizona and Nevada on Friday filed a lawsuit against Bank of America, accusing it of engaging in “widespread fraud” by misleading customers with “false promises” about their eligibility for modifications on their home mortgages.

In withering complaints filed in state courts in both states, the attorneys general accused Bank of America of assuring customers that they would not be foreclosed upon while they were seeking loan modifications, only to proceed with foreclosures anyway; of falsely telling customers that they must be in default to obtain a modification; of promising that the modifications would be made permanent if they completed a trial period, only to renege on the deal; and of conjuring up bogus reasons for denying modifications.

“Bank of America’s callous disregard for providing timely, correct information to people in their time of need is truly egregious,” Catherine Cortez Masto, the attorney general of Nevada said in a statement.

Many Nevada homeowners continued “to make mortgage payments they could not afford, running through their savings, their retirement funds or their children’s education funds.”

The lawsuit comes as top prosecutors nationwide are investigating whether the paperwork that banks used to support foreclosure cases often was egregiously sloppy, sometimes relying on robo-signers — employees who signed hundreds of documents a day — to sign sworn court documents.

Tom Miller, Iowa’s attorney general who is heading the multistate investigation into foreclosure fraud allegations, said the two states’ lawsuits would not dilute his inquiry. “It is clear that attorneys general in Arizona and Nevada believe that it is in their two states’ best interests to pursue coordinated civil cases against Bank of America,” he said in a statement.

A Bank of America spokesman, Dan Frahm, said bank officials were disappointed that the lawsuits were filed “at this time,” given the bank’s cooperation with the multistate investigation.

Mr. Frahm disputed the allegations in the lawsuit, saying the bank was committed to making sure no property was foreclosed until the customer had a chance to modify the loan or, if ineligible for a modification, to pursue another solution.

He said the attorneys general didn’t acknowledge the many improvements the bank had made, like providing a single point of contact for customers who have started the modification process and increasing staff to support “homeownership retention initiatives.”

Arizona and Nevada are among the states hardest hit by the housing downturn, and the state attorneys general said their lawsuits were prompted by hundreds of complaints by consumers who sought modifications of their mortgages.

The complaints in the lawsuit in many ways echoed problems encountered by homeowners nationwide who have tried with little luck to obtain mortgage modifications from banks, often through a federal program set up for that purpose. Thousands of homeowners complain that banks repeatedly lose their documents, fail to return calls or foreclose when a homeowner believes he or she is still negotiating a modification.

Indeed, according to the lawsuits, Bank of America’s efforts were the most anemic of the big banks and were not confined to the Western states but rather “reflect a pervasive nationwide pattern and practice of conduct.” The lawsuit noted that Bank of America ranked last in “virtually every homeowner experience metric” monitored in a monthly report on the federal home loan modification program.

Ms. Masto of Nevada said her office’s findings were confirmed by interviews with consumers, former employees, third parties and documents. Former employees said that Bank of America’s modification staff was “chaotic, understaffed and not oriented to customers,” according to a news release. One former employee said, “The main purpose of the training is to teach us how to get customers off the phone in less than 10 minutes.”

Another employee said, “When checking on a borrower’s status, I often found that the modification request had not been dealt with or was so old that the request had become inactive. Yet, I was instructed to inform borrowers that they were ‘active and in status.’ One time I complained to a supervisor that I felt I always was lying to borrowers.”

The Arizona complaint cites the case of an Apache Junction couple who faced foreclosure. When the wife called the bank, a representative told her ‘not to worry,’ there was a stop order on the foreclosure and the couple’s loan modification package would arrive the next day. The next day the homeowner learned that her house had already been sold, the suit says.

Terry Goddard, attorney general of Arizona, said the lawsuit was filed in part because the bank had violated the terms of a 2009 consent decree that Countrywide Home Loans — which Bank of America purchased in 2008 — had engaged in “widespread consumer fraud” in originating and marketing mortgages. As part of the judgment, Countrywide had agreed to create a loan modification program for some Arizona homeowners.

Mr. Goddard, a Democrat who lost a bid for governor, will leave office in January.

BofA Joins Attack on Wikileaks

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EDITOR’S NOTE: The effort to choke off payments to WikiLeaks is being defended by some as an act of patriotism, protecting the state secrets of our government. BOA wold no doubt say that it is merely cooperating with the government. But my guess is that the information coming out about BOA and the other megabanks has nothing to do with state secrets. My guess is that it will show government complicity in the continuing fraud created, enabled and promoted by the megabanks against homeowners, taxpayers and investors.

The sale of the bogus mortgage bonds was fraudulent because there was nothing to back them up and even if there were actual loans in the pool they did not conform to the conditions promised to the investors.

The servicing of the the alleged mortgages or stream of receivables was performed with the sole intent to grab as much of the money from the stream of payments from homeowners and third party insurers and guarantors without accounting to either the investors or the homeowners. The servicers faked events, fees, and costs to do it and they are succeeding even as this article is being written.

The modification and settlement schemes were sham operations creating the appearance of an attempt to help homeowners and right the wrongs committed by Wall Street and the securitization co-venturers. The “negotiations” were conducted by servicers lacking any authority or economic interest int eh loan, the property or the mortgage bond. Their only interest was to take all the money from payments, take all the money from sales of property and keep it.

The original obligations were in most cases fraudulently created with misrepresentations about the nature of the transaction, the value of the property and the viability of the the complex mortgage transaction they thought they were getting. In fact, it was more like an unregistered security whose purchase would produced promised passive returns arising from a continually rising housing market that “never goes down.”

The original notes signed by the homeowners were fatally defective because they neither identified the creditor nor disclosed the true nature of the transaction.

The original mortgages or deeds of trust were fatally defective because they were used a security for a fatally defective promissory note and did not secure the obligation, which was between the investors and the homeowners.

The foreclosure proceedings were fraudulent based upon fabricated, false and forged documents.

The auction sales were all fraudulent because non-creditors were allowed to “bid” on property without putting up one dime. Instead they submitted “credit bids” which were accepted illegally and wrongfully by the auctioneers, resulting in the issuance of title that corrupted the entire title system throughout the the country.

How much of this will be disclosed by WikiLeaks? I don’t know. But my guess is that at least some of the disclosures will show full knowledge by the government and complicity in the acts described above all done in the name of saving the finance system. It seems that nobody was minding the store when it came to considering saving our society. There is more than one way to right a wrong. Yes lying more will get you down the road a bit, but telling the truth will move you toward a fair and just resolution.

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Bank of America Suspends Payments to WikiLeaks

By NELSON D. SCHWARTZ

In a sign of the increasing tensions between WikiLeaks and the corporate world, Bank of America has said it will no longer help process payments for the organization, which released a huge cache of secret State Department cables in late November and has threatened to “take down” a major United States bank with another data dump.

“Bank of America joins in the actions previously announced by MasterCard, PayPal, Visa Europe and others and will not process transactions of any type that we have reason to believe are intended for WikiLeaks,” the bank said in a statement issued on Friday. “This decision is based upon our reasonable belief that WikiLeaks may be engaged in activities that are, among other things, inconsistent with our internal policies for processing payments.”

In a Twitter post put up soon after Bank of America’s announcement, WikiLeaks called on supporters to boycott the bank, urging that “all people who love freedom close out their accounts at Bank of America.”

After MasterCard and PayPal, which is owned by eBay, announced they would no longer handle payments for WikiLeaks, the companies were attacked by online hackers who supported WikiLeaks.

Investors have worried that the founder of WikiLeaks, Julian Assange, was referring to Bank of America when he said in an interview with Forbes last month that he possessed a large cache of potentially embarrassing documents from a large American bank. In an interview with Computerworld in 2009, Mr. Assange said WikiLeaks held five gigabytes worth of information from the hard drive of a Bank of America executive.

Mr. Assange is free on bail in Britain in connection with accusations of sexual offenses he faces in Sweden. Swedish authorities are now seeking to extradite Mr. Assange, a request Mr. Assange has vowed to fight.

Mr. Assange has called the accusations of sexual misconduct a ”smear campaign.”

BofA Cleanup Is Impossible Unless……

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

“The problem facing Bank of America is stunning, both on an economic and on a human scale. Among its 14 million mortgage customers, nearly 1 in 10 is past due. Another 190,000 have not been able to make a payment in at least two years, and one-third of the homes facing foreclosure are vacant, making them harder to maintain and sell. Dealing with customer service, many homeowners say, is frequently infuriating.”

Nor has the company signaled its path out, experts say. “If this is truly the biggest bank, they should be a leader, out in front,” says Mark Williams, executive-in-residence at Boston University and a former bank examiner for the Federal Reserve. “But they’re still in defense mode.”

EDITOR’S NOTE: They can write all they want about “good  intentions” and intractable problems, the fact remains that the assets on the books are an illusion, the business model is skewed by non-disclosure of a complete lack of planning on how to exit the mortgage mess, and the growing consensus of people in the court systems — Federal and State is that BofA has not emerged with a plan because it doesn’t have one.

THERE IS A PLAN THAT WILL WORK. But not one where BofA has it all their own way. There is an old expression that if you are being run out of town you might as well get in front of the crowd and make it look like a parade. If BofA wants to survive this and regain its some brightness to its image, it needs to adopt the obvious strategies that are necessary to bring down the increasingly deafening cries for heads to roll. If they take the lead, they can reload the investors, minimize losses, minimize the immediate risk and vastly improve the prospect of recovering the quality of their balance sheet. If they wait, then all will be lost. People on Wall Street are too devoted to believing that EVERYTHING IS AN ILLUSION. That is not and never has been true. Reality is affected by illusion — but in the end, if you promise someone 10 bucks, you have to give it to him or satisfy him in some other way — or you’re out of business.


Batting Cleanup at Bank of America

By NELSON D. SCHWARTZ

Charlotte, N.C.

BRIAN MOYNIHAN isn’t one to look back. And as the chief executive of Bank of America, he has plenty of reasons not to.

His company is staggering under the weight of his predecessors’ decisions, and each day seems to bring more bad news. More than 1.3 million of the bank’s customers are behind on their home loans, all 50 state attorneys general are investigating the industry’s foreclosure practices and Bank of America has become a leading symbol of the mortgage mess.

When the founder of WikiLeaks, Julian Assange, bragged late last month that his group was about to “take down” an American bank with a mother lode of damaging insider documents, the scuttlebutt on Wall Street quickly turned to Bank of America, sending its shares down more than 3 percent in a day.

But don’t bother feeling sorry for Mr. Moynihan. As far as he’s concerned, things are just fine.

“It’s been a great year and we’ve learned a lot,” he says during an interview in his office here, 58 floors above downtown Charlotte. “There’s not a better job in the world.”

However improbable that may sound, his damn-the-torpedoes stance has helped him stabilize a company that was in such desperate straits that it required two federal bailouts that totaled $45 billion. He’s even returned the bank to profitability — after a little help from that sizable taxpayer-supported cushion, of course.

But since he was named to the position a year ago this week, Mr. Moynihan’s strategy has failed to convince investors, analysts, and some customers that Bank of America is headed in the right direction. The bank’s shares have fallen 18 percent during his tenure.

“Many investors are trying to put their arms around Bank of America’s problems and have been left fluttering in the wind,” says Mike Mayo, a bank analyst with Crédit Agricole in New York. “The company hasn’t given investors much assurance or confidence. It’s like they’re in the twilight zone.”

As the chief executive of the largest bank in the country, Mr. Moynihan is under increasing pressure from Wall Street to raise his profile and rebuild his company’s battered image. “Given some of the problems the company has had, he’s got to show shareholders that he’s standing up for Bank of America,” said Moshe Orenbuch, an analyst with Credit Suisse.

Unfortunately, that doesn’t come easily to Mr. Moynihan. Unlike Jamie Dimon, who has become a media darling as the head of the nation’s second-largest bank, JPMorgan Chase, and has sidestepped some of the withering criticisms aimed at Bank of America, Mr. Moynihan isn’t fond of the spotlight.

“Jamie is visible, he’s a brand, and he gets much more of the benefit of the doubt than Brian,” says Christopher Whalen, managing director of Institutional Risk Analytics. “Brian still has to prove that he can ride the tiger at Bank of America.”

EVEN as his company was battered by one bad headline after another over the last 12 months, Mr. Moynihan rarely wavered from his script, sticking to his calls for better “execution” and a “customer focus.” The problem is that lengthy accounts of robo-signers, lost documents and other foreclosure imbroglios hardly sound like smart execution to furious customers.

“He’s got to get out there and become an equally large public figure as Jamie and articulate the bank’s position,” says D. Anthony Plath, an associate professor of finance at the University of North Carolina, Charlotte. “He’s a hard worker and he’s well liked inside the bank. But the way they are handling it now just won’t work.”

Within the company, Mr. Moynihan gets credit for prying open Bank of America’s rigid and top-down corporate culture and pressing the flesh with clients. Still, that side of Mr. Moynihan, a lawyer by training, doesn’t always come through in public settings. His detractors compare him to Charles O. Prince III, the general counsel at Citigroup who proved unable to adequately manage that sprawling juggernaut after he was promoted to chief executive in 2003.

That’s not a fair comparison, says Laurence D. Fink, chief executive of BlackRock, a money-management giant that was partially owned by Bank of America until last month, when Mr. Moynihan sold off most of that stake in an effort to raise capital and focus on the company’s core banking business.

“There’s always skepticism hiring a lawyer as C.E.O.,” Mr. Fink says. “He’s facing enormous headwinds, but in the first year Brian has surprised a lot of those skeptics.”

Mr. Moynihan has, indeed, put out a series of fires — settling a Securities and Exchange Commission suit against the company, mending ties with regulators and hinting last week that a dividend increase is coming soon.

He has also eliminated much-maligned overdraft fees on debit cards, strengthened the bank’s balance sheet and sold off $16 billion worth of businesses that didn’t serve core customers. On Wall Street, the combined Bank of America and Merrill Lynch has emerged as a global powerhouse, helping the company earn $9.4 billion so far this year.

But if Mr. Moynihan can’t get a handle on the foreclosure furor and restore the company’s reputation as a fair-minded lender, his wins will continue to be drowned out, according to interviews with analysts, industry experts and former Bank of America executives.

The problem facing Bank of America is stunning, both on an economic and on a human scale. Among its 14 million mortgage customers, nearly 1 in 10 is past due. Another 190,000 have not been able to make a payment in at least two years, and one-third of the homes facing foreclosure are vacant, making them harder to maintain and sell. Dealing with customer service, many homeowners say, is frequently infuriating.

A report that the Moody’s Corporation issued on Thursday found that, when it comes to resolving delinquent subprime loans, Bank of America had taken longer than the other six major servicers examined.

“Bank of America has a lot more to clean up than any other servicer or lender,” says Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. “And customers find themselves facing a bureaucracy where it’s hard to get answers, hard to understand what they’re telling you and certainly hard to get solutions.”

Nor has the company signaled its path out, experts say. “If this is truly the biggest bank, they should be a leader, out in front,” says Mark Williams, executive-in-residence at Boston University and a former bank examiner for the Federal Reserve. “But they’re still in defense mode.”

Mr. Moynihan’s predecessors, Hugh McColl and Ken Lewis, were classic empire builders who, during banking’s boom years, transformed a sleepy North Carolina financial institution, NCNB, into the nation’s largest bank through a never-ending series of deals. But in the end, Bank of America had swallowed much more than it could digest, leaving it stuffed with an unwieldy collection of assets and dangerously exposed to any economic downturns.

Mr. Lewis’s final acquisition, Merrill Lynch, fulfilled his longstanding dream of becoming a banker to Wall Street and Main Street, and promised to prove to the elite banks in New York that a bunch of bankers from Charlotte could be every bit as successful as they were. Yet all he ended up showing, most analysts concur, was that he was every bit as poor at risk management as most of the Manhattan bankers.

The Merrill deal proved to be Mr. Lewis’s undoing, saddling Bank of America with tens of billions in losses even as the red ink began to flow from another of his errant purchases: the mortgage lending giant Countrywide Financial. By the time Mr. Lewis resigned in 2009, several outside executives had made it clear they didn’t want his job, and it fell to Mr. Moynihan to impose some kind of strategy on the sprawling empire.

Today, Bank of America’s customers range from millions of subprime borrowers barely hanging on to their homes to the swells who bank with U.S. Trust, where the minimum deposit required to open an account is $3 million. Its 300,000-strong work force includes the “thundering herd” of some 15,000 brokers from Merrill, and 55,000 mortgage workers who help service one in five American home loans.

“This is a behemoth,” Mr. Williams says. “But I have no idea where Bank of America is going.”

MR. MOYNIHAN appears to be scarcely aware that his anniversary is upon him. “We are working that day, right?” he points out. “I don’t have any special things planned. My mother asked me what day it was, and I couldn’t remember whether it was the 16th or 17th.” (It’s the 16th.)

Then again, it might just be an uncomfortable reminder of the selection process that led to his appointment in the fall of 2009, when the bank was rudderless for two and a half months after Mr. Lewis resigned and the board mulled over different candidates. Initially, directors looked at an outside choice, Robert P. Kelly, chief executive of Bank of New York Mellon, but that foundered after it became clear that it would be expensive to lure him away.

Ken Lewis had poked fun at Mr. Prince, says one former executive who requested anonymity because he was not authorized to speak publicly, and joked that he would never turn the company over to a lawyer. But Mr. Lewis, who declined to comment for this article, had not groomed a successor.

Mr. Moynihan’s internal rivals had troubles of their own. One of them, Greg Curl, then the chief risk officer, was a strategist behind the acquisitions of Merrill Lynch and Countrywide, both of which had turned into money pits.

Mr. Moynihan, on the other hand, didn’t carry much baggage. An Ohio native and former rugby player who graduated from Brown University and Notre Dame Law School, he initially made his mark in New England in the 1990s, quickly working his way up from associate general counsel at Fleet bank to run corporate strategy.

At Fleet, Mr. Moynihan was a leading member of the so-called Nifty 50, a group of young executives who had been identified as up and comers, recalls Bill Mutterperl, who served as Fleet’s general counsel and was Mr. Moynihan’s first boss. “He’s indefatigable in terms of being a hard worker, putting in incredible hours, focusing and never losing attention,” Mr. Mutterperl says.

He also played a central role in Fleet’s own expansion. “On many deals he knew how to find the bodies that were buried and really do the due diligence,” Mr. Mutterperl says. “He is a real fixer.”

Mr. Moynihan was one of the few Fleet executives to survive when Bank of America acquired it in 2004, becoming president of the combined company’s global wealth and investment management business. He stabilized that unit, in which mutual fund managers had run afoul of regulators over trading practices, and then switched over to run Bank of America’s global corporate and investment bank in 2007.

Mr. Moynihan remained based in Boston, however, raising his three children in the suburbs and making it a point to be there for soccer games and birthday parties. His distance from Charlotte would actually turn out to be crucial when the top job opened up.

Amid the tumult caused by the merger with Merrill, Mr. Moynihan managed to hang on, cycling through four top jobs in 2008 and 2009, stepping in as other executives quit or were fired. He served for less than two months as general counsel, moving on to run corporate and investment banking and wealth management in January 2009, only to shift to running the consumer bank in August 2009. By December, he was chief executive.

“The good news was that he’d seen a lot of the businesses,” says Mr. Mayo, the analyst at Crédit Agricole. “The downside is that he wasn’t in any position for that long, making it much harder to evaluate his track record.”

Charles O. Holliday Jr., Bank of America’s chairman, admits that “nobody likes to move an executive after four months. But this guy was a proven quantity who could hit the ground running and produce results quickly.”

Others say Mr. Moynihan gets the job done without complaining or spending too much time analyzing the unforgiving messes he has frequently had to clean up.

“It’s really interesting how we got here, but it’s completely unimportant to where we go next,” Mr. Moynihan says. “You got to sit there and say, ‘Do I want to be part of the team? Yes.’ Then go do your job.”

IF Mr. Moynihan didn’t have time to settle into the myriad jobs he had before becoming chief executive, it also meant he avoided blame for the losses piling up at Merrill and for the controversial decision to hand out billions in bonuses to Merrill’s employees shortly before the deal closed in the beginning of 2009.

Unlike Countrywide, Merrill is now paying off for the company. In the first nine months of the year, Bank of America’s investment bank, wealth management and capital markets units earned $6.7 billion, or well over half the company’s overall profits. In businesses like leveraged finance, equity underwriting and investment banking, the combination of two middle-tier players has created a powerhouse.

“It took a long while for people to agree with us,” Mr. Moynihan says about Merrill. “You’re seeing the power of the franchise come through. It was a terrific transaction.”

David Darnell, the head of commercial banking, says his unit has received 10,000 leads from the former Merrill. “This is working,” he says. “Merrill is a game-changer in my business.”

But what about Countrywide?

“A decision was made; I wasn’t running the company,” Mr. Moynihan says, although he was obviously a top bank official at the time. “Our company bought it and we’ll stand up; we’ll clean it up.”

Countrywide has already cost Bank of America more than $5 billion in write-offs. But Mr. Moynihan might be the last man standing when it comes to defending the merits of the deal.

“When we get through the work on the management side, people will come to the same conclusion that this is a great thing for customers and a great thing for the bank,” he says. “Right now, we’re still absorbing the body blows.”

There’s no sign that those body blows will stop anytime soon. Nearly all of Bank of America’s subprime mortgage portfolio was inherited from Countrywide, whose risky lending typified the giddy years before the housing bubble burst.

Countrywide also saddled Bank of America with many more homeowners in default than its system could possibly handle. The overload contributed heavily to the consumer abuses and dubious legal practices that led it to halt foreclosures across the country in October, after the news media, courts and regulators began questioning the bank’s operations.

Mr. Moynihan remains reluctant to yield much ground on Bank of America’s foreclosure practices, however.

“At the end of the day, we could have done better. I’ll take constructive criticism,” he says, especially on delays as the caseload exploded. Still, with the number of workers focusing on defaults set to hit 30,000 by early next year — triple what the bank had two years ago — he says he’s “satisfied that we are doing everything we can and that we’ve caught up and are working through the backlog.”

“This is a very, very difficult process,” he adds. “People want to pay us their debt, but they’re sick, they’ve lost their job, they’ve lost their income. It’s a very tough scenario to have a good outcome for anybody.”

In-house mortgage modifications, the process in which the terms of a loan are eased so homeowners have a chance to catch up, have been a source of contention between the banking industry and its critics.

Mr. Moynihan points out that the scale of Bank of America’s modification efforts far exceeds those of his competitors — 725,000 modifications since January 2008 — and is expanding fast. He says the rate of monthly modifications jumped to 22,400 in November from 12,700 in September.

“I feel proud of what we’ve done,” he says. “You never want to have a customer feel something wasn’t done right.”

But with more than 1.3 million of its customers still behind on their mortgage payments, even tens of thousand of modifications a month still represents a small portion of the loans.

Other numbers also tell a less rosy story. For homeowners who failed to get a permanent modification under the federal government’s Home Affordable Modification Program, only 14 percent managed to get an alternative in-house modification at Bank of America, compared with 31 percent at JPMorgan Chase, 27 percent at Citibank and 40 percent at Wells Fargo.

And of the 425,000 homeowners serviced by Bank of America estimated to be eligible for the program at the end of September, only 0.7 percent began trial modifications in October, according to federal data. That compares with 2.4 percent at JPMorgan Chase, 1 percent at Citibank and 1.6 percent at Wells Fargo.

“Bank of America has just had a culture of being more reluctant to make concessions as part of the modification process,” said Alan White, associate professor of law at Valparaiso University in Indiana. “It’s improving slowly, but they continue to lag their peers.”

Bank of America says that the government’s modification program is a limited benchmark for measuring its progress, and its overall record on modifications is hampered by Countrywide’s subprime-heavy portfolio.

While the bank may be making progress, the overall picture Mr. Moynihan paints still doesn’t reflect reality, says Rachel Bloch, a foreclosure prevention advocate at Empowering and Strengthening Ohio’s People, a Cleveland community organization that helps borrowers with troubled mortgages stay in their homes.

“I’ve been working with Bank of America for three years now, and it’s been a really hard process,” she says. “I have homeowners waiting for a year just to get an update, let alone a resolution.” Over and over again, she said, the paperwork sent in by borrowers is lost, causing further delays, while fees and penalties accumulate.

It’s a problem cited by other consumer advocates and homeowners like Dorothy Robinson of San Jose, Calif. Ms. Robinson, 66, has been trying to get a modification from Bank of America on her $476,000 mortgage for the last two years, ever since her husband lost his job.

But dealing with customer service has been incredibly frustrating, she says, with one bank representative telling her she’d been denied, another saying the modification had been approved, and both of them repeatedly asking for documents she’d already sent in. And when Ms. Robinson withdrew money from her retirement account to try to get caught up, it took months for Bank of America to even record the payment, she says.

“I have to get this resolved. I need a roof over my head,” says Ms. Robinson. “I don’t know what’s happening.”

Bank of America says Ms. Robinson has been conditionally approved for a modification under the government program, including a principal reduction. More information is still needed from Ms. Robinson to confirm final eligibility for the modification, the bank says, while denying that there is any systematic problem causing documents to be lost.

BAD as the foreclosure mess has been for Bank of America’s reputation, Wall Street analysts say a bigger financial threat is looming: what if Bank of America and other giants are forced to buy back a portion of the hundreds of billions in mortgages gone bad?

A growing number of investors are arguing that because the mortgages may have been originated fraudulently, or sliced into mortgage-backed securities without adequate due diligence, the banks are obligated to buy them back under the original terms of the securities — a process known as a putback.

Legal barriers to putbacks are high, but the sheer amount of mortgages originated, securitized and sold to all investors by Bank of America and Countrywide is staggering — $2.1 trillion from 2004 to 2008.

So even if only a small portion are put back, some analysts argue, the losses for banks could run into the tens of billions. This is one issue on which Mr. Moynihan and Charles H. Noski, the chief financial officer, have made a more forceful case that the risk is “manageable,” promising “hand-to-hand combat” in the courts on a loan-by-loan basis if putbacks start cascading in.

But analysts like Mr. Mayo cite fear of putbacks as one reason Bank of America’s stock has lagged behind its main rivals. “People are worried about a $35 billion hit,” Mr. Mayo says. “That may be wrong, but they haven’t convinced people otherwise.”

Mr. Moynihan is unbowed. “We signed up for the task, and we’ll clean it up,” he says. “We’re working our tails off.”

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