OCC AND FEDERAL RESERVE DEMAND BANKS START REVIEW PROCESS ON OVER 4 MILLION LOANS

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GET COMBO TITLE AND SECURITIZATION ANALYSIS – CLICK HERE

“This is the ultimate discovery mechanism that the Banks have been avoiding for 6 years. If it is used properly, at the end of the day everyone will know everything they need to know — where the money came from and where it went, where the documents came from and where they went, who signed them and with what authority, with what knowledge etc. You can ask for proof of the formation and current existence of the trust, its status and an accounting from the Trust for money in and out. If the Banks are forced to actually give up this information both the investors and the borrowers are going to see exactly how they have been screwed.” Neil Garfield, livinglies.me

THE MORE INFORMATION YOU ALREADY HAVE (FROM THE COMBO TITLE AND SECURITIZATION REPORT, LOAN LEVEL ACCOUNTING, FORENSIC ANALYSIS ETC), THE MORE POINTED YOUR QUESTIONS. DO YOUR HOMEWORK!

SEE IMPORTANT WHITE PAPER: National Consumer Law Firm Servicers Why They Foreclose

YOU MUST WRITE DEMAND FOR REVIEW

EDITOR’S NOTE: In an important step (maybe), the Federal regulators are now showing their ire at the Banks who entered into consent decrees in which they were ordered to conduct thorough audits of the accounts they claim they service or own. The Banks have not done it for the same reason they have fought so hard to resist discovery attempts in court — the results will be devastating to the position of the Banks in their court filings, their SEC filings and their reports to regulators. There are several elements listed but the complete list of items are in the actual orders that are posted on this Blog and at OCC website.

A key component I think in this process is that you demand that they explain discrepancies that you have already found and that you ask them about other things that you believe apply to your loan. It is very much like a QWR. You can use the QWR form free on this blog as a form and adapt it. Get a lawyer to draft it and I would suggest that it go out under a lawyer’s letterhead. Make sure the lawyer is licensed in the jurisdiction in which the property is located.

The Banks are already behind schedule on this and they are continuing to stone wall — because in the past it has always worked with the agency accepting far less than what was ordered. You can make the difference by demanding answers and when you don’t get them reporting it to the OCC and Federal Reserve. But better yet, these documents and the method that was used to audit the accounts, must be made available to you. You can demand them from the servicer, the purported owner of the loan, the Federal reserve and the OCC (or OTS if that applies).

I would recommend that in your discovery you ask them to produce their responses to this requirement in the OCC orders, that you question them in interrogatories as to who is in charge of the audit process at the Bank, what their plan is (and provide a copy), who is involved in the audit process at the Bank, what independent consultants they have used — note that they all announced they would use independent consultants), requests for admission based upon their failure to comply with the OCC, OTS and Federal Reserve Consent Decrees, and notices for deposition of the people who are identified as being in charge of the audit process for the Bank. It isn’t enough that they say they outsourced it. Who at the Bank signed the outsource contract? What did the contract say and who has it? To whom does the outsource contractor report? You get the idea, I hope.

Whatever opposition the Bank raises to these questions and demands for discovery should be reported to the regulators as direct proof that the Banks are refusing to comply with the intent of the Order — which is to allow borrowers to know the facts about their mortgage loan — or to be more precise the facts about the origination and chain of events before, during and after the transaction in which their obligation arose.

Here are some questions I would like to see answered on each closing:

1. Using UCC as guideline, who was the creditor at the time of the closing?
2. Where did the money for the closing come from?
3. Where did the money go (the money that was paid by borrower, by third parties, etc.)
4. How much money was received from each category of insurance and credit enhancement? By whom was it received?
5. What reports were issued to investors? What accounting?
6. Relative to the initial money borrowed from investors, what is the current balance due to those investors? How was this figure determined? By whom?
7. Is the Bank or Servicer claiming to be an agent of the investors?
8. What entity is authorized to sign a satisfaction of mortgage (or release and reconveyance) by virtue of the fact that the amount due to that entity has been paid?
9. What are the duties of the trustee with respect to foreclosure on your property?
10. What fees and profits were paid to the servicer, trustees, and other third parties in connection with processing your loan origination, processing payments from all sources, and processing foreclosure?
11. Have any documents been filed in court or in the title registry that contained signatures of people who were unauthroized to sign on behalf of the entity receiving the benefit of the document filed?
12. Have any documents been filed in court or the title registry that contained the signatures of people who had no knowledge of the contents of the document or any data or information supporting the contents of the document?
13. Have any documents been filed in court or the title registry that contained information that was untrue? OK, how about information that the servicer or Bank doesn’t know if it was true or not?
14. What is the procedure by which information was obtained to initiate foreclosure? Who was in charge of that?
15. What is the procedure by which information was obtained to draft affidavits filed in court? who was in charge of that?
16. What is the procedure by which modifications are considered? Who is in charge of that?
17. What evidence exists that the investors were told of the existence of a modification offer?
18. What method was used to evaluate the relative merits of foreclosure versus modification? By whom?
19. What are the financial reasons for turning down a modification or short-sale? How is that determined? By whom?
20. What are the legal reasons for turning down a modification or short-sale? How is that determined? By whom?
    

Regulators Begin Offering Foreclosure Reviews to Borrowers

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By Lorraine Woellert

(Updates with industry and regulator comments starting in the sixth paragraph.)

Nov. 1 (Bloomberg) — U.S. mortgage servicers have begun offering case reviews to borrowers who may have suffered financial injury from errors and misrepresentations during foreclosure proceedings in 2009 and 2010, according to the Office of the Comptroller of the Currency.

The reviews, announced by the OCC in a statement today, are required under a settlement regulators reached with 14 of the biggest mortgage-servicing firms to resolve complaints over mishandled home seizures. The OCC was joined by the Federal Reserve and the Office of Thrift Supervision in the reaching the April accord with companies including JPMorgan Chase & Co., Citigroup Inc. and Wells Fargo & Co.

The companies have hired independent consultants to review foreclosure actions to determine whether borrowers were harmed and recommend appropriate remediation where necessary, the OCC said today. Letters explaining the review process are being sent to an estimated 4.5 million eligible borrowers, who may request reviews through April 30, 2012, the agency said.

“The challenge is substantial, but the steps we have required the servicers to take are vitally important to resolving these issues in a way that respects the rights of those who have been harmed and helps to restore confidence in the system,” John Walsh, acting Comptroller of the Currency, said in the OCC’s statement.

A record 2.87 million homeowners received foreclosure filings in 2010, surpassing the 2.82 million total for 2009, according to Irvine, California-based RealtyTrac Inc.

The first letters went out today, according to Joe Evers, the OCC’s deputy comptroller for large banks. Borrowers also can request a review at http://www.independentforeclosurereview.com.

Mortgage servicers will run an advertising campaign later this year and work with housing counselors to get word out to eligible borrowers, said Paul Leonard, a Financial Services Roundtable lobbyist who is serving as a spokesman for the firms.

It’s impossible to predict how many borrowers might be awarded compensation or when they might receive it, Leonard said today on a conference call. Regulators will make the final decision on whether borrowers have suffered harm and the amount of any remediation, he said.

The Fed and the OCC, which absorbed the OTS in July, haven’t offered said what might constitute harm to borrowers. Consultants will review company records and homeowner information to make decisions about compensation, according to Evers.

“Between the two sets of information, they should be able to determine if there’s injury or harm,” he told reporters on a conference call.

Robo-signing

Companies are being required to conduct the reviews under terms of the consent agreement they reached with regulators to resolve claims that they botched foreclosure paperwork amid the wave of foreclosures stemming from the subprime mortgage crisis. Reports of document robo-signing prompted several lenders to temporarily suspend foreclosures last year.

Servicers signing the accords included JPMorgan, Wells Fargo, Bank of America Corp., Citigroup, Ally Financial Inc.’s GMAC unit, Aurora Bank FSB, EverBank Financial Corp., HSBC Holdings Plc, OneWest, MetLife Inc., PNC Financial Services Group Inc., Sovereign Bank, SunTrust Banks Inc. and US Bancorp.

In addition to compensating harmed borrowers, the banks agreed to improve their foreclosure, loan modification and refinancing procedures by hiring staff, upgrading tracking systems, assigning each borrower a single point of contact, and policing lawyers and vendors.

State attorneys general and the U.S. Justice Department are continuing their own talks with servicers to seek additional relief for homeowners.

–Editor: Gregory Mott

To contact the reporter on this story: Lorraine Woellert in Washington at lwoellert@bloomberg.net

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net

Allocating Bailout to YOUR LOAN

Editor’s Note: Here is the problem. As I explained to a Judge last week, if Aunt Alice pays off my obligation then the fact that someone still has the note is irrelevant. The note is unenforceable and should be returned as paid. That is because the note is EVIDENCE of the obligation, it isn’t THE obligation. And by the way the note is only one portion of the evidence of the obligation in a securitized loan. Using the note as the only evidence in a securitized loan is like paying for groceries with sea shells. They were once currency in some places, but they don’t go very far anymore.

The obligation rises when the money is funded to the borrower and extinguished when the creditor receives payment — regardless of who they receive the payment from (pardon the grammar).

The Judge agreed. (He had no choice, it is basic black letter law that is irrefutable). But his answer was that Aunt Alice wasn’t in the room saying she had paid the obligation. Yes, I said, that is right. And the reason is that we don’t know the name of Aunt Alice, but only that she exists and that she paid. And the reason that we don’t know is that the opposing side who DOES know Aunt Alice, won’t give us the information, even though the attorney for the borrower has been asking for it formally and informally through discovery for 9 months.

I should mention here that it was a motion for lift stay which is the equivalent of a motion for summary judgment. While Judges have discretion about evidence, they can’t make it up. And while legal presumptions apply the burden on the moving party in a motion to lift stay is to remove any conceivable doubt that they are the creditor, that the obligation is correctly stated and to do so through competent witnesses and authenticated business records, documents, recorded and otherwise. All motions for lift stay should be denied frankly because of thee existence of multiple stakeholders and the existence of multiple claims. Unless the motion for lift stay is predicated on proceeding with a judicial foreclosure, the motion for lift stay is the equivalent of circumventing due process and the right to be heard on the merits.

But I was able to say that the the PSA called for credit default swaps to be completed by the cutoff date and that obviously they have been paid in whole or in part. And I was able to say that AMBAC definitely made payments on this pool, but that the opposing side refused to allocate them to this loan. Now we have the FED hiding the payments it made on these pools enabling the opposing side (pretender lenders) to claim that they would like to give us the information but the Federal reserve won’t let them because there is an agreement not to disclose for 10 years notwithstanding the freedom of information act.

So we have Aunt Alice, Uncle Fred, Mom and Dad all paying the creditor thus reducing the obligation to nothing but the servicer, who has no knowledge of those payments, won’t credit them against the obligation because the servicer is only counting the payments from the debtor. And so the pretender lenders come in and foreclose on properties where they know third party payments have been made but not allocated and claim the loan is in default when some or all of the loan has been repaid.

Thus the loan is not in default, but borrowers and their lawyers are conceding the default. DON’T CONCEDE ANYTHING. ALLEGE PAYMENT EVEN THOUGH IT DIDN’T COME FROM THE DEBTOR.

This is why you need to demand an accounting and perhaps the appointment of a receiver. Because if the servicer says they can’t get the information then the servicer is admitting they can’t do the job. So appoint an accountant or some other receiver to do the job with subpoena power from the court.

Practice Hint: If you let them take control of the narrative and talk about the note, you have already lost. The note is not the obligation. Your position is that part or all of the obligation has been paid, that you have an expert declaration computing those payments as close as  possible using what information has been released, published or otherwise available, and that the pretender lenders either refuse or failed to credit the debtor with payments from third party sources —- credit default swaps, insurance and other guarantees paid for out of the proceeds of the loan transaction, PLUS the federal bailout from TARP, TALF, Maiden Lane deals, and the Federal reserve.

The Judge may get stuck on the idea of giving a free house, but how many times is he going to require the obligation to be paid off before the homeowner gets credit for the issuance that was was paid for out of the proceeds of the borrowers transaction with the creditor?

Fed Shouldn’t Reveal Crisis Loans, Banks Vow to Tell High Court

By Bob Ivry

April 14 (Bloomberg) — The biggest U.S. commercial banks will take their fight against disclosure of Federal Reserve lending in 2008 to the Supreme Court if necessary, the top lawyer for an industry-owned group said.

Continued legal appeals will delay or block the first public look at details of the central bank’s $2 trillion in emergency lending during the 2008 financial crisis. The Clearing House Association LLC, a group that includes Bank of America Corp. and JPMorgan Chase & Co., joined the Fed in defense of a lawsuit brought by Bloomberg LP, the parent company of Bloomberg News, seeking release of records related to four Fed lending programs.

The U.S. Court of Appeals in Manhattan ruled March 19 that the central bank must release the documents. A three-judge panel of the appellate court rejected the Fed’s argument that disclosure would stigmatize borrowers and discourage banks from seeking emergency help.

“Our member banks are very concerned about real-time disclosure of information that could cause a run on the banks,” said Paul Saltzman, the group’s general counsel, in an interview yesterday. “We’re not going to let the Second Circuit opinion stand without seeking a review.”

Regardless of whether the Fed appeals, the Clearing House will take the next legal step by asking for a review by the full appellate court, Saltzman, 49, said at his office in New York. If the ruling is unfavorable, the bank group will petition the Supreme Court, he said.

Joined Lawsuit

The 157-year-old, New York-based Clearing House Payments Co., which processes transactions among banks, is owned by its 20 members. They include Citigroup Inc., Bank of New York Mellon Corp., Deutsche Bank AG, HSBC Holdings Plc, PNC Financial Services Group Inc., UBS AG, U.S. Bancorp and Wells Fargo & Co.

The Clearing House Association, a lobbying group with the same members, joined the lawsuit in September 2009, after an initial ruling against the central bank in federal court in Manhattan.

The Fed is “reviewing the decision and considering our options,” said Fed spokesman David Skidmore in Washington. He had no comment on Saltzman’s plans.

Attorneys face a May 3 deadline to file their appeals.

“We’ll wait to see the motion papers,” said Thomas Golden, attorney for Bloomberg who is a partner at New York- based Willkie Farr & Gallagher LLP. “The judges’ decision was well-reasoned, and we doubt further appeals will yield a different result.”

Bloomberg sued in November 2008 under the U.S. Freedom of Information Act, after the Fed denied access to records of four Fed lending programs and a loan the central bank made in connection with New York-based JPMorgan Chase’s acquisition of Bear Stearns Cos. in March 2008.

231 Pages

The central bank contends that 231 pages of daily reports summarizing lending activity, which were prepared by the Federal Reserve Bank of New York for the Fed Board of Governors in Washington, aren’t covered by the FOIA. The statute obliges federal agencies to make government documents available to the press and the public. The suit doesn’t seek money damages.

The Fed released lists on March 31 of assets it acquired in the 2008 bailout of Bear Stearns.

The New York Times Co., the Associated Press and Dow Jones & Co., publisher of the Wall Street Journal, are among media companies that have signed up as friends of the court in support of Bloomberg.

The Fed Board of Governors’ “refusal to disclose the names of borrowers renders public oversight of its actions impossible — it prevents any assessment of the effectiveness of the Board’s actions and conceals any collusion, corruption, fraud or abuse that might have occurred,” the news organizations said in a letter to the appeals panel.

The case is Bloomberg LP v. Board of Governors of the Federal Reserve System, 09-04083, U.S. Court of Appeals for the Second Circuit (New York).

To contact the reporter on this story: Bob Ivry in New York at bivry@bloomberg.net.

Last Updated: April 14, 2010 00:01 EDT