Don’t leave or enter short sale home without quiet title and adequate title insurance.

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U.S. home short sales surpass foreclosure deals for first time

Editor’s Comment: 

Well of course short sales will be higher than REO sales. REO sales of foreclosed property where the bank or its agent owns the property presents a virtually impossible situation with respect to title. The odds are rising every day that a homeowner is going to sue, reverse the eviction, reverse the foreclosure, get title free of the mortgage and note and have the right to exclusive possession. We are getting reports of this across the country. While the banks are trying to keep a stiff upper lip about it all they are in a state of panic (!) because of the loss of ill-gotten gains they thought they had in the bag and (2) because this loss must now be written down on their balance sheet which means that their capital reserves must be correspondingly increased. Where will they get the money?

 SO REO sales are going to be increasingly problematic.

But in a short sale it is the actual homeowner who signs the deed. That eliminates a wild card that is totally out of the control of the banks. The balance of the problem is that the satisfaction of the old mortgage is being executed by parties who have no ownership of the loan nor any agency authority to represent the true creditors (in most cases). But if the short-sale goes thorugh the new buyer can file a quiet title action for a few hundred dollars in fees and a couple of hundred dollars in court costs, and get a judge to sign off on all title claims. To paraphrase American Express’ “don’t leave home without it” It is the best interest of both the old homeowner who could be subject to liability a second time if the real creditor wakes up and in the interest of the new buyer who doesn’t want to lose his home to the claims of some creditor who can actually prove a case. So don’t leave or enter a short-sale home with quiet title — and a REAL title insurance policy that does not exclude claims arising from supposed securitization of the loan.

U.S. home short sales surpass foreclosure deals for first time                                        New Mexico Business Weekly

In a sign that banks are becoming more willing to sell houses for less than the amount that is owed on them, the number of U.S. home short sales surpassed foreclosure deals for the first time, Bloomberg reports, citing Lender Processing Services Inc.

Short sales accounted for 23.9 percent of home purchases in January, the most recent month available, compared with 19.7 percent for sales of foreclosed homes, data compiled by the company show. A year earlier, 16.3 percent of transactions were short sales and 24.9 percent involved foreclosures.

The three largest banks in New Mexico are Wells Fargo, Bank of America and U.S. Bancorp    , respectively.

TBTF Banks Bigger than Ever — How is that possible in a recession?

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Editor’s Comment: 

The pernicious effect of the banks and the difficulty of regulating them across transnational and state borders has led to a growing nightmare that history will repeat itself sooner than later.

This is to rocket science — it is recognition. We have median income still declining in what is still by most measures a recession that is about to get worse. Yet the largest banks are reporting record profits. What that means is that Wall Street is making more money “trading paper” than the rest of the country is making doing actual commerce — i.,e. the making and selling of goods of services.

This is another inversion of common sense. But it is explainable. 4 years ago I predicted that as the recession depressed the earnings of most companies the banks would nonetheless show increased profits. The reason was simply that using Bermuda, Bahamas, Cayman Islands the banks siphoned off most of the credit market liquidity through the tier 2 yield spread premium. The tier 2 YSP was really the money the banks made by selling crappy loans as good loans from aggregators to the investors — and then failed to document any part of the real transactions where money exchanged hands. In some case the YSP “trading profit” exceed the amount of the loan.

So now they are able to feed those “trading profits” back into their system a little at a time reporting ever increasing profits while the the real world goes to hell. So tell, me, what is it going to take to get you to to go to the streets, write the letters and demand that justice be done and allow, for the first time, investors and borrowers to get together and reach settlements in lieu of foreclosures? Don’t you see that whether you are rich or poor, renting or owning, that all of this is going to bring down your wealth and buying power. The Federal Reserve has already tripled the U.S. Currency money supply giving all the benefit to the TBTF banks. It seems to me that as group the American citizens are far more too big to fail than any industry or company.

Evil prospers when good people do nothing. 

Big Five Banks larger than before crisis, bailout

WASHINGTON –

Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the credit crisis.

Five banks — JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did during the 2008 crunch.

“Market participants believe that nothing has changed, that too-big-to-fail is fully intact,” said Gary Stern, former president of the Federal Reserve Bank of Minneapolis.

That specter is eroding faith in Obama’s pledge that taxpayer-funded bailouts are a thing of the past. It also is exposing him to criticism from Federal Reserve officials, Republicans and Occupy Wall Street supporters, who see the concentration of bank power as a threat to economic stability.

As weaker firms collapsed or were acquired, a handful of financial giants emerged from the crisis and have thrived. Since then, JPMorgan, Goldman Sachs and Wells Fargo have continued to swell, if less dramatically, thanks to internal growth and acquisitions from European banks shedding assets amid the euro crisis.

The industry’s evolution defies the president’s January 2010 call to “prevent the further consolidation of our financial system.” Embracing new limits on banks’ trading operations, Obama said then that taxpayers wouldn’t be well “served by a financial system that comprises just a few massive firms.”

Simon Johnson, a former chief economist of the International Monetary Fund, blames a “lack of leadership at Treasury and the White House” for the failure to fulfill that promise. “It’d be safer to break them up,” he said.

The Obama administration rejects the criticism, citing new safeguards to head off further turmoil in the banking system. Treasury Secretary Timothy Geithner says the U.S. “financial system is significantly stronger than it was before the crisis.” He credits a flurry of new regulations, including tougher capital and liquidity requirements that limit risk-taking by the biggest banks, authority to take over failing big institutions, and prohibitions on the largest banks acquiring competitors.

The government’s financial system rescue, beginning with the 2008 Troubled Asset Relief Program, angered millions of taxpayers and helped give rise to the tea-party movement. Banks and bailouts remain unpopular: By a margin of 52 to 39 percent, respondents in a February Pew Research Center poll called the bailouts “wrong” and 68 percent said banks have a mostly negative effect on the country.

The banks say they have increased their capital backstops in response to regulators’ demands, making them better able to ride out unexpected turbulence. JPMorgan, whose chief executive officer, Jamie Dimon, this month acknowledged public “hostility” toward bankers, boasts of a “fortress balance sheet.” Bank of America, which was about 50 percent larger at the end of 2011 than five years earlier, says it has boosted capital and liquidity while increasing to 29 months the amount of time the bank could operate without external funding.

“We’re a much stronger company than we were heading into the crisis,” said Jerry Dubrowski, a Bank of America spokesman. The bank, based in Charlotte, says it plans to shrink by year-end to $1.75 trillion in risk-weighted assets, a measure regulators use to calculate how much capital individual banks must hold.

Still, the banking industry has become increasingly concentrated since the 1980s. Today’s 6,291 commercial banks are less than half the number that existed in 1984, according to the Federal Deposit Insurance Corp. The trend intensified during the crisis as JPMorgan acquired Bear Stearns and Washington Mutual; Bank of America bought Merrill Lynch; and Wells Fargo took over Wachovia in deals encouraged by the government.

“One of the bad outcomes, the adverse outcomes of the crisis, was the mergers that were of necessity undertaken when large banks were at-risk,” said Donald Kohn, vice chairman of the Federal Reserve from 2006-2010. “Some of the biggest banks got a lot bigger, and the market got more concentrated.”

In recent weeks, at least four current Fed presidents — Esther George of Kansas City, Charles Plosser of Philadelphia, Jeffrey Lacker of Richmond and Richard Fisher of Dallas — have voiced similar worries about the risk of a renewed crisis.

The annual report of the Federal Reserve Bank of Dallas was devoted to an essay by Harvey Rosenblum, head of the bank’s research department, “Why We Must End Too Big to Fail — Now.”

A 40-year Fed veteran, Rosenblum wrote in the report released last month: “TBTF institutions were at the center of the financial crisis and the sluggish recovery that followed. If allowed to remain unchecked, these entities will continue posing a clear and present danger to the U.S. economy.”

The alarms come almost two years after Obama signed into law the Dodd-Frank financial-regulation act. The law required the largest banks to draft contingency plans or “living wills” detailing how they would be unwound in a crisis. It also created a financial-stability council headed by the Treasury secretary, charged with monitoring the system for excessive risk-taking.

The new protections represent an effort to avoid a repeat of the crisis and subsequent recession in which almost 9 million workers lost their jobs and the U.S. government committed $245 billion to save the financial system from collapse.

The goal of policy makers is to ensure that if one of the largest financial institutions fails in the next crisis, shareholders and creditors will pay the tab, not taxpayers.

“Two or three years from now, Goldman Sachs should be like MF Global,” said Dennis Kelleher, president of the nonprofit group Better Markets, who doubts the government would allow a company such as Goldman to repeat MF Global’s Oct. 31 collapse.

Dodd-Frank, the most comprehensive rewriting of financial regulation since the 1930s, subjected the largest banks to higher capital requirements and closer scrutiny. The law also barred federal officials from providing specific types of assistance that were used to prevent such firms from failing in 2008. Instead, the Fed will work with the FDIC to put major banks and other large institutions through the equivalent of bankruptcy.

“If a large financial institution should ever fail, this reform gives us the ability to wind it down without endangering the broader economy,” Obama said before signing the act on July 21, 2010. “And there will be new rules to make clear that no firm is somehow protected because it is too big to fail.”

Officials at the Treasury Department, the Fed and other agencies have spent the past two years drafting detailed regulations to make that vision a reality.

Yet the big banks stayed big or, in some cases, grew larger. JPMorgan, which held $2 trillion in total assets when Dodd-Frank was signed, reached $2.3 trillion by the end of 2011, according to Federal Reserve data.

For Lacker, the banks’ living wills are the key to placing the financial system on sounder footing. Done right, they may require institutions to restructure to make their orderly resolution during a crisis easier to accomplish, he said.

Neil Barofsky, Treasury’s former special inspector general for the Troubled Asset Relief Program, calls the idea of winding down institutions with more than $2 trillion in assets “completely unrealistic.”

It’s likely that more than one bank would face potential failure during any crisis, he said, which would further complicate efforts to gracefully collapse a giant bank. “We’ve made almost no progress on ending too big to fail,” he said.

ANOTHER VICTORY IN OKLAHOMA

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Editor’s Comment: 

There is no doubt that the tide is turning and that Judges are increasingly uncomfortable with the presence of forged, fabricated documents containing fraudulent statements of fact on transactions that never actually occurred. As this article explains, in Oklahoma — a very conservative red state — they are beginning to realize that it isn’t the borrower seeking the free house it is the foreclosing party who has no financial stake in the outcome except a windfall if they get the house on a “credit bid.”

by Brian Mahany

We have been saying for several months that the tide is beginning to turn against big banks and mortgage lenders. Many courts are beginning to get fed up with the abusive practices of lenders. Recently several state supreme courts have been weighing in on a wide variety issues including missing paperwork, forged affidavits, questionable title and abusive foreclosure or loan modification practices.

When a state supreme court decides a case, the decision takes on considerable weight. As the highest court in the land, a state supreme court decision is generally binding on all trial courts in that state. We were happy to learn that the Oklahoma Supreme Court decided 7 cases this month in favor of homeowners.

The facts in each of the cases were similar. In each case, the court ruled that in order to bring a foreclosure action, the plaintiff must prove that it has the right to enforce the promissory note. No note means no standing to bring the complaint.

It’s in the details that the Oklahoma cases become important.

Many lenders have problems producing the note and mortgage. In recent years, most lenders sell the mortgage shortly after the closing. Banks rarely hold their own paper any more. The mortgages are often packaged, securitized and sold several times. In that process, paperworks frequently is lost. The lost or incomplete paperwork issue was addressed by the court.

The Oklahoma Supreme Court opinion is helpful to homeowners in several ways.

First, the court reaffirmed that the plaintiff must prove it has the right to enforce the note. Courts shouldn’t simply rely on an affidavit from a lawyer saying the bank or servicer has the right to enforce the note. They must prove it.

Next, the court said that the foreclosing party needs to have the note. Just having an assignment of mortgage is not enough. (Often the servicing bank will draft an assignment of mortgage. That requires the lender’s signature. The note, obviously, contains the borrowers signature. If documents are missing it is much easier for a lender to forge a mortgage assignment than to forge a homeowners signature.)

FInally, the court said that the lack of standing (missing note) can be raised at any time. That can be extremely important in foreclosure cases. Often borrowers seek legal counsel after a judgment of foreclosure has issued. Many folks don’t seek legal help until well into the foreclosure process. By the time a lawyer gets the case, discovery periods have elapsed and often there is already a judgment of foreclosure. The Oklahoma court said as long as the case isn’t closed, its not too late to challenge jurisdiction.

Postscript- There are tens of millions of homeowners under water. Many are facing foreclosure. Unfortunately, there are few lawyers that truly understand how to fight big lenders and even fewer actually willing to do so. If you are facing foreclosure, seek professional assistance as soon as possible. Don’t settle for a bankruptcy lawyer or a fly by night foreclosure “rescue” consultant. Foreclosures can be won but it’s not easy.

The average cost for a lawyer to file an answer and defend a foreclosure action is between $2500 and $5000. While there are some highly qualified lawyers that do this work, we think the only thing big banks understand is a counterclaim and aggressive lawyer.

Everyday we receive calls from homeowners across the U.S. Although we write about foreclosure defense, we rarely take such cases. Our primary purpose in writing is to provide general information and offer hope. The cases we do take are lawsuits against banks and lenders for illegal lending, loan modification and foreclosure practices. If you sufered a particularly bad experience, we certainly want to listen.

Our mortgage fraud team is currently co-counsel in the largest federal false claims act case in the nation, the $2.4 billion action on behalf of HUD against Allied Home Mortgage. Large or small, suing banks and getting justice for victims of predatory lending and foreclosure practices is what we enjoy.

Mahany & Ertl, America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Portland, Maine & Minneapolis, Minnesota. Services available in many jurisdictions.

Current Bank Plan Is Same as $10 million Interest Free Loan for Every American

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“I wonder how many audience members know that Bair’s plan is more or less exactly the revenue model for all of America’s biggest banks. You go to the Fed, get a buttload of free money, lend it out at interest (perversely enough, including loans right back to the U.S. government), then pocket the profit.” Matt Taibbi

From Rolling Stone’s Matt Taibbi on Sheila Bair’s Sarcastic Piece

I hope everyone saw ex-Federal Deposit Insurance Corporation chief Sheila Bair’s editorial in the Washington Post, entitled, “Fix Income Inequality with $10 million Loans for Everyone!” The piece might have set a world record for public bitter sarcasm by a former top regulatory official.

In it, Bair points out that since we’ve been giving zero-interest loans to all of the big banks, why don’t we do the same thing for actual people, to solve the income inequality program? If the Fed handed out $10 million to every person, and then got each of those people to invest, say, in foreign debt, we could all be back on our feet in no time:

Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)

Every time I watch a Republican debate, and hear these supposedly anti-welfare crowds booing the idea of stiffer regulation of Wall Street, I wonder how many audience members know that Bair’s plan is more or less exactly the revenue model for all of America’s biggest banks. You go to the Fed, get a buttload of free money, lend it out at interest (perversely enough, including loans right back to the U.S. government), then pocket the profit.

Considering that we now know that the Fed gave out something like $16 trillion in secret emergency loans to big banks on top of the bailouts we actually knew about, you might ask yourself: How are these guys in financial trouble? How can they not be making mountains of money, risk-free? But they are in financial trouble:

• We’re about to see yet another big blow to all of the usual suspects – Goldman, Citi, Bank of America, and especially Morgan Stanley, all of whom face potential downgrades by Moody’s in the near future.

We’ve known this was coming for some time, but the news this week is that the giant money-managing firm BlackRock is talking about moving its business elsewhere. Laurence Fink, BlackRock’s CEO, told the New York Times: “If Moody’s does indeed downgrade these institutions, we may have a need to move some business around to higher-rated institutions.”

It’s one thing when Zero Hedge, William Black, myself, or some rogue Fed officers in Dallas decide to point fingers at the big banks. But when big money players stop trading with those firms, that’s when the death spirals begin.

Morgan Stanley in particular should be sweating. They’re apparently going to be downgraded three notches, where they’ll be joining Citi and Bank of America at a level just above junk. But no worries: Bank CFO Ruth Porat announced that a three-level downgrade was “manageable” and that only losers rely totally on agencies like Moody’s to judge creditworthiness. “A lot of clients are doing their own credit work,” she said.

• Meanwhile, Bank of America reported its first-quarter results yesterday. Despite that massive ongoing support from the Fed, it earned just $653 million in the first quarter, but astonishingly the results were hailed by most of the financial media as good news. Its home-turf paper, the San Francisco Chronicle, crowed that BOA “Posts Higher Profits As Trading Results Rebound.” Bloomberg, meanwhile, summed up results this way: “Bank of America Beats Analyst Estimates As Trading Jumps.”

But the New York Times noted that BOA’s first-quarter profit of $653 million was down from $2 billion a year ago, and paled compared to results of more successful banks like Chase and Wells Fargo.

Zero Hedge, meanwhile, posted an amusing commentary on BOA’s results, pointing out that the bank quietly reclassified nearly two billion dollars’ worth of real estate loans. This is from BOA’s report:

During 1Q12, the bank regulatory agencies jointly issued interagency supervisory guidance on nonaccrual policies for junior-lien consumer real estate loans. In accordance with this new guidance, beginning in 1Q12, we classify junior-lien home equity loans as nonperforming when the first-lien loan becomes 90 days past due even if the junior-lien loan is performing. As a result of this change, we reclassified $1.85B of performing home equity loans to nonperforming.

In other words, Bank of America described nearly two billion dollars of crap on their books as performing loans, until the government this year forced them to admit it was crap.

ZH and others also noted that BOA wildly underestimated its exposure to litigation, but that’s nothing new. Anyway, despite the inconsistencies in its report, and despite the fact that it’s about to be downgraded – again – Bank of America’s shares are up again, pushing $9 today.

Foreclosure Strategists: Meeting in Phx: Learn about QWRs

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Editor’s Comment: 

Contact: Darrell Blomberg  Darrell@ForeclosureStrategists.com  602-686-7355

Meeting: Tuesday, April 24, 2012, 7pm to 9pm

Qualified Written Requests (QWRs)

10-day Owner / Assignee Requests

Payoff Demand Requests

The goal of this meeting is to build an effective set of requests that operate within the law get us real answers from our loan servicers.

We will be discussing recent updates to Qualified Written Requests laws.  We will look at what the appropriate contents of the QWR should be.

Many people are blindly sending bloated letters demanding every possible bit of discovery.  A QWR loaded with arbitrary demands diminishes the effectiveness of your effort.  We will focus on drafting a succinct, laser-focused QWR that gets you the results you want.

Well also be studying the key points for effective 10-day Owner / Assignee and Payoff Request Letters.

**** PLEASE SEND ME ANY QUALIFIED WRITTEN REQUESTS (or 10-day assignee or payoff demand requests) THAT YOU HAVE ACCESS TO.  I WILL USE THESE AS A BASIS FOR THIS MEETING. ****

Tuesday, May 08, 2012

Special guest speaker:  Arizona Attorney General Tom Horne

We will be discussing among other things:

Arizona v Countrywide / Bank of America lawsuit
National Attorneys General Mortgage Settlement
Attorney General Legislative Efforts (Vasquez?)
OCC Complaints notarizations and all that is associated with that.

Please send me your thoughts and questions you’d like to ask Tom Horne.  More details for this meeting will follow.

We meet every week!

Every Tuesday: 7:00pm to 9:00pm. Come early for dinner and socialization. (Food service is also available during meeting.)
Macayo’s Restaurant, 602-264-6141, 4001 N Central Ave, Phoenix, AZ 85012. (east side of Central Ave just south of Indian School Rd.)
COST: $10… and whatever you want to spend on yourself for dinner, helpings are generous so bring an appetite.
Please Bring a Guest!
(NOTE: There is a $2.49 charge for the Happy Hour Buffet unless you at least order a soft drink.)

FACEBOOK PAGE FOR “FORECLOSURE STRATEGIST”

I have set up a Facebook page. (I can’t believe it but it is necessary.) The page can be viewed at www.Facebook.com, look for and “friend” “Foreclosure Strategist.”

I’ll do my best to keep it updated with all of our events.

Please get the word out and send your friends and other homeowners the link.

MEETUP PAGE FOR FORECLOSURE STRATEGISTS:

I have set up a MeetUp page. The page can be viewed at www.MeetUp.com/ForeclosureStrategists. Please get the word out and send your friends and other homeowners the link.

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg

602-686-7355

Darrell@ForeclosureStrategists.com


Bringing in the Clowns Through Breach of Fiduciary Duties

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Editor’s Comment: In my many conversations with both attorneys and pro se litigants they frequently express intense frustration about those invisible relationships and entities that permeate the entire mortgage model starting in the 1990′s and continuing to the present day, every day court is in session.

I think they are right. This article takes it as given, whether the courts wish to recognize it or not, that the parties at the closing table with the homeowner were all fiduciaries and included all those who were getting fees paid out of the closing proceeds — in other words paid out either the homeowner’s hapless down payment (worthless the moment it was tendered) or the proceeds of a loan (undocumented as to the source of the loan and documented falsely as to the creditor and the terms of repayment.

This article also takes it as a given, whether the courts are ready to recognize it or not, that the parties at the closing table with the investors who were the source of funds pooled or not were all fiduciaries and included all those who were getting fees paid out of the closing proceeds — in other words paid out either the hopeless plunge into an abyss with no loans purchased or funded until long after the money was in “escrow” with the investment banker in exchange for a completely worthless mortgage backed security without any mortgages backing the security.

But the interesting fact is that while some of the parties were known to the investor, and some of the parties were known to the homeowners, the investor did not know the parties at the closing table with the homeowner; and the borrower did not know the parties at the closing table with the investor.

In point of fact, the borrower did not even know there was a table or an investor or a table funded loan until long after closing, if ever. Remember that for years MERS, the  servicers and others brought foreclosures that are still final (but subject to challenge) while they vigorously denied the very existence of a pool or any investors.

While this is interesting from the perspective of Reg Z that states that a pattern of table-funded loans is to be regarded as “predatory” per se, which the courts have refused to enforce or even recognize, I have a larger target — all the participants in the securitization chain, each of whom actually claims to have been some sort of escrow agent giving rise to a fiduciary relationship per se — meaning that the cause of action is simple and cannot be barred by the economic loss rule because they had no contract with the homeowners and probably had no contracts with the investors.

Again, I warn about the magic bullet. there isn’t one. But this one comes close because by including these fiduciaries by name from your combo title and securitization report and by description where the fake securitization was dubbed “private label” they are all brought into the courtroom and they are all subject to a simple action for accounting which can be amended later to allege damages, or if you think you have enough information already, state your damages.

Based upon my research of the fiduciary relationship there are no limits anywhere if the action is not based upon a direct contract, and some states and culled that down to a “no limit’ doctrine (see Florida cases) except in product liability or similar cases.

The allegation is simply that the homeowner bought a loan product that was known to be defective, poorly documented, if at all, and subject to a shell game (MERS) in which the homeowner would never know the identity of the chosen creditor until the homeowner was maneuvered into foreclosure. There are several potential channels of damages that can be alleged.

Lawyers are encouraged to do about 30 minutes of research into fiduciary liability in your state and match up the elements of the cause of action for breach of fiduciary duty with the securitization documents that either has already been admitted or that has been discovered.

Go through the PSA and look at it from the point of view of assumed agency and escrowing or holding documents, receivables, notes, money and mortgages. Each one of those is low hanging fruit for a breach of fiduciary duty lawsuit.

And of course any party specifically named as a “trustee” whether a trust exists or not raises the issue of trust duties which are fiduciary as well, whether it is the trustee of a “pool” or the trustee on the deed of trust (or more likely the alleged substitution trustee on the DOT).



FireDogLake: How the Corruption of the Land Title System is NOT Being Fixed

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“You’re talking about massive, massive fraud. And this is what the state Attorneys General and the federal regulators gave up, in exchange for their non-investigatory investigation.”

The Real Foreclosure Fraud Story: Corruption of the Land Title System

By: David Dayen

George Zornick carries a rebuttal from Eric Schneiderman’s team on yesterday’s damaging expose of the securitization fraud working group. Here’s what it has to say:

• There are 50 staffers “across the country” working on the RMBS working group (the official title).
• DoJ has asked for $55 million for additional staffing.
• The five co-chairs of the working group meet formally weekly, and talk daily.
• There are no headquarters for the working group, but that’s because it’s spread across the country.
• There is no executive director.
• Activists still think the staffing level is too low.

If any of this looks familiar, it’s because it’s EXACTLY what Reuters and I reported a week ago. In other words, it was unnecessary. And it doesn’t contradict what the New York Daily News op-ed said yesterday, either. Like that op-ed, this confirms that there is no executive director and no headquarters for the working group, which sounds more like a central processing space for investigations that could have happened independently, at least at this point.

Meanwhile, if you want actual news, you can go to this very good story at MSNBC, revealing the truth that nobody wants to talk about: the inconvenient detail that the land title and property rights system that has served this country well for over 300 years has been irreparably broken by this gang of thieves at the leading banks.

In a quiet office in downtown Charlotte, N.C., dozens of Wells Fargo’s foreclosure foot soldiers sit in cubicles cranking out documents the bank relies on to seize its share of the thousands of homes lost to foreclosure every week [...]

The Wells Fargo worker, who first contacted msnbc.com via email in late January, told of a wide range of concerns about the foreclosure documents she processes. Some families apparently were denied loan modifications after only cursory interviews, she said. Other borrowers applying for help sent comprehensive personal financial documents to a fax machine that she discovered had been unattended for weeks. Others landed in foreclosure after owing interest payments of as little as $1.18 a day, according to documents she said she reviewed.

“There was one file where they weren’t even past due and they were in foreclosure status,” the loan processor said. “They’re pushing these files and pushing these files….”

Five years into the worst housing collapse since the Great Depression, the foreclosure pipeline that is removing tens of thousands of families from their homes every month rests on a legal process that has been badly compromised by errors, misrepresentation and outright fraud, according to consumer attorneys, state attorneys general, federal investigators and state and federal judges.

I must confess that I don’t throw this in everyone’s face nearly enough. What is being described in this article is the product of a completely broken system. The low-level grunts are being forced to sign off on a quota of loan files every day, and push the paper through the pipeline. Veracity, or even knowledge of the underlying data in the files, is irrelevant. This is precisely what got us into this mess in the first place, and it’s still happening. And these grunts, making $30,000 a year, are given titles like “Vice President of Loan Documentation” to sign off on affidavits attesting to the loan files. That’s basically robo-signing. It’s still happening.

Check out this part about LPS:

Like many mortgage servicers, Wells Fargo relies on a company called Lender Processing Services to assemble some of the information used to foreclose on properties.

With each file they prepare, the bank’s document processors must swear “personal knowledge” the information in each affidavit was properly collected and is accurate and complete.

But they have no way of making good on that promise because they are not able to check whether LPS properly collected and processed the data, according to the document processor.

“We’re basically copying and pasting” information from the LPS system, she said. “It’s data entry. We just input (on the affidavit) what’s on that system. And that’s it. We don’t go back through system and look.”

You’re talking about massive, massive fraud. And this is what the state Attorneys General and the federal regulators gave up, in exchange for their non-investigatory investigation.

This story is familiar here, but not necessarily to the MSNBC.com audience. I applaud them for putting this long piece together that synthesizes a lot of the information that’s been out there for years. This is the real scandal here, a corrupted residential housing market that actually cannot be put back together.

 

Citi’s Parsons Blames Glass-Steagall Repeal for Crisis

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Editor’s Comment: So here we have one of the guys that was part of the team that overturned Glass-Steagal saying that their success led to the failure of our financial system. But then he says it is too late to change what we have done. It is not too late and if we are ever going to correct the financial system and hence the economy, we need to fix what we have done — separate the banks back into investment banks that take risks and commercial banks that are supposed to minimize risks. Instead we have a system where there is a virtually unlimited supply of other people’s money in the form of deposits and taxpayer bailouts that is the engine for leading what is left of the financial system into another ditch, this one deeper and worse.

Think about it. The banks are reporting record profits while the rest of us are experiencing record problems. That means that the banks are reporting gargantuan profits trading paper based upon economies that are in a nose-dive. How is that possible. We have less commerce (buying and selling) and more money being made by banks trading paper to each other. Or is this simply money laundering — bringing back and repatriating the money they stole in the mortgage meltdown and paying little or no tax?

Parsons Blames Glass-Steagall Repeal for Crisis

By Kim Chipman and Christine Harper 

Richard Parsons, speaking two days after ending his 16-year tenure on the board of Citigroup Inc. (C) and a predecessor, said the financial crisis was partly caused by a regulatory change that permitted the company’s creation.

The 1999 repeal of the Glass-Steagall law that separated banks from investment banks and insurers made the business more complicated, Parsons said yesterday at a Rockefeller Foundation event in Washington. He served as chairman of Citigroup, the third-biggest U.S. bank by assets, from 2009 until handing off the role to Michael O’Neill at the April 17 annual meeting.

A Citigroup Inc. Citibank. Photographer: Dado Galdieri/Bloomberg

April 20 (Bloomberg) — Bloomberg’s Erik Schatzker and Stephanie Ruhle report that Richard Parsons, speaking two days after ending his 16-year tenure on the board of Citigroup Inc. and a predecessor, said the financial crisis was partly caused by a regulatory change that permitted the company’s creation. They speak on Bloomberg Television’s “Inside Track.” (Source: Bloomberg)

“To some extent what we saw in the 2007, 2008 crash was the result of the throwing off of Glass-Steagall,” Parsons, 64, said during a question-and-answer session. “Have we gotten our arms around it yet? I don’t think so because the financial- services sector moves so fast.”

The 1998 merger of Citicorp and Sanford I. Weill’s Travelers Group Inc. depended on the U.S. government overturning the portion of the Depression-era act that required banks to be separate from capital-markets businesses like Travelers’ Salomon Smith Barney Holdings Inc. Parsons, who was president of Time Warner Inc. (TWX) at the time, had been a member of the Citicorp board before joining the board of the newly created Citigroup.

“Why didn’t he do something about it when he had a chance to?” Mike Mayo, an analyst at CLSA in New York who rates Citigroup shares “underperform,” said in a phone interview. “He’s a couple days out the door and he’s publicly criticizing the ability to manage the company.”

‘Dynamic World’

Unlike John S. Reed, the former Citicorp CEO who said in 2009 that he regretted working to overturn Glass-Steagall, Parsons said he didn’t think that the barriers can be rebuilt.

“We are going to have to figure out how to manage in this new and dynamic world because there are good and sufficient business reasons for putting these things together,” Parsons said. “It’s just that the ability to manage what we have built isn’t up to our capacity to do it yet.”

Parsons didn’t refer to Citigroup specifically during his comments and Shannon Bell, a spokeswoman for the bank in New York, declined to comment. Mayo said Parsons’ comments show he views the New York-based bank as “too big to manage.”

“This gives more support to the new chairman to take more radical action,” said Mayo, whose book “Exile on Wall Street” was critical of Parsons and the management of banks including Citigroup. “Citigroup needs to be reduced in size whether that’s breaking up or additional asset sales or whatever it takes.”

‘Separate Houses’

Parsons said in a phone interview after the event that it was difficult to find executives who could run retail banks and investment banks in the U.S. because the two businesses had been separated by Glass-Steagall for about 60 years.

“One of the things we faced when we tried to find new leadership for Citi, there wasn’t anybody who had deep employment experience in both sides of what theretofore had been separate houses,” he said. Chief Executive Officer Vikram Pandit is trying to change that, Parsons said. “I think if you ask Vikram he’d say probably his biggest challenge long-term is developing the management.”

Banks are growing because corporations and other clients want them to, and management must meet the challenge, he said.

U.S. Bailout

“People have a sort of a notion that ‘well, we can decide that’s too big to manage,’” he said. “But it got that way because there was a market need and institutions find and follow the needs of the marketplace. So what we have to do is we have to learn how to improve our ability to manage it and manage it more effectively.”

Citigroup, which took the most government aid of any U.S. bank during the financial crisis, has lost 86 percent of its value in the past four years, twice as much as the 24-company KBW Bank Index. (BKX) Most shareholders voted this week against the bank’s compensation plan, which awarded Pandit about $15 million in total pay for 2011, when the shares fell 44 percent.

Shareholders’ views shouldn’t be “given the same level of weight” as those of the board and management, Parsons said. Companies “shouldn’t make the mistake of putting them in the driver’s seat.”

To contact the reporters on this story: Kim Chipman in Washington at kchipman@bloomberg.net; Christine Harper in New York at charper@bloomberg.net.

To contact the editors responsible for this story: Colleen McElroy at cmcelroy@bloomberg.net; David Scheer at dscheer@bloomberg.net.

 

OCC Review Getting Few Takers

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Demand an Administrative Hearing

Very few people have asked for a review of their wrongful foreclosures. Maybe it is because we are all war-weary from this constant barrage of illegal activity from the banks. But there are avenues to travel, whether your foreclosure is past, present or even future. While the OCC review process has some restrictions announced, it nonetheless allies to all foreclosures whether they like it or not. They are the regulatory agency for certain types of banks and servicers, just like OTS, and the Federal Reserve. If one of their chartered and regulated members commits an atrocity, the agency is required by law to do something about it.

And one more thing. The OCC should be setting up review panels and administrative hearing processes because you can be sure that homeowners are not going to agree with the “review” that is conducted by the bank that is accused of committing the error, which is what the “review process” is all about. Why not ask a rapist to investigate whether he did it or if she was just asking for it?

This stuff is not just made up out of my head. It comes from the Administrative Procedures Act and its likeness in the federal, state and even local systems where any government agency is involved.

So if you are alleging wrongdoing in ANY foreclosure — past, present or future — you should be making your allegations. What do you allege? That is where the COMBO product linked next to my picture comes in and there are other people who do similar work although it is true that the title companies are trying their best to obscure the searches for title information. Getting a loan specific title analysis and a loan specific securitization analysis should provide you with enough information to allege wrongful foreclosure. Getting a Forensic Analysis and loan level analysis might also be helpful in rounding out the allegations.

Here are just a few items to get you going:

  • The debt wasn’t due
  • The debt wasn’t due to the party who  foreclosed
  • The party who foreclosed misrepresented itself as the owner of the debt
  • The debt was paid in full by insurance, credit default swaps or federal bailouts
  • The monthly payment was paid by the servicer to the creditor (or the party they claim is the creditor) at the same time that the servicer was declaring a default to the borrower. If the creditor was getting paid, where is the default?
  • The credit bid was submitted by a party who was not a creditor and therefore should have paid cash at the auction
  • The auction was conducted by an employee or agent of the party seeking to foreclose
  • Payments were improperly applied or were not applied
  • Charges were illegal and unfair and were the reason for the foreclosure
  • You were tricked into foreclosure by the pretender lender’s agent telling you had to skip payments before you could be considered for modification. (known in the industry as dual tracking)
  • The “lender” failed to comply with Reg Z on rescission
  • The loan violated TILA, RESPA
  • The “lender” failed to comply with RESPA

 

Hoping Canadians are Stupid, Stewart Title Skips Warranties of Title

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I’ve been telling Canadians that there is considerable doubt as to whether the investment properties they are buying in the context of foreclosure are going to work out for them because of title defects. Some of them are listening and most see the deals as too good to be true. They are right — it is too good to be true, which means it isn’t true that the prices and title are just find, eh?

Here is the new disclaimer (see below). If you can find anything that protects anyone other than the title company then you are able to drill down further than we can. This disclaimer shows what we have been saying — the very use of the term “virtual” title tells us that there is no basis upon which the title agent or carrier will be held accountable or will pay anything if you buy property and take a policy from any of the major carriers.

Up until now it was standard practice in the industry that lawyers and lay people would rely upon the title report issued by the title company. Now they say it is for general information and you can’t rely on it. This means that virtually every buyer should have an attorney who is competent and has the resources to obtain and independent title report and is able to advise people holding or intending to hold title, mortgage or anything else. This gives them a license to insert or delete almost anything. The only way you can really know your chain of title is to go down to the county recorder’s office and examine the chain, one instrument at a time and to check for cross references where a parcel number or name might have been transposed.

What this also means is that anyone seeking to foreclose now must go through the same process and prove to the judge with a certified copy of the title registry that the mortgage is on there and that no satisfaction or other impediments to foreclosure are present. This is a new development and it therefore calls for new tactics and strategies.

Virtual Underwriter® is an underwriting tool. Stewart Title Guaranty Company and its affiliated underwriters (collectively “Stewart”) does not guarantee the accuracy, adequacy, or completeness of any content of Virtual Underwriter®, and you may not rely upon any such content. Only Stewart Issuing Offices may rely on Virtual Underwriter and only to issue Stewart insurance forms. Stewart makes no express or implied warranties with regard to Virtual Underwriter® and shall have no liability for any errors or omissions or for the results of the use of such material. You should not assume that Virtual Underwriter® is error-free or that it will be suitable for the particular purpose that you have in mind. Any material, forms, documents, policies, endorsements, annotations, notations, interpretations, or constructions included in Virtual Underwriter® are made available as a convenience only and should not be considered as altering or modifying the text of any matter to which they relate. Virtual Underwriter® should not be relied upon as a basis for interpreting the forms contained herein. Virtual Underwriter® is made available with the understanding that Stewart is not engaged in rendering legal, accounting, or other professional advice or services. If legal advice or services or other expert assistance is required, the services of a competent professional person should be sought. The material contained in Virtual Underwriter® is not a substitute for the advice of an attorney or other professional person. Preparation/facilitation of documents other than by an attorney may constitute the unauthorized practice of law.

see vubulletins.jsp?displaykey=BL133368894600000002

 

Banks Slammed for Misrepresenting Themselves as Owners of the Loan

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2008 Legal Memo at BKR Conference

Cautions Banks and Lawyers Against Lying About Ownership

A legal compendium of cases published by the American Bankruptcy Institute establishes a pattern of conduct by Ameriquest, Wells Fargo and Chase dating back before 2008 in which these and other banks have intentionally misrepresented themselves to the court as owners of the note, entitled to foreclose and seeking to lift the automatic stay in bankruptcy court under “color of title” arguments. The link to the entire article is below.

What I see is not just wrongful conduct in court but a continuous pattern of lying, fabricating, forging and cheating that has left millions of homeowners without possession of their rightful homes. The ONLY REMEDY in my opinion is to restore these homes to the bankruptcy estate and that the debtor’s be allowed to assert claims attacking the supposed mortgage liens that were based upon false identification of the lender, false and predatory figures used in borrowing and servicing and a large shroud thrown over the entire fictitious securitization process as a place to hide an illegal scheme to issue multiple securities in which the borrower was the issuer of the promissory note under false pretenses and the REMIC was carefully constructed to issue bogus mortgage bonds.

In both cases, the issuer and the investor were dealing with participants in the securitization chain who had no intention of allowing them to keep or recover their investment. In both cases, the instrument was a security that did NOT fall under the exemptions previously used to protect the banks. The borrower as issuer was induced to enter into a securities transaction in which he purchased a loan product under the false assumption created and promoted by the Banks that the real estate market never went down and would always go up, thus allaying the borrowers’ fear that the loan was not affordable. In fact that loan was not affordable and would violate the affordability guidelines in TILA and RESPA if it was classified as a residential mortgage loan. The REMIC that issued the bonds did so without any assets, and even though the disclosure was in the prospectus buried in parts where one would not be looking for that risk, that fact alone removes the REMIC issuance as a REMIC under the Internal Revenue Code, and removes the issuance of the mortgage bond from the cover of exemption under the 1998 Act.

We have all seen Wells Fargo, BOA, Chase, US Bank, Ameriquest and others banged repeatedly fro misrepresenting themselves in court as the owner of the loan when in fact they were not the owner of the loan, never loaned the money to begin with and never purchased the loan obligation from anyone because no money exchanged hands. Even if they tried, the only party who could sell or release claims to the receivable from the “borrower” (issuer) would have been the partnership or individuals or as a group pooled their money into leaky, fictitious entities created for the express purpose of deceiving the pension funds and other investors.

The bottom line is that when it suits them (when they want the property, in addition to the unearned insurance payments, proceeds of credit default swaps and proceeds from other credit enhancements and federal bailouts) these banks assert falsely that they are the creditor, claiming the losses that trigger payments to them rather than the investor. When it does not suit them, like when they abandon the property, or are subject to imposition of fees, sanctions or fines or attorney fees, then they finally fess up and state that they are not the owner of the loan in order to avoid paying appropriate costs, fines, fees, penalties and fees.

Here are some of the notable quotes from the piece written by Catherine V Eastwood, Esq., of Partridge, Snow and Hahn, LLP. At some point the lawyers must be subjected to the same sanctions knowing in the public domain that these practices exist as a pattern of conduct. see Consumer_Sept_2008_NE08_Messing_Mortgages_Cases

QUOTES FROM ARTICLE:

Make Sure Your Pleading Contains Accurate Information Regarding The Identity Of The Real Party In Interest
[AMERIQUEST FINED $250,000, LAW FIRM FINED $25,000, WELLS FARGO FINED $250,000 FOR A TOTAL OF $525,000] On April 25, 2008, Judge Rosenthal issued an memorandum of decision regarding an order to show cause why sanctions should not be imposed in the matter of Nosek v. Ameriquest Mortgage Company, 2008 Bankr. LEXIS 1251 (Bankr. D. Mass. 2008). Ameriquest had maintained throughout a prior adversary proceeding and bankruptcy case that it was the “holder” of the note and mortgage. When the debtor filed a second adversary proceeding requesting trustee process from two Chapter 13 Trustees to collect payment on the judgment issued in the prior case, Ameriquest argued that it was merely the servicer of the loans and that it was not the owner of the funds sought to be collected. The court noted that Ameriquest and its attorneys had made misrepresentations to the court throughout the prior proceedings regarding its status as noteholder. Wells Fargo, NA as Trustee for Amresco Residential Securities Corp. Mortgage Loan Trust, Series 1998-2 was the real holder of the note. The Court issued a Notice to Show Cause why sanctions should not be imposed

Make Sure Your Pleading Contains Accurate Financial Information or Fed. R. Bankr. P. 9011 May Be Imposed: Judge Bohm asked counsel why a motion from relief from stay was being withdrawn. The lawyer’s answer resulted in the judge issuing two show cause orders in In re Parsley, 2008 Bankr. LEXIS 593 (Bankr. S.D. Texas 2008). The real answer should have been that the motion for relief was filed in error on account of an erroneous payment history. Unfortunately, counsel misrepresented to the court that it was a “good motion” and that set off an explosion, leading to evidence of other misrepresentations…. Testimony also revealed that the payment histories were prepared by paralegals and were not reviewed by any attorneys. Countrywide did not review the loan histories either. No one was catching the errors under this system. Judge Bohm wrote “what kind of culture condones its lawyers lying to the court and then retreating to the office hoping that the Court will forget about the whole matter.”

[$75,000 Sanction against Law Firm] In an earlier matter, also in the Southern District of Texas, the Court sanctioned a law firm in the amount of $75,000 for filing an objection to plan and subsequent withdrawal of the objection that was deemed to be “gibberish.”    In re Allen, 2007 Bankr. LEXIS 2063 (Bankr. S.D. Texas 2007). It was clear to the Court that the pleadings were not being reviewed by an attorney after being generated by a computer as the objection listed reasons that were completely unrelated or blatantly opposite of the contents of the Chapter 13 plan filed by the debtor.

[Chase required to pay legal fees of debtor] On April 10, 2008, Judge Morris, a bankruptcy court judge for the Southern District of New York, issued a decision in the case of In re Schuessler, 2008 Bankr. LEXIS 1000 (Bankr. S.D. NY. 2008) regarding an order to show cause why Chase Home Finance, LLC should not be sanctioned for submitting pleadings that were misleading and that had no factual support.

Standing Challenges: Make Sure The Company Bringing The Action Has The Legal Right To Do So
[RELIEF FROM STAY DENIED RETROACTIVELY ON DEBTOR'S MOTION] In re Schwartz, 366 BR 265 (Bankr. D. Mass. 2007) that parties who do not hold the note or mortgage and who do not service the mortgage do not have standing to pursue motions for relief or other actions arising out of the mortgage obligation. In Schwartz the creditor was seeking relief to pursue an eviction action following a foreclosure sale. The assignment of mortgage into the foreclosing mortgagee was executed four days after the foreclosure sale took place. The Court stated that while the term “mortgagee”, as used in M.G.L. c. 244 §1, “has been defined to include assignees of a mortgage, there is nothing to suggest that one who expects to receive the mortgage by assignment may undertake any foreclosure activity.” Id. at 269. The motion for relief was denied.
While not a bankruptcy court case, a United States District Court case worthy of inclusion in this section is In re Foreclosure Cases, 2007 WL 3232430 (N.D. Ohio 2007). The District Court issued an order covering numerous foreclosure cases that were pending in the state. The creditor was ordered by the Court to produce evidence that the named plaintiff was the holder and owner of the note and mortgage as of the date the foreclosure complaint was filed. The court dismissed the foreclosure complaints when the lenders were unable to produce the assignments.
How Many Times Can A Lender Continue a Foreclosure Sale?
In re Soderman, 2008 Bankr. LEXIS 384 (Bankr. D. Mass. 2008). In Soderman the court recited the “one-time” postponement blessing in order to seek relief from stay but that repeated continuances may be a violation of the automatic stay.    The repeated continuances will be deemed a violation of the stay if the postponements are made in order to harass the debtor, gain an advantage for the creditor or renew the financial strain that led the debtor to file for bankruptcy protection. Id.    One month after the decision in Soderman was released, Judge Hillman also ruled that repeated continuances of a foreclosure sale was a violation of the automatic stay. In re Lynn-Weaver, 2008 Bankr. LEXIS 1101 (Bankr. D. Mass 2008).
Challenging the Assessment of Mortgage Fees to a Loan and the United States Trustee’s Office’s Investigation of Countrywide Home Loans, Inc.
In an unprecedented move, Judge Agresti of the Pennsylvania Bankruptcy Court, in April 2008, approved the Justice Department’s further investigation of Countrywide due to widespread allegations that the lender is filing false or inaccurate claims, misapplying funds, assessing unreasonable fees to borrowers’ accounts or ignoring the discharge injunction and other court orders. Countrywide Homes Loans, Inc. f/k/a Countrywide Funding Corp., 2008 Bankr. LEXIS 1023 (Bankr. W.D. PA. 2008).
This matter was precipitated by a Standing Chapter 13 Trustee in Pennsylvania originally filing for sanctions against Countrywide Home Loans, Inc. due to her experience with the lender
The Pennsylvania matters have led the United States Trustee’s Office to file similar suits in Georgia1 and Ohio2 seeking to investigate the servicing practices of Countrywide. Various subpoenas have also been served by the United States Trustee’s office upon Countrywide in Florida regarding the assessment of fees on borrower’s accounts.

1 The United States Trustee’s Office filed a complaint on February 28, 2008 styled as Walton v. Countrywide Home Loans, Inc.,08-06092-mhm in the Northern District of Georgia. The related bankruptcy case is In re Atchley, 05- 79232-mhm. In Atchley, the homeowners eventually sold their home to avoid foreclosure but believe the payoff amount cited by Countrywide contained excessive fees and that Countrywide continued to accept trustee payments after the loan paid off.
2    The United States Trustee’s Office filed a complaint on February 28, 2008 styled as Fokkena v. Countrywide Homes Loans, Inc., 08-05031-mss in the Northern District of Ohio. The related bankruptcy case is In re O’Neal, 07- 51027. In O’Neal, Countrywide filed a proof of claim and objection to plan when it had already accepted a short sale on the property prior to the bankruptcy filing.

ALL LENDERS ARE FAIR GAME
[Forensic Audits Suggested --- $10,000 damages, $12,350 Legal Fees, Wells Fargo sanctioned $5000] in the matter of In re Dorothy Stewart Chase, Docket 07-11113, Chapter 13 (Bankr. E.D. LA 2008), Judge Magner issued a 49 page decision on April 10, 2008 which ordered Wells Fargo to audit every proof of claim it filed in the district since April 13, 2007 and to provide a complete loan history on every account. If the audits reveal additional concerns, the judge reserved the right to appoint experts to do forensic accountings at the expense of Wells Fargo. She also ruled that Wells Fargo was negligent in the loan servicing of Ms. Chase’s loan and assessed damages of $10,000, legal fees of $12,350 and sanctioned Wells Fargo $5,000 for filing a consent order that did not reflect the agreement of the parties and for filing erroneous proofs of claim.
[Wells sanctioned $67,202.45] The decision in Chase was on the heels of Judge Magner’s earlier decision in In re Jones, 2007 Bankr. LEXIS 2984 (Bankr. E.D. LA. 2007). In Jones, Judge Magner sanctioned Wells Fargo $67,202.45 for violating the order of confirmation and the automatic stay by improperly assessing the debtor’s loan with fees in the amount of $16,852.01 and diverting payments made by the Chapter 13 trustee and the Debtor to satisfy fees that had not been authorized by the Court. The judge stated that the Jones case would provide guidance in the post-petition administration of home mortgage loans to a degree that, until this decision issued, had been lacking in the industry.

Moynihan Must Testify in Fraud Suit Brought by Bond Insurer

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Editor’s Comment; The fact they he is being forced to testify is a major breakthrough the wall silence used by the banks and servicers. BY this article I am asking for people to review the court file, get the pleadings and memorandums and send them to me at neilFgarfield@hotmail.com. Everyone should be paying attention to this case, and everyone should be reading everything. The insurer is making the case for the borrowers at the the same time as they are making the case for recovery of money paid by them under false pretenses to the wrong parties, screwing both the investors and the borrowers.

NEW YORK | Thu Apr 12, 2012 10:00pm EDT

(Reuters) – A New York judge has ruled that Bank of America (BAC.N) CEO Brian Moynihan must testify in a lawsuit brought by bond insurer MBIA Inc.(MBI.N) which claims the bank fraudulently induced it to insure risky mortgage-backed securities.

The judge said Moynihan could provide relevant testimony in the case due to his position as CEO, former president of investment banking and the fact that he oversaw the process of integrating Countrywide into Bank of America.

Bank of America acquired mortgage lender Countrywide in July 2008. MBIA filed a Countrywide later that year. In 2009, MBIA claimed Bank of America was liable for Countrywide’s conduct.

Bank of America, the second-largest U.S. bank by assets, is fighting several legal cases following the global financial crisis and had sought to block MBIA efforts for Moynihan to give evidence.

MBIA was once the largest U.S. municipal bond insurer. It announced a restructuring in 2009 after incurring large losses insuring mortgage debt.

Bank of America had asked New York Supreme Court Justice Eileen Bransten to rule that Moynihan did not need to testify, arguing that MBIA was seeking his deposition only to harass the bank and that Moynihan had no unique knowledge about the case.

But the judge on Wednesday denied the request, according to court papers made public on Thursday.

“The knowledge Moynihan gained as part of the (Countrywide) Steering Committee is unique, and it is material and necessary to MBIA’s successor liability claim,” the judge said.

Moynihan was involved in “high-level decisions regarding the Countrywide transaction” and his testimony will not duplicate that of lower-level employees, she said.

MBIA declined to comment and Bank of America did not immediately respond to requests for comment.

The cases is MBIA Insurance Corp v. Countrywide Home Loans Inc et al, New York State Supreme Court, New York County, No. 602825/2008.

State and Federal Agencies Should Brace for Demands for Administrative Hearings

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Editor’s Comment: We had an interesting exchange in a civil, almost charming meeting with the Arizona Secretary of State last night at Darrell Blomberg’s Tuesday night meeting. He has the  AZ AG coming in a couple of weeks.

One thing that came out is that the oath of the notary is missing in many cases and there were some people who thought this might be the magic bullet that would bring down the entire foreclosure process. I don’t know how this got started but the responses from the Secretary and his manager of business affairs were mostly correct — although they point to serious deficiencies in the system and training of the people.

The oath and the bond are usually on the same page. That it is not recorded anywhere is flimsy at best and even if correct would be a source of annoyance to a judge rather than convincing him that the mortgage origination was defective and the foreclosure wrongful.Proving the notary to have been incorrectly affixed might accomplish a right to have the mortgage or deed of trust removed from the title records — but it does NOT invalidate the document itself. There is no magic bullet.

I again say: there is no magic bullet, and there is no paper defect that will discharge a debt. Debts are discharged by payment or waiver of payment (and waived could be involuntary, like in bankruptcy). By concentrating upon the possibility of a defect in the process of record-keeping on the oath of office of a judge or notary, you are essentially admitting the debt, the default and the right to collect and even foreclose, although your intent is otherwise.

The attestation by the notary has nothing to do with the validity of the contents of the document. It serves only to say that a person appeared before the notary and fulfilled the statutory requirements by identifying themselves. The notary is merely attesting to the fact that this is what happened. Someone appeared, gave a drivers license etc., and signed in front of the notary. That is the fullest extent of the attestation of the notary and the power of the notary.

In Arizona, any attestation by the notary that includes corroboration that the person whose signature is being notarized is in fact that person or has a particular relationship with a particular company is void to the extent that the attestation of the notary includes assurance of the signor’s official position or representative powers.

California has a similar provision but allows notaries — if they actually know — to attest to the official capacity of the signor. But California law has an important caveat. Any attestation as to the powers, rights and obligations of the signor cannot be used and is of no effect if it is being used outside the state. So if you are in Arizona and the notary was in California and included an attestation that the signor was vice president of MERS, the part about the signor being a VP of MERS counts for nothing.

The secretary stepped in immediately when his manager tried to say that any decision by the office of the secretary of state is final and cannot be reviewed. However, as he pointed out, the finding of an administrative agency is presumptively true unless you can prove otherwise. That is why the OCC decrees etc. should be viewed as valuable to homeowners because there have already been admissions and findings that the foreclosures were wrongful, and in some studies (San Francisco). Those findings after investigations are also entitled to a presumption of validity and throws the burden of proof onto the the pretender lender IF you show that the bad practices cited by the agencies show up in your particular case.

It is disturbing that (a) a state official second only to the secretary of state himself actually believed that she had supreme authority that was never subject to review. And (b) although the secretary affirmed his believe that his office was a record keeper and not an enforcement arm of the executive branch, I think that is a contradiction in terms. The purpose of the executive branch of government is to enforce the law. If a filing is required with the Secretary of State providing information about the activities of a limited partnership along with the fees payable to the State of Arizona, it is a mistake, in my opinion, to believe that such an agency lacks the right to prosecute those who fail to register, do business in the state and don’t pay their fees.

After decades of practice in administrative law all over the country, I believe I have discovered a mistaken impression that is often found amongst state departments, both as to their powers and their obligations to enforce those powers. I think a lawsuit in mandamus against the office of Secretary of State requiring them to use the Administrative Procedures Act and participate in hearings conducted by administrative hearings judges who are objective and unbiased, may well be necessary unless the Secretary rethinks his position and does so on his own.

This might be particularly important to the State of Arizona and other states since the REMIC pools appear to be either general or limited partnerships and not Trusts as they are described in the PSA and prospectus. This ought to be at least tested.

But whether the restrictive power of the secretary of state extends only to limited partnerships and not corporations and other business entities ( division that is peculiar at best) the major point is still the same. A foreign entity or person holding money in their hands, solicited applicants for loans and then closed transactions for those loans within the state of Arizona and with respect to an interest or potential interest in real property located strictly within the state of Arizona, violated state law and must suffer the consequences.

If they want to say that these leads to an unfair or inequitable result, they must allege and prove that they will lose money by applying the law and that means proving that they funded the loan, bought it or otherwise advanced real money where money exchanged hands. At this point everyone who knows the logistics here knows that there is not one party, group or person that can prove that case, which is why the rejection of modifications is so ridiculous and born of pure arrogance.

The real lender or creditor is now admitted to be an out of state group or entity of some kind that never registered in the state, never paid the fees, and never gave any required information about the group or entity. Perhaps the Secretary of state should be more intrigued when he realizes that hundreds of thousands of such transactions occurred in the State of Arizona over the last 12 years and they continue to be conducting business activity and legal activity in the state all without the required registration. The exemptions from registration do not apply.

Under normal rules of engagement, the party failing to properly register is subject to fees, fines and penalties for doing business without registration and may neither bring any legal claim or defend against one in the absence of the proper registration. So whether it is the office of the Secretary of State or some other department that somehow does not fall under the authority of the secretary of state (a peculiar circumstance at best) the State is (a) missing out on hundreds of millions of dollars in revenue from out-of-state carpet baggers and (b) missing its chance to stop the foreclosures and even return the wrongfully foreclosed homes to their rightful owners.

So my question to the Secretary of State is this: As the putative lieutenant governor of the State who might be seeking higher office (the governor’s mansion), which would you rather do — run with the backing of back s  tabbing bankers who have already shown their willingness and desire to lie, forge documents and otherwise cheat the state’s citizens out of the right to possession of their own homes AFTER payment has been received in full — or would you rather ride the crest of anti-bank sentiment that can be found lurking in almost every voter regardless of the status of the ir mortgage or living arrangements? My bet is that the politician who seeks higher office or to maintain incumbency, would best be served by leading a populist revolt against the major out of state banks and a movement toward local in-state banks that had nothing to do with the mortgage mess created by false claims of securitization.

My second piece of advice is that the head of any agency having anything to do with regulation of business entities , banking and lending had best brush off their old copy of the Administrative Procedure Act because in my view there is right to bring a complaint against the agency that cannot be denied. And without having procedures and facilities for administrative hearings, complainants cannot fulfill the requirement of exhaustion of administrative remedies. That allegation alone in state or federal court could bring a mountain of constitutional issues crashing upon the shoulders of agency heads who thought they were immune from some issues.

Occupy Homes Protest Forces Delay of Sheriff Sale

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Occupy Homes Protest Forces Delay of Sheriff Sale
By Ty Moore

US Bank buckles under pressure, delaying sale of veteran John Vinje’s home until May 29th

After a week of escalating pressure demanding US Bank postpone the sheriff’s sale of John and Lucinda Vinje’s home, Occupy Homes won another 11th hour victory today. John Vinje led a contingent of 50 Occupy Homes MN supporters into the Hennepin County Sheriff’s Office Civil Division where the sale was to take place at 11:00am this morning.

Speeches, chants, and song filled the marbled hallways in the ground floor of city hall. No potential buyers were seen entering the courtroom the entire time, and just after 11:30am it was announced that US Bank had delayed the sale to May 29th. Following the victory, John said: “This shows that the power is now with the people, and not with large, monolithic corporations, like US Bank.

Homeowners throughout Minnesota facing foreclosure, facing sheriff’s sales, should get together with their community and demand a postponement and renegotiation. They should get connected with Occupy Homes because we can save homes throughout the state of Minnesota when we all work together.” Today’s action followed a week of escalating pressure on US Bank, including a national call-in campaign aimed to VP Tom Joyce, and a march on US Bank CEO Richard Davis’ mansion on April 7th. Ty Moore, an organizer with Occupy Homes explained: “We’ve got the banks scrambling already, but this fight is just beginning. John’s victory, following Monique and Bobby’s victories, is sending a message. Minnesota homeowners aren’t going to leave their homes quietly and in shame anymore. It’s the banks and CEOs like Richard Davis who should be ashamed!”

Occupy Homes MN achieved national media attention after winning Bobby Hull’s foreclosed home back after US Bank bought his property at a sheriff sale, and repeatedly delaying the eviction of Monique White, who also received her original mortgage through US Bank. John and Lucinda Vinje are among a growing number of homeowners joining together through Occupy Homes to fight back against the unjust and illegal banking practices behind the foreclosure crisis. John and Lucinda Vinje bought their home in 2008, the first house either of them had ever owned. John is an Air Force veteran now working as a security guard, and Lucinda has worked a government job for ten years.

But when financial difficulties caused them to fall behind on payments by just two months, US Bank refused their request to repay their arrears in installments and immediately began foreclosure proceedings. Meanwhile, Lucinda has been forced into “medical retirement” due to a chronic condition, adding financial strain on the family. If US Bank would renegotiate their mortgage to current market value as the Vinje’s request, they could afford the payments. After six months of delays, in March US Bank offered them a measly $97 less on their monthly payments. Both John and Lucinda have worked their entire lives, but now stand to lose the only home they have ever owned.

 

Home Prices Still Spiralling down

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EDITOR’S ANALYSIS: As this article demonstrates in sampling some counties in the Northeast, there is no indication that the prices of homes are stabilizing nor that there is any prospect of anything but further reductions in prices of homes. The reason is simple. Price is not the same as value. The value of the homes are still at least 15% lower than the current prices. Thus it is not difficult to recognize that when the market catches up with the current reality, the prices will come down to meet the actual values.

That is exactly how in 2007 I was able to call with precision, the collapse of the housing market, the collapse of the stock market and the freezing of the credit markets — and the resulting effect on some brokerage houses who neither loaned any money nor bought any of the bogus mortgage bonds they were selling, but rather created fictitious losses that were carefully manipulated to extract taxpayer money for toxic assets that could have been protected and improved but for the narrative created and controlled by the banks and servicers.

Brad Keiser deserves some credit here for predicting the actual order and timing of the crash of each investment house. All he did was put pen to paper and figure out how many time each investment firm was leveraged on the same bond pools. He was exactly right. You can see it on the DVD package we offer that describes securitization.

The more pernicious part of this process is that the capital sucked out of the economy by the banks (who are now reporting “profits” of high magnitude) this money was tucked away and NOT used to finance start-ups, expansion or even maintenance of existing business. Just as the clear policy of the banks and service is to foreclose on residential property, they have followed the path of starving new and existing capital for the sole purpose of favoring competition and financing the purchase of what is left after these companies die, laying off hundreds of thousands of workers.

As for the workers, they are still out there or giving up on finding a job that will pay anything for their household expenses after deductions of work-related expenses. Hence median income has no current prospect of stabilizing or increasing under the current circumstances. In fact median income continues to decline. A decline in median income means that there will be further decline in home values which in turns means further decline in home prices.

Add to this deadly cycle the fact that title to the “foreclosed” properties is very much in doubt, at best, and probably fatally defective at worst, and you have a very slow moving, downward market in residential home sales and financing for at least the next ten years. My projection is that overall, there will be at least another 30% drop in prices over the next 10 years. This will be offset by inflation averaging at least 3% per year under the best of circumstances. We have now more than tripled our currency volume and we still can’t get out of this mess. Follow the example of Iceland and watch what happens — huge fiscal stimulus to the economy, the banks taking the hit for their own misdeeds, the each household getting enough relief that they can start purchasing things besides  food.

Follow the examples of our own common law history and the homes that were the subject of wrongful foreclosure are re turned to their rightful owners and if someone wants to make a claim for collection or even foreclosure they still can — if they can prove each and every essential element of their case.

And it seems clear that nothing can stop this drag on the entire U.S. economy except the application of law. BUT the application law goes both ways. Having truth on your side makes no difference at all if you don’t present in the right way, at the right time and prove it. And THAT is the reason for the many negative positions taken by Judges. If you go in and concede that you know owe the money, you agree you failed (not refused) to make scheduled payments, and that you defaulted on the loan, the Judge really has very little choice except granting whatever motions the banks and servicers present. You have conceded your case away.

This is why you need title, securitization and forensic reporting from reliable third parties whose credentials are indisputable in court. Take these issues to your accountants and see what they think. You may come up with some surprising answers.

The point you need to know and believe is that the money went down one path and the documents went down an entirely different path so the banks could oversell the loans and the bets on those loans. This leaves the banks and servicers in a vulnerable position but it is a complex set of facts. You have about 30 seconds to get the Judge’s attention and 5 minutes to make your point. After that, expect nothing.

But the single-most important ingredient in the recovery is the resistance and fear of the borrowers who feel like deadbeats, and do not appreciate how they were used as pawns in getting  tons of money from investors that far exceeded the amount of their loans. There is a new diagnosis created by the authors of the book, Legal Abuse Syndrome. You all ought to look it up, and order it. They hit the nail on the head. Without the outrage shown in Iceland, our country’s finances will never be fixed.

www.businessinsider.com/home-prices-across-the-northeast-are-still-declining-2012-4

The Truth About The ‘Housing Bottom’: Home Prices Across The Northeast Are In Total Freefall

Keith Jurow | Apr. 16, 2012, 9:00 AM
For nearly two years, I have been warning in my articles posted on BUSINESS INSIDER that there is no housing bottom in sight.  I’ve been correct.

Yet one analyst after another has been proclaiming that the housing bottom is finally here.  This is nonsense!

Many of these “experts” have skin in the game and hope to lure you back into the market. They base their assumptions on the fact that housing prices seem to be falling more slowly.  They’re not.  Take a look at these shocking numbers I uncovered in the last two weeks:

SINGLE-FAMILY HOME PRICES IN THE NORTHEAST
February 2012

Location      Avg. Price Per Sq. Ft     Change from Feb. 2011
Connecticut
Fairfield County              $260           down 16.6%
City of Bridgeport              $86           down 17.3%
City of New Haven              $88           down 31.2%
City of Hartford              $72           down 10.1%
Westport              $311           down 30.3%
Greenwich              $481           down 34.8%
Darien              $354           down 19.3%
New Canaan              $371           down 10.1%
Branford              $126           down 41.4%
Glastonbury              $161           down 19.1%
Simsbury              $129           down 13.2%
Massachusetts
Framingham              $157           down 9.2%
Newton              $313           down 13.5%
Scituate              $215           down 16.5%
Rhode Island
Providence              $101           down 5.5%
Warwick              $120           down 12.2%
Pawtucket              $91           down 18.3%
New York State
Westchester County              $276           down 10.1%

Source:  Wm. Raveis & Co. – raveis.com

These are real, raw numbers, not an index like Case-Shiller.  They come from the largest family-owned brokerage firm in the northeast — Raveis and Co. whose reputation is impeccable.  I spent several days reviewing the terrific raveis.com search tool and found similar price declines in more than 150 towns and cities.

Sales volume was way down in most towns in the northeast.  To my surprise, inventories are up substantially from a year earlier.  All that talk last fall about shrinking MLS inventories is history.  Listings are soaring in most towns.

Some people I speak with are skeptical about these numbers.  Check them for yourself if you think I’m making them up.   Go to the raveis.com homepage and the drop-down menu for “Housing Data.”  Then hit the link to “View local housing data” and this will take you to their search page where you can see the latest sales and price statistics for towns in seven northeast states.  You’ll be as shocked as I was.

Here is my warning:  Prices are crumbling and homeowners have perhaps six months to decide what to do.  I strongly suspect that a year from now will be too late.

AZ Secretary of State Ken Bennett Guest Speaker at Phoenix Foreclosure Strategists Meeting

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Foreclosure Strategists:  Phoenix Arizona

Contact: Darrell Blomberg 602-686-7355 or Darrell@ForeclosureStrategists.com

Meeting: Tuesday, April 17, 2012

Special guest speaker:  Arizona Secretary of State Ken Bennett

Some of the topics we will be discussing are:
Duties of the Secretary of the State
Oath’s of Office
Missing pages
Complaint Process
Notaries Public
Training & Commissioning
Can the public attend?
Administration of Oath
Duties
Notarized versus Acknowledged
Electronic Notarizations
Complaint Process
Who can file
Missing dates: “My Commission Expires: ____”
Procedural process
Interaction with Attorney General’s Office
Suspensions
Revocation of notary commission
Reinstatements
Informal Settlement Conferences
Paula Gruntmeir’s three retroactive reinstatements
Validity of Documents not properly acknowledged
Interaction with Legislative Process
Current efforts
Interaction with Attorney General’s Office
Have you written a guitar parody about Arizona Foreclosures?
Comments on Foreclosure effects on fellow Arizonans
Things we can expect from your office
Things we can do to support your efforts
Thank you!

IF YOU HAVE ANY ADDITIONAL TOPICS TO ADD TO THIS OUTLINE PLEASE GET THOSE TO ME NOW!

To further prepare for this meeting you may want to familiarize yourself with:

            Arizona Secretary of State’s website
            (http://www.azsos.gov)
            Annual Report of the Arizona Secretary of State
            (http://www.azsos.gov/public_services/annual_report/2011/Annual_Report.pdf) 

Tuesday, April 24, 2012

Qualified Written Requests (QWRs)

10-day Owner / Assignee Requests

Payoff Demand Letters

We will be discussing recent updates to Qualified Written Requests laws.  We will look at what the appropriate contents of the QWR should be.  Many people are blindly sending letters demanding every possible bit of discovery.  A QWR loaded with arbitrary demands diminishes the effectiveness of your effort.  Learn to draft a succinct, laser-focused QWR that gets you the results you want.

Well also be studying the key points for effective 10-day Owner / Assignee and Accounting Request Letters.  More details for this meeting will follow.

Tuesday, May 08, 2012

Special guest speaker:  Arizona Attorney General Tom Horne

We will be discussing among other things:

Arizona v Countrywide / Bank of America lawsuit
National Attorneys General Mortgage Settlement
Attorney General Legislative Efforts (Vasquez?)
OCC Complaints notarizations and all that is associated with that.

Please send me your thoughts and questions you’d like to ask Tom Horne.  More details for this meeting will follow.

We meet every week!

Every Tuesday: 7:00pm to 9:00pm. Come early for dinner and socialization. (Food service is also available during meeting.)
Macayo’s Restaurant, 602-264-6141, 4001 N Central Ave, Phoenix, AZ 85012. (east side of Central Ave just south of Indian School Rd.)
COST: $10… and whatever you want to spend on yourself for dinner, helpings are generous so bring an appetite.
Please Bring a Guest!
(NOTE: There is a $2.49 charge for the Happy Hour Buffet unless you at least order a soft drink.)

MEETUP PAGE FOR FORECLOSURE STRATEGISTS:

I have set up a MeetUp page. The page can be viewed at www.MeetUp.com/ForeclosureStrategists. Please get the word out and send your friends and other homeowners the link.

FACEBOOK PAGE FOR “FORECLOSURE STRATEGIST”

I have set up a Facebook page. (I can’t believe it but it is necessary.) The page can be viewed atwww.Facebook.com, look for and “friend” “Foreclosure Strategist.”

I’ll do my best to keep it updated with all of our events.

Please get the word out and send your friends and other homeowners the link.

May your opportunities be bountiful and your possibilities unlimited.

“Emissary of Observation”

Darrell Blomberg

602-686-7355

Darrell@ForeclosureStrategists.com

Iceland Forgives Household Debt and Now leads the Way to Economic Recovery

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Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.

It’s Not a Theory

When it was Wrong from the Beginning:

The Highest Form of Economic Stimulus is to

Correct Debt Balances

Editor’s Comment: Iceland has taken the obvious common sense approach — fueled by an outraged population — and ended up creating the largest fiscal stimulus of any developed country without spending one cent of taxpayer money and without printing any “quantitative easing” currency debasing their currency. By the way more than 90 bankers there are headed for jail. Sounds like magic? That is what U.S. Banks would have you believe. But it is true as you can see from the Bloomberg article below.

The problem has been that the populations cannot pay the interest or the principal on debts that were so exotic in their construction that Alan Greenspan confesses he never understood them, let alone the borrowers. Borrowers were forced to rely on misrepresentations by the Banks and their agents as to the value of the loan, the value of the collateral and the viability of the transaction.

People in Iceland rioted in the streets throwing rocks at politicians and government buildings — not because they owed the money but because they knew that (a) they were victims of bank fraud and (b) the banks owed them money, not the other way around.

Under pressure from the government, the banks have decreased household debt by around 25% so far. The banks have not collapsed, financial system is in good shape and Iceland leads the developed world in economic recovery. The risk fell back on the Banks, the perpetrators of this mess.

The relief was and is being shared by two victims — the households tricked into buying these debt packages and the investors who pooled their money to fund the exotic debt structures. The claims of bank losses have been ignored as being not (and never were) economically real.

That’s what happens when the populations rises up and says “NO!” Similar programs here even on a small scale have corroborated the Iceland experience. And yet we continue to support the banks whom we believe are too big to fail. Following the Iceland example — now in its 3rd year — would provide many trillions of dollars in fiscal stimulus to our economy, launch the economy into a full recovery and clear up the budget deficits of local, state and federal government agencies.

It’s a choice. What do you choose?

Icelandic Anger Brings Debt Forgiveness in Best Recovery Story

By Omar R. Valdimarsson

Icelanders who pelted parliament with rocks in 2009 demanding their leaders and bankers answer for the country’s economic and financial collapse are reaping the benefits of their anger.

Since the end of 2008, the island’s banks have forgiven loans equivalent to 13 percent of gross domestic product, easing the debt burdens of more than a quarter of the population, according to a report published this month by the Icelandic Financial Services Association.

Enlarge image Icelandic Anger Brings Debt Forgiveness

Icelandic Anger Brings Debt Forgiveness

Icelandic Anger Brings Debt Forgiveness

Paul Taggart/Bloomberg

A cyclist passes an Icelandic national flag hanging in a popular shopping street in Reykjavik, Iceland.

A cyclist passes an Icelandic national flag hanging in a popular shopping street in Reykjavik, Iceland. Photographer: Paul Taggart/Bloomberg

“You could safely say that Iceland holds the world record in household debt relief,” said Lars Christensen, chief emerging markets economist at Danske Bank A/S in Copenhagen. “Iceland followed the textbook example of what is required in a crisis. Any economist would agree with that.”

The island’s steps to resurrect itself since 2008, when its banks defaulted on $85 billion, are proving effective. Iceland’s economy will this year outgrow the euro area and the developed world on average, the Organization for Economic Cooperation and Development estimates. It costs about the same to insure against an Icelandic default as it does to guard against a credit event in Belgium. Most polls now show Icelanders don’t want to join the European Union, where the debt crisis is in its third year.

The island’s households were helped by an agreement between the government and the banks, which are still partly controlled by the state, to forgive debt exceeding 110 percent of home values. On top of that, a Supreme Court ruling in June 2010 found loans indexed to foreign currencies were illegal, meaning households no longer need to cover krona losses.

Crisis Lessons

“The lesson to be learned from Iceland’s crisis is that if other countries think it’s necessary to write down debts, they should look at how successful the 110 percent agreement was here,” said Thorolfur Matthiasson, an economics professor at the University of Iceland in Reykjavik, in an interview. “It’s the broadest agreement that’s been undertaken.”

Without the relief, homeowners would have buckled under the weight of their loans after the ratio of debt to incomes surged to 240 percent in 2008, Matthiasson said.

Iceland’s $13 billion economy, which shrank 6.7 percent in 2009, grew 2.9 percent last year and will expand 2.4 percent this year and next, the Paris-based OECD estimates. The euro area will grow 0.2 percent this year and the OECD area will expand 1.6 percent, according to November estimates.

Housing, measured as a subcomponent in the consumer price index, is now only about 3 percent below values in September 2008, just before the collapse. Fitch Ratings last week raised Iceland to investment grade, with a stable outlook, and said the island’s “unorthodox crisis policy response has succeeded.”

People Vs Markets

Iceland’s approach to dealing with the meltdown has put the needs of its population ahead of the markets at every turn.

Once it became clear back in October 2008 that the island’s banks were beyond saving, the government stepped in, ring-fenced the domestic accounts, and left international creditors in the lurch. The central bank imposed capital controls to halt the ensuing sell-off of the krona and new state-controlled banks were created from the remnants of the lenders that failed.

Activists say the banks should go even further in their debt relief. Andrea J. Olafsdottir, chairman of the Icelandic Homes Coalition, said she doubts the numbers provided by the banks are reliable.

“There are indications that some of the financial institutions in question haven’t lost a penny with the measures that they’ve undertaken,” she said.

Fresh Demands

According to Kristjan Kristjansson, a spokesman for Landsbankinn hf, the amount written off by the banks is probably larger than the 196.4 billion kronur ($1.6 billion) that the Financial Services Association estimates, since that figure only includes debt relief required by the courts or the government.

“There are still a lot of people facing difficulties; at the same time there are a lot of people doing fine,” Kristjansson said. “It’s nearly impossible to say when enough is enough; alongside every measure that is taken, there are fresh demands for further action.”

As a precursor to the global Occupy Wall Street movement and austerity protests across Europe, Icelanders took to the streets after the economic collapse in 2008. Protests escalated in early 2009, forcing police to use teargas to disperse crowds throwing rocks at parliament and the offices of then Prime Minister Geir Haarde. Parliament is still deciding whether to press ahead with an indictment that was brought against him in September 2009 for his role in the crisis.

A new coalition, led by Social Democrat Prime Minister Johanna Sigurdardottir, was voted into office in early 2009. The authorities are now investigating most of the main protagonists of the banking meltdown.

Legal Aftermath

Iceland’s special prosecutor has said it may indict as many as 90 people, while more than 200, including the former chief executives at the three biggest banks, face criminal charges.

Larus Welding, the former CEO of Glitnir Bank hf, once Iceland’s second biggest, was indicted in December for granting illegal loans and is now waiting to stand trial. The former CEO of Landsbanki Islands hf, Sigurjon Arnason, has endured stints of solitary confinement as his criminal investigation continues.

That compares with the U.S., where no top bank executives have faced criminal prosecution for their roles in the subprime mortgage meltdown. The Securities and Exchange Commission said last year it had sanctioned 39 senior officers for conduct related to the housing market meltdown.

The U.S. subprime crisis sent home prices plunging 33 percent from a 2006 peak. While households there don’t face the same degree of debt relief as that pushed through in Iceland, President Barack Obama this month proposed plans to expand loan modifications, including some principal reductions.

According to Christensen at Danske Bank, “the bottom line is that if households are insolvent, then the banks just have to go along with it, regardless of the interests of the banks.”

To contact the reporter on this story: Omar R. Valdimarsson in Reykjavik valdimarsson@bloomberg.net.

To contact the editor responsible for this story: Jonas Bergman at jbergman@bloomberg.net


Why the Banks Are Paying You to Sign the Deed in a Shortsale

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“The bottom line is that the value of a homeowner’s signature is going up and might be the best investment in existence. The walls are closing in on trillions of dollars in real estate that could be the subject of summary proceedings repatriating the property to their rightful owners using the most basic principles of property law.” — Neil F Garfield, livinglies.me

It isn’t just hype. Law firms like the one shown below are realizing that there really is money in servicing homeowners who are underwater. But lawyers should also beware of this offer. Think about it. What economic reason would there be to pay a distressed homeowner to enter into a short-sale? If they really thought they had the right to foreclose and/or collect on the promissory note they are using, the last thing they would do is pay a person who is  already delinquent in their payments.

The banks have realized that in a short sale they don’t sign the deed — that job goes to the homeowner who is usually giving a warranty that title is all fine and dandy. The pretender lender is not doing the lying; they are getting the homeowner to do their lying. All that is fine if there was only one owner of the property or one prior mortgagee who is joining in the transaction and registering the appropriate releases, satisfactions and warranties.

If a third party or prior owner makes a claim against title, the pretender lender has succeeded in placing another layer between them and claimants who want title vested or re-vested as a result of wrongful, illegal foreclosures — or wrongful or illegal satisfactions (release and reconveyance). They now have a stronger argument about why the “chain of title” while imperfect, should not be disturbed because of the transactions that were in the public records and notice to the world.

If you are buying one of these short-sales or other REO property, take a good long look at the title policy they are offering and make sure you get advice of competent legal counsel — because most of the new “replacement” policies have language that excludes risks associated with the chain of title being mangled by securitization or claims arising out of securitization. So if you buy, you are getting naked paperwork that may or may not be ratified later — or could be the target of a wave a repatriating property to their rightful owners because the foreclosures are and were wrongful. With no title insurance proceeds you could be out of a lot of money and still have a liability if you financed the purchase.

I’ve heard some talk of the statute of limitations being applied against claims of repatriating property. I don’t know of any statute of limitations on defects in the title chain but there might be some on theft, fraud and adverse possession that could provide some cover for the older mortgages. That alone could be an interesting question. Imagine representing the bank and arguing “yes your honor, we admit that we stole this property and illegally evicted the owner. However, under the statute of limitations I have shown you, the homeowner has no cause of action because it is barred by the expiration of time.”

THAT is where civil rights violations should be alleged in Federal courts. If the states failed to safeguard the rights of homeowners in their procedures for foreclosures then the civil rights of the homeowners may well be the last and only claim the homeowner can make even after it is admitted that the foreclosures are wrongful and illegal.

The lesson here is stop waiting to see what happens. Get on your horse and have your bags packed with as much proof as you can and start your actions now. At this point, you need to show that the general policies resulted in wrongful, illegal foreclosures with “strangers” taking title to property on which they loaned no money and never financed or purchased the property; and then show that those policies that have been the subject so many studies, orders, decrees, fines, penalties, settlements etc. are the same same policies that were used in your case.

Remember, the burden of proof shifts when you cross the line of establishing a prima facie case. At that point the pretender is dead in the water unless they still have more rabbits in that hat.

BANKS PAYING HOMEOWNERS TO AVOID FORECLOSURES

by Harold Shepley & Associates, LLC, see http://www.jdsra.com

Banks, anxious to move troubled mortgages off their books, have started offering cash incentives to homeowners to sell their properties for less than what they owe – typically called a “short sale.”

In the past, banks have balked or dragged their feet at short sales. However, lately, they have decided that short sales are more advantageous than foreclosures, which can take a year or more to process. Additionally, banks take about 15% less of a loss on a short sale than they do on a foreclosure.

Some banks are now offering cash incentives to homeowners to have them sell their homes at a loss—sometimes up to $35,000. Experts believe that banks just want to get rid of bad loans. They can often afford to forgive the debt and offer incentives yet still make a profit, because they usually purchase the loan from another bank at a discount.

For a bank, approving a short sale can cut a year or more off the process of unloading a home and its accompanying loan. A short sale takes about 123 days on average. On the other hand, it takes nearly a year to foreclose on a home and then another 175 days to re-sell the property.

Allowing your home to go into foreclosure is may not be your only option. Every situation is different. For a in depth look at your situation you should contact a full service debt relief law firm like Harold Shepley & Associates that can answer any questions you may have about debt relief, mortgage modification, and short sales.

From the OCC, The Path to Discovery in Litigation

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Appendix J: Underwriter Interview Guide

Bank Name:            Examiner: Exam Date:            Product:

As necessary, ask follow-up questions until it is clear how requirements or procedures apply to the files to be examined and until the rationales for unusual policies are understood. Items in bold are apparent violations if not carried out as prescribed in Regulation B. Examiners may conduct a second interview to discuss inconsistencies found during file reviews.

If the bank’s standards are unclear or if loan files lack data on applicants’ qualifications:

•            Ask what specific problems were the basis for the reasons for denying applicants cited on the notices of adverse action.

•            Using specific approved applicants, ask how the bank determined that they differed from the denied applicants.

•            Use file comments (if any) that characterize qualifications as “good,” “adequate,” “weak,” etc., as points of reference.

GENERAL

1. Obtain from the chief underwriter an overview of the underwriting procedures and standards. Review written policies, procedures, standards, etc.

2. Do underwriting policies differ across the different loan products within the loan purpose categories of the focal points for this exam? If yes, how?

3. Do underwriting policies differ by lien status, occupancy, property type, loan purpose, or documentation type?

4. Does your bank apply different standards in any of the geographical areas within the proposed scope of the examination? If so, why?

5. Does your bank apply different standards based on the size of the loan or the value of the property securing the loan requested?

6. Does your bank apply different standards based on the amount of the applicant’s income?

7. Are there any factors we have not addressed that might make it inappropriate to compare some transactions within the proposed scope to others?

Comptroller’s Handbook for Compliance            123            Fair Lending

8. Please provide all policy manuals and underwriting guidelines for the products included in the focal points for this examination.

9. Were there any policy changes during the period under review? If yes, are there changes that would preclude combining the data for the entire time period (i.e., prevent comparison over the entire time period)? Please provide a summary of all policy changes.

10. Are there any other reasons why any two applications in the focal point could not be compared?

11. If the focal point covers home improvement loans, are home improvement loans underwritten differently from home equity loans?

12. Are any of the 2nd lien Home Purchase or Refinance loans piggyback loans? If so, how are underwriting policies different if it is a piggyback loan vs. a stand-alone 2nd lien loan?

13. What creditworthiness factors does the bank consider when making underwriting decisions for these products?

14. How are creditworthiness factors used – for example, do you use ranges of values for the FICO score, or LTV and apply different underwriting policies based on tiers that applicants fall into? Or, do you use an absolute cutoff for values of the credit score, LTV, or DTI?

15. Obtain any exception reports maintained on loans approved despite failing to meet requirements. Learn who approves exceptions.

16. How does the bank ensure that all information related to an application for credit is retained for 25 months after notifying the applicant of action taken, pursuant to Section 202.12(b) of Regulation B?

17. Find out if a credit-scoring system is used. If so, obtain information and follow guidance as called for in appendix B, “Considering Automated Underwriting and Credit Scoring Risk Factors.”

18. Obtain copies of any consumer guidance on the loan process (such as: how to develop a viable application).

19. Obtain copies of any checklists, log sheets, or other loan-processing aids used by bank personnel.

BANK STRUCTURE

1. Could you explain the bank’s organization in terms of prime, subprime or near-prime units; or subsidiaries? Are there any differences in underwriting/pricing across units/subsidiaries?

Fair Lending            124            Comptroller’s Handbook for Compliance

2. Could you explain the bank’s organization in terms of channels ‒ wholesale, retail, Internet,

correspondent banking, etc.? Are there any differences in underwriting/pricing across channels?

3. What are the bank’s primary markets or geographic areas of operation?

4. Where are the service centers for each business unit and/or channel?

5. Could you explain how an applicant gets channeled to a particular business unit?

6. Could you explain the relationship the bank has with brokers? (Correspondent vs. broker lending) What kind of discretion do brokers have in underwriting/pricing?

7. Please provide a list of the specific products and programs within the loan purpose category of the focal point for this examination?

APPLICATION PROCESS

1. Could you walk us through the application process for each of the relevant products in each channel and/or business unit?

2. Where are applications accepted? Who handles them?

3. Which bank or subsidiary staff meets face-to- face with applicants?

4. Which bank staff review or have access to the applications with completed monitoring information?

5. For a home purchase or refinance loan, how is government monitoring information obtained to comply with section 202.13 of Regulation B?

6. For other loans, how are staff directed not to obtain prohibited information?

7. If the product is covered by HMDA, when and how are data entered on the LAR?

8. What applicant information verifications are obtained? When and how?

9. What happens if there is a problem obtaining verifications or if they are inconsistent with the application data?

10. Is the applicant asked if assistance or explanation is needed?

11. Is there a “conditional approval” stage in the process?

12. Do files document conditions and attempts to resolve them?

13. How long are terms locked in by a written or oral agreement?

14. Under what circumstances are lock-ins extended?

15. How does the bank determine whether married applicants intend to apply jointly or

Comptroller’s Handbook for Compliance            125            Fair Lending

individually?

16. Do you discuss with applicants all loan products they qualify for, or only the product requested by the applicants?

17. What is the extent of automation in underwriting?

i.            How is the risk level of an applicant

determined?

ii.            Are the products being analyzed here eligible

for automated underwriting?

iii.            Do you use the Desktop Underwriter, Loan

Prospector or some customized system?

iv.            If applications are auto-decisioned, would the loan officer only be involved to verify information? If information cannot be verified what is the next step?

v.            Who has discretion during the underwriting process?

vi.            What controls are in place to monitor this discretion?

vii. What percent of applications are automatically “approved” or automatically “denied” – without additional manual review?

viii. If there are no automatic approvals or denials, what percent of applications that are on the path to approval after risk level determination are eventually denied, and what percent of applications on the path to denial are eventually approved?

ix.            If there are no automatic approvals or denials, what is the nature of the manual review? Is it primarily verification of information?

x.            Are there second reviews for denials? Are there any second reviews for approvals? Please explain what factors are considered during these second reviews.

18. Are there any other aspects to the application process that we should keep in mind during our analysis?

19. If an applicant is denied a loan for the product he or she was applying for, does the lender make an effort to offer other loan products more suitable? Please explain this process.

20. Which loans are sold in the secondary market? Are different underwriting guidelines used for these loans?

21. Is there a certain time limit to receiving required documentation? After the time limit has elapsed would the application be denied automatically?

Fair Lending            126            Comptroller’s Handbook for Compliance

22. Is there guidance given to the applicant when there is documentation outstanding? If the loan officer follows up with the borrower, how many contacts would be made?

CREDIT HISTORY

1. Which credit report is used?

2. When multiple credit scores are obtained, which score is used – lowest or middle?

3. Do you use any custom score – own or vendor product? Could you describe the elements used if it is a custom score?

4. Is the credit score of both primary applicant and co-applicant used in the credit decision? If yes, how?

5. Review with the underwriter a copy of each type of credit report used. Obtain copies of any code sheets or other guidance on using the credit report(s).

6. At what stage of the transaction is a credit report obtained?

7. Does the bureau send a copy of the report (or abstract) to consumers? Obtain a copy of the transmittal letter.

8. Do you look at details in the credit report – if so, for all or only marginal applicants? Could you give examples?

9. Do you consider compensating factors if creditworthiness factors are not satisfactory? Can you provide some examples?

10. Does the bank require that corrected information come from the bureau, or will it accept corrected information directly from the customer?

11. What constitutes a sufficient credit history on which to make a decision?

12. Is a minimum number of accounts reported required?

13. Is a minimum length of reported credit history required?

14. Has the bank made loans to persons who did not meet these standards?

15. In such a case, what evidence of creditworthiness substituted for the bureau report?

16. How does the bank evaluate additional information when an applicant seeks to correct or explain credit information from another source?

17. How does the bank evaluate joint spousal accounts when a married person applies for individual credit?

18. How does the bank treat unmarried joint applicants in terms of evaluating their creditworthiness?

Comptroller’s Handbook for Compliance            127            Fair Lending

19. How does the bank evaluate accounts held jointly with a former spouse that an applicant for individual credit asks to be considered to show his or her own creditworthiness?

20. What credit history deficiencies would cause denial?

21. Does a mortgage payment defect negate otherwise good credit? Does a good mortgage payment record offset other credit defects?

22. How far into the past is derogatory information relevant?

23. Does it matter if the debt has been paid?

24. Is minor derogatory information ignored? What kinds?

25. Does the bank solicit explanations? In what circumstances? Obtain the form letter to the applicant, if one exists. If the mode of contact is by phone rather than letter, are these noted in the file?

26. What constitutes a “good” explanation?

27. Is the failure to disclose serious derogatory information on the application fatal?

28. Is derogatory information associated with a medical problem in the applicant’s household treated differently than other derogatory information?

29. How does the bank view judgments, repossessions, and collections?

30. Under what circumstances would the bank lend to a customer with a bankruptcy in his or her record?

31. How does the bank view inquiries? Would the bank ever deny a loan solely on the basis of inquiries?

FUNDS TO CLOSE

1. What items must be covered by funds for closing?

2. How many months of cash reserves are needed?

3. When are funds from undocumented sources acceptable?

4. Are applicants with inadequate or marginal cash to close advised on how gift funds may be applied?

5. Are grants acceptable as gifts? From what sources?

6. How does the bank assure that applicants are advised uniformly regarding the use of grants?

7. May family or household cash be pooled for closing?

Fair Lending            128            Comptroller’s Handbook for Compliance

8. How are funds to close documented by the applicant?

EMPLOYMENT AND INCOME

1. How many years on the job are required for income to be deemed stable? How many years in the line of work?

2. What length of gap or frequency of changes in employment is regarded as negative? Are explanations routinely requested for employment negatives?

3. How is stable income defined?

4. Do loan originators routinely ask for verifiable unstable sources of income, such as overtime and seasonal work?

5. Is rent paid by household members counted as income?

6. Do loan originators routinely ask about rent paid by household members?

7. Is any or all nontaxable income to be “grossed up”?

8. Are applicants routinely asked whether they expect their income to rise? What type of documentation is needed to establish a projected increase?

9. How is part-time income handled?

10. How is annuity, pension, or retirement income handled?

11. How is income from alimony, child support, and separate maintenance handled? How is income from public assistance handled?

PROJECTED HOUSING COSTS AND DEBTS

1. What types of debts are included or excluded from ratio calculations?

2. Are certain types of accounts viewed more negatively than others, for example, revolving debt?

3. Under what circumstances would an applicant be advised to pay down debts?

4. Would the bank specify which debts should be paid off?

DEBT RATIOS

1. What maximum housing debt and total debt ratios are used?

2. What is the source or rationale for them?

3. What would justify approving an application with a ratio higher than the requirement?

4. Are applicants with qualifying ratios ever refused because of debt considerations?

COLLATERAL/APPRAISALS

1. Are applicants advised of their right to obtain

Comptroller’s Handbook for Compliance            129            Fair Lending

a copy of the appraisal report on their property? Is a copy routinely provided? If the FHFA Code5 applies, are applicants provided a copy of the appraisal upon completion or at least three days before closing unless they waive the right?

2. Does the bank employ its own appraisers? If the FHFA Code applies, does the bank take appropriate steps to prevent the improper influencing of such in-house appraisers and affiliated appraisers, appraisal company, or appraisal management companies?

3. Review the guidance the bank provides appraisers, whether employed or independent.

4. What rules govern adjustments to initial appraised values? If the FHFA Code applies, ensure any such adjustments are consistent with the appraiser independence safeguard standards.

5. Who reviews appraisals? If the FHFA Code applies, does the bank quality control test a randomly selected 10 percent of appraisals?

6. When is PMI required?

7. What does the bank do if a PMI company refuses to insure the loan?

8. On adverse action notices and HMDA-LAR “reasons for denial,” does the bank report PMI denials as “denied for PMI,” or does it merely repeat the substantive reason that the PMI company cited?

9. Under what circumstances would a lender order a second appraisal?

10. If the FHFA Code applies, does the bank prohibit reliance on appraisals completed by mortgage brokers or other third parties?

11. What steps does the bank take to ensure appraiser independence and that the appraiser is not coerced or influenced?

GUARANTORS, ETC.

1. Under what circumstances would a guarantor materially increase an applicant’s likelihood of approval (e.g., if the applicant had bad ratios, poor credit history)?

2. Are applicants with such weak qualifications routinely told that a guarantor would increase the likelihood of approval?

DENIALS

1. Obtain a list of the reasons for denial and review it with the interviewee.

5 The FHFA Code will apply to all conventional, single-family loans originated on or after May 1, 2009, that are sold to the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).

Fair Lending            130            Comptroller’s Handbook for Compliance

2. How is the adverse action notice prepared? Review it with the interviewee.

3. How does the bank document the timely provision of adverse action notices?

4. Are all denied applicants given a second review? Describe the review process.

FATAL FLAWS AND DEROGATORIES

1. Are there any “fatal” values for factors that would result in an automatic decline? Is there any written guidance for the same?

2. Would a bankruptcy in the last six months be fatal – if not, what would be a compensating factor? Are there any other fatal flaws – e.g., LTV >125 or DTI >100, etc.?

3. What is the time frame considered for derogatory factors? Is the magnitude of delinquencies considered as well? (e.g., x number of 30-day delinquencies compared to y number of 90-day delinquencies?) Also, within the time frame considered, would newer derogatories get more weight than older ones (e.g., if the time frame for bankruptcies is six months, would a bankruptcy which is one month old get more weight than a five- month-old bankruptcy?)

4. Are there any compensating factors that can make up for derogatory information – can you provide some examples?

SECONDARY MARKET CONSIDERATIONS

1. To whom does the bank principally sell loans?

2. Arrange to have copies of the loan purchasers’ guidance available during file review.

3. In what ways are bank standards different from those loan purchasers require?

4. What have been the lender’s experiences in attempting to persuade loan purchasers to reconsider refusals to purchase?

PORTFOLIO LENDING

1. Does the bank lend for its own portfolio?

2. How do the requirements for this differ from those for loans to be sold?

3. Does the bank hold loans to “season” them until sale? What features would cause a loan to be handled this way?

4. Does the bank purchase loans?

EXCEPTIONS/OVERRIDES

1. Are there any exceptions to the bank’s stated requirements? Can you provide examples? When would they be made?

2. Does the bank produce (for its management’s use) an “exceptions” report that lists all residential loans made that do not meet the bank’s stated requirements? Obtain any such report for the period being examined in the fair lending review.

Comptroller’s Handbook for Compliance            131            Fair Lending

3. At what level in the bank can loans be approved that fail to meet requirements?

4. Are there any overrides? Do you generate a report or list of overrides or flag them?

5. Is there written guidance on exceptions and overrides? If so, please provide.

6. Who authorizes exceptions and/or overrides?

7. Is any special consideration given based on customer relationship with the bank? If so, please explain.

COMPENSATING/OFFSETTING FACTORS

1. Do strong qualifications in certain areas overcome an applicant’s failure to meet requirements in others?

2. Describe specific factors that operate to overcome particular deficiencies (e.g., projected income compensates for excessive total debt ratio)?

3. Are compensating factors formal or informal? (Obtain any written guidance.)

4. What constitutes a “good customer relationship?”

LOAN TERMS AND CONDITIONS

1. How are prices set? Is there a range?

2. Why would prices differ? Which aspects of pricing are fixed and which are discretionary?

3. How are loan terms set? Why would loan terms vary?

4. How is the down payment set? Why would requirements vary?

5. How are collateral requirements set? Why would requirements vary?

6. How are escrow amounts set? Why would they vary?

7. What fees are imposed for the product? Why would they vary?

8. Please provide a copy of each of the rate sheets you use? If rates change often, a set of rate sheets for one or a small number of dates would be sufficient.

9. Please provide all policy manuals and pricing guidelines for the products included in the focal points for this exam.

10. Does pricing policy differ across the different loan products within the loan purpose categories identified in the focal points? If yes, how?

11. Does pricing vary across channels and/or geography? If yes, how? Could you provide a list of all of the areas that have their own rate sheets?

12. Were there any policy changes in pricing during the period under review? If yes, would

Fair Lending            132            Comptroller’s Handbook for Compliance

these changes preclude combining the data for the time period covered by this exam? Also, please provide a summary of these changes.

13. Were there any special promotions during the period under analysis? If yes, please explain.

14. Could you walk us through the pricing process for each of the relevant products in each channel and/or business unit? How do brokers price loans? Do they have different rate sheets? Are any rate sheets broker-specific?

15. What are the reasons why interest rates would be lower than or greater than what appears on the pricing sheets?

16. Please expand on the discretionary reasons for price differences?

i.            Can you provide some examples of these reasons?

ii.            How is pricing influenced by loan officers? iii.            Is loan officer compensation tied to pricing? If

so, please explain. iv.            How is pricing influenced by brokers?

v.            How are brokers compensated? vi.            Are there caps for broker compensation?

vii.            Who else has discretion during the pricing process?

viii.            What controls are in place to monitor discretion in pricing?

ix.            Explain to what degree potential loan customers are allowed to negotiate a better interest rate/loan fees. Are loan officers or brokers allowed to deviate from the pricing sheets? If yes, to what degree, what are the criteria considered, and how are the pricing exceptions/pricing discretion documented?

17. What fees are charged? When and why would charged fees differ? Is there any discretion in charging fees?

18. Are there maximum and minimum fees? Any exceptions?

19. Do any fees vary by state due to state-specific laws?

20. Which fees affect the APR?

21. Are loan customers allowed to buy down the interest rates by paying more in discount points? If yes, explain the criteria and provide written guidance regarding this practice.

22. How are origination points, discount points, and YSP determined? Are there caps on each or caps on totals?

23. If any of the 2nd lien loans are piggyback loans,

i.            How are pricing policies different if a product is a piggyback loan vs. a stand-alone second lien loan?

Comptroller’s Handbook for Compliance            133            Fair Lending

ii.            How are pricing policies different if the corresponding first lien is held with another bank?

iii.            Are first and second lien loans as part of a combo loan priced independently?

FILE DOCUMENTATION

1. How are contacts with the customer documented?

2. How are in-bank conferences (or other face-to- face encounters) with the applicant documented?

3. What work sheets should be found in the typical file?

ELECTRONIC DATA

1. Can automatic approvals and denials be identified in the electronic data? That is, are there identifiers for automated approvals and/or denials; or identifiers for the output from an automated system (such as DU/LP)?

2. Can “document type” be identified in the electronic data?

3. Is product name available in the electronic data?

4. Are applicant names and addresses available in the electronic data?

5. Can piggyback loans be identified in the electronic data? If yes, can one also identify if the 1st lien is from this bank or from another bank?

6. Can individual brokers be identified in the data?

7. Is there electronic information on any of the following: number of trade lines; number of 30- 60- 90-day “lates” and the time period in which those “lates” occurred; incidence of bankruptcy and/or foreclosure; combined loan to value; combined debt to income; years in job; years in occupation; loan term; identifier for whether applicant uses ACH; override codes; collateral value; customer relationship; employment type (salaried or self-employed); any measure of “stable income”; indicator for first-time home buyer?

8. Is there electronic information on any additional pricing variables that can be incorporated into the dataset – overages; underages; broker fees; total broker compensation; YSP; any other points and fees; rate lock date or period (15-30-45-60 days, etc.)?

9. Could you also provide explanations for the variables provided in the electronic dataset?

10. If you update DTI, LTV, or other credit variables during the underwriting process, does the updated information appear in the data?

 

The Neglected Auction Process as a Vehicle for Voiding Bank Title to REO Property

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After doing a lot of research and analysis on the subject to foreclosure auctions and credit bids I have arrived at several conclusions. The result is that I believe there are multiple causes of action against the “Substitute Trustee” (often with forged fabricated documents and the original trustee whose passive stance allowed the wrongful foreclosures to occur. There may well be an action in mandamus against the recording offices that maintain property records showing the mistaken title to the REO property and potentially a federal action for deprivation of civil rights in the event the state court grants relief.

Let’s start with the original trustee on a Deed of Trust. According to the legislative history of using the “power of sale” the Trustee on the deed of trust is inserted to replace the court, so that the due process rights of the homeowners could be protected. Until the 1990’s the trustee, in the event of impairment of the collateral or non-payment of the loan, would receive an instruction from the lender to sell the home according to the power of sale included in the deed of trust. The Trustee, acting exactly the same as a court would review the papers.

Seeing that the lender was the payee on the note, the lender was the beneficiary under the deed of trust, and receiving adequate assurances that the note was still payable to the lender, but the borrower had been unable or unwilling to make the scheduled payments, the Trustee was perfectly safe in issuing the required notice of default or the notice of sale. The foreclosure process would be considered launched and the borrower in Arizona for example, would have up until the day before the scheduled sale to file a Motion for Temporary Injunction, citing reasons why the sale should not proceed. Normally any defect in legal description or any allegation of payments being improperly implied would get the borrower some time, and a hearing as to whether there was any truth to the allegations. Thus the Judge would have issued a Temporary restraining order and conducted a hearing on the merits to determine if the temporary injunction should become permanent.

Assuming the Court found no merit to the borrower’s allegations, the Judge would then issue an order permitting the lender and trustee to go forward with the sale of the property. And this is where the rubber meets the road.

Up until the 1990’s the date and time of the auction would be set and while there might be communication between the lender and the trustee prior to the auction the property was sold only at the time, date and place posted on the notice of sale as required by local statutes. If the lender was $100,000, they were allowed to bid $100,000. If they wanted to bid more than $100,000 then they needed to pay cash to the trustee. If anyone other than the lender wished to bid, they could only pay in cash. A Trustee’s deed upon foreclosure is issued to the highest bidder and the deed from the trustee carries a heavy presumption of validity. The foreclosure shown in the chain of title would be no cloud, defect or question of marketability of title. Any third party purchasing the property from the bank or lender was and could be assured that title was clear and that the title insurance was real, viable, enforceable and effective. In other words the new buyer could have maximum confidence that title was clear and that he owned the property as a result of the lender’s sale to the new buyer.

The sale cannot be private. Yet today, virtually all original trustees are fired and a new or “substitute trustee” is named in place of the old trustee because of the right of the beneficiary to change trustees any time they want. But we have seen that the substitutions of trustee are virtually all robo-signed, fabricated, forged and fraudulent documents which means that the original trustee is or should be considered the trustee under the deed of trust. The acts of the “substitute trustee” are therefore void and constitute a private sale — exacerbated by the fact that most “substituted trustees” are either owned directly by the new party claiming to be the lender or beneficiary or operated by a consortium of banks and servicers who answer only to the party claiming to be the new lender or beneficiary.

Thus neither the original trustee on the deed of trust nor the substitute trustee perform any review or due diligence to match up the lender shown on the promissory note, the beneficiary shown on the deed of trust, and the new parties claiming to be lenders, creditors and servicers pursuant to documents that were never disclosed much less signed by the borrower.

The key role of the trustee has been inverted by the illegal substitution of trustee and the acts and process that followed. If this practice is allowed by state court, then the appropriate action would be a civil rights action against the state allowing the power of sale to be used without confirmation of the parties, the amount due, and the identity of the creditor, the lender, and the beneficiary.

In theory the power of sale does not violate the due process requirement of a fair hearing before the property can be taken because there are provisions allowing the borrower to object and a Trustee who acts as General master to at least confirm the bear essentials of a valid foreclosure. BUT IN THE ABSENCE OF SUCH REVIEW, THE BORROWER’S OBJECTIONS ARE OBVIATED AND THE PROPERTY IS TAKEN WITHOUT A FAIR HEARING ON THE MERITS. As applied in this case any statute allowing the power sale would be unconstitutional if it removed the Trustee and inserted the mortgagee or beneficiary.

Research or consultation with any expert in property and/or constitutional law would result in unanimous corroboration of what has been described above. submitted in the wrong order to the wrong parties. The problem with the auction is the same as the problem with securitization — in most cases it doesn’t legally or actually exist. It doesn’t legally exist because the wrong documents were submitted to the wrong party. It doesn’t actually exist because the transaction never took place (no money or property actually changed hands) regardless of what is recited on any of the fabricated documents, forged under a robo-signing or “surrogate signing” process after the documentation was fabricated out of thin air and then recorded — now with the full knowledge and cooperation of county recorders whose offices have been cheated out of millions of dollars in filing fees.

So here are the problems.

  1. The use of a faulty, forged, defective, forged substitution of trustee, recorded or not, means that there was no legal substitution. In most cases this cannot be cured because the loan originators named on the origination papers are long gone, which is why the banks and servicers started the illegal document fabrication mills.  In my opinion, the original trustee should be sued for damages and sued for an entry of a mandatory injunction requiring the original trustee to assume the duties of the trustee, which would include voiding all transactions and documents performed in the name of the substitute trustee.
  2. The use of a faulty, forged, defective, forged substitution of trustee, recorded or not, means that there was no legal substitution. In most cases this cannot be cured because the loan originators named on the origination papers are long gone, which is why the banks and servicers started the illegal document fabrication mills.  In my opinion, the substitute trustee should be sued for damages and sued for an entry of a prohibitive injunction requiring the substituted trustee to stop any and all actions undertaken by them as Trustees under the deed of Trust and a mandatory injunction requiring the substituted trustee to file disclaimers in the records of all such foreclosures and chain of title appearing in the title registry of the recording office which would include voiding all transactions and documents performed in the name of the substitute trustee. An action naming the the title registrar might be required to comply with the court’s order.
  3. Even if the substitute trustee was real or joined with the original trustee the actual facts and behavior at and before the auction are wrongful, illegal and potentially criminal. In most cases trustees show up at the auction with a statement that they have already received a credit bid from the “lender” in excess of the value of the property, thus eliminating any competition and since the arrangement was made before the scheduled time of the auction it constitutes a private sale.
  4. But the most egregious defect in the auction comes from the exercise of common sense which is shown under the law and statutes. All such auctions must be a sale to the highest bidder or else the borrower is potentially still liable or possibly entitled to excess proceeds once the accounting is done. Since the actual bidder is not an actual creditor, the logical interpretation would require either that the sale never legally took place or that the borrower is entitled to the proceeds or outcome of the sale which would be the home or the value of the home.
  5. However there is no such accounting and despite the laws that clearly state the terms upon which one may submit a bid, these statutory requirements are routinely ignored. Without any proof or even submission to the trustee, substituted or otherwise, a stranger to the borrower’s transaction is allowed to buy the property not for cash, but for the value or amount due under the borrower’s obligation. In other words, your  Aunt  Sally can go to the auction and submit papers to the trustee that are totally false and then submit a “credit bid” on any property that the trustee calls for auction and where the bank, servicer or their attorney fails to show or otherwise create an appearance.
  6. Aunt Sally could become rich very quickly buying property without cash and the use of a little elbow grease creating false documentation. If the trustee received the papers from someone looking like a lawyer and sounding like they were an authorized agent or representative, they probably would get away with it — simply because the substitute trustees are all low paid clerks ordered by the pretender lenders to question nothing. What is one more pretender lender, more or less in a sea of fraudulent documents? What stops the average Joe from gaming the system in the same way the banks and servicers are gaming the system?

Nothing in this article should be construed as legal advice with respect to your property or any other property. Before taking any actions at any auctions or any other legal proceeding you should consult the services of legal counsel who is licensed in the jurisdiction in which the property is located.

For more information on auctions and credit bids, especially under the laws of the state of California, please see —-> foreclosure_bidding strategies

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