Foreclosures on Nonexistent Mortgages

I have frequently commented that one of the first things I learned on Wall Street was the maxim that the more complicated the “product” the more the buyer is forced to rely on the seller for information. Michael Lewis, in his new book, focuses on high frequency trading — a term that is not understood by most people, even if they work on Wall Street. The way it works is that the computers are able to sort out buy or sell orders, aggregate them and very accurately predict an uptick or down-tick in a stock or bond.

Then the same investment bank that is taking your order to buy or sell submits its own order ahead of yours. They are virtually guaranteed a profit, at your expense, although the impact on individual investors is small. Aggregating those profits amounts to a private tax on large and small investors amounting to billions of dollars, according to Lewis and I agree.

As Lewis points out, the trader knows nothing about what happens after they place an order. And it is the complexity of technology and practices that makes Wall Street behavior so opaque — clouded in a veil of secrecy that is virtually impenetrable to even the regulators. That opacity first showed up decades ago as Wall Street started promoting increasing complex investments. Eventually they evolved to collateralized debt obligations (CDO’s) and those evolved into what became known as the mortgage crisis.

in the case of mortgage CDO’s, once again the investors knew nothing about what happened after they placed their order and paid for it. Once again, the Wall Street firms were one step ahead of them, claiming ownership of (1) the money that investors paid, (2) the mortgage bonds the investors thought they were buying and (3) the loans the investors thought were being financed through REMIC trusts that issued the mortgage bonds.

Like high frequency trading, the investor receives a report that is devoid of any of the details of what the investment bank actually did with their money, when they bought or originated a mortgage, through what entity,  for how much and what terms. The blending of millions of mortgages enabled the investment banks to create reports that looked good but completely hid the vulnerability of the investors, who were continuing to buy mortgage bonds based upon those reports.

The truth is that in most cases the investment banks took the investors money and didn’t follow any of the rules set forth in the CDO documents — but used those documents when it suited them to make even more money, creating the illusion that loans had been securitized when in fact the securitization vehicle (REMIC Trust) had been completely ignored.

There were several scenarios under which property and homeowners were made vulnerable to foreclosure even if they had no mortgage on their property. A recent story about an elderly couple coming “home” to find their door padlocked, possessions removed and then the devastating news that their home had been sold at foreclosure auction is an example of the extreme risk of this system to ALL homeowners, whether they have or had a mortgage or not. This particular couple had paid off their mortgage 15 years ago. The bank who foreclosed on the nonexistent mortgage and the recovery company that invaded their home said it was a mistake. Their will be a confidential settlement where once again the veil of secrecy will be raised.

That type of “mistake” was a once in a million possibility before Wall Street directly entered the mortgage loan business. So why have we read so many stories about foreclosures where there was no mortgage, or was no default, or where the mortgage loan was with someone other than the party who foreclosed?

The answer lies in how these properties enter the system. When a bank sells its portfolio of loans into the system of aggregation of loans, they might accidentally or intentionally include loans for which they had already received full payment. Maybe they issued a satisfaction maybe they didn’t. It might also include loans where life insurance or PMI paid off the loan.

Or, as is frequently the case, the “loan” was sold after the homeowner was merely investigating the possibility of a mortgage or reverse mortgage. As soon as they made application, since approval was certain, the “originator” entered the data into a platform maintained by the aggregator, like Countrywide, where it was included in some “securitization package.

If the loan closed then it was frequently sold again with the new dates and data, so it would like like a different loan. Then the investment banks, posing as the lenders, obtained insurance, TARP, guarantee proceeds and other payments from “co-obligors” on each version of the loan that was sold, thus essentially creating the equivalent of new sales on loans that were guaranteed to be foreclosed either because there was no mortgage or because the terms were impossible for the borrower to satisfy.

The LPS roulette wheel in Jacksonville is the hub where it is decided WHO will be the foreclosing party and for HOW MUCH they will claim is owed, without any allowance for the multiple sales, proceeds of insurance, FDIC loss sharing, actual ownership of the loans or anything else. Despite numerous studies by those in charge of property records and academic studies, the beat goes on, foreclosing by entities who are “strangers to the transaction” (San Francisco study), on documents that were intentionally destroyed (Catherine Ann Porter study at University of Iowa), against homeowners who had no idea what was going on, using the money of investors who had no idea what was going on, and all based upon a triple tiered documentary system where the contractual meeting of the minds could never occur.

The first tier was the Prospectus and Pooling and Servicing Agreement that was used to obtain money from investors under false pretenses.

The second tier consisted of a whole subset of agreements, contracts, insurance, guarantees all payable to the investment banks instead of the investors.

And the third tier was the “closing documents” in which the borrower, contrary to Federal (TILA), state and common law was as clueless as the investors as to what was really happening, the compensation to intermediaries and the claims of ownership that would later be revealed despite the borrower’s receipt of “disclosure” of the identity of his lender and the terms of compensation by all people associated with the origination of the loan.

The beauty of this plan for Wall Street is that nobody from any of the tiers could make direct claims to the benefits of any of the contracts. It has also enabled then to foreclose more than once on the same home in the name of different creditors, making double claims for guarantee from Fannie Mae, Freddie Mac, FDIC loss sharing, insurance and credit default swaps.

The ugly side of the plan is still veiled, for the most part in secrecy. even when the homeowner gets close in court, there is a confidential settlement, sometimes for millions of dollars to keep the lawyer and the homeowner from disclosing the terms or the reasons why millions of dollars was paid to a homeowner to keep his mouth shut on a loan that was only $200,000 at origination.

This is exactly why I tell people that most of the time their case will be settled either in discovery where a Judge agrees you are entitled to peak behind the curtain, or at trial where it becomes apparent that the witness who is “familiar” with the corporate records really knows nothing and ahs nothing about the the real history of the loan transaction.

Message on the Forensic TILA Analysis — It’s a Lot More Than it Appears

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No doubt some of you know that we have had some challenges regarding the Forensic TILA analysis. It’s my fault. I decided that the plain TILA analysis was insufficient for courtroom use based upon the feedback that I was getting from lawyers across the country. Yet I believed then as I believe now that the only law that will actually give real help to the homeowners — past, present and future — is TILA, REG Z and RESPA. Once it dawns on more people that there were two closings, one that was hidden from the borrower which included the real money funding his loan and the other being a fake closing purporting to loan money to the homeowner in a transaction that never happened, the gates will start to open. But I am ahead of the curve on that.

For those patiently waiting for the revisions, I appreciate your words of kindness. And your words of wisdom regarding the content of the report which I have been wrestling with. I especially appreciate your willingness to continue doing business with us despite the lack of organizational skills and foresight that might have prevented this situation. I guess the problem boils down to the fact that when I started the blog in 2007 I never intended it to be a business. But as it evolved and demands grew we were unable to handle it without help from the outside. If I had known I was starting a business at the beginning I would have done things much differently.

At the moment I am wrestling with exactly how I want to portray the impact of the appraisal fraud on the APR and the impact on “reset” payments have on the life of the loan, which in turn obviously effects the APR. I underestimated the computations required to do both the standard TILA Audit and the extended version which I think is the only thing of value. The standard TILA audit simply doesn’t tell the story although there is some meat in there by which a borrower could recover some money. There is also the standard issue of steering the borrower into a more expensive loan than that which he qualified for.

The other thing I am wrestling with is the computational structure of the HAMP presentation so that we can show that we are using reasonable figures and producing a reasonable offer. This needs to be credible so that when the rejection comes, the borrower is able to say that the offer was NOT considered by the banks and servicers because of the obvious asymmetry of results — the “investor” getting a lot less money from the proceeds of foreclosure.

And THAT in turn results in the ability of the homeowner to demand proof (a) that they considered it (b) that it was communicated to the investor (with copies) and (c) that there was a reasonable basis for rejection — meaning that the servicer must SHOW the analysis that was used to determine whether to accept or reject the HAMP proposal. Limited anecdotal evidence shows that like that point in discovery when the other side has “lost” in procedural attempts to block the borrower, the settlement is achieved within hours of the entry of the order.

So I have approached the analysis from the standpoint of another way to force disclosure and discovery as to exactly what money the investor actually lost, whether the investor still exists and whether there were payments received by agents of the creditor (participants in the securitization chain) that were perhaps never credited to the account of the bond holder and therefore which never reduced the amount due to the creditor from the homeowner. My goal here is to get to the point where we can say, based upon admissions of the banks and servicers that there is either nobody who qualifies as a creditor to submit a “credit bid” at auction or that such a party might exist but is different than the party who was permitted to initiate the foreclosure proceedings.

The complexity of all this was vastly underestimated and I overestimated the ability of outside analysts to absorb what I was talking about, take the ball and run with it. Frankly I am wondering if the analysis should be worked up by the people who do our securitization work, whose ability to pierce through the numerous veils has established a proven track record. In the meantime, I will plug along until I am satisfied that I have it right, since I am actually signing off on the analysis, and thus be able to confidently defend the positions taken on the analytical report (Excel Spreadsheet) etc.

People Have Answers, Will Anyone Listen?

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Editor’s Comment: 

Thanks to Home Preservation Network for alerting us to John Griffith’s Statement before the Congressional Progressive Caucus U.S. House of Representatives.  See his statement below.  

People who know the systemic flaws caused by Wall Street are getting closer to the microphone. The Banks are hoping it is too late — but I don’t think we are even close to the point where the blame shifts solidly to their illegal activities. The testimony is clear, well-balanced, and based on facts. 

On the high costs of foreclosure John Griffith proves the point that there is an “invisible hand” pushing homes into foreclosure when they should be settled modified under HAMP. There can be no doubt nor any need for interpretation — even the smiliest analysis shows that investors would be better off accepting modification proposals to a huge degree. Yet most people, especially those that fail to add tacit procuration language in their proposal and who fail to include an economic analysis, submit proposals that provide proceeds to investors that are at least 50% higher than the projected return from foreclosure. And that is the most liberal estimate. Think about all those tens of thousands of homes being bull-dozed. What return did the investor get on those?

That is why we now include a HAMP analysis in support of proposals as part of our forensic analysis. We were given the idea by Martin Andelman (Mandelman Matters). When we performed the analysis the results were startling and clearly showed, as some judges around the country have pointed out, that the HAMP loan modification proposals were NOT considered. In those cases where the burden if proof was placed on the pretender lender, it was clear that they never had any intention other than foreclosure. Upon findings like that, the cases settled just like every case where the pretender loses the battle on discovery.

Despite clear predictions of increased strategic defaults based upon data that shows that strategic defaults are increasing at an exponential level, the Bank narrative is that if they let homeowners modify mortgages, it will hurt the Market and encourage more deadbeats to do the same. The risk of strategic defaults comes not from people delinquent in their payments but from businesspeople who look at the principal due, see no hope that the value of the home will rise substantially for decades, and see that the home is worth less than half the mortgage claimed. No reasonable business person would maintain the status quo. 

The case for principal reductions (corrections) is made clear by the one simple fact that the homes are not worth and never were worth the value of the used in true loans. The failure of the financial industry to perform simple, long-standing underwriting duties — like verifying the value of the collateral created a risk for the “lenders” (whoever they are) that did not exist and was present without any input from the borrower who was relying on the same appraisals that the Banks intentionally cooked up so they could move the money and earn their fees.

Many people are suggesting paths forward. Those that are serious and not just positioning in an election year, recognize that the station becomes more muddled each day, the false foreclosures on fatally defective documents must stop, but that the buying and selling and refinancing of properties presents still more problems and risks. In the end the solution must hold the perpetrators to account and deliver relief to homeowners who have an opportunity to maintain possession and ownership of their homes and who may have the right to recapture fraudulently foreclosed homes with illegal evictions. The homes have been stolen. It is time to catch the thief, return the purse and seize the property of the thief to recapture ill-gotten gains.

Statement of John Griffith Policy Analyst Center for American Progress Action Fund

Before

The Congressional Progressive Caucus U.S. House of Representatives

Hearing On

Turning the Tide: Preventing More Foreclosures and Holding Wrong-Doers Accountable

Good afternoon Co-Chairman Grijalva, Co-Chairman Ellison, and members of the caucus. I am John Griffith, an Economic Policy Analyst at the Center for American Progress Action Fund, where my work focuses on housing policy.

It is an honor to be here today to discuss ways to soften the blow of the ongoing foreclosure crisis. It’s clear that lenders, investors, and policymakers—particularly the government-controlled mortgage giants Fannie Mae and Freddie Mac—must do all they can to avoid another wave of costly and economy-crushing foreclosures. Today I will discuss why principal reduction—lowering the amount the borrower actually owes on a loan in exchange for a higher likelihood of repayment—is a critical tool in that effort.

Specifically, I will discuss the following:

1      First, the high cost of foreclosure. Foreclosure is typically the worst outcome for every party involved, since it results in extraordinarily high costs to borrowers, lenders, and investors, not to mention the carry-on effects for the surrounding community.

2      Second, the economic case for principal reduction. Research shows that equity is an important predictor of default. Since principal reduction is the only way to permanently improve a struggling borrower’s equity position, it is often the most effective way to help a deeply underwater borrower avoid foreclosure.

3      Third, the business case for Fannie and Freddie to embrace principal reduction. By refusing to offer write-downs on the loans they own or guarantee, Fannie, Freddie, and their regulator, the Federal Housing Finance Agency, or FHFA, are significantly lagging behind the private sector. And FHFA’s own analysis shows that it can be a money-saver: Principal reductions would save the enterprises about $10 billion compared to doing nothing, and $1.7 billion compared to alternative foreclosure mitigation tools, according to data released earlier this month.

4      Fourth, a possible path forward. In a recent report my former colleague Jordan Eizenga and I propose a principal-reduction pilot at Fannie and Freddie that focuses on deeply underwater borrowers facing long-term economic hardships. The pilot would include special rules to maximize returns to Fannie, Freddie, and the taxpayers supporting them without creating skewed incentives for borrowers.

Fifth, a bit of perspective. To adequately meet the challenge before us, any principal-reduction initiative must be part of a multipronged

To read John Griffith’s entire testimony go to: http://www.americanprogressaction.org/issues/2012/04/pdf/griffith_testimony.pdf


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


LPS: So We Fabricated and Forged Documents… So what? Here’s what!!

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IT’S ALL ABOUT THE MONEY, STUPID!

Editor’s Analysis: This is the moment I have been waiting for. After years of saying the documents were real, they admit, in the face of a mountain of irrefutable evidence, that the documents were not real, but that as a convenience they should still be allowed to use them. Besides the obvious criminality and slander of tile and all sorts of other things that are attendant to these practices, there is a certain internal logic to their assertion and you should not dismiss it without thinking about it. Otherwise you will be left with your jaw hanging open wondering how an admitted criminal gets to keep the spoils of illegal activities.

I have been pounding on this subject for weeks because I could see in the motions being filed by banks and servicers that they had changed course and were now pursuing a new strategy that plays on the simple logic that you took a loan, you signed a note, you didn’t make the payments as stated in the note — everything else is window dressing and for the various parties in securitization to sort amongst themselves.

All foreclosure actions are actually, when they boil them down, just collection actions. It is about money owed. So far, the arguments that have worked have been those occasions where the conduct of the Bank has been so egregious that the Judge wasn’t going to let them have the money or the house even if they stood on their heads.

But to coordinate an attack on these foreclosures, you need to defeat the presumption that the collection effort is simple, that the homeowner didn’t pay a debt that was due, and that the arguments concerning the forged, fabricated, fraudulent documents are paperwork issues that can be taken up with law enforcement or civil suits between the various undefined participants in the non-existent securitization chain.

Now we have LPS admitting false assignments. The question that must be both asked and answered by you because you have enough data and expert opinions to raise the material fact that there was a reason why the false paperwork was fabricated and forged and it wasn’t because of volume. Start with the fact that they didn’t have any problem getting the paperwork signed they wanted in the more than 100 million mortgage transactions “closed” during this mortgage meltdown period. Volume doesn’t explain it.

Your first assertion should be payment and waiver because the creditor who loaned the money got paid and waived any remainder. You use the Securitization and title report from a credible expert who can back up what you are saying. That gets you past the motions to dismiss and into discovery, where these cases are won.

Your assertion should be that the paperwork was fabricated because there was no transaction to support the contents of any of the assignments. And from that you launch the basic attack on the loan closing itself. First, following the above line of reasoning, they used the same tactics to create false paperwork at closing that identified neither the lender (contrary to the requirements of TILA and state lending statutes), nor ALL of the terms of the transaction, as contained in the prospectus and PSA given to investors.

But let us be clear. There are only two ways you can get out of a debt: (1) payment and (2) waiver. There isn’t any other way so stop imagining that some forgery in the documents is going to give you the house. It won’t. But if you can show payment or waiver or both, then you have a material issue of fact that completely or at least partially depletes the presumption of the Judge that you simply don’t want to pay a legitimate debt from a loan you now regret.

Why are the terms of the securitization documentation important?

  1. Because it was the investor who came up with the money and it was the borrower who took it. The money transaction was between the investors and the homeowners, with everyone else an intermediary or conduit.
  2. It is ONLY the securitization documents that provide power or authority for the servicer or trustee to act as servicer or trustee of the mortgage backed security pool.
  3. If the deal was between the investor who put up the money and the homeowner who took it, where are the documents between the investor and the homeowner? They can only exist if we connect the closing documents with the homeowner with the closing documents with the investor. 
  4. But if the transfer or assignment documents were defective, faulty, forged and fabricated, as well as fraudulent attempts to transfer bad loans into pools that investors said they would only accept good loans, then the there is nothing in the REMIC, there is no trust, there is no trustee of the pool and the servicer has authority to service nothing. 
  5. That breaks the connection between the so-called closing documents with the homeowner and the so-called closing documents with the investor. No connection means no nexus. No nexus means the investors have a claim arising from the fact that they loaned money but they don’t get the benefit of a secured loan and they especially don’t get anything unless THEY make the claim.
  6. If the investors choose not to make the claim for collection or foreclosure, there is nothing anywhere in any law that allows an interloper to insert himself into the process and say that if the investor doesn’t want it, I’ll take it.
  7. Your position should address the reality: appraisal fraud, deceptive lending practices, violations of TILA all contributed to the acceptance of a faulty loan product. But that isn’t why your client doesn’t owe the money. Your client does owe the money, but it has been paid to the creditor and the balance has been waived in the insurance and credit default swap contracts as well as the the Federal bailouts.
  8. The source of funding has been paid in whole or in part, they received the monthly payments even while they declared a default against your client homeowner, and they waived any right to pursue the rest from homeowners because they wish to avoid the exposure to defenses and affirmative defenses that the homeowner will  bring in the mortgage origination process.
  9. The failure to identify the true creditor contrary to the requirements of law and the failure to describe in the note and mortgage the full terms of the loans creates a fatal defect when applied to THIS case on its facts, which you will be able to prove if you are allowed to proceed in discovery.
  10. Allowing interlopers into the process to pretend as though they were the mortgage lenders or successors leaves the homeowner with nobody to sue for offset, and no defenses to raise against a party who had nothing to do with either the investor or the homeowner in the closing with the investor wherein mortgage bonds were purchased, and the closing with the homeowner in which a portion of the funds collected were used to fund a loan to the homeowner.

LPS Uses Bogus Florida IG Report on Firing of Foreclosure Fraud Investigators in Motion to Dismiss Nevada Lawsuit

By: David Dayen http://news.firedoglake.com/2012/01/31/lps-uses-bogus-florida-ig-report-on-firing-of-foreclosure-fraud-investigators-in-motion-to-dismiss-nevada-lawsuit/

We’re at T-minus four days for sign-ons to the foreclosure fraud settlement, and we know that Florida’s Pam Bondi is on board, despite pushback from advocates in her state, ground zero for the foreclosure crisis. There’s an interesting nugget buried in this article, though.

Bondi spokeswoman Jennifer Meale said in an email that their concerns are “misguided” because the settlement would provide a historic level of monetary relief and will overhaul the mortgage industry.

“Rather than engaging in political grandstanding, Attorney General Bondi is working hard to reach an agreement that gets Floridians substantial relief now and holds banks accountable for their misconduct,” Meale wrote.

The settlement is expected to provide $1,800 each for about 750,000 families across the country. It is a response to such practices as “robo-signing” by bank employees who often knew little or nothing about the mortgage documents they were hired to sign.

Nevada, New York, Delaware, New Hampshire and Massachusetts contend the deal isn’t strong enough because it would protect banks from future civil liability.

It will not, though, fully release them from future state criminal lawsuits.

Put aside Bondi’s dissembling for a second, and the idea that an $1,800 for the theft of your home represents “historic” relief. This lawyer in Utah called it what it is: “An arbitrary system of modifications administered by the same banks that knowingly perpetrated the fraud on the homeowner in the first place, and allowed to get off by paying $1800 for an illegal foreclosed home. That’s outrageous.”

But New Hampshire? That’s a new one. I know that Attorney General Michael Delaney has done some preliminary investigations of foreclosure practices in his state, and I know he was present at that meeting of 15 AGs looking for an alternative to the settlement. But Delaney has been pretty quiet overall. Since when is he listed among the holdouts?

That could just be bad information. And to be clear, liability isn’t the central issue anymore. But I don’t know how states like Massachusetts and Nevada, with active legislation against banks and document processors over the same conduct that would be released here, could possibly sign on to this deal.

There’s some news on that front. Lender Processing Services, which has been sued by Nevada for deceptive practices in generating false documents, sought to dismiss the complaint today in a filing with a state court.

The complaint by Nevada Attorney General Catherine Cortez Masto fails to allege any document executed by subsidiaries was incorrect or caused any borrower financial harm, Lender Processing Services said in a statement today.

The state’s claims “are a collection of suppositions, legal conclusions and inflammatory labels,” the company said in the court filing. The document couldn’t be immediately verified in court records [...]

Nevada sued the company in December, claiming that it engaged in a pattern of “falsifying, forging and/or fraudulently executing” foreclosure documents, requiring employees to execute or notarize as many as 4,000 foreclosure- related documents a day, according to a statement from the attorney general. Lender Processing Services also demanded kickbacks from foreclosure firms, the office said.

Two interesting things here. First, LPS leans hard on the idea that borrowers weren’t harmed by the use of false documents. The implication here is that the borrower was delinquent anyway, so there’s no abuse going on. But the more important part of the motion to dismiss (copy at the link) comes when LPS makes the claim that robo-signing isn’t really a crime. It’s merely “signing of documents by an authorized agent,” says LPS, and that is permitted under Nevada law. Here’s one way they justify that (DocX is a subsidiary of LPS):

The State of Florida has reached an identical conclusion regarding DocX’s surrogate signed documents. Two assistant attorneys general involved in that state’s investigation of the mortgage crisis, including DocX, prepared an information power point presentation in which surrogate signing was characterized as “forgery.” The two attorneys were subsequently terminated for alleged fraud, deficient and improper investigatory practices which triggered a formal review by the Inspector General of Florida. In a recently issued official report, the propriety of the termination of the attorneys was confirmed, and specifically, the power point characterization of surrogate signing as “forgery” was determined to be unsupported by the legal definition of forgery.

Wow. So LPS used the whitewash IG report from Florida to justify the dismissal of their lawsuit in Nevada. And remember, LPS lobbyists more recently urged the Florida AG’s office to intervene on their behalf in a criminal case in Michigan. The connections between the Florida AG’s office and LPS just continue to grow.

This also happens to be BS. Pam Bondi made a recent motion in a Florida appeals court, as part of a case against the foreclosure mill David J. Stern, which stated, among other things, this:

The Attorney General’s motion asks the Fourth DCA to certify that its decision in Stern passes upon the following question of great public importance: whether the creation of invalid assignments of mortgages by a law firm and subsequent use of such documents by the firm in foreclosure litigation on behalf of the purported assignee is an unfair and deceptive trade practice which may be the subject of an investigation by the Office of the Attorney General.

This is a tacit acknowledgement of illegal assignments, which is functionally the opposite of what the IG report said. So of course LPS uses the latter in their Nevada case.

It’s completely insidious. And if the foreclosure fraud settlement goes through, LPS will surely point to that as another reason why they should be held harmless for their illegal conduct.

Deutsch Bank Inquiry Reveals Insider Influence by Paulson

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Editor’s Comment: At the end of the day, everyone knows everything. The billions that Paulson made are directly attributable to his ability to instruct Deutsch and others as to what should be put into the Credit Default Swaps and other hedge products that comprised his portfolio. He did this because they let him — and then he traded on what he not only knew, he was trading on what he had done — all to the detriment of the investors who had purchased mortgage bonds and other exotic instruments.
The singular question that comes out of all this is what happened to the money? Judges are fond of saying that there was a loan, it wasn’t paid and the borrower is the one who didn’t pay it. Everything else is just window dressing that can be addressed through lawsuits amongst the securitization participants so why should a lowly Judge sitting in on a foreclosure case mess with any of that?
The reason is that the debt, contrary to the Judges assumption (with considerable encouragement from the banks and servicers) was never owed to the originator or the intermediaries who were conduits in the funding of the loan. The debt was owed to the investor-lender. And those who are attempting to foreclose are illegally inserting themselves into mortgage documentation in which they have no interest directly or indirectly.
If they are owed money, which many of them are not because they waived the right of recovery from the homeowner, it is through an action for restitution or unjust enrichment, not mortgage foreclosure. Banks and servicers are intentionally blurring the distinction between the actual creditor-lender and those other parties who were co-obligees on the mortgage bond in order to get the benefit of of foreclosure on a loan they did not fund or purchase.
So how does that figure in to what happened here. Paulson an outside to the transaction with investors and an outside to the investors in the bogus loan products sold to homeowners, arranges a bet that the mortgages were fail. He is essentially selling the loans short with delivery later after they fail and are worth pennies. But the Swap doesn’t require delivery, so he just gets the money. The fees he paid for the SWAP are buried into the income statement of Deutsch in this case. So it looks like a transaction like a horse-race where you place a bet — win or lose you don’t get the horse and you don’t have to feed him either.
But in order for this transaction to occur, the money received by Deutsch and the money paid to Paulson must be the subject of a detailed accounting. Without a COMBO Title and Securitization search and Loan Level Accounting, you won’t see the whole picture — you only see the picture that the servicer presents in foreclosure which is snapshot of only the borrower payments, not the payments and receipts relating to the mortgage loan, which as we all know were never owned by Deutsch or anyone else because the transfer papers were never executed, delivered or recorded without fabrication and forgery.
Paulson is an extreme case where claw-back of that money will be fought tooth and nail. But that money was ill-gotten gains arranged by Paulson based upon insider information, that directly injured the investor-lenders who were still buying this stuff and directly injured the borrowers who were never credited with the money that either was received by the investor creditors, or should have been received or credited tot hem because the money was received on their behalf.
Once you factor in the third party obligee payments as set forth in the PSA and Prospectus, you will find that we have a choice: either the banks get to keep the money they stole from investors and borrowers, or the money must be returned. If it must be returned, then a portion of that should go to reducing the debt, as per the requirements of the note, for payment received by the creditor, whether or not it was paid by the borrower.
BOTTOM LINE: Securitization never happened. And the money that was passed around like a whiskey bottle (see Mike Stuckey’s article in 2009) has never been subject to an accounting. Your job, counselor, is not to prove that all this true, but to prove that you have a reasonable belief that the debt has been paid in whole or in part to the creditor and that the default doesn’t exist. This creates the issue of fact that allows you to proceed the next stage of litigation, including discovery where most of these cases settle. They settle because the intermediaries who are bringing these actions are doing so without authority or even interest from the investor-creditors.
What is needed, is a direct path between investor creditors and homeowners debtors to settle up and compare notes. This is what the banks and servicers are terrified about. When the books are compared, everyone will know how much is missing, that the investors should be paid in full and that the therefore  the debt does not exist as set forth in the closing papers with the borrower. Watch this Blog for an announcement for a program that provides just such a path — where investors and borrowers can get together, compare notes, settle up, modify or mediate their claims, leaving the investors in MUCH better position and a content homeowner who no longer needs to fear that his world, already turned upside down, will get worse.
It may still be that the homeowner borrower has on obligation, but it isn’t to the creditor that loaned the money that funded the mortgage loan. Any such debt is with a third party obligee whose cause of action has been intentionally blurred so that the pretenders can pretend that they have rights under a mortgage or deed of trust in which they have no interest on a deal where they was no transfer or sale.

SEC looks into Deutsche Bank CDO shorted by Paulson

Tuesday, January 31, 2012
Deutsche Bank is facing an SEC investigation for its role in structuring a synthetic CDO, according to a report by Der Spiegel. The German publication states that the bank’s actions in raising a CDO under its Start programme will come under question after it allegedly allowed hedge fund Paulson to select assets to go into the fund. The bank is then said to have neglected to have told investors about Paulson’s role in the transaction as well as concealing the fact that the hedge fund had taken a short position on the assets, allowing it to profit as the deal collapsed.
According to the article, Goldman Sachs settled a similar case with the SEC for $500 million regarding Goldman’s role in arranging an Abacus CDO.

 

Reuters: Ex-Credit Suisse Manager Pleads Guilty in Subprime Bond Probe

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Editor’s Comment: So SOMEONE is going to jail for up to five years. But the meat of this lies between the lines.
First, it was a conspiracy charge. You can’t run a PONZI scheme the size of the Madoff scheme without channels that are sending “marks” to you to “invest.” The securitization scam is several hundred times the size of the Madoff scam, and that means there were literally thousands of traders and managers who knew that they were acting improperly — illegally, that is.
Second, Higgs told a Federal Judge that his criminal behavior consisted of manipulation and inflation of the cash bond position markings in his tradings book (called ABNI), in order to hide the losses. Most people will never know what that means. It simply means that the trades were kept out of the system where losses would be easily apparent.
There are numerous reports that the book was kept literally in pencil on paper, so they could change the contents or destroy the book if that became necessary. This is why tracking the the actual money trail becomes challenging but it can be done through what one of our senior analysts calls “reverse engineering. IN other words, take the money going into the system and see where it went or where the trail ends. This will give you sufficient clues to determine whether payments in part or in whole were made to REMICS upon whose behalf foreclosures are being filed. In most cases, the figures are wrong, the debt to the investor has been paid in whole or in part, and there is no default. That is why we do the loan level accounting for those readers who are willing to fight about it.
Sadly, this guy seems like the fall guy for what was ordered by his managers. HIs statement that he fooled Credit Suisse management rings hollow when you compare the facts and the the history of the business. It simply isn’t possible for these events to occur without senior management knowing what was going on. Their mantra is plausible deniability. Soon you will see other people, like Higgs, who “flip” and testify against the large Banks upon which they depended for employment at rates of compensation that were too high — unless you factor in the hush money.

Ex-Credit Suisse manager pleads guilty in subprime probe

NEW YORK |

(Reuters) – A former London-based Credit Suisse trader pleaded guilty to a criminal conspiracy charge on Wednesday, and he is cooperating with a U.S. government investigation on writedowns of subprime mortgage derivatives at the height of the financial crisis.

David Higgs told a federal judge in New York that while he was a managing director in the investment banking division of Credit Suisse in 2007 and 2008, he and others manipulated and inflated the cash bond position markings of a trading book, called ABNI, in order to hide losses.

“As a result of my actions, senior management of Credit Suisse was given the false impression that the ABNI book was profitable and caused Credit Suisse to report false year-end numbers for 2007 in their books and records,” Higgs said in court. “I did this because I wanted to remain in good favor with my boss, Kareem Seregeldin, and enhance my job performance.”

Higgs said Seregeldin and others he did not identify had known about the manipulation and assisted in it.

Higgs faces a maximum possible prison sentence of up to 5 years on the charge of conspiracy to commit falsification of books and records and to commit wire fraud. He was released on a $500,000 bond and will be allowed to return to his home in Britain while the investigation continues.

(Reporting By Grant McCool; Editing by Lisa Von Ahn)

 

Nevada AG Asks Pointed Questions to DOJ and HUD

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See Full Letter from Masto to DOJ and HUD Here 1-27-12

Hawaii did it, Nevada did it and now other states are doing it. Seeing the devastating effect on the state economy and the ensuing effects on the nation’s economy and the world finance, State Attorney generals are taking matters into their own hands, and pressing the points that hurt. The Banks don’t like it because it undermined their narrative. This year, 2012, is the year when most of the truth will come out and it will blow your mind to find out just how pernicious and pervasive this false, faked, securitization has been.

The number of foreclosures has plummeted in those states that have put up a fight. Why? Not because they were banned but because those states that require proof of authority to foreclose, proof of the accounting and the proof of settlement or the ability to mediate, have all but eliminated foreclosures. Now the question is how do we correct the corruption of the the title registries, get people restored to their homes and force the pretenders to compensate victims of fraud, forgery, and outright theft.

Catherine Cortez Masto has mastered the basics of securitization and she, like Beau Biden in Delaware, Schneiderman in New York, Coakley in Maine and others don’t like what they see — corroboration of some of the worst nightmares of conspiracy theorists.

It won’t be long before the investigations get traction and start picking up steam. Indictments will follow but not for a few months, at least.

You will hear words from these prosecutors that you never thought you would hear about the banks conduct, the transfer of wealth through theft, and the commission of crimes  too numerous to list here. As the momentum picks up, you will see thousands convicted, jailed, defrocked from their law license, notary license, appraisal license, title license and even the license to do business in the states where they thought they had a lock on the whole thing. People are wide awake right now and when Americans awaken, things happen fast.

Here are some of the more important questions and my comments that were posed in a recently released letter to Thomas J. Perrelli at the U.S. Department of Justice and Shaun Donovan as secretary of the U.S. Department of Housing and Urban Development. It would be a good idea to take out those template discovery forms you have for clients and start your revisions. Stop assuming that anything the Banks said was true and start assuming the everything they said was false — including the losses they claimed to get the bailouts.

  1. What origination conduct did the federal agencies not release? [That's not my question, it is Masto's question. This is a direct frontal assault on the complicity of the Federal government in the mortgage mess. Inherently it addresses the issue of whether the origination process violated law, rules or regulations and whether there is a valid lien on most properties that were financed with investor money.]
  2. The State release refers to “…brother and sister corporations…” Please provide some clarity as to this particular phrase as used in the state release. [Masto is not going to be papered over by vague wording that could mean anything. She wants to know what went on. Where did the money go, and who were the parties involved?]
  3. The State release contains a provision that prevents the State AG’s and banking regulators from seeking to invalidate past assignments or foreclosures. Does this prevent States from effectively challenging future foreclosure actions that are based upon faulty prior assignments? [Masto nails it on the head. First of all this is AMNESTY for the Banks who committed crimes and want the government to ratify the crime since the government was complicit in allowing, creating and promoting the crime. It does nothing to clear up the title problems that currently exist or that will exist if the faulty assignments contain not only forgeries but fabrications of the truth of the transactions inherently referred to within the instruments.]
  4. Paraphrasing Masto, when will the results of existing investigations be made public — or do you want us to take your word for it that there are or are not weapons of mass financial destruction still hidden in the pile?
  5. Paraphrasing Masto, how will we be able toe enforce the new servicing standards or are we taking the word of the Banks and servicers who lied to us consistently up until this point in time?
  6. Paraphrasing Masto, how and when will consumers get relief if they were victims of fraud, chicanery and theft?
  7. Under what circumstances will the Monitor be able to access servicers source documents, i.e., the documents that form the underlying basis for the work papers? [Of course Masto knows that she will never see the source documents because they would contradict everything the Banks and servicers have said up until this point, one of many reasons she will not participate in the multi-state settlement.]
  8. What kind of data will the monitor be able to demand regarding the allocation and performance of servicers’ modification/other consumer relief? What compliance or enforcement provisions address the Monitor’s and States’ ability to enforce the consumer relief provisions? Before the claim of securitization of mortgage debt that never in fact was completed, there were simple formulas to determine whether the workout was good or bad for the lender. Now the servicers are using excuses like “everyone will do it” if they accept modifications, even though the proposed modifications i results in proceeds that are much higher than the results of foreclosure. So the real question is whether the consideration of modifications requires (a) authority and (b) no discretion if the proposed modification exceeds x% of fair market value of the collateral. If accepted, this change would have eliminated 2/3 of all the past foreclosures and 90% of the future ones.
  9. Please explain the assumptions on which the settlement value chart relies. It describes a maximum expected benefit; what is the minimum expected benefit? Can we get a range of values for each state.? [And what data exists showing the true liability for false, fraudulent, fabricated loans and foreclosures to compare with the settlement?]
  10. Paraphrasing Masto, how do these detailed formulas actually work in real life? What will be the effect on blighted areas and how can we as AG’s determine what risk is associated with acceptance of an agreement in which the probability of millions more foreclosures will take place under false pretenses, only to become abandoned property?

 

Fannie and Freddie Preventing Modifications and Betting Against Modifications at the Same Time

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Freddie Mac, Deutsche Bank Caught Up In Securities Allegations

By: David Dayen See Full Article on FIredoglake.com

One reason why I don’t think we should particularly accept a six-month timeline on significant action from the RMBS working group is that there’s so much already in the public record. I recognize that criminal or civil enforcement actions take voluminous legal work and due diligence, but quite a bit of it has already been done. The FCIC referred criminal fraud violations a year ago. Gretchen Morgenson notes all the evidence from private litigation that can be leveraged and used. And Pro Publica, in conjunction with NPR, offers this up today, which is somewhat tangential to what Eric Schneiderman wants to delve into because it’s post-crash conduct, but which still shows the element we’re dealing with and how many revelations are already out there:

Freddie Mac has invested billions of dollars betting that U.S. homeowners won’t be able to refinance their mortgages at today’s lower rates, according to an investigation by NPR and ProPublica, an independent, nonprofit newsroom [...]

In December, Freddie’s chief executive, Charles Haldeman, assured Congress his company is “helping financially strapped families reduce their mortgage costs through refinancing their mortgages.”

But public documents show that in 2010 and 2011, Freddie Mac set out to make gains for its own investment portfolio by using complex mortgage securities that brought in more money for Freddie Mac when homeowners in higher interest-rate loans were unable to qualify for a refinancing.

Those trades “put them squarely against the homeowner,” PIMCO’s Simon says.

Bascially, Freddie trapped its own borrowers, denying them refinances. And they stood to benefit from that, because the higher interest rates meant bigger streams of income from their MBS.

This may seem like a sidelight to the securitization bubble, but indeed, we’ve seen many instances of investment banks taking one side of a mortgage-backed securities bet, and selling investors the other side, without disclosure. That’s securities fraud. It’s been litigated. The SEC has been giving out settlements like candy for this kind of conduct. But it’s a central part of the unscrupulous behavior on Wall Street. You can see this today in the fact that the SEC is only now getting around to investigating CDOs from Deutsche Bank when Robert Khuzami, the current head of enforcement at the SEC and a co-chair of the RMBS working group, was working there as general counsel.

That brings up a whole other element about trusting the guys who swept this conduct under the rug to properly investigate it. But the larger point is that there’s a lot already on the table. In a sense, you may not need massive resources for this, because they can just pick up where others left off.

My reporting shows that Schneiderman actually has a few announcements on enforcement coming in the next few weeks. We don’t have to wait months. We can judge the seriousness of this thing pretty quickly.

 

Using UDCPA Fair Debt Collection Acts to get Money, Information and Fees

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RIPE AREA FOR STEADY INCOME FOR LAWYERS REPRESENTING HOMEOWNERS

Editor’s Comment: One small step for a man, one giant leap for mankind. You have both a private right of action against the debt collector and the right to apply to the FTC to set up administrative hearings, where these cases should probably be heard by experienced hearing officers who know what they are looking at.

The practice of playing the numbers on debt collection has been around for a long time. Whether the debt is real or not, there is a statute of limitations, bankruptcies and other obstacles to collection. A lot of times the debt is now owed at all, but byb pestering customers, the collection agency gets some money out of them, which they keep because they have already bought the portfolio at pennies or less on the dollar.

This is where servicers and other intermediaries in the fake securitization chain are going to get into hot water. The debt was created when the investor loaned the borrower the money. The intermediaries are by definition debt collectors under the UDCPA and they are, and have been banged for fines many times on individual cases.

This is an instance where the Obama administration is attacking the practice head-on and taking away their toys. So when the pretender lender comes knocking, it isn’t just a RESPA 6 (Qualified Written Request) that you send out, it is a UDCPA letter you send demanding to know both the identity and contact information for the creditor. As you can see from this article, failure to provide you with that information  plus the balance due and how it was computed, is a violation of that Federal Statute.

It might also be a shortcut way of identifying the pretender not as holder of the note but as agent for an undisclosed principal seeking to collect on a note that was defective in the first place because they did not identify the correct creditor (in violation of TILA) and it did not provide you with a proper accounting showing exactly what this “creditor” received that would reduce your loan balance.

The MAIN point here is that the servicer might well be the one sending you the notice of delinquency swhen they have performed zero due diligence as to the creditor’s accounting. Where the servicer itself or some other party is keeping the account current, as is often the case, the loan is neither delinquent nor susceptible to being declared in default — but they do it anyway.

Now that the FTC has declared war on debt collectors who perform illegally, and banged them with this fine, we can invoke the same administrative procedures and grievances with the FTC as to the collection efforts on mortgages where the “collector” is not the creditor and where the money demanded is not actually shown as due.

There is a presumption that if you didn’t make the payment as set forth in the note, then you must be delinquent and you must be declared (at some point) in default. But that is not true in most cases. There can only be a delinquency or default under the mortgage loan if the borrower has failed to make a payment or cure a payment that is actually due. If the payment has been made already, then no such payment is due, regardless of whether it came from the borrower or not.

This is why you need to know the four legs of the stool in order to object, sue, defend, and present genuine issues of fact before a trial court that will have no choice but to allow you to proceed to discovery. Discovery is where these cases settle because the pretenders know they didn’t fund the loan, they didn’t pay for the loan and the creditor has been paid in whole or in part, with a lower or zero balance remaining.

Just for reminders, the four legs of the stool are:

  1. The loan closing papers with the investors under which he agrees to advance funds into a pool in exchange for a note or bond from a REMIC (which is never properly constituted). Here the investors expects that the money advanced will be used for funding mortgages conforming with the standards set forth in the prospectus and pooling and servicing agreement. Note that there is no nexus or connection between the investor and the borrower because the borrower usually does not even exist at that point in time. If a nexus ever arises, it is when the loan is transferred into the pool, something which we all now know was never done until the loan went into litigation or foreclosure — obviously in violation of the cut-off date required by the IRS REMIC statute, and the concurrent cut-off date in the PSA. But more importantly is the money angle — the investors didn’t advance money for loans that were delinquent or in default. They invested their money for good quality performing loans. Thus there is no way that the loans could be transferred into the pools if they were already declared problematic, delinquent, or non-performing. The failure to provide a nexus between borrower and lender (investor) is fatal to the enforcement of the mortgage lien. The creditor has no interest in the loan and doesn’t want one. Any claim from third parties who also have no nexus with the borrower would be on causes of action that are separate or apart from the mortgage lien. (SEE COMBO TITLE AND SECURITIZATION REPORT ABOVE)
  2. The loan closing papers with the borrower(s), which are subject to roughly the same analysis with identical result. There is no nexus between the borrower and the investor because neither one knows the other, despite requirements in the TILA and RESPA laws that require disclosure of parties and their compensation. (SEE FORENSIC ANALYSIS TILA+ REPORT on Livinglies-store.com) The note does not describe the actual monetary transaction between the investor lender and the borrower. Instead it inserts a straw-man as “lender” and a straw-man as “beneficiary”. This usually takes the form of a new animal in mortgage lending called an “originator” who is a paid fee service provider whose sole duty is to pretend to be the lender, even though they never funded the loan, never bought the loan and never had any interest in the debt, the note or the mortgage. This is deemed by many in the title industry as a corrupted document that breaks the chain of title if any action was taken on such a loan in foreclosure. 
  3. The actual money trail which varies from both the requirements set forth in the paperwork with the investor lender and the paperwork with the homeowner borrower. A full accounting would show that the parties in the middle without any interest in the loan, bought, sold, transferred and used those fabricated, forged documents to initiate foreclosure and eviction proceedings. Under the investor documentation, the pretenders are allowed to use a legal PONZI scheme in which the investors money is used to pay him his interest income, although it is not reported as such. The servicer also has the option of taking money from other revenue and pools and paying certain investors in complete  violation of the explicit requirements of any standard promissory note from a borrower requiring that payments be credited to the account of the borrower. Instead, they make the payment and do not credit the borrower or they receive the money and they pay neither the investors nor the give credit to the borrowers. (see Loan Level Accounting REPORT on Livinglies-store.com). The servicers and intermediaries and attempting, with some success to take over the position of the investor without an assignment from the investor, and enforce a mortgage to which they are not a party.
  4. The Fourth legal of the stool arises from the false representations made in court or foreclosure proceedings. These representations made by people who purport to be authorized to substitute trustees, or file notice of defaults, notice of sales, notice of evictions, or lawsuits for all of those in judicial states, turn out to be at variance with all three of the other legs of the stool — the investor paperwork, the borrower’s paperwork and the actual money trail. 

Using a service like Elite Litigation Management services or others to present the matrix, which we also offer at livinglies-store.com, dial 480-405-1688, and you can present a poster-size board that shows a number of the discrepancy between all four legs of the stool, thus giving rise to the question of fact necessary to get to the next step in litigation. remember, if you go in thinking you have a magic bullet that will end your case, you are dreaming of a better worked than the one we have.

F.T.C. Fines a Collector of Debt $2.5 Million

See Full Article on New York Times and Firedoglake.com
By

The Federal Trade Commission signaled on Monday that it would continue to crack down on debt collectors who harass consumers for money they may not even be legally obligated to pay.

In the second-largest penalty ever levied on a debt collector, the F.T.C. said that Asset Acceptance, one of the nation’s largest debt collection companies, had agreed to pay a $2.5 million civil penalty to settle charges that the company deceived consumers when trying to collect old debts.

The settlement is part of a broader effort to patrol the industry, agency officials said.

“Our attention to debt collection has increased over the past couple of years because the complaints have been on the rise,” said J. Reilly Dolan, assistant director for the F.T.C.’s division of financial practices.

Consumer complaints about debt collection companies consistently rank as the second-highest category among all complaints at the agency, behind identity theft. But in 2010, complaints jumped 17 percent to 140,036, which represented 11 percent of all complaints in the commission’s database, up from 119,540, or about 9 percent of complaints, in 2009.

Asset Acceptance, based in Warren, Mich., was charged with a variety of complaints, including failing to tell consumers that they could no longer be sued for failing to pay some debts because the debts were too old. The company’s collectors also failed to inform consumers that paying even a small portion of the amount owed would revive the debt — in other words, making a payment would extend the amount of time the collector could legally sue.

Debt collectors have only a certain number of years to sue consumers. The statute of limitations varies by state, but typically ranges from two to 15 years, Mr. Dolan said, beginning when a consumer fails to make a payment. But borrowers often do not realize that making a payment on the old debt may restart the clock.

Among other things, the complaint also contended that the company — which buys unpaid debts for pennies on the dollar from credit card companies, health clubs and telecommunications and utility providers and tries to collect them — reported inaccurate information about the consumers to the credit reporting agencies. It also said that Asset Acceptance failed to conduct a reasonable investigation when it was notified by one of the credit agencies that a debt was being disputed. Moreover, the complaint says that the company used illegal collection practices and that it continued to try to collect debts that consumers disputed even though the company failed to verify that the debt was valid.

The proposed settlement with Asset Acceptance requires the company to tell consumers whose debt may be too old to be collected that it will not sue. It also requires the company to investigate disputed debts and to ensure it has a reasonable basis for its claims before going after the consumer. It is also barred from placing debt on credit reports without notifying the consumer.

The penalty “is certainly a slap on the wrist and probably a little bit more, but it really depends on what the F.T.C. does to enforce this in the coming months and years,” said Robert Hobbs, deputy director at the National Consumer Law Center and author of “Fair Debt Collection” (National Consumer Law Center, 1987). But “it is a great step forward. It is not self-enforcing, and it has a mechanism for the F.T.C. to follow up.”

Still, while the settlement requires the company to take more responsibility for checking the statute of limitations before it contacts consumers, he said most states did not require debt collectors to do that. That means it is up to consumers to know the rules on the statute of limitations, which, he said, can be “an enormously complex legal question.”

In a statement, Asset Acceptance said that the settlement ended an F.T.C. investigation that began nearly six years ago, and that the company did not admit to any of the allegations. “We are pleased to have this matter behind us, and to have clarity on the F.T.C.’s policies and expectations of the debt collection industry,” said Rion Needs, president and chief executive of Asset Acceptance.

In March, another leading debt collection company, West Asset Management, agreed to pay $2.8 million, the largest civil penalty ever levied by the F.T.C., to settle charges that its collection techniques violated the law. The commission charged that West Asset’s collectors often called consumers multiple times a day, sometimes using rude and abusive language, about accounts that were not theirs. The Consumer Financial Protection Bureau and the F.T.C. now share enforcement authority for debt collection companies, though the new bureau has a power that the F.T.C. did not: it can write new rules for debt collectors. But F.T.C. officials said that debt collection enforcement would remain a top priority.

 

Are the Prosecutions Real or Just PR for an Election Year?

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Private Litigants Still Doing the Heavy Lifting that Government Should be Doing

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By

PRESIDENT OBAMA told the nation last week that he was convening a task force to investigate the abusive practices in the mortgage industry that led to our economic woes. Both lending and the practice of bundling loans into securities will come under scrutiny, he said, adding: “This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans.”

Some greeted this new task force — its unwieldy name is the Residential Mortgage-Backed Securities Working Group — with skepticism. It is an election year, after all, and many might wonder if this is just a public-relations response to the outrage against the institutions and executives that almost wrecked the economy.

If this task force nailed some big names, and soon, it would help to allay deep suspicions that the authorities have given powerful people and institutions a pass during this awful episode.

Such bars typically last five years, but some are permanent. The S.E.C.’s settlement with Angelo Mozilo, 73, former head of Countrywide Financial, barred him from acting as a director or officer of a public company for the rest of his life.

Some cases on the list are still being litigated. Those that have been settled have generated $1.97 billion in penalties, disgorgement and other monetary relief, according to the S.E.C. Harmed investors have received $355 million of that.

Drilling into the details, though, indicates that little of this money was paid by individuals. The payments came from companies, or more precisely, their shareholders.

Talk about making the wrong people pay.

Only one of the cases seems to involve a clawback of executive compensation. It’s the 2009 case against three former top executives of New Century Financial, a quintessential Wild West lender. Together, the three paid $1.5 million when settling charges of making false and misleading statements about the company’s soundness as it imploded.

If this is justice, it’s certainly not rough. Brad Morrice, the company’s former chief executive, returned just $542,000 to regulators; he took home at least $2.9 million in incentive pay in the two years before New Century collapsed.

It seems obvious that until executives are forced to dig deep into their own pockets to pay penalties in these matters, they will be tempted to take as many risks as possible to generate fat paychecks. Then they will move on to the next opportunity.

The S.E.C. is clearly proud of its financial crisis cases. But comparing its tally with the mountainous evidence produced in private lawsuits shows how much more work there is to be done.

Consider the most recent complaint filed by the Assured Guaranty Corporation, an insurer of mortgage securities, against Bear Stearns, the defunct brokerage firm; EMC, Bear’s mortgage origination and servicing unit; and JPMorgan Chase, which bought Bear in March 2008.

Filed in November, the complaint shows what kinds of revealing material can be dug up by determined investigators.

The complaint contends that Bear Stearns knew it was stuffing its mortgage-backed securities with crummy loans. It cites an e-mail written by a former EMC analyst in the unit that dealt with these instruments. “I have been toying with the idea of writing a book about our experiences,” the analyst wrote. “Think of all of the crap that went on and how nobody outside of the company would believe us … the fact that data was constantly changing and we sold loans without the data being correct — wouldn’t investors who bought the MBS’s want to know that?”

Indeed they would.

Discovery in the case also identifies top executives who oversaw the mortgage machine that felled Bear Stearns. Thomas F. Marano, senior managing director and designated principal of the mortgage- and asset-backed securities department, was “well aware of the amount of risk that was being taken on in terms of acquiring assets and … the activities with respect to securitization,” the complaint said, citing a Bear Stearns executive’s deposition.

The complaint also contends that John Mongelluzzo, the Bear Stearns vice president for due diligence, misled investigators for the Financial Crisis Inquiry Commission when he described the extensive vetting the company did when it bundled mortgages.

Mr. Mongelluzzo told the commission that Bear Steams tested “all of the due diligence firms and their contract underwriters, and if they couldn’t pass the underwriting test, they weren’t permitted to work on our transactions,” the complaint said. He also told the investigators that the company “instituted a process where we went out and audited the individual diligence firms to see what their processes were and what they were doing internally as well.”

But in a subsequent deposition, Mr. Mongelluzzo conceded that Bear had not started to test its underwriters until February 2007, well after the mortgage market had begun crumbling, and that it didn’t begin its audit program of due diligence vendors until April 2007.

Mr. Marano is now chairman and chief executive of Residential Capital, the mortgage unit of Ally Financial. Mr. Mongelluzzo is an executive there as well. Both declined to comment.

It is to be expected that investigators for private law firms will turn up loads of ammunition to help them in their court battles. But in the past, law enforcement was similarly aggressive in its own pursuits.

Now, the balance seems to have shifted, with private litigants doing more legal heavy lifting than those who serve the public.

Perhaps the new working group will right this imbalance. But its members don’t have a lot of time, with the election coming. Private litigants have drawn a pretty clear road map for the places that this new group might go. Its leaders should welcome the assistance, given that the clock is ticking.

Cuomo Appoints New Cop: Homeowners Hopeful That Truth Will be Revealed

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Expanding Reach, Cuomo Creates Second Cop on Financial Beat

By

ALBANY — Benjamin M. Lawsky is not the attorney general of New York State.

But one could be forgiven for being confused. Since Gov. Andrew M. Cuomo installed him as superintendent of a new state agency, the Department of Financial Services, which became active in October, Mr. Lawsky has been making headlines normally associated with attorneys general.

He has forced insurers to turn over more than $100 million in unpaid death benefits to surviving family members, dispatched rafts of subpoenas to banks, and pressed lenders to curb abusive foreclosure practices.

Critics say the new financial services agency reflects Mr. Cuomo’s expansive view of his executive powers, which he has continually sought to strengthen during his 13 months in office. They also see an attempt by the governor to encroach on the turf of Attorney General Eric T. Schneiderman, a fellow Democrat with whom Mr. Cuomo has had a precarious relationship.

Supporters say it is an auspicious time to have two cops on the financial beat — after all, the agency, which subsumed the existing Banking and Insurance Departments, came into being as the Occupy Wall Street movement was finding its footing and focusing its critique on those very industries.

Mr. Lawsky, in his first few months on the job, is using a playbook that he helped write as a top lieutenant in the attorney general’s office when Mr. Cuomo held that post, gravitating toward headline-grabbing cases while looking for negotiated solutions with industry executives.

“We set our priorities here often simply based on what the big issues are,” Mr. Lawsky, 41, said in an interview. “Does that come from the world of Andrew Cuomo? Yes, because government shouldn’t be a waste of time. Government should be about making a difference in people’s lives.”

For his part, Mr. Schneiderman has not allowed himself to be rolled over.

Last year, he helped beat back an effort by Mr. Cuomo’s office to give Mr. Lawsky and the new agency even more expansive powers that would have cut into the heart of the attorney general’s jurisdiction. The governor’s proposal, which would have allowed Mr. Lawsky to investigate violations of the Martin Act, the sweeping state securities law used by former Gov. Eliot Spitzer and his successors to pursue financial malfeasance, alarmed Wall Street and even academics.

Writing in The New York Law Journal, Jonathan R. Macey, a Yale Law School professor, called it “a naked and highly suspicious power grab.”

And in a recent interview, John C. Coffee Jr., a law professor at Columbia University, put it this way: “Cuomo made his fame as attorney general, and he sort of treated that jurisdiction as portable and took it with him as governor.”

The Cuomo administration backed off, dropping the Martin Act provision. Nonetheless, the new agency, besides absorbing two major regulatory bodies, has gained a number of new powers. It has broader authority to fight fraud beyond the insurers and state-chartered banks it licenses, and its reach has extended to all manner of financial products, including student lending, credit cards and tax refund anticipation loans.

Eric R. Dinallo, a partner at Debevoise & Plimpton and former state insurance superintendent, likened the new agency to the Securities and Exchange Commission, in the way it combines regulation and enforcement under one roof.

“It’s not common to have a combined regulatory and enforcement function,” he said, adding, “It’s effectively very competitive with the attorney general’s jurisdiction.”

The two agencies are publicly cordial, but behind the scenes they are much like two boxers feeling each other out in an opening round. Already, turfs are overlapping.

Mr. Schneiderman, a liberal-minded attorney general, made a national name for himself in his first year by spurning a settlement that the Obama administration and other attorneys general had been negotiating with the banking industry over foreclosure practices. Then last week, President Obama, vowing to get tougher on Wall Street, reached out to Mr. Schneiderman, naming him co-chairman of a new financial crimes unit to prosecute large-scale financial fraud.

At the same time, Mr. Cuomo, in his State of the State address this month, turned to Mr. Lawsky, not Mr. Schneiderman, on the issue, directing the Department of Financial Services to create a Foreclosure Relief Unit. And Mr. Lawsky has moved on his own to secure deals with smaller lenders on curbing abuses.

Asked whether he supported Mr. Schneiderman’s stance on the national negotiations, Mr. Lawsky was noncommittal.

“We’re not commenting at all on the ongoing negotiations because we are at least tangentially a part of them and could ultimately be called on to sign or not sign,” he said, adding, “We want to see what the final proposal is.”

Danny Kanner, a spokesman for Mr. Schneiderman, said in a statement that the two offices “will continue to work together toward our common purpose of protecting consumers, investors, and the integrity of New York’s global markets.”

“In the aftermath of the financial crisis,” the statement said, “we need more willing hands on deck, not less, to meet that critical objective.”

Mr. Lawsky said he was learning to balance the roles of regulator and enforcer. And during his years as a top aide to Mr. Cuomo, Mr. Lawsky has been known as one of the relatively few administration officials to play nicely with others.

“A lot of people like to paint me as a tough guy because I’m a former prosecutor,” he said, adding: “You are being handed a huge amount of power over people’s lives and their businesses. It’s not something you willy-nilly bang people over the head with.”

Mr. Lawsky grew up in New York and Pittsburgh, received his undergraduate and law degrees from Columbia, and worked under four United States attorneys for the Southern District of New York, prosecuting everything from insider trading to terror and mob cases. He is a runner, but last had time to train for and run a marathon — the Marine Corps Marathon — in 2009. (His time was 3:40:17.)

Perhaps his most notable early achievement has been putting pressure on health insurers to make public proposed rate increases. But his office also pointed to early relationships he has formed with both industry executives and consumer groups.

Theodore A. Mathas, chief executive of the New York Life Insurance Company, said, “Ben is approachable, he’s a good listener and he’s quickly grasped a lot of complex things we’ve thrown at him.” Michael P. Smith, president of the New York Bankers Association, said, “We are very pleased with his performance.”

On the consumer advocacy side, Charles Bell, programs director for Consumers Union, said, “We’ve been pleased that they have reached out,” adding that a group of consumer advocates was meeting with the agency monthly on a variety of topics.

Mr. Lawsky does know how to answer the tough questions. During a recent online question-and-answer session with the public, the first questioner asked: “Mr. Lawsky, are you copying the governor’s hairstyle? It seems you have a similar look.” He replied: “That never occurred to me. It’s very flattering. Thanks.”

 

Occupy Protesters and Police Clash in Oakland

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Occupy Protesters and Police Clash in Oakland

By SARAH MASLIN NIR

See full story on New York Times

A march to take over a vacant building by members of the Occupy movement in Oakland, Calif., turned into a violent confrontation with the police on Saturday, leaving three officers injured and about 200 people arrested.

The clashes began just before 3 p.m. when protesters marched toward the vacant Henry J. Kaiser Convention Center, the police said, and began to tear down construction barricades. Officers ordered the crowd to disperse when protesters “began destroying construction equipment and fencing,” the Oakland police said in a press release.

“Officers were pelted with bottles, metal pipe, rocks, spray cans, improvised explosive devices and burning flares, the police said.” Officers responded with smoke, tear gas and beanbag projectiles. Twenty people were arrested.

Most of the arrests occurred in the evening, when large groups of people were corralled in front of the Downtown Oakland Y.M.C.A. on Broadway. At one point, one group of protesters broke into the City Hall building.

On a livestream broadcast on the Web site oakfosho.com, dozens of protesters could be seen sitting cross-legged in darkness on the street in front of the Y.M.C.A. Their hands appeared to be bound behind them, while police officers stood watch. Occasionally the protesters sang or cheered.

The events were part of a demonstration dubbed “Move-in Day,” a plan by protesters to move into the vacant convention center and use it as a commune-like command center, according to the Web site occupyoaklandmoveinday.org.

“We were going to set up a community center,” said Benjamin Phillips, 32, a member of the Occupy Oakland media team. “It would be a place where we could house people, feed people, do all the things that we have been doing.”

In an open letter to Mayor Jean Quan on the Move-in Day site, the group threatened actions like “blockading the airport indefinitely, occupying City Hall indefinitely” and “shutting down the Oakland ports.” Occupy protesters did briefly shut down the city’s busy port in November.

In a statement issued before the march, Ms. Quan said that “the residents of Oakland are wearying of the constant focus and cost to our city.” On Saturday night, she added: “Once again, a violent splinter group of the Occupy Movement is engaging in violent actions against Oakland. The Bay Area Occupy Movement has got to stop using Oakland as their playground.”

In a statement, city officials said the total number of arrests was estimated at 200.

Ms. Quan has spent her first term embattled by the Occupy movement, which installed itself in Frank H. Ogawa Plaza in October. After initially embracing the protest, she ordered the encampment removed from the plaza.

After a series of violent episodes, including a clash in which a Marine veteran of Iraq suffered a fractured skull when struck by a projectile in a confrontation with the police, Ms. Quan relented and permitted the protesters to return to the plaza. But two weeks later, in response to fears of renewed violence, she ordered the plaza cleared again.

Mr. Phillips, who said he is a veteran of the United States Air Force, spoke Saturday night from his home on Grand Avenue where he had stopped to rinse tear-gas residue from his contact lenses. He described the scene in front of the Y.M.C.A. as “terrifying.”

“This is disgusting, because this is not the way that America is supposed to work,” he said. “You’re supposed to be able to have something like freedom to assemble and air your grievances,” he said.

“It’s bizarre,” he said of the police reaction. “It’s not something you expect to see in the United States, and we’ve seen it over and over in Oakland.”

 

 

FLORIDA HOMES OWNED BY 8 LARGEST BANKS ON 1-24-2012

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Editor’s Note: As Lynn knows, these are the official figures. But the properties were deeded based upon false premises. First the credit bid wasn’t submitted by a creditor. Second the foreclosure process was defective, fraudulent and filled with forged or incomplete documents. And third, the mortgage documents themselves were defective because they failed to properly recite the terms of the transaction — from the identity of the creditor to the use of proceeds from securitization and how that would impact the amount due when third parties made payments to the creditor. Accounting for creditors (investors) is always absent.
Anyone who buys an REO property assumes the risk that the chain of title is so defective that the old homeowner can come back and claim it.

BIG BANK HOMEOWNERS

Lynn E. Szymoniak, Esq., Ed., Fraud Digest, January 28, 2012

In most counties, the records of the county property appraiser identify the homeowners in the county.

In January, 2012, in Palm Beach County, Florida, for example, 11 banks, FANNIE and FREDDIE and one mortgage servicer were the biggest homeowners, with 2,907 homes owned in total. Palm Beach County is the third largest county, by population, in Florida.

The banks and servicer owned 2,284 homes; FANNIE & FREDDIE owned 623 homes.

Three of the banks, Bank of America, Wells Fargo and Deutsche Bank, owned more homes than FANNIE.

Wells Fargo (including Wachovia) was the largest homeowner, owning 551 homes.

Bank of America and Deutsche Bank were close second and third largest, owning 496 homes and 454 homes, respectively. (The Bank of America total represents homes owned by Bank of America, BAC Home Loans Servicing and Countrywide.)

FANNIE owned 441 homes; FREDDIE owned 182 homes.

Bank of New York, the trustee for hundreds of Countrywide trusts, owned 338 homes.

U.S. Bank, the trustee for many Bear Stearns trusts, owned 196 homes

HSBC bank, the trustee for almost all of the Deutsche Bank Securities trusts, owned 175 homes.

JP Morgan Chase, including the homes owned by Chase Mortgage, and the Chase subsidiaries, Homesales, Inc. and Homesales of Delaware, Inc., owned a relatively low 174 homes.

Aurora Loan Services, keeper of most of the Lehman Brothers loans, was in 10th place among the large homeowners, with 149 homes.

Citibank, including Citimortgage, was the only other bank owning over 100 homes, with 111 homes.

Suntrust owned 82 homes; IndyMac/OneWest owned 54 homes; and GMAC owned 31 homes.

Home ownership in Florida’s 33 counties with population of 100,000 or greater as of January 24, 2012, is set forth below. The 34 counties with populations under 100,000 have a combined population of 1,278,080, approximately the population of Hillsborough County. The home ownership of Hillsborough has been used to approximate the ownership in these 34 counties.

FLORIDA HOMES OWNED BY 8 LARGEST BANKS ON 1-24-2012: 22,112

FLORIDA HOMES OWNED BY FANNIE & FREDDIE ON 1-24-2012: 7,170

FL HOMES OWNED BY BANK OF AMERICA ON 1-24-2012: 5,143

FL HOMES OWNED BY WELLS FARGO ON 1-24-2012: 4,727

FL HOMES OWNED BY DEUTSCHE BANK ON 1-24-2012: 3,114

FL HOMES OWNED BY BANK OF NEW YORK ON 1-24-2012: 2,855

1 – MIAMI-DADE COUNTY (pop. 2,496,435)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 650
BANK OF NEW YORK: 367
CHASE: 254
CITIBANK: 222
DEUTSCHE BANK: 676
FANNIE: 515
FREDDIE: 213
HSBC: 324
U.S. BANK: 121
WELLS FARGO: 579
BANKS: 3,193/F & F: 728

2 – BROWARD COUNTY (pop. 1,748,066)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 624
BANK OF NEW YORK: 479
CHASE: 157
CITIBANK: 99
DEUTSCHE BANK: 445
FANNIE: 712
FREDDIE: 188
HSBC: 205
U.S. BANK: 489
WELLS FARGO: 493
BANKS: 2,991/F & F: 900

3 – PALM BEACH COUNTY (pop. 1,320,134)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 497
BANK OF NEW YORK: 338
CHASE: 180
CITIBANK: 111
DEUTSCHE BANK: 454
FANNIE: 441
FREDDIE: 182
HSBC: 175
U.S. BANK: 196
WELLS FARGO: 551
BANKS: 2,502/F & F: 623

4 – HILLSBOROUGH COUNTY (pop: 1,229,226)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 220
BANK OF NEW YORK: 116
CHASE: 40
CITIBANK: 30
DEUTSCHE BANK: 152
FANNIE: 265
FREDDIE: 83
HSBC: 84
U.S. BANK: 138
WELLS FARGO: 197
BANKS: 977/F & F: 348

5 – ORANGE COUNTY (pop. 1,145,956)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 278
BANK OF NEW YORK: 31
CHASE: 102
CITIBANK: 49
DEUTSCHE BANK: 130
FANNIE: 500
FREDDIE: 126
HSBC: 83
U.S. BANK: 120
WELLS FARGO: 216
BANKS: 1,009/F & F: 626

6 – PINELLAS COUNTY (pop. 916,542)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 166
BANK OF NEW YORK: 99
CHASE: 16
CITIBANK: 28
DEUTSCHE BANK: 113
FANNIE: 47
FREDDIE: 0
HSBC: 40
U.S. BANK: 143
WELLS FARGO: 181
BANKS: 786/F & F: 47

7 – DUVAL COUNTY (pop. 864,263)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 208
BANK OF NEW YORK: 116
CHASE: 93
CITIBANK: 30
DEUTSCHE BANK: 93
FANNIE: 204
FREDDIE: 93
HSBC: 40
U.S. BANK: 90
WELLS FARGO: 240
BANKS: 910/F & F: 297

8 – LEE (pop. 618,754)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 357
BANK OF NEW YORK: 208
CHASE: 52
CITIBANK: 48
DEUTSCHE BANK: 112
FANNIE: 411
FREDDIE: 100
HSBC: 52
U.S. BANK: 157
WELLS FARGO: 190
BANKS: 1,176/F & F: 511

9 – POLK (pop. 602,095)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 210
BANK OF NEW YORK: 79
CHASE: 38
CITIBANK: 30
DEUTSCHE BANK: 86
FANNIE: 153
FREDDIE: 58
HSBC: 34
U.S. BANK: 93
WELLS FARGO: 130
BANKS: 697/F& F: 211

10 – BREVARD (pop. 543,376)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 127
BANK OF NEW YORK: 67
CHASE: 25
CITIBANK: 10
DEUTSCHE BANK: 44
FANNIE: 144
FREDDIE: 42
HSBC: 18
U.S. BANK: 53
WELLS FARGO: 108
BANKS: 452/F& F: 186

11 – VOLUSIA (pop. 494,593)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 95
BANK OF NEW YORK: 88
CHASE: 26
CITIBANK: 14
DEUTSCHE BANK: 59
FANNIE: 50
FREDDIE: 43
HSBC: 26
U.S. BANK: 61
WELLS FARGO: 99
BANKS: 468/F& F: 93

12 – SEMINOLE (pop. 422,718)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 107
BANK OF NEW YORK: 81
CHASE: 24
CITIBANK: 11
DEUTSCHE BANK: 48
FANNIE: 146
FREDDIE: 41
HSBC: 23
U.S. BANK: 25
WELLS FARGO: 76
BANKS: 395/F& F: 187

13 – PASCO (pop. 464,697)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 102
BANK OF NEW YORK: 53
CHASE: 21
CITIBANK: 17
DEUTSCHE BANK: 64
FANNIE: 174
FREDDIE: 28
HSBC: 33
U.S. BANK: 74
WELLS FARGO: 95
BANKS: 459/F& F:202

14 – SARASOTA (pop. 379,448)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 110
BANK OF NEW YORK: 81
CHASE: 16
CITIBANK: 13
DEUTSCHE BANK: 51
FANNIE: 157
FREDDIE: 46
HSBC: 23
U.S. BANK: 38
WELLS FARGO: 134
BANKS: 466/F& F: 203

15 – MARION (pop. 331,298)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 90
BANK OF NEW YORK: 18
CHASE: 19
CITIBANK: 9
DEUTSCHE BANK: 31
FANNIE: 87
FREDDIE: 28
HSBC: 16
U.S. BANK: 38
WELLS FARGO: 98
BANKS: 319/F& F: 115

16 – MANATEE (pop. 322,833)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 117
BANK OF NEW YORK: 40
CHASE: 8
CITIBANK: 14
DEUTSCHE BANK: 37
FANNIE: 77
FREDDIE: 18
HSBC: 22
U.S. BANK: 52
WELLS FARGO: 396
BANKS: 686/F& F: 95

17 – COLLIER (pop. 321,520)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 121
BANK OF NEW YORK: 54
CHASE: 18
CITIBANK: 16
DEUTSCHE BANK: 33
FANNIE: 120
FREDDIE: 33
HSBC: 25
U.S. BANK: 28
WELLS FARGO: 79
BANKS: 374/F& F: 153

18 – ESCAMBIA (pop. 297,619)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 30
BANK OF NEW YORK: 27
CHASE: 3
CITIBANK: 10
DEUTSCHE BANK: 26
FANNIE: 62
FREDDIE: 23
HSBC: 17
U.S. BANK: 46
WELLS FARGO: 40
BANKS: 199/F& F: 85

19 – LAKE (pop. 297,052)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 51
BANK OF NEW YORK: 38
CHASE: 12
CITIBANK: 5
DEUTSCHE BANK: 28
FANNIE: 91
FREDDIE: 35
HSBC: 14
U.S. BANK: 40
WELLS FARGO: 75
BANKS: 263/F& F: 126

20 – ST. LUCIE (pop. 277,789)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 110
BANK OF NEW YORK: 47
CHASE: 27
CITIBANK: 9
DEUTSCHE BANK: 59
FANNIE: 132
FREDDIE: 40
HSBC: 33
U.S. BANK: 65
WELLS FARGO: 76
BANKS: 426/F& F: 172

21 – LEON (pop. 275,487)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 23
BANK OF NEW YORK: 12
CHASE: 7
CITIBANK: 2
DEUTSCHE BANK: 9
FANNIE: 44
FREDDIE: 12
HSBC: 4
U.S. BANK: 16
WELLS FARGO: 33
BANKS: 106/F& F: 56

22 – OSCEOLA (pop. 268,685)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 134
BANK OF NEW YORK: 3
CHASE: 30
CITIBANK: 6
DEUTSCHE BANK: 10
FANNIE: 103
FREDDIE: 29
HSBC: 7
U.S. BANK: 10
WELLS FARGO: 55
BANKS: 255/F& F: 132

23 – ALACHUA (pop. 247,336)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 36
BANK OF NEW YORK: 9
CHASE: 6
CITIBANK: 4
DEUTSCHE BANK: 11
FANNIE: 39
FREDDIE: 14
HSBC: 3
U.S. BANK: 19
WELLS FARGO: 40
BANKS: 128/F& F: 53

24 – CLAY (pop. 190,865)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 39
BANK OF NEW YORK: 16
CHASE: 7
CITIBANK: 2
DEUTSCHE BANK: 17
FANNIE: 43
FREDDIE: 7
HSBC: 11
U.S. BANK: 22
WELLS FARGO: 29
BANKS: 143/F& F: 50

25 – ST. JOHNS (pop. 190,039)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 40
BANK OF NEW YORK: 33
CHASE: 6
CITIBANK: 11
DEUTSCHE BANK: 14
FANNIE: 56
FREDDIE: 31
HSBC: 8
U.S. BANK: 29
WELLS FARGO: 58
BANKS: 203/F& F: 87

26 – OKALOOSA (pop. 180,822)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 35
BANK OF NEW YORK: 27
CHASE: 2
CITIBANK: 8
DEUTSCHE BANK: 19
FANNIE: 50
FREDDIE: 12
HSBC: 8
U.S. BANK: 24
WELLS FARGO: 16
BANKS: 139/F& F: 62

27 – HERNANDO (pop. 172,778)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 53
BANK OF NEW YORK: 41
CHASE: 13
CITIBANK: 3
DEUTSCHE BANK: 24
FANNIE: 82
FREDDIE: 26
HSBC: 15
U.S. BANK: 30
WELLS FARGO: 47
BANKS: 226/F& F: 108

28 – BAY (pop. 168,852)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 43
BANK OF NEW YORK: 39
CHASE: 13
CITIBANK: 2
DEUTSCHE BANK: 25
FANNIE: 70
FREDDIE: 18
HSBC: 7
U.S. BANK: 21
WELLS FARGO: 21
BANKS: 171/F& F: 88

29 – CHARLOTTE (pop. 159,978)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 110
BANK OF NEW YORK: 59
CHASE: 15
CITIBANK: 4
DEUTSCHE BANK: 29
FANNIE: 22
FREDDIE: 23
HSBC: 18
U.S. BANK: 41
WELLS FARGO: 56
BANKS: 332/F& F: 45

30 – SANTA ROSA (pop. 151,372)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 30
BANK OF NEW YORK: 13
CHASE: 1
CITIBANK: 5
DEUTSCHE BANK: 8
FANNIE: 34
FREDDIE: 10
HSBC: 3
U.S. BANK: 10
WELLS FARGO: 33
BANKS: 103/F& F: 44

31 – MARTIN (pop. 146,318)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 22
BANK OF NEW YORK: 6
CHASE: 5
CITIBANK: 2
DEUTSCHE BANK: 18
FANNIE: 53
FREDDIE: 9
HSBC: 11
U.S. BANK: 15
WELLS FARGO: 33
BANKS: 112/F& F: 62

32 – CITRUS (pop. 141,236)
HOMES OWNED BY 8 MAJOR BANKS, FANNIE & FREDDIE

BANK OF AMERICA: 50
BANK OF NEW YORK: 27
CHASE: 6
CITIBANK: 3


 

 

FED White Paper Identifies Negative Equity as Primary Economic Problem

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EDITORIAL NOTES: The principal problem I see is that while the Fed and other agencies are still getting their heads wrapped around what occurred in the mortgages mess, they still barely notice the elephant in the living room because if you remove the distraction it will reveal basic flaws and defects in the debts, the notes and security instruments (mortgages and deeds of trust) that are present in the system. It will also reveal the fact that the transfer documents, even if they were real, are in conflict with (a) the provisions of the enabling documents that were meant to create the blueprint of securitizing residential mortgage debt and specifically (b) the transfer of non-performing loans into the alleged pools — an event that no investor would approve.

The focus on all these proposals and white papers is to preserve the integrity of the mortgage lending process that was employed and to preserve the integrity of the foreclosures that followed. These premises are false and they cannot be made true by saying so, or by establishing a national registry for lien (in violation of states rights under the U.S. Constitution) or otherwise.

The reality is that nearly all the mortgages, whether declared delinquent or not, involve debts that have not been liquidated or determined by a full accounting. Further each debt is subject to third party payments that either cured any alleged default or reduced the principal due, or both. Thus the “credit bid” at the auction was defective unless the bid was reduced by payments received but unaccounted for previously by the creditor. The absence of the creditor from the courtroom or at any part of the process prevents the court, the trustee on the deed of trust, and the borrower to determine where the money went and why.

The second problem clearly evident in its absence, is that the debt arose between the borrower and the lender, which is to say the party who took the money (or the benefit) and the party who paid the money (the source of funding on the loan). Everyone else is a intermediary with no right to claim otherwise. This fact alone accounts for the corruption of the state and county title registries, which, contrary to the assertions in the white paper, have operated perfectly regardless of volume, thus negating the use of a national registry that is being attempted to paper over the property rights of individuals, and local taxing authorities.

The third problem is the assumption that it is difficult for the investors to fire the services and replace them with others who will perform in the interests of the real parties, thus reducing the huge unnecessary deflation in home values caused by forcing them into foreclosure. Investors can easily set up their own operations (announcement from livinglies coming shortly) wherein they can either purchase clear title from the homeowners effected or enter into meaningful modifications and settlements without the use of the existing servicers who are marching to the tune played by banks. It is well known and well established that most homeowners would give up many claims and defense if they settle the issue with their home. For those who have left they could be induced to either return or be paid a small fee for clearing title.

The solution is evading the regulatory authorities because they are presuming the mantra from Wall Street is true. There is nothing to support the mantra other than the persistent drumbeat of the same lies.

The central thesis of the white paper is true, however. Negative equity will destroy the housing market and the economy will be dragged down with it. Converting properties to rentals assumes the parties renting the properties own them. Not even Fannie Mae of Freddie have any clear right to claim title to these “REO” properties. But its equally true that a trusted portal could provide a method of settling, mediating and modifying the mortgages such that the recovery would be multiples of what are current being reserved for investors. And it is equally true and well-established that most homeowners will accept principal due and payments that exceed the current value of the collateral which is artificially deflated by the incessant pressure of ever-expanding supply inventory.

The ONLY obstacle to resolution is our commitment to using realism and practicality instead of ideology and an unswerving loyalty to those who trashed the system.

NOTABLE QUOTES:

Federal Reserve Jan 4 2011 housing-white-paper-20120104

The ongoing problems in the U.S. housing market continue to impede the economic recovery. House prices have fallen an average of about 33 percent from their 2006 peak, resulting in about $7 trillion in household wealth losses and an associated ratcheting down of aggregate consumption. At the same time, an unprecedented number of households have lost, or are on the verge of losing, their homes. The extraordinary problems plaguing the housing market reflect in part the effect of weak demand due to high unemployment and heightened uncertainty. But the problems also reflect three key forces originating from within the housing market itself: a persistent excess supply of vacant homes on the market, many of which stem from foreclosures; a marked and potentially long-term downshift in the supply of mortgage credit; and the costs that an often unwieldy and inefficient foreclosure process imposes on homeowners, lenders, and communities.

Finally, foreclosures inflict economic damage beyond the personal suffering and dislocation that accompany them.1    In particular, foreclosures can be a costly and inefficient way to resolve the inability of households to meet their mortgage payment obligations because they can result in “deadweight losses,” or costs that do not benefit anyone, including the neglect and deterioration of properties that often sit vacant for months (or even years) and the associated negative effects on neighborhoods.2    These deadweight losses compound the losses that households and creditors already bear and can result in further downward pressure on house prices. Some of these foreclosures can be avoided if lenders pursue appropriate loan modifications aggressively and if servicers are provided greater incentives to pursue alternatives to foreclosure. And in cases where modifications cannot create a credible and sustainable resolution to a delinquent mortgage, more-expedient exits from homeownership, such as deeds-in-lieu of foreclosure or short sales, can help reduce transaction costs and minimize negative effects on communities.

Housing Market Conditions
House Prices and Implications for Household Wealth
House prices for the nation as a whole (figure 1) declined sharply from 2007 to 2009 and remain about 33 percent below their early 2006 peak, according to data from CoreLogic. For the United States as a whole, declines on this scale are unprecedented since the Great Depression. In the aggregate, more than $7 trillion in home equity (the difference between aggregate home values and mortgage debt owed by homeowners)–more than half of the aggregate home equity that existed in early 2006–has been lost. Further, the ratio of home equity to disposable personal income has declined to 55 percent (figure 2), far below levels seen since this data series began in 1950.4

This substantial blow to household wealth has significantly weakened household spending and consumer confidence. Middle-income households, as a group, have been particularly hard hit because home equity is a larger share of their wealth in the aggregate than it is for low-income households (who are less likely to be homeowners) or upper-income households (who own other forms of wealth such as financial assets and businesses). According to data from the Federal Reserve’s Survey of Consumer Finances, the decline in average home equity for middle-income homeowners from 2007 through 2009 was about 66 percent of the average income in 2007 for these homeowners. In contrast, the decline in average home equity for the highest-income homeowners was only about 36 percent of average income for these homeowners.5
For many homeowners, the steep drop in house prices was more than enough to push their mortgages underwater–that is, to reduce the values of their homes below their mortgage balances (a situation also referred to as negative equity). This situation is widespread among borrowers who purchased homes in the years leading up to the house price peak, as well as those who extracted equity through cash-out refinancing. Currently, about 12 million homeowners are underwater on their mortgages (figure 3)–more than one out of five homes with a mortgage.6    In states experiencing the largest overall house price declines–such as Nevada, Arizona, and Florida–roughly half of all mortgage borrowers are underwater on their loans.

Negative equity is a problem because it constrains a homeowner’s ability to remedy financial difficulties. When house prices were rising, borrowers facing payment difficulties could avoid default by selling their homes or refinancing into new mortgages. However, when house prices started falling and net equity started turning negative, many borrowers lost the ability to refinance their mortgages or sell their homes. Nonprime mortgages were most sensitive to house price declines, as many of these mortgages required little or no down payment and hence provided a limited buffer against falling house prices. But as house price declines deepened, even many prime borrowers who had made sizable down payments fell underwater, limiting their ability to absorb financial shocks such as job loss or reduced income.7

Loan Modifications and the HAMP Program
Loan modifications help homeowners stay in their homes, avoiding the personal and economic costs associated with foreclosures. Modifying an existing mortgage–by extending the term, reducing the interest rate, or reducing principal–can be a mechanism for distributing some of a homeowner’s loss (for example, from falling house prices or reduced income) to lenders, guarantors, investors, and, in some cases, taxpayers. Nonetheless, because foreclosures are so
costly, some loan modifications can benefit all parties concerned, even if the borrower is making reduced payments.

Negative equity is a problem, above and beyond affordability issues, because it constrains the ability of borrowers to refinance their mortgages or sell their homes if they do not have the means or willingness to bring potentially substantial personal funds to the transaction. An inability to refinance, as discussed previously, blocks underwater borrowers from being able to take advantage of the large decline in interest rates over the past years. An inability to sell could force underwater borrowers into default if their mortgage payments become unsustainable, and may hinder movement to pursue opportunities in other cities.

Mortgage Servicing: Improving Accountability and Aligning Incentives
Mortgage servicers interact directly with borrowers and play an important role in the resolution of delinquent loans. They are the gatekeepers to loan modifications and other foreclosure alternatives and thus play a central role in how transactions are resolved, how losses are ultimately allocated, and whether deadweight losses are incurred.
Thus far in the foreclosure crisis, the mortgage servicing industry has demonstrated that it had not prepared for large numbers of delinquent loans. They lacked the systems and staffing needed to modify loans, engaged in unsound practices, and significantly failed to comply with regulations. One reason is that servicers had developed systems designed to efficiently process large numbers of routine payments from performing loans. Servicers did not build systems, however, that would prove sufficient to handle large numbers of delinquent borrowers, work that requires servicers to conduct labor-intensive, non-routine activities. As these systems became more strained, servicers exhibited severe backlogs and internal control failures, and, in some cases, violated consumers’ rights. A 2010 interagency investigation of the foreclosure processes at servicers, collectively accounting for more than two-thirds of the nation’s servicing activity, uncovered critical weaknesses at all institutions examined, resulting in unsafe and unsound practices and violations of federal and state laws.40    Treasury has conducted compliance reviews since the inception of HAMP, and, beginning in June 2011, it released servicer compliance reports on major HAMP servicers. These reports have shown significant failures to comply with the requirements of the MHA program.41    In several cases, Treasury has withheld MHA incentive payments until better compliance is demonstrated.

These practices have persisted for many reasons, but we focus here on four factors that, if addressed, might contribute to a more functional servicing system in the future. First, data are not readily available for investors, regulators, homeowners, or others to assess a servicer’s performance. Second, even despite this limitation, if investors or regulators were able to determine that a servicer is performing poorly, transferring loans to another servicer is difficult. Third, the traditional servicing compensation structure can result in servicers having an incentive to prioritize foreclosures over loan modifications.42    Fourth, the existing systems for registering liens are not as centralized or as efficient as they could be.

A third potential area for improvement in mortgage servicing is in the structure of compensation. Servicers usually earn income through three sources: “float” income earned on cash held temporarily before being remitted to others, such as borrowers’ payments toward taxes and hazard insurance; ancillary fees such as late charges; and an annual servicing fee that is built into homeowners’ monthly payments. For prime fixed-rate mortgages, the servicing fee is usually 25 basis points a year; for subprime or adjustable-rate mortgages, the fee is somewhat higher. From an accounting and risk-management perspective, the expected present value of this future income stream is treated as an asset by the servicer and accounted for accordingly.
The value of the servicing fee is important because it is expected to cover a variety of costs that are irregular and widely varying. On a performing loan, costs to servicers are small–especially for large servicers with highly automated systems. For these loans, 25 basis points and other revenue exceed the cost incurred. But for nonperforming loans, the costs associated with collections, advancing principal and interest to investors, loss mitigation, foreclosure, and the maintenance and disposition of REO properties might be substantial and unpredictable and might easily exceed the servicing fee.

A final potential area for improvement in mortgage servicing would involve creating an online registry of liens. Among other problems, the current system for lien registration in many jurisdictions is antiquated, largely manual, and not reliably available in cross-jurisdictional form. Jurisdictions do not record liens in a consistent manner, and moreover, not all lien holders are required to register their liens. This lack of organization has made it difficult for regulators and policymakers to assess and address the issues raised by junior lien holders when a senior mortgage is being considered for modification. Requiring all holders of loans backed by residential real estate to register with a national lien registry would mitigate this information gap and would allow regulators, policymakers, and market participants to construct a more comprehensive picture of housing debt.

 

Citizens United Threatens Independence of Judicial System — Tennessee Answer to Problem

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Editor’s Note: The New York Times editorial makes a good point. Many Judges are elcted and even those who are appointed are frequently appointed by elected officials. Having money pour into these campaigns from  banks and servicers, which is what is happening, will conform the worst fears of most citizens who are cocnerned about getting a fair hearing in court. It is difficult to be objective if the majority of your campaign money has come from the financial sector.

  • Remember the judicial system doesn’t actually guarantee justice of a fair result as you would see it. It is there to guarantee a fair hearing. You may think they are the same thing, but if you think about it, they are not the same.
  • This is why presentation and procedure is so important and that from the start you establish credibility — which means objecting to proffers of facts not in evidence and making it clear that you do not concede that the debt still exists, you do not concede that the debt is in default and you do not concede the standing or interest of the party seeking to foreclose or even settle, mediate or modify the loan.
  • That is why it is so essential that you obtain the COMBO Title and Securitization report, and you most probably should have the Loan Level Accounting report that frequently shows that the forecloser on the one hand is declaring a default and on the other hand paying the creditor curing the default. Adding the Forensic Loan Analysis (TILA+) may well pave the ground for damages, recover of attorney fees at an early stage to finance the rest of litigation and attacking the validity (not the existence) of the mortgage lien.
  • The issue is not whether you are right or wrong — a conclusion that is reached at trial. The issue is whether you can get into the CONTESTED factual assertions made by each side and to achieve the result of getting into the discovery stage. discovery. Once, there, most cases settle when the banks and servicers must come up with actual full accounting, actual documents and proof of transactions that referred to on fabricated transfer papers.

I think it is appropriate to ask the Judge in as non-threatening way as possible whether the Judge has any conflicts. Perhaps the question can be phrased that your client is concerned about the amount of money that is flowing into campaigns and the pension money that has been used to purchase what now appear to be worthless mortgage bonds or what may be valid bonds but worth far less depending upon the outcome of the cases that attack either the security instrument or the debt or the note supposedly evidencing the debt.

That way you are introducing the basic issues and at the same time you are asking the Judge to commit himself on record as to whether he has any conflicts or whether there is any relationship or investment which could influence his decisions.

If you are going to do that — and I recommend you do — make sure your client is there or it will seem that you are just using tactics or strategy. Whatever the answer, instruct your client to remain calm and passive.

The very conservative Tennessee Supreme Court has already recognized the problem and issued an order for automatic recusal (self removal by the Judge) where the problem surfaces.

A more interesting proposition is where the prosecutors are elected or appointed in the same way. Prosecutorial discretion (whether to prosecute or not) could undermine the criminal process. Remember that despite the efforts of the  newly constituted investigatory and prosecution units, the politics is running heavily in the direction of the banks despite the public outcry.

Perhaps the answer to all of this is to have retired Judges hear the cases and where appropriate appoint special prosecutors from the private sector.

A Reform for Fair Courts

New York Times Editorial January 28, 2012.

With rising special-interest spending in state judicial elections, there is an urgent need to protect judicial integrity from the flood of campaign cash. Tennessee is leading the way with a new rule prohibiting judges from hearing cases when campaign spending by lawyers or litigants raises a reasonable question of their impartiality.

Adopted earlier this month by the Tennessee Supreme Court, the recusal rule applies to both direct contributions and independent expenditures favoring a judge’s election. It requires judges to step aside when the level of campaign support raises a reasonable concern about his or her ability to be fair. Judges who deny a recusal request will need to provide their reasons in writing, and the final word on recusal will not be left to the challenged judge. The litigants will have a chance to appeal recusal decisions to the court’s other judges.

The United States Supreme Court in a 2009 case recognized the potential threat to public trust in the justice system posed by outsized campaign spending in judicial elections. But few of the 38 states that elect their top judges have tried to combat the problem with more rigorous recusal rules. If special interests knew their campaign spending would be likely to trigger recusal, they might not try as hard to buy up judges.

Tennessee’s good model should help prod court leaders in other jurisdictions to follow suit. Campaign spending problems have plagued judicial races in states like Illinois, Alabama and Pennsylvania. A sensible rule on recusal would significantly increase public confidence in judicial integrity.

Bribery? California promised 60% of AG Wrongful Foreclosure Settlement — Harris Still Says No

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Editor’s Note: Maybe the Banks and servicers are running scared. Maybe the AG’s are too lazy to the research with few exceptions like Harris. But, California never accounted for more than 40% of foreclosures and yet to get Harris to agree, they tried bribing her with a 60% share of the big AG settlement that might never happen — especially not without California. She still said no she said it was premature, and she said it was insufficient to compensate those who were wrongfully foreclosed. Right on all counts.

California AG Harris Turned Down a Guaranteed 60% of the Foreclosure Fraud Deal

By: David Dayen

See full story on foredoglake.com

Somebody really wants this foreclosure fraud settlement to go through. So much so that California was offered a sum to participate in the settlement sure to piss off the other 49 AGs across the country. Only California was guaranteed earmarked funds from the settlement. Earlier we heard they would get $8 billion out of the $25 billion pot, or 32% of the total (California has roughly 10% of the population). Now, Shahien Nasiripour says they were in line for $15 billion, or a whopping 60%.

California, home to the largest US property market, spurned an offer of roughly $15bn in lower monthly mortgage payments and reduced loan balances for its residents in talks to settle allegations of mortgage-related misdeeds by leading US banks.

Bank of America had guaranteed California borrowers would receive $8bn in mortgage aid, while Wells Fargo and JPMorgan Chase committed at least $5bn to the state’s distressed homeowners, according to people familiar with the matter, who declined to give exact figures.

California would have received more than half of about $25bn of aid that would be available to borrowers in a nationwide deal under discussion to settle allegations that banks illegally seized homes using faulty documentation.

Deal terms, sent to state attorneys-general late last week after nearly a year of talks between the banks and various states and federal agencies, did not include guaranteed minimums for any other states, people familiar with the matter said. Various state officials said they were unaware of the California offer.

I suppose this could be disinformation designed to anger the other AGs and pressure California’s Kamala Harris to accept the deal when the terms are actually not as clear-cut. But this shows two things: one, how desperate federal regulators are to get California into the deal, and two, how inadequate the overall deal is, even to the state of which it’s tilted so far in favor.

Looking at raw population totals isn’t a fair way to look at this; California has lots of single-family homes, more than other states, and a large oversample of subprime loans. It’s hard to get at all these figures. But I was a bit surprised that the state is not in the top five among homes in negative equity. About 30% of the state’s homes have negative equity, behind Nevada, Arizona, Florida, Michigan and Georgia. If I were the AGs of those other states, I’d be pissed that California is getting such special treatment.

But one of those state AGs, Pam Bondi of Florida, is instead mad that California won’t go along, which likely holds up the deal for other states.

Florida Attorney General Pam Bondi stood by the 50-state attorneys general settlement with the nation’s biggest banks on Thursday as California and Delaware formally rejected the proposal she helped negotiate.

Bondi said Floridians can’t wait for foreclosure relief and that the draft proposal sent to states on Monday addresses California’s concerns.

“The settlement under discussion contains all the elements California purports to be looking for; transparency, substantial relief for distressed homeowners, and strict enforcement,” Bondi said Thursday. “Florida’s homeowners need relief now, and protracted and uncertain litigation would be contrary to their best interests.”

Bondi would have to share $10 billion with the rest of the country, with no guarantee of any percentage going to her state, and she’s mad at California, and not the officials who negotiated that stinker of a deal for her?

And here’s the larger point. This settlement deal is so bad, that even the state getting 60% of it sees that it would not provide commensurate relief to the scale of the problem. When the overall deal is $25 billion and there is $700 billion in negative equity nationwide, you can see that as a problem. Plus, if I were any AG, I would doubt the enforcement, since the last time they settled with a mortgage lender on fraud claims, and were supposed to get loan modifications as a result, Bank of America didn’t do the mods, in the Countrywide settlement.

So between California and Florida, there’s one AG who has their head on straight at the moment, and one who doesn’t. Of course, you have to understand who these people are working for. In the case of Harris, it looks to be the people. In the case of Bondi… the banks. Why else would she fire the two most aggressive investigators in her office looking into foreclosure fraud?

Should I Default on my Mortgage?

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Should I Default on my Mortgage?

Posted on January 25th, 2012 by Mark Stopa

I get all sorts of comments on this blog, not to mention inquiries from prospective clients via email. This one, which I’ll paraphrase, really caught my attention, as it presents a situation I suspect a lot of Florida homeowners are facing. Here’s the question, and my response:

Question: My wife and I have always paid our mortgage, but with the economy as it is we’ve struggled to do so recently. Our house is about $150,000 underwater, and for the past year or so, we’ve borrowed money from my parents to make the mortgage payments. Unfortunately, my parents can no longer afford to lend us any more money, so we’re trying to decide what to do.

I’ve been asking the bank for a loan modification for many months. They keep telling me “we’ll get back to you,” but then I never hear anything. Most recently, the bank began insisting that my wife disclose her financial information as well. I argued with them about this, since my wife wasn’t a borrower and did not sign the Note, but they insisted that the only way I would be considered for a loan modification was if my wife submitted her financial information as well.

What should I do? My wife doesn’t want to disclose anything, but if she doesn’t, and we don’t get a modification, then we can’t continue to keep making our mortgage payments for much longer.

Answer: First off, this might sound backwards to you, but I’m glad your parents are no longer giving/lending you money for your monthly mortgage payments. I can understand the logic behind their doing so, don’t get me wrong, and I’m certainly not trying to criticize you or them. However, as I’ve explained on many occasions, including here and here, depleting a 401(k), IRA, or savings account to make monthly mortgage payments on a house you just can’t afford is almost never a good idea.

Please read this post, which I wrote in July, 2010. As I explained there in detail, it’s almost never a good idea to deplete your savings to make monthly mortgage payments, as all that will happen is you’ll run out of savings and then still be facing foreclosure anyway. If you realize you can’t afford to continue making monthly mortgage payments indefinitely into the future, isn’t it better to stop making those payments now, keep whatever money you have in your own pocket, and brace yourself for the impending foreclosure lawsuit, rather than spend all of your savings, then face foreclosure with no money left in your pocket?

The fact that your parents were lending to you, as opposed to you depleting your own savings, doesn’t change my view. In fact, it might make it worse. Your parents are obviously older than you, so they’ll have fewer years in the work force (if any) to recover, and I suspect from your email that you’ve depleted your own savings, too. Nonetheless, you’re still in the same situation you would have been in had you and your parents kept those monies in your own pockets – facing foreclosure.

It’s critical for you, your parents, and all homeowners to realize that any money in your 401(k) or IRA can never be taken by the bank (i.e. to collect on a deficiency judgment) – the only way you’ll ever lose that money is if you take it out voluntarily. Even if you get foreclosed, you’ll still get to keep your 401(k) and IRA monies. Even if you have to file bankruptcy, you’ll still get to keep your 401(k) and IRA monies. Hence, I can hardly imagine a circumstance where it makes sense to dip into these accounts to make mortgage payments. I suppose a temporary reduction in income could justify doing so for a short period of time, but that’s the catch – lots of people think/hope their reduction in income is temporary, but before they know it, they’ve made a year of mortgage payments from their IRA or 401(k) with no end in sight.

More at http://www.stayinmyhome.com/blog/2012/01/should-i-default-on-my-mortgage/

Mark Stopa Esq.

http://www.stayinmyhome.com

 

Reuters: HSBC Laundering Money For Terrorists?

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Editor’s Comment: As the foreclosure story unfolds and the amount of money taken from the investor pools by the investment banks becomes quantified, the question becomes “where did they put all that money?” This Senate inquiry, while focused on laundering money for terrorists and countries that sponsor terrorism, will show the path that was used to distribute the “off balance sheet” transactions and “trading profits” off shore. Just ask Romney — he’ll show you how to do it.

See Full Story on Reuters

HSBC Holdings PLC is under investigation by a Senate panel in a money-laundering inquiry, the latest step in a long-running U.S. effort to halt shadowy money flows through global banks, according to people familiar with the situation and a company securities filing.

The inquiry being conducted by the Senate Permanent Subcommittee on Investigations could yield a report and congressional hearing later this spring, these people said. The subcommittee has a history of conducting high-profile hearings that have proved embarrassing for the world’s biggest banks.

The intensifying scrutiny of HSBC is the latest in a series if investigations by U.S. officials into how global banks have processed — and in some cases, intentionally hidden — financial transactions on behalf of countries which allegedly support terrorism, corrupt foreign officials, drug gangs and criminals. Since 2008, European and U.S. banks have signed deferred prosecution agreements and paid more than $1.2 billion in penalties for alleged violations of anti-money laundering regulations.

The specific focus of the Senate probe of HSBC isn’t known. A Reuters review of legal documents and prior regulatory probes, though, points to a number of alleged breakdowns in HSBC’s anti-money laundering systems.

HSBC spokesman Robert Sherman said in a statement, “We have ongoing discussions with officials” including the Senate panel “on a number of regulatory and compliance matters. The nature of these discussions is confidential; in all cases, we are cooperating.”

A spokesperson for the Senate subcommittee declined comment.

Earlier this month, HSBC named former top U.S. Treasury Department official Stuart Levey as chief legal officer in a sign of how the bank is hiring outside experts in money laundering. Levey, who specialized in combating terrorism financing and left the Treasury Department last year, is based in London. An HSBC spokesman said Levey wasn’t available for comment.

Stuart Gulliver, HSBC chief executive, said in a statement this month that Levey’s experience “dealing with international financial and legal issues is highly relevant to a global bank such as HSBC.”

EARLY WARNING SIGNS

For HSBC, which has operations in more than 80 countries and territories, the Senate probe is another sign that U.S. law enforcement officials are widening their inquiries into the London bank – one that for the past decade has repeatedly drawn scrutiny from U.S. financial regulators for weak money-laundering controls and allegedly enabling healthcare fraud and tax evasion.

In 2003 and 2010, two U.S. bank regulators raised serious concerns about the bank’s anti-money laundering systems and staff and ordered the bank to improve anti-money laundering systems and personnel, according to enforcement actions by the Federal Reserve Bank of New York and the Comptroller of the Currency, a Treasury Department unit.

In securities filings, the bank has disclosed increasing inquiries. In 2010, the bank disclosed that it had received grand jury subpoenas and was being investigated by the Justice Department in money-laundering inquiries. It subsequently said the district attorney’s office in Manhattan was investigating.

 

Az AG Takes Aim at Secret Settlements with Homeowners

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Editor’s Comment: I’ve been telling people for years that the same banks that use ridicule and derision to characterize the arguments of homeowners who defend their homes — then turnaround and enter into settlements that are sealed with confidentiality (as usual they don’t call them that, they instead use the term “non-disparagement clauses” —- but only after there is a real risk that the Bank will need to show the actual transactions through which they claim to have the right to foreclose. Those transactions do not exist. And it is has taken a long time for anyone, much less a majority of people in the justice system, to realize that fact.

Most people who heard me say that thought that I was exaggerating or even making it up. So now it is somewhat comforting to have it recognized by an attorney general and to have him inquire. The promise of confidentiality has teeth. breach it, and the Bank says they own your property and you have waived all defenses.

Now the Arizona Attorney General is taking the position that these sealed settlements represent areas of inquiry that should be open for his continuing investigation into the misbehavior of the banks (a euphemism for criminal acts). He’s probably right, although the chilling effect on those settlements is bound to cause a stir.

It is challenging to quantify, but it would appear that such settlements from all the major players number in the tens of thousands now. The point being made by the Az Attorney general, I think, is that if the there was no case there should have been no foreclosure and everyone should be given the same treatment.

From my sources, who must remain anonymous for obvious reasons, the settlements generally look like this: 40%-75% correction of principal on the loan, forgiveness of all missed payments including taxes, payment of attorney fees and sometimes payment of damages. The new loan, which is adjusted on the unrecorded note is set at 2-3% interest with 30-40 year amortization.

While this is irresistible to many homeowners who are weary from fighting the bank, it still leaves them with a title problem down the road when they seek to sell or refinance — because the very reason the Bank is settling is the same reason why they have no actual authority to settle or satisfy the mortgage once it is deemed paid in full. Thus it is important in those settlements to get a court order quieting title at the time of settlement because if you wait, the players may vanish into oblivion.

Worse yet, the AG could take the position that the settlement was collusion to continue corrupting the title registry in each of the counties of the state.

SEE FULL STORY ON HOUSING WIRE

as the nation focuses on the proposed foreclosure settlement, Arizona’s attorney general takes aim at the mortgage modification practices of Bank of America. Bloomberg Businessweek reports the bank negotiated at least 12 secret settlements with borrowers that include nondispargement clauses. Arizona AG Thomas Horne asked a judge to block the nondisparagement clauses. Bank attorneys deny the settlements have hindered the AG’s probe. The AG investigation is part of a 2010 lawsuit against the bank, and a court hearing is set for Feb. 1.

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