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CHAIN OF TITLE by David Dayen. Available on Amazon

LISTEN LIBERALS! by Thomas Frank. Available on Amazon and Kindle.

Pretender Lenders: How Tablefunding and Securitization Go Hand in Hand” By William Paatalo and Kimberly Cromwell. CLICK:

FDCPA Claims Upheld in 9th Circuit Class Action

The court held that the FDCPA unambiguously requires any debt collector – first or subsequent – to send a section 1692g(a) validation notice within five days of its first communication with a consumer in connection with the collection of any debt.


If anyone remembers the Grishom book “The Firm”, also in movies, you know that in the end the crooks were brought down by something they were never thinking about — mail fraud — a federal law that has teeth, even if it sounds dull. Mail fraud might actually apply to the millions of foreclosures that have taken place — even if key documents are sent through private mail delivery services. The end of month statements and other correspondence are definitely sent through US Mail. And as we are seeing, virtually everything they were sending consisted of multiple layers of misrepresentations that led to the detriment of the receiving homeowner. That’s mail fraud.
Like Mail Fraud, claims based on the FDCPA seem boring. But as many lawyers throughout the country are finding out, those claims have teeth. And I have seen multiple cases where FDCPA claims resulted in the settlement of the case on terms very favorable to the homeowner — provided the claim is properly brought and there are some favorable rulings on the initial motions.
Normally the banks settle any claim that looks like it would be upheld. That is why you don’t see many verdicts or judgments announcing fraudulent conduct by banks, servicers and “trustees.”And you don’t see the settlement either because they are all under seal of confidentiality. So for the casual observer, you might see a ruling here and there that favors the borrower, but you don’t see any judgments normally. Here the banks thought they had this one in the bag — because it was a class action and normally class actions are difficult if not impossible to prosecute.
It turns out that FDCPA is both a good cause of action for damages and a great discovery tool — to force the banks, servicers or anyone else that is a debt collector to respond within 5 days giving the basic information about the loan — like who is the actual creditor. Discovery is also much easier in FDCPA actions because it is forthrightly tied to the complaint.
This decision is more important than it might first appear. It removes any benefit of playing musical chairs with servicers, and other debt collectors. This is a core of bank strategy — to layer over all defects. This Federal Court of Appeals holds that it doesn’t matter how many layers you add — all debt collectors in the chain had the duty to respond.

Justia Opinion Summary

Hernandez v Williams, Zinman and Parham, PC No 14-15672 (9th Cir, 2016)

Plaintiff filed a putative class action, alleging that WZP violated the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. 1692(g)(a), by sending a debt collection letter that lacked the disclosures required by section 1692(g)(a) of the FDCPA. Applying well-established tools of statutory interpretation and construing the language in section 1692g(a) in light of the context and purpose of the FDCPA, the court held that the phrase “the initial communication” refers to the first communication sent by any debt collector, including collectors that contact the debtor after another collector already did. The court held that the FDCPA unambiguously requires any debt collector – first or subsequent – to send a section 1692g(a) validation notice within five days of its first communication with a consumer in connection with the collection of any debt. In this case, the district court erred in concluding that, because WZP was not the first debt collector to communicate with plaintiff about her debt, it had no obligation to comply with the statutory validation notice requirement. Accordingly, the court reversed and remanded.

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Deutsche Closes 200 Branches in Germany

German economy on a knife edge: Struggling Deutsche Bank closes nearly 200 branches

GERMANY’S economy could be on the brink of collapse after its largest bank announced it will shut one-quarter of its branches.

PUBLISHED: 17:31, Mon, Jul 18, 2016 | UPDATED: 18:29, Mon, Jul 18, 2016

Deutsche Bank

Germany’s largest lender Deutsche Bank will shut one-quarter of its branches

Deutsche Bank will close 188 branches across Germany in the coming months, with 51 of them in the North Rhine-Westphalia region.

The lender has been forced to implement dramatic austerity measures after share prices plummeted by a staggering 48 per cent, marking an all-time low.

It has also pulled out of 10 foreign markets, including Russia and Australia, and is poised to cut around 3,000 full-time jobs.

Earlier this year Wolfgang Schaeuble, Germany’s Finance Minister, claimed he had “no concerns” about Deutsche Bank’s plunging share prices.

And co-CEO John Cryan insisted: “Deutsche Bank remains absolutely rock-solid, given our strong capital and risk position.”

But financial expert Max Keiser has poured cold water on their claims, saying the bank is “technically insolvent” and runs a “ponzi scheme”.

Deutsche Bank

The bank has pulled out of 10 foreign markets and will cut 3,000 full-time jobs

It’s dead, it’s insolvent, the bank is dead

Max Keiser

Speaking on Russia Today’s Keiser Report, he added: “The bank needs to go out of business, because they are not solvent.

“But politicians, including Schaeuble, allow for financial engineering products to come onto the market that mask insolvency.

“It’s dead, it’s insolvent, the bank is dead… This is a dead bank walking.”

NM and Fla Judges Express Doubt Over Whether Loans Ever Made it Into trust

Judges are thinking the unthinkable — that none of the trusts ever acquired anything and that the foreclosures were and are a sham.



It isn’t “theory. It is facts, or rather the absence of facts.

As shown in the two articles by Jeff Barnes below, we are obviously reaching the tipping point. First, the presentation of a Trust instrument means nothing if there is no proof the trust was active — and in particular actually purchased the subject loan. And Second, Judges will deny all objections to discovery and will rule for the borrower if the Trust did not acquire the loan.

In ruling this way the two Judges — thousands of miles apart — are obviously recognizing that the long standing bank objection to borrowers’ defenses based upon lack of legal standing absolutely do not apply. It is not a matter of whether the borrower has “standing” to bring up the PSA, it is a matter of whether the trust was party to any real transaction with relation to the subject mortgage. The answer is no. And no amount of extra paper, powers of attorney, assignments, or endorsements can change that.

Judges are thinking the unthinkable — that none of the trusts ever acquired anything and that the foreclosures were and are a sham.

It is probably worth re-publishing this portion from a long article by Adam Levitin written shortly after the Ibanez decision was reached in Massachusetts. Note how he points out that the vast majority of PSAs that are offered as evidence are neither executed nor do they have a mortgage loan schedule that is “reviewable.” The real problem — and the reason why the SEC-filed PSA documents do not have any signatures and why there is no mortgage loan schedule is that there was no transaction in which the Trust acquired the loans. Virtually all assignments are backdated and virtually none of the assignments relate back to any ACTUAL transaction in which the Trust was involved. The banks have been winning on fumes generated by legal inapplicable presumptions. —

It seems to me that any trust with Massachusetts loans that doesn’t have a publicly filed, executed PSA with a reviewable loan schedule should be on a downgrade watch. Very few publicly filed PSAs are executed and even fewer have publicly filed loan schedules. That doesn’t mean they don’t exist, but somewhere off-line, but if I ran a rating agency, I’d want trustees to show me that they’ve got those papers on at least a sample of deals. Of course should and would are quite different–the ratings agencies, like the regulators, are refusing to take the securitization fail issue as seriously as they should (and I understand that it is a complex legal issue), but I think they ignore it at their (and our) peril

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Excerpts from Barnes’ articles:

A Florida Circuit Judge has gone on the record requiring Wells Fargo, as the claimed “trustee” of a securitized mortgage loan trust, to show that the mortgage loan which WF is attempting to enforce actually went into the PSA, and if not, the standing requirement has not been met and the case will fall on summary judgment. The homeowner is represented by Jeff Barnes, Esq.

The Judge specifically stated as follows:

“…but what I want plaintiff’s counsel to understand, that what you submitted to me with regards to the pooling and servicing agreement still does not have the actual mortgages that went into that pooling and servicing agreement…So at some point you’re going to have to show that this mortgage and note certainly went into that pooling and servicing agreement, which is what I have requested before. …  So I’m just asking you that before we get too far out, please make sure that’s there, or its going to be taken out on summary judgment. … In other words, if you’re a trustee for that pooling and servicing agreement, and the mortgage and note are not in that pooling and servicing agreement, you don’t have standing.”

This ruling not only directly confirms the proof requirements for standing in a securitization case, but supports the production of discovery on the issue as well.


The borrower thus requested 53 categories of documents from BAC, including securitization documents. BAC filed a Motion for Protective Order which claimed that public information on the SEC website was “confidential”; that the securitization-related discovery was “irrelevant”; and that it was essentially entitled to withhold discovery because it “has the original note” and has moved for summary judgment on the “relevant” issues.

The Court disagreed, denying BAC’s Motion in its entirety and commanding full responses to the borrower’s discovery request (including production of all responsive documents) within 30 days. The Court found BAC’s Motion to be “sparse”; not in compliance with New Mexico court rules as to discovery; and against New Mexico’s case law which provides for liberal discovery in foreclosure actions so that all of the issues are fully developed and a fair trial is had.


A New Mexico District Judge yesterday denied BAC Home Loan Servicing’s Motion for Protective Order which it filed in an attempt to avoid producing documentary discovery to a homeowner who BAC has sued for foreclosure. The loan was originated by New Mexico Bank and Trust, was sold to Countrywide, and thereafter allegedly “assigned” first to MERS and then by MERS to BAC.

Jeff Barnes, Esq.,

The Adam Levitin Article on Ibanez and Securitization fail:

Ibanez and Securitization Fail

posted by Adam Levitin

The Ibanez foreclosure decision by the Massachusetts Supreme Judicial Court has gotten a lot of attention since it came down on Friday. The case is, not surprisingly being taken to heart by both bulls and bears. While I don’t think Ibanez is a death blow to the securitization industry, at the very least it should make investors question the party line that’s been coming out of the American Securitization Forum. At the very least it shows that the ASF’s claims in its White Paper and Congressional testimony are wrong on some points, as I’ve argued elsewhere, including on this blog. I would argue that at the very least, Ibanez shows that there is previously undisclosed material risk in all private-label MBS.

The Ibanez case itself is actually very simple. The issue before the court was whether the two securitization trusts could prove a chain of title for the mortgages they were attempting to foreclose on.

There’s broad agreement that absent such a chain of title, they don’t have the right to foreclose–they’d have as much standing as I do relative to the homeowners. The trusts claimed three alternative bases for chain of title:

(1) that the mortgages were transferred via the pooling and servicing agreement (PSA)–basically a contract of sale of the mortgages

(2) that the mortgages were transferred via assignments in blank.

(3) that the mortgages follow the note and transferred via the transfers of the notes.

The Supreme Judicial Court (SJC) held that arguments #2 and #3 simply don’t work in Massachusetts. The reasoning here was heavily derived from Massachusetts being a title theory state, but I think a court in a lien theory state could easily reach the same result. It’s hard to predict if other states will adopt the SJC’s reasoning, but it is a unanimous verdict (with an even sharper concurrence) by one of the most highly regarded state courts in the country. The opinion is quite lucid and persuasive, particularly the point that if the wrong plaintiff is named is the foreclosure notice, the homeowner hasn’t received proper notice of the foreclosure.

Regarding #1, the SJC held that a PSA might suffice as a valid assignment of the mortgages, if the PSA is executed and contains a schedule that sufficiently identifies the mortgage in question, and if there is proof that the assignor in the PSA itself held the mortgage. (This last point is nothing more than the old rule of nemo dat–you can’t give what you don’t have. It shows that there has to be a complete chain of title going back to origination.)

On the facts, both mortgages in Ibanez failed these requirements. In one case, the PSA couldn’t even be located(!) and in the other, there was a non-executed copy and the purported loan schedule (not the actual schedule–see Marie McDonnell’s amicus brief to the SJC) didn’t sufficiently identify the loan. Moreover, there was no proof that the mortgage chain of title even got to the depositor (the assignor), without which the PSA is meaningless:

Even if there were an executed trust agreement with the required schedule, US Bank failed to furnish any evidence that the entity assigning the mortgage – Structured Asset Securities Corporation [the depositor] — ever held the mortgage to be assigned. The last assignment of the mortgage on record was from Rose Mortgage to Option One; nothing was submitted to the judge indicating that Option One ever assigned the mortgage to anyone before the foreclosure sale.

So Ibanez means that to foreclosure in Massachusetts, a securitization trust needs to prove:

(1) a complete and unbroken chain of title from origination to securitization trust
(2) an executed PSA
(3) a PSA loan schedule that unambiguously indicates that association of the defaulted mortgage loan with the PSA. Just having the ZIP code or city for the loan won’t suffice. (Lawyers: remember Raffles v. Wichelhaus, the Two Ships Peerless? This is also a Statute of Frauds issue–the banks lost on 1L contract issues!)

I don’t think this is a big victory for the securitization industry–I don’t know of anyone who argues that an executed PSA with sufficiently detailed schedules could not suffice to transfer a mortgage. That’s never been controversial. The real problem is that the schedules often can’t be found or aren’t sufficiently specific. In other words, deal design was fine, deal execution was terrible. Important point to note, however: the SJC did not say that an executed PSA plus valid schedules was sufficient for a transfer; the parties did not raise and the SJC did not address the question of whether there might be additional requirements, like those imposed by the PSA itself.

Now, the SJC did note that a “confirmatory assignment” could be valid, but (and this is s a HUGE but), it:

cannot confirm an assignment that was not validly made earlier or backdate an assignment being made for the first time. Where there is no prior valid assignment, a subsequent assignment by the mortgage holder to the note holder is not a confirmatory assignment because there is no earlier written assignment to confirm.”

In other words, a confirmatory assignment doesn’t get you anything unless you can show an original assignment. I’m afraid that the industry’s focus on the confirmatory assignment language just raises the possibility of fraudulent “confirmatory” assignments, much like the backdated assignments that emerged in the robosigning depositions.

So what does this mean? There’s still a valid mortgage and valid note. So in theory someone can enforce the mortgage and note. But no one can figure out who owns them. There were problems farther upstream in the chain of title in Ibanez (3 non-identical “true original copies” of the mortgage!) that the SJC declined to address because it wasn’t necessary for the outcome of the case. But even without those problems, I’m doubtful that these mortgages will ever be enforced. Actually going back and correcting the paperwork would be hard, neither the trustee nor the servicer has any incentive to do so, and it’s not clear that they can do so legally. Ibanez did not address any of the trust law issues revolving around securitization, but there might be problems assigning defaulted mortgages into REMIC trusts that specifically prohibit the acceptance of defaulted mortgages. Probably not worthwhile risking the REMIC status to try and fix bad paperwork (or at least that’s what I’d advise a trustee). I’m very curious to see how the trusts involved in this case account for the mortgages now.

The Street seemed heartened by a Maine Supreme Judicial Court decision that came out on FridayHarp v. JPM Chase. If they read the damn case, they wouldn’t put any stock in it.

In Harp, a pro se defendant took JPM all the way to the state supreme court. That alone should make investors nervous–there’s going to be a lot of delay from litigation. Harp also didn’t involve a securitized loan. But the critical difference between Harp and Ibanez is that Harp did not involve issues about the validity of chain of title. It was about the timing of the chain of title. Ibanez was about chain of title validity. In Harp JPM commenced a foreclosure and was subsequently assigned a loan. It then brought a summary judgment motion and prevailed. The Maine SJC stated that the foreclosure was improperly commenced, but it ruled for JPM on straightforward grounds: JPM had standing at the time it moved (and was granted) summary judgment. Given the procedural posture of the case, standing at the time of summary judgment, rather than at the commencement of the foreclosure was what mattered, and there was no prejudice to the defendant by the assignment occurring after the foreclosure action was brought, because the defendant had an opportunity to litigate against the real party in interest before judgment was rendered. The Maine Supreme Judicial Court also indicated that it might not be so charitable with improperly foreclosing lenders that were not in the future; JPM benefitted from the lack of clear law on the subject. In short, Harp says that if the title defects are cured before the foreclosure is completed, it’s ok. There’s a very limited cure possibility under Harp, which means that the law is basically what it was before: if you can’t show title, you can’t complete the foreclosure.

What about MERS?

The Ibanez mortgages didn’t involve MERS. MERS was created in part to fix the problem of unrecorded assignments gumming up foreclosures in the early 1990s (and also to avoid payment of local real estate recording fees). In theory, MERS should help, as it should provide a chain of title for the mortgages. Leaving aside the unresolved concerns about whether MERS recordings are valid and for what purposes, MERS only helps to the extent it’s accurate. And that’s a problem because MERS has lots of inaccuracies in the system. MERS does not always report the proper name of loan owners (e.g., “Bank of America,” instead of “Bank of America 2006-1 RMBS Trust”), and I’ve seen lots of cases where the info in the MERS system doesn’t remotely match with the name of either the servicer or the trust bringing the foreclosure. That might be because the mortgage was transferred out of the MERS system, but there’s still an outstanding record in the MERS system, which actually clouds the title. I’m guessing that on balance MERS should help on mortgage title issues, but it’s not a cure-all. And it is critical to note that MERS does nothing for chain of title issues involving notes.

Which brings me to a critical point: Ibanez and Harp involve mortgage chain of title issues, not note chain of title issues. There are plenty of problems with mortgage chain of title. But the note chain of title issues, which relate to trust law questions, are just as, if not more serious. We don’t have any legal rulings on the note chain of title issues. But even the rosiest reading of Ibanez cannot provide any comfort on note chain of title concerns.

So who loses here? In theory, these loans should be put-back to the seller. Will that happen? I’m skeptical. If not, that means that investors will be eating the loss. This case also means that foreclosures in MA (and probably elsewhere) will be harder, which means more delay, which again hurts investors because there will be more servicing advances to be repaid off the top. The servicer and the trustee aren’t necessarily getting off scot free, though. They might get hit with Fair Debt Collection Practices Act and Fair Credit Reporting Act suits from the homeowners (plus anything else a creative lawyer can scrape together). And mortgage insurers might start using this case as an excuse for denying coverage. REO purchasers and title insurers should be feeling a little nervous now, although I doubt that anyone who bought REO before Ibanez will get tossed out of their house if they are living in it. Going forward, though, I don’t think there’s a such thing as a good faith purchaser of REO in MA.

You can’t believe everything you read. Some of the materials coming out of the financial services sector are simply wrong. Three examples:

(1) JPMorgan Chase put out an analyst report this morning claiming the Massachusetts has not adopted the UCC. This is sourced to calls with two law firms. I sure hope JPM didn’t pay for that advice and that it didn’t come from anyone I know. It’s flat out wrong. Massachusetts has adopted the uniform version of Revised Article 9 of the UCC and a non-uniform version of Revised Article 1 of the UCC, but it has adopted the relevant language in Revised Article 1. There’s not a material divergence in the UCC here.
(2) One of my favorite MBS analysts (whom I will not name), put out a report this morning that stated that Ibanez said assignments in blank are fine. Wrong. It said that they are not and never have been valid in Massachusetts:

[In the banks’] reply briefs they conceded that the assignments in blank did not constitute a lawful assignment of the mortgages. Their concession is appropriate. We have long held that a conveyance of real property, such as a mortgage, that does not name the assignee conveys nothing and is void; we do not regard an assignment of land in blank as giving legal title in land to the bearer of the assignment.”

A similar line is coming out of ASF. Courtesy of the American Banker:

Perplexingly, the American Securitization Forum issued a press release hailing the court’s ruling as upholding the validity of assignments in blank. A spokesman for the organization could not be reached to explain its interpretation.

ASF’s credibility seems to really be crumbling here. It’s one thing to disagree with the Massachusetts SJC. It’s another thing to persist in blatant misstatements of black letter law.

(3) Wells and US Bank, the trustees in the Ibanez case, immediately put out statements that they had no liability. Really? I’m not so sure. Trustees certainly have very broad exculpation and very narrow duties. But an inability to produce deal documents strikes me as such a critical error that it might not be covered. Do they really want to litigate a case where the facts make them look like such buffoons? Do they really want daylight shed on the details of their operations? Indeed, absent an executed PSA, I don’t think the trustees have any proof of exculpation. They might be acting, unwittingly, as common law trustees and thus general fiduciaries. I think they’ll settle quickly and quietly with any investors who sue.
Finally, what are the ratings agencies going to do?

It seems to me that any trust with Massachusetts loans that doesn’t have a publicly filed, executed PSA with a reviewable loan schedule should be on a downgrade watch. Very few publicly filed PSAs are executed and even fewer have publicly filed loan schedules. That doesn’t mean they don’t exist, but somewhere off-line, but if I ran a rating agency, I’d want trustees to show me that they’ve got those papers on at least a sample of deals. Of course should and would are quite different–the ratings agencies, like the regulators, are refusing to take the securitization fail issue as seriously as they should (and I understand that it is a complex legal issue), but I think they ignore it at their (and our) peril


Beware of Predatory Foreclosure “Help”

Just five years out of law school, Gennady Litvin ran a bustling legal practice that took in millions of dollars from distressed homeowners who hoped they could avoid foreclosure.

The Litvin Law Firm grossed $5.2 million in 2013, much of it from financially strapped clients who paid $500 a month or more for help negotiating lower mortgage rates or other legal assistance to keep them from losing their homes. That year, Litvin drew a salary of $466,477, according to court filings.

But the Brooklyn, New York, law firm’s fortunes soured as it faced repeated accusations of fraud and other illegal conduct in complaints filed by state regulators and disgruntled clients, some of whom were low-income and minority homeowners who lost their property after trusting the firm. In March and April 2015, Litvin and the firm both filed for bankruptcy, leaving more than 4,500 potential creditors, mostly former clients.

“There was a ton of money that he made and where that money has gone, we don’t know,” said Cleveland lawyer Geoff McCarell.

McCarell represented Branko Perisic, of Parma, Ohio. Perisic ran a small trucking firm that fell on hard times as fuel prices spiked and demand for his services fell off during the recession. In 2011, he hired the Litvin firm to get him a break on his home mortgage.

Perisic paid a total of $4,760, but got nothing but stall tactics and unmet promises as his finances worsened, according to a lawsuit he filed.

In April 2015, a Cuyahoga County judge awarded Perisic $287,575. Most of the award was to punish Litvin for “fraudulent and/or deceptive conduct, and his willful, reckless and/or grossly negligent breaches of care and/or ethical duties to plaintiff,” according to the court docket.

But because of the bankruptcy case the chance of Perisic getting paid is “slim to none,” according to his attorney.

Litvin, who lists his current practice address as the Law Office of Yuriy Moshes in Brooklyn, would not discuss his legal career.

“Thank you for reaching out seeking comment but I have no comment to make on your article,” Litvin wrote in an email.

Litvin is one of hundreds of lawyers and law firms nationwide that have participated in suspect foreclosure “rescue” schemes in the wake of the housing market crash nearly a decade ago, a Center for Public Integrity investigation found. State and federal authorities contend these plans typically have violated a range of legal ethics codes and consumer-protection laws. But while dozens of lawyers have been stripped of their licenses for running them, many others have paid little in penalties — even when desperate homeowners lost millions of dollars. Litvin is in “good standing” with the Florida Bar Association, which oversees lawyers in the state. He is not eligible to practice there, however, unless he completes 30 hours of continuing legal education required of all lawyers, officials said.

In New York, Litvin has “no record of public discipline,” according to the New York State Unified Court System.

Litvin graduated in 2008 from the University of Miami School of Law and practiced in Florida and in Brooklyn. In a 2013 deposition,  he recalled operating an “open door” practice, as in “anything that walks in through the door.”

Within two years, Litvin had cut a deal with telemarketers operating out of Fort Lauderdale who were pitching expert foreclosure relief plans nationwide for which homeowners paid $595 to $750 a month.

Sales of these foreclosure “rescue” plans took off in the wake of a 2009 federal government program that encouraged lenders to cut rates or balances on home mortgages through a review process known as loan modification.

Federal officials had hoped cutting loan balances would help millions of people behind on their mortgage payments from being foreclosed on. But they quickly were overwhelmed by complaints that scam artists were ripping off desperate homeowners by promising them loan modifications for a fee and not delivering.

Often, telemarketers partnered with a law firm, which gave them a look of legitimacy. The practice also exploited loopholes exempting lawyers from regulations that prohibited advance fees for securing loan modifications.

Litvin early on caught the attention of regulators in several states. In December 2011, Connecticut officials ordered Litvin to “cease and desist” from soliciting its residents because he lacked a license to practice law there. Officials in Georgia, Rhode Island and North Carolina later issued similar orders.

Litvin pushed back, arguing he had built a network of “affiliated” attorneys in 31 states, which he said permitted the firm to operate in those places and accept advance fees.

Some of the Litvin “affiliated” lawyers were hired in response to ads he posted on the online classifieds website Craigslist. The Litvin firm split the fees it received from homeowners with the affiliated attorneys, Litvin testified in a deposition.

One Litvin ad sought lawyers with “experience in the foreclosure defense area” who were “looking to make an extra $5,000 to $10,000 per month per state (and more with time) without having to increase their expenses.” At different times, Litvin listed at least 52 lawyers as  affiliates.

In late 2012, the Federal Trade Commission sued the Florida telemarketers working with Litvin, alleging their customers suffered “significant economic injury,” including “going into foreclosure and even losing their homes.”

The FTC accused the telemarketers, who operated as Prime Legal Plans as well as under several other names, of taking $21 million in fees “from distressed homeowners through deception.” The FTC suit criticized the performance of the Litvin firm, but it did not name him or the firm as a defendant. The FTC would not discuss the matter.

According to the FTC, the marketers falsely promised clients that a “network of top-notch attorneys” would defend them against foreclosure actions and “win concessions from lenders that will result in lower mortgage payments.”


In 2012, Litvin was enjoying his honeymoon in Hawaii when an associate phoned to tell him federal agents had raided the Fort Lauderdale offices and shuttered the sales operation, according to his deposition.

Despite the raid, Litvin forged ahead with his foreclosure practice. In New York, Litvin relied partly on a website to promote his services.

“Who said that a high quality defense attorney had to cost a fortune?” reads a note on the Litvin Law Firm’s website, which has since been taken off-line.

“Litvin Law firm understands that if you could afford to pay high attorney fees then you probably could afford to pay your mortgage.”

Nattily attired and confident, Litvin starred in several videos posted on YouTube, some replete with gushing testimonials from thankful clients. He also made appearances on New York radio and television, weighing in on a host of debt-relief strategies.

But punching back at regulators and civil lawsuits from upset clients began to take a toll and business dropped off sharply. In 2014, the firm took in $3.5 million, down from $5.2 million the year before. Litvin’s salary in 2014 fell to about $92,000 from $466,477 the previous year, according to bankruptcy court filings.

The Maryland Attorney General’s office filed administrative charges in 2014 questioning whether that money was made honestly, accusing the firm of projecting an “air of trustworthiness” while providing little or no legal services.

At least 129 of 500 Litvin clients in Maryland, who paid more than $1.4 million in fees, were foreclosed on anyway, according to the suit.

Sixty-three clients eventually lost their homes, while 10 others kept them only by resorting to bankruptcy, according to the Maryland attorney general’s research.

In New York, criticism from regulators was blistering. The New York Attorney General’s Office in a lawsuit accused the Litvin firm of “repeated and persistent fraud and illegality.” Potential clients were told they could “get foreclosures dismissed and mortgages deleted,” results the attorney general called “improbable at best,” according to the lawsuit.

Some clients, according to complaints, said the firm advised them to avoid contact with their lenders, leaving them in the dark about how their cases were proceeding, if they even were.

One couple alleged the Litvin firm led them to believe they would be given their Maryland home debt-free. Instead, the house where they had lived for two decades and raised six children was sold out from under them because the firm failed to complete paperwork to forestall foreclosure, according to a lawsuit they filed.

So far, both regulators and former clients — at least eight have sued Litvin for what his bankruptcy petition calls “malpractice and fraud” — have received nothing.

Litvin, in a June 2015 court filing, said the cost of defending lawsuits and a drop-off in clients “took a heavy financial toll” and that “bankruptcy loomed for me and for the firm.”

In that filing, Litvin denied misleading anyone and said he had saved his clients more than $75 million, including reductions in future mortgage payments.

The lawsuits are on hold while the Litvin bankruptcy cases play out. So is a $2.3 million federal court judgment from May 2015 that names an earlier Litvin legal partnership that operated out of Miami.

In court filings, Charles H. Lichtman, a Florida attorney appointed in the FTC case to chase after any possible money on behalf of victims, said he knew “collectability was problematic.” But Lichtman said he sought the judgment because of the firms’ “substantial roles in this massive consumer fraud,” and that he couldn’t “let them simply get away with it without recourse.”

Lichtman said in an interview that he handled hundreds of phone calls from people who lost their homes, or gave some of their “very last money” to the scheme.

“It caused them immense personal distress,” he said. “It was genuinely heartbreaking when you heard the stories.”

The New York Attorney General’s Office has sought more than $24 million from Litvin, half of it restitution and half as a penalty.

But in early May, the office offered to settle, for far less. The deal would require Litvin to pay $15,000 and for five years 15 percent of his annual salary, or $12,000, whichever is greater. The agreement says the minimum overall amount Litvin must pay is $75,000.


Continued here…..

Mortgage Servicing: You can Bank on Bad Service


By The Lending Lies Team

The Goldman’s bought their house months prior to 9/11. For a decade before they had been able to supplement their income by restoring old homes and returning them to their original condition. On average they netted about 27k a home after taxes and expenses. They were so credit-worthy they were granted signature loan status.

Then 9/11 occurred and the markets froze. All of a sudden the Goldman’s had two homes and couldn’t sell either.   Within six months the markets started correcting and although they had gotten behind on their payments they had enough equity in each property- that they could have sold the homes and paid the banks back in full. The banks had different plans.

In fact, the servicer didn’t want to work with the Goldmans- they wanted their homes. The Goldman’s could easily make good on both loans with a little assistance based on their assets and salaries- but they would need help restructuring their loans.  The servicer saw only an opportunity to make a large profit off of the Goldman’s bad fortune.


The Goldmans ended up giving one house back to a pretend lender and the 35k in equity they had accumulated. The other house has now been in litigation for the past 13 years. The bank could have worked with the Goldman’s to find an equitable solution. The Goldman’s would have made a small profit and the bank would have been paid in full.

Instead, the home is locked in a tug-of-war between a servicer with no standing and a family who refuses to give their home back to an imposter. It is anyone’s guess who will win but the bank has now resorted to fabricating documents to try and get the upper hand (and it will likely result in a court loss based on a complaint now for fraud). Meanwhile, both parties have spent over 300k on legal fees on a home that was purchased for $186k. Mrs. Goldman reports that this battle is no longer about the home, but about due process and justice.


The mortgage servicing industry is a punitive and predatory system. One missed payment can result in the loss of your home. It doesn’t matter how much equity you have in the home or if the missed payment was a simple oversight and not indicative of financial issues- your mortgage is an unconscionable adhesion contract that protects the bank in full- and is structured to the detriment of the homeowner.


Seniors who are briefly hospitalized emerge from the hospital to discover that because they were incapacitated and missed one monthly mortgage payment that the bank will prevent them from repaying any missed payments and fees. The loan servicer is financially rewarded from creating a default.


At LivingLies, it isn’t unusual to get calls from homeowners who missed one payment while traveling internationally, experienced a short-term cash flow period, or even faced a natural disaster to find that they have lost control of their home due to one missed payment. Even if they attempt to solve the issue in good faith, homeowners claim that there servicer refuses to provide assistance.


We recently consulted with an older woman in San Diego who has 950k of equity in her home, and was suckered into a reverse mortgage. She is now $48k in arrears and has had to file bankruptcy to get the court to assist her in structuring some type of agreement with a belligerent servicer. Her lender was not willing to work with her- but kept providing erroneous information to ensure she would not be able to correct the outstanding balance. As the late fees compounded, her mortgage statement became indecipherable.


One, or even two missed payments during a thirty-year mortgage should not result in the loss of a home. However, the modern mortgage industry is militant, inflexible, and rigged to create a default. Even if the bank makes the mistake and misapplies a payment, trying to get a loan servicer to correct their error and do the right thing can be an extended battle that often requires hiring legal counsel.


Mortgages are written to be unconscionable, strict contracts with no flexibility. There should be some type of loan mechanism that permits an occasional error without the loss of the home. The bank should be permitted to charge the homeowner for their losses but foreclosing on a home, for example, with over 200k in equity for a missed payment of $1,650 (one late payment in ten years) should not result in the loss of a home- but it often does.


50 years ago, a homeowner who missed a payment or two would meet with their local banker and explain their situation. The bank wanted the homeowner to pay the loan, they did not want to take back real estate from working families- so an equitable solution was found. Now, the bank hopes the homeowner will make a mistake, because they are in the business of taking back real estate from working families.


People are not perfect and life is messy. Crisis occur despite our best attempts to avoid them. If your mortgage is due on Monday, you better not have a heart attack on Sunday night. If you miss a payment you are in default. Since most people are dependent on their employer, and most people have no savings to speak of, almost all Americans are extremely vulnerable if life doesn’t go as planned. One unforeseen crisis that disrupts cash flow could result in the loss of a home- and the banks, like vultures, simply wait for the opportunity to swoop in.


Abusive Mortgage Servicing Defined
Abusive servicing occurs when a loan servicer, either through action or inaction, obtains or attempts to obtain unwarranted fees or other costs from borrowers, engages in unfair collection practices, or through its own improper behavior or inaction causes borrowers to go into default or have their homes foreclosed.


Abusive practices are distinguished from appropriate actions that may harm borrowers, such as a servicer collecting appropriate late fees or foreclosing on borrowers who have not make their payments despite proper loss mitigation efforts. Servicing is abusive when the bank intentionally charges unwarranted fees, or negligently like when a servicer’s records are so inaccurate that the borrowers are regularly charged late fees even when mortgage payments were made on time, for example.


There is evidence that some Mortgage servicers are regularly engaging in abusive behavior. Some servicers have engaged in practices that are not only detrimental to borrowers but also illegal. The abusive servicing practices that have been documented include improper foreclosure or attempted foreclosure, improper fees, improper forced-placed insurance, and improper use or oversight of escrow funds .


Improper foreclosure or Attempted foreclosure

Because servicers exact fees from filing foreclosures, such as attorneys’ fees, some servicers attempt to foreclose on property even when borrowers are current on their payments or without giving borrowers enough time to repay or refusing to work with them on a repayment plan. Premature foreclosure may save servicers the cost of attempting other remedies that might have prevented the foreclosure.

Servicers have acted so brazenly that they regularly declare to the courts that borrowers are in default so as to justify foreclosure, even though the borrowers were current on their payments. The use of false statements in court to obtain relief from stay in order to foreclose on borrowers’ homes is a daily occurrence. Take for example, Hart v. GMAC Mortgage Corporation, et al., 246 B.R. 709 (2000).

Even though the borrower had made the payments required by a forbearance agreement with the servicer GMAC Mortgage Corporation, it created a “negative suspense account” for moneys it had paid out, and improperly charged the borrower an additional monthly sum to repay the negative suspense account and charged him late fees for failing to make the entire payment demanded. Foreclosure proceedings were then enacted.
Improper fees
Servicers routinely claim that borrowers are in default when they are actually current. This fraudulent practice allows servicers to charge unwarranted fees, either late fees or fees related to default and foreclosure. Servicers receive a fee percentage of the total value of the loans they service, typically 25 basis points for prime loans and 50 basis points for subprime loans. In addition, servicing contracts typically provide that the servicer, not the trustee or investors, has the right to keep any and all late fees or fees associated with defaults.

Servicers don’t make money off of homeowners who pay, they make money off homeowners who miss payments and/or default. These fees are crucial profit centers for servicers. In fact, extra fees, like late fees often pay all operating costs for a lender’s entire servicing department. The pressure to collect these fees appears to be higher for subprime servicers than for prime servicers.

For example, borrowers who mail in their payment can’t usually prove the exact date a payment was received. This allows a servicer to add on late fees even when the payment was received on time. Improper late fees may also be based on the loss of borrowers’ payments by servicers, their inability to track those payments accurately, or the servicer’s failure to post payments in a timely fashion.

In Ronemus v. FTB Mortgage Services, 201 B.R. 458 (1996), under a Chapter 13 bankruptcy plan, the borrowers had made all of their payments on time except for two; the debtors received permission to pay these two late and paid late fees for the privilege. However, the servicer, FTB Mortgage Services, misapplied their payments, then began placing their payments into a suspense account and collecting unauthorized late fees without court approval. The servicer ignored several letters from the borrowers’ attorney attempting to clear up the matter, sent regular demands for late fees, and began harassing the borrowers with collection efforts. When the borrowers sued, the servicer submitted to the court an artificially inflated accounting of how much the borrowers owed.


Servicers are known to retain extra payment of principal or misapply the payment, and fail to credit it to the borrower. Late fees on timely payments are a common problem when borrowers are making mortgage payments through a bankruptcy plan.


Servicers routinely add false fees and charges not authorized by law or contract to their monthly payment demands, relying on borrowers’ ignorance of the exact amount owed. The servicer has the power to collect such fees or other unwarranted claims by submitting inaccurate payoff demands when a borrower refinances or sells the house). Or they can place the borrowers’ monthly payments in a suspense account and then charge late fees even though they received the payment.


Worse yet, some servicers pyramid their late fees, applying a portion of the current payment to a previous late fee and then charging an additional late fee even though the borrower has made a timely and full payment for the new month pyramiding late fees allows servicers to charge late fees month after month even though the borrower made only one late payment.


Servicers can turn their fees into a profit center by sending inaccurate monthly payment demands, demanding unearned fees or charges not owed, or imposing fees higher than the expenses for a panoply of actions For example, some servicers take advantage of borrowers’ ignorance by charging fees, such as prepayment penalties, where the note does not provide for them Servicers have sometimes imposed a uniform set of fees over an entire pool of loans, disregarding the fact that some of the loan documents did not provide for those particular fees.

Or the servicer will charge more for attorneys’, property inspection, or appraisal fees than were actually incurred. Some servicers may add a fee by conducting unnecessary property inspections, having an agent drive by even when the borrower is not in default, or conducting multiple inspections during a single period of default to charge the resulting multiple fees


The complexity of the terms of many loans makes it difficult for borrowers to discover whether they are being overcharged Moreover, servicers can frustrate any attempts to sort out which fees are genuine.

Escrow Account Mismanagement
One of the benefits of servicing mortgages is controlling escrow accounts to pay for insurance, taxes, and the like and, in most states, keeping any interest earned on these accounts Borrowers have complained that servicers have failed to make tax or insurance payments when they were due or at all. The treasurer of the country’s second largest county estimated that this failure to make timely payments cost borrowers late fees of at least $2 million in that county over a two-year span, causing some to lose their homes. If servicers fail to make insurance payments and a policy lapses, borrowers may face much higher insurance costs even if they purchase their own, non-force-placed policy. Worse yet, borrowers may find themselves unable to buy insurance at all if they cannot find a new insurer willing to write them a policy.

It is recommended that all borrowers demand to pay the insurance and taxes on their properties instead of relying on a loan servicer with ulterior motives to do so.


The system must be changed to include some modicum of flexibility, accountability and equitable agreement between the homeowner and servicer.  As it stands the servicer has all of the power, the incentive to perform in bad faith, and to profit from their illegal tactics.  Borrowers will likely have some sort of life tragedy or crisis that may result in a payment being received late.  This error should not result in a loss of their home if there is sufficient proof that the homeowner will make good on their commitment.


When you miss one new car payment on an auto lease or installment agreement- the lender typically will help you catch up and bring your loan current.  The manufacturer doesn’t want a depreciated car back, the expense of repossession and prefer that the loan stay in good standing.  The servicer, on the other hand, has different goals because the asset (the home) is appreciating- plus they will make more money if the homeowner defaults.  The way this industry is set up creates a conflict of interest.  You can’t call yourself a servicer when your objectives are to create profit by any means possible.


If a homeowner is wise they will purchase a home with a local bank or credit union who will agree to hold the paper in-house instead of securitize or sell the debt.  A lender with skin in the game operates much differently than a lender with none.  A homeowner would be wise to negotiate a clause where one payment can be missed once every five years with no penalty.  The missed payment will be automatically amortized into the overall balance due at the end of the loan and a penalty can be assessed to cover the bank’s costs.


It is time that the homeowner take back some control and avoid mega-bank loan servicers who have figured out how to rig loan servicing to their advantage by unfair and illegal tactics.  The industry is the epitome of a predatory lending entity and by the time the homeowner figures out how the game is played- it is often too late.



David Dayen: The Advent of Foreclosure Fatigue


“America got a bad case of “foreclosure fatigue”. People in law enforcement, judges, they’re just tired of it.” – David Dayen


David Dayen came of age as a writer during a golden age for bloggers.

Dayen, a 1990 graduate of Council Rock High School, was making a living in Los Angeles editing films and TV programs. “Name a channel on your digital cable package, and I’ve probably done something for it,” he says.

Interested in expressing his opinion in prose since his days as a columnist for his high school paper, Dayen, who is 43, discovered blogging around 2004. “I would be editing, and there’d be something . . . that would take a few minutes, and I’d go over and blog something,” he recalled. “It became more and more a part of my life, on my personal websites at the time, and these big political blog sites.

“It was a really new medium, and people who got involved at the time had the ability to advance themselves pretty quickly,” he said. “I was able to get caught up in that, and I did advance. I got hired to write for a site called firedoglake, it was one of the largest political blogs at the time.”

An acquaintance told him of a personal disaster involving a loan modification, including sudden demands by his lender for a large sum of money. Dayen began looking into the larger issues.

“There just weren’t a lot of people focused on it. That was how I set myself apart, and made myself sort of a self-taught expert,” he said.

This work led the author to a huge financial story — family homes had become fodder for billion-dollar investment vehicles, and foreclosure proceedings exploded across the country. The crisis had become a sad trek from Main Street to Wall Street, a financial stampede that trampled the lives of millions.

In 2010, Dayen met Lisa Epstein, Michael Redman and Lynn Szymoniak, Florida residents battling for their rights against deceptive practices during foreclosure proceedings. The result is the recently released, favorably reviewed “Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud,” published by The New Press. The New York Times called it “A gripping story of foreclosure fraud . . . Prepare to be surprised, and angry.”

“Chain of Title” also is a frightening book.

“This could have been a much bigger media event than it was if people (at news organizations) had figured out the right way to tell these stories,” said Dayen. “Was Watergate complicated? This is important stuff  . . . the story should already have been written (before his book). This was the largest fraud in American history. That’s effectively the theft of millions of homes.

“You don’t have to have intricate knowledge of finance to understand this book.”

The author writes of the nation’s long history of tracking property transfers, which are usually recorded at the county level. “. . . so mortgage lenders could confirm ownership before they issued loans, tracking the chain of title back to the original owner and ensuring the lack of defects in that chain.

“When banks started securitizing mortgages on a wide scale in the 1980s, they viewed recording offices as a problem to be overcome. … To create the bankruptcy-remote trusts used in mortgage-backed securities, banks needed to transfer mortgages multiple times. Under the old system, that would trigger a recording fee and document creation at every step. With millions of mortgages expected to enter securitization, suddenly recording fees represented a drain on profits.”

So the industry computerized the process, creating an entity called the Mortgage Electronic Registration Systems (MERS).

“Instead of filing with county recording offices each time a mortgage transferred — and paying that fee — banks instead listed MERS as the ‘mortgagee of record’ in the initial mortgage assignment,” Dayen writes. “Then for subsequent transfers, the parties would go to the MERS database and list trades on an electronic spreadsheet. Banks could make unlimited transactions inside MERS; the county recorder only knew about the original assignment.”

A law professor who studied MERS found that the company “sold their corporate seal on their own website for $25,” the author reports. “Thousands of low-level workers across the country who worked at mortgage servicers or their law firms became ‘vice presidents’ and ‘assistant secretaries’ of MERS, despite never working for or receiving pay from them, so they could sign documents purporting to assign mortgages. Under the membership agreement, MERS empowered these ‘corporate officers’ to execute whatever documents were necessary for loans in the MERS system.”

At foreclosure, “You would need original promissory notes and assignments from every link in the securitization chain, along with certified testimony from each document custodian. But nobody preserved the records. Nobody tracked or verified evidence,” Dayen writes. “From a legal point of view, the chain of custody of hundreds of thousands if not millions of loans was fatally corrupted.”

Dayen reports the activists found some banks and lenders were foreclosing loans in which the institutions could not prove they had legal standing. A entire industry sprang up dedicated to document falsification — one such outfit offered a catalog, with prices, for fake notes, mortgages, securitization agreements and other papers available to lenders.

The author writes of runaway sub-prime mortgage lending to unqualified buyers, homeowners who never missed a payment foreclosed upon, the wrong properties foreclosed upon, people who did not have mortgages foreclosed upon, “rocket docket” judicial proceedings where summary judgments kicking people out of their homes were made in seconds (in one case mentioned, before the hearing).

There was the mysterious death of a witness in a criminal case against a company that routinely falsified documents on behalf of major lenders such as Bank of America; and other outrages against the land title process and ordinary citizens who should have been able to depend on it.

Instead, they were shamed out of fighting back with slurs like “deadbeat.” “Ninety-five percent of all foreclosure victims do not contest their cases,” Dayen said.

The author has noticed the most common word in readers’ reactions to the story is “appalling.”

Some big companies were made to pay a big settlement, but Dayen says that is not the end of the story.

“Every day in America, somebody continues to be tossed out of their homes based on false documents,” he said. “You would assume this activity stops, but it didn’t.

“This was an epochal moment in American life. There are so many people who have been touched by this. You’re talking about the collapse of trillions of dollars of wealth.” He quotes an informed source who called the waves of foreclosures “An extinction event for the black and Latino middle class.”

The author cites a Wall Street Journal report that 9.3 million families “either went through foreclosure or surrendered their home between the peak of the housing bubble in 2006 and 2014,” he said. Dayen estimates this affected 13 to 14 million people, not a few of whom came home from work to find their belongings scattered outside their houses and the locks changed.

“Thousands of executives” went to jail following massive failures of savings and loan associations in the 1980s and 1990s, but in the foreclosure crisis, “Nobody was held accountable for it,” said Dayen.

Instead, America got a bad case of “foreclosure fatigue,” he said. “People in law enforcement, judges, they’re just tired of it. They don’t  want to hear the mortgage companies are engaging in illegal activity. . . there are real people behind those decisions. (People) most powerfully affected by it, homeowners . . . they were invisible in the policy discussion.”

Continued here…..

“The things you own end up owning you.” – Chuck Palahniuk



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