DON’T FORGET THAT THERE IS A DIFFERENCE BETWEEN THE SERVICER WITH WHOM YOU ARE DEALING (THE SUBSERVICER) AND THE MASTER SERVICER WHO IS CALLING THE SHOTS ON BEHALF FOR THE INVESTMENT BANKER. DEMAND PROOF OF WHO IS HANDLING THE MODIFICATION, WHO IS ASSIGNED AND WHO THEY CONSULTED.
After interviewing Danielle Kelley on the issue of modification, there is a lot of red meat that can be used to bring relief to the homeowner and sanctions against the servicer that was negligently or intentionally avoiding its responsibilities under HAMP. Danielle points out that according to the DOJ judgment against BOA, there seems to be direct guidelines (which BOA has intentionally breached as a matter of policy) that under HAMP, the servicer is required to submit the proposal for underwriting prior to offering a trial payment plan. This would suggest something that is certain to be attractive to the Judge who neither wants to throw anyone out of their home nor let the borrower off the hook because there is a coffee stain on the documents.
It may be presumed that the servicer HAS submitted the plan for underwriting if they offer a trial modification. That means the borrower has been twice approved for the loan — first at origination and then under the trial modification. No more documents or financial statements, no more “consideration,” and no more denials based upon nothing. If the bank refuses, then the appropriate motion would be to enforce a settlement agreement — which is the way I would entitle it. And the argument would be that if the trial modification is not a gateway to permanent modification after underwriting twice the same borrower and after accepting trial payments, then what is it — a survey?
As we have already seen in a recent case litigated by Danielle Kelley the Judge didn’t buy the argument that the permanent modification is not automatic even if the borrower fulfills all requirements under the trial modification. remember, this borrower has already been qualified in the loan origination. Use that against the bank, saying that you approved them twice and now you want to deny them a modification after they have demonstrated the loan is viable by making the actual payments?
If the situation gets hairy then go into discovery and identify all the actual people who were involved, who they contacted, what computers they used, what software and what criteria they used in approving the trial modification. You will find they contacted nobody and did not actually underwrite the trial modification at all even though they were required to do so before the trial modification was offered by them. That’s their choice. If they want to approve trial modifications the same way they approved loans — without conforming to industry underwriting standards — they have made their election. They do not now have the excuse or basis for denying the permanent modification or demanding that the loan modification process begin all over again.
Once again we are confronted with a bank that doesn’t want the money, doesn’t want the loan reinstated, and who refuses to mitigate their damages, electing instead to push the borrower into foreclosure where both the investor/creditor (who probably knows nothing about the situation because they were never contacted, contrary to the condition precedent in HAMP and the DOJ judgment) and the borrower end up screwed.
This is only now coming out through whistle blowers. I have been predicting that this would be revealed for years and most people thought I was nuts. Maybe I am nuts but I am still right. The servicers and investment bankers have painted themselves into a corner. The truth is that none of them has any authority to negotiate the terms of the modification, nor to pursue foreclosure because not even they know if there is an actual balance left on the old loan receivable which has long since been converted into something else thanks to payment by a third party who expressly waived their right of substitution, subrogation or contribution against the borrower.
This is not theory — it is about the facts. Why would you take a document handed to you by the bank or attached to a pleading or recording be assumed by the attorney for the homeowner to be true and correct. We know it isn’t. So it is the lawyer’s job to probe through discovery down to see what transactions occurred, when they occurred and who were the parties to the transaction, as well as the terms of the transaction. Then the lawyer should compare the actual transactions, (shown by canceled checks, wire transfer receipts or other indicia of payment that can be corroborated through the national payments systems), with the documents proffered by the forecloser who is now pretending to modify when in fact they are steering the borrower into foreclosure, contrary to normal banking practice of maximizing the mitigation of damages such that the bank loses nothing or close to nothing. Listen to any seminar, as late as the last year, on foreclosure defaults and the seminar is all about workouts because that is the best answer for both the bank and the borrower. Now they would rather lose more money than less. Why?
Workouts are the furthest thing from the bankers’ minds because the dirty secret they are hiding is that at all times they were dealing with investor money, much of which they stole. The assets on the balance sheet, the proceeds of insurance, CDS proceeds, and subservicer continuing payments after default (thus curing the default) all tell the story that has yet to be told in Court. Now with me practicing again with great lawyers like Danielle Kelley, William Gwaltney and Ian White, the story will be told.
BANKS ARE NOT MITIGATING LOSSES. THEY ARE AVOIDING LIABILITY TO INVESTORS, INSURERS AND THE GOVERNMENT
The only hope for the banks is getting a foreclosure sale that gives the further appearance that the reason the investor, the insurer, the credit default swap counter party, the U.S. Treasury and the Federal Reserve lost money was because of the vast number of defaults on mortgages. But even with the banks tricking and pushing borrowers into “default” [from a script written by BOA officers and lawyers — “you have to be 3 months behind in your payments before we can consider modification” — a criteria ABSENT from HAMP], the number of defaults and the amount the banks are reporting that investors lost don’t add up — and THAT is why you must be relentless in discovery..
The simple truth is that the banks that are dealing with the foreclosures and modifications stand to lose nothing if the loan results in a zero return to mitigate damages. They stand to lose everything if the loan is reinstated because of all that money they took from investors, insurers, CDS counterparties, the U.S. Treasury, and the Federal Reserve. BOA would not have made it a policy to lie, cheat and deceive borrowers until they ended up in foreclosure unless it was in their interest to do so. What reason would that be other than the one postulated by this paragraph?
“Servicer shall promptly send a final modification agreement to borrowers who have enrolled in a trial period plan under current HAMP guidelines (or fully underwritten proprietary modification programs with a trial payment period) and who have made the required number of timely trial period payments, where the modification is underwritten prior to the trial period and has received any necessary investor, guarantor or insurer approvals. The borrower shall then be converted by Servicer to a permanent modification upon execution of the final modification documents, consistent with applicable program guidelines, absent evidence of fraud.” -HAMP
Filed under: AMGAR, CORRUPTION, evidence, expert witness, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud, Servicer Tagged: | are, avoidance of liability, discovery, forcing modification, HAMP, master servicers, mitigation of loss, modification, pretender lender, pretender modifier, sub-servicers, WHISTLEBLOWERS, WORKOUTS