1. text-of-obama-speech-on-foreclosure-crisis
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  5. %E2%80%9Cservicers-are-limited-in-their-ability-to-modify-mortgages%E2%80%9D
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  8. civil-disobedience-on-the-rise-as-sheriffs-refuse-to-serve-evictions-%E2%80%9Ci-refuse-to-leave-the-home-that-i%E2%80%99ve-worked-so-hard-to-keep-i-will-not-let-the-bank-take-my-home-and-i-will-not
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What Lawyers Are Saying About Neil Garfield\’s Seminars

PURCHASE ATTORNEY WORKBOOKS: request-to-purchase-garfield-lawyers-workbook-v3

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  7. Faithful March on Washington
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  10. Suits Against Lenders Multiply — The Movement is growing thanks to YOU
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SANTA FE, N.M. – Countrywide Financial Corp. has been sued by New Mexico‘s investment and pension funds, which accuse the company of misleading investors.

The lawsuit — filed on behalf of the state Investment Council, the Educational Retirement Board and the Public Employees Retirement Association — accuses the mortgage lender of duping investors about the value and safety of mortgage-backed securities.

The lawsuit, filed Friday in state district court in Santa Fe, also names a number of Countrywide affiliates as defendants.

“We haven’t seen it (the lawsuit) yet, so we can’t comment at this point,” Shirley Norton, spokeswoman for Countrywide’s parent company Bank of America, said Wednesday in a phone call from San Francisco.

Calabasas, Calif.-based Countrywide, once the nation’s largest mortgage originator before a jump in bad loans decimated its business, has been blamed for helping to cause the nation’s mortgage meltdown.

Countrywide was sued earlier by California, Connecticut, Florida, Illinois and the city of San Diego over its lending practices.

The lawsuits make similar allegations that Countrywide conned homeowners into mortgages they could not afford.

New Mexico’s lawsuit differs because it refers to securities backed by shaky mortgages.

The Investment Council spent $372.7 million on such securities, the lawsuit said.

The Educational Retirement Board bought about $2.3 million in the securities, and the Public Employees Retirement Association invested about $20.4 million, the lawsuit said.

The lawsuit alleges the defendants claimed the mortgages backing the securities “were originated and verified using prudent, defined loan underwriting guidelines. They were not.”

“Defendants and their subsidiaries routinely ignored their own stated underwriting procedures and guidelines in an effort to generate high volume loan business regardless of credit risk, and shifted bad loans upon unsuspecting … investors,” the lawsuit said.

Some false information about the securities was contained in a prospectus issued to investors, the lawsuit said.

The lawsuit also cites various statements by company executives that later were brought into question.


Information from: Albuquerque Journal,

BESIDES THE OBVIOUS “OOPS!”, HERE, LET ME ALSO STATE THAT WE HAVE THREE OTHERS JUST LIKE IT FROM WELLS FARGO AND THERE ARE OTHERS POPPING UP WITH OTHER LENDERS. Here the “borrower” filled out an application and then changed their mind. No Closing, No Note. Note Mortgage. And yet there was an assignment and a note attached. Even those with limited understanding of securitization understand that this is demonstrative proof that they were selling the loans “forward” (as the industry puts it) signing an assignment, and attaching a note in blank, with the signature of the “borrower” forged by a bank employee. WELLS FARGO obviously did not book the loan on its balance sheet or anywhere on its bookkeeping system or financial system, because then there would have been tracks. They proceeded to harass the “borrower” and then file suit in foreclosure, thus clouding the title of the real person who bought the subject house and the real mortgage lender who financed the purchase that actually occurred. Why are the notes gone? Because they have to be gone. If they show up, then the people involved go to jail. Whether the closing occurred or did not occur, in at least 40% of all loan closings 2001-2008, the notes were forged in this manner, the assignments were fraudulent, but the “lender” got paid in full PLUS a fee of 2.5%.


UBS to settle securities case for $19.4B
Friday August 8, 10:03 am ET

UBS agrees to $19.4B buyback to settle charges it misled investors to buy risky bonds BOSTON (AP) — The Massachusetts Secretary of State’s office says Swiss Bank UBS has reached a $19.4 billion agreement to buy back bonds to settle claims that it misled investors into buying high-risk securities.The agreement has been reached between UBS Financial Services Inc. and the federal Securities and Exchange Commission and regulators in several states.

Brian McNiff, a spokesman for Secretary of State William Galvin, said an official announcement may not come until Monday. The deal was first disclosed on Friday in The Boston Globe.

Wachovia in $8.8 bln auction-rate settlement: SEC

By John Spence
Last update: 11:16 a.m. EDT Aug. 15, 2008
BOSTON (MarketWatch) — The Securities and Exchange Commission on Friday said Wachovia Corp. (WB

Citigroup to buy back over $7 bln in auction rate securities

Wachovia Corp

WB) has agreed to a settlement related to sales of auction-rate securities, the market for which collapsed earlier this year. Under the settlement, Wachovia will offer to purchase roughly $5.7 billion of auction-rate securities held by individual investors, small businesses and charitable organizations, the SEC said. The bank will also offer to purchase the roughly $3.1 billion of securities held by all other Wachovia investors, according to an SEC press release. End of Story

By Wallace Witkowski
Last update: 11:18 a.m. EDT Aug. 7, 2008
SAN FRANCISCO (MarketWatch) — Citigroup Inc. will buy back more than $7 billion in illiquid auction rate securities under a settlement, the Office of the New York Attorney General said Thursday. Under the settlement, Citigroup will have to buy back the securities no later than Nov. 5 to relieve about 40,000 customers who have been unable to sell the securities since Feb. 12. Citigroup will also have to pay the State of New York a $50 million civil penalty and a separate $50 million civil penalty to the North American Securities Administrators Association, the office said. End of Story

Calif. groups seek moratorium on Countrywide foreclosures

Charlotte Business Journal

Two California community groups are urging the state’s attorney general to place a moratorium on mortgage foreclosures by Countrywide Financial Corp.

Countrywide is a division of Charlotte-based Bank of America Corp.

The California Reinvestment Coalition and the Greenlining Institute have asked Attorney General Jerry Brown to cease the foreclosure process on mortgages that match deceptive loans and practices cited in Brown’s recent lawsuit against Countrywide.

In June, Brown sued Countrywide and its top executives, accusing them of engaging in deceptive advertising and unfair competition. The suit contends the company pushed homeowners into mass-produced, risky loans in order to resell the mortgages on the secondary market.

State attorneys general in Florida and Illinois have filed similar suits against Countrywide, which is based in Calabasas, Calif.

As many as 900,000 Californians will face foreclosure in the next two and a half years, the community groups say.

Because of Countrywide’s dominance in the subprime mortgage market, 200,000 or more of those foreclosures could occur solely from Countrywide mortgages, they say.

In early July, BofA (NYSE:BAC) paid about $2.5 billion for Countrywide in a deal that made the bank the country’s largest mortgage lender.


NEW YORK — Bank of America Corp. revealed Thursday that it has received subpoenas and requests for information from various state and federal regulators regarding its sale of auction-rate securities.

In a filing with the Securities and Exchange Commission, the Charlotte, N.C.-based bank said subsidiaries Banc of America Investment Services Inc. and Banc of America Securities LLC are cooperating fully with the requests.

Auction-rate securities are bonds whose interest rates are set at periodic auctions, on the basis of bids submitted. The market collapsed in February amid turmoil in the credit markets.

Regulators have been investigating some banks’ involvement in the sale of the securities.

Earlier Thursday, Citigroup Inc. said it reached a settlement with the New York Attorney General and regulators to repurchase $7 billion in auction-rate securities and pay $100 million in fines.

Regulators claimed the investments were marketed as safe even when banks knew of liquidity risks during the downturn in the credit markets.

According to the SEC filing, four purported class action lawsuits have also been filed against Bank of America on behalf of purchasers of auction-rate securities. The cases relate to the sale of the investments between May 2003 and February 2008 and allege that the bank violated certain securities laws in regards to its marketing and sale of the securities.

The actions seek unspecified damages and attorneys’ fees.

A related individual federal action as well as several related Financial Industry Regulatory Authority arbitrations have also been filed, the bank said.

A Bank of America representative was not immediately available for comment.

Bank of America shares tumbled $1.93, or 5.8 percent, to close at $31.52. Shares are down about 19 percent for the year.

August 7, 2008

Connecticut Files Suit
Against Countrywide connecticut-countrywidelawsuit

August 7, 2008

Connecticut Attorney General Richard Blumenthal has sued Bank of America Corp.’s Countrywide Financial Corp. for allegedly deceptive lending practices.

Echoing the many other legal complaints against the mortgage lender, the Connecticut lawsuit alleges Countrywide engaged in several types of inappropriate lending behavior and made loans to consumers that were unaffordable or unsuitable for the borrower. The complaint, filed in state court in Hartford, alleges violations of Connecticut’s unfair trade practices and banking laws.

[Richard Blumenthal]

“Countrywide conned customers into loans that were clearly unaffordable and unsustainable, turning the American Dream of homeownership into a nightmare,” Mr. Blumenthal said.

The lawsuit seeks civil penalties of as much as $100,000 per violation of state banking laws and as much as $5,000 per violation of state consumer-protection laws; as well as disgorgement of any ill-gotten gains and an order compelling the company to cease the disputed practices.

Countrywide — which became a symbol of the loose lending standards that set the stage for the nation’s current mortgage crisis and housing-market implosion — was taken over by Bank of America in a $2.5 billion deal that closed last month.

“While we cannot comment on pending litigation, we will respond to the AG in due course,” a Bank of America spokeswoman said.The spokeswoman noted that since taking over Countrywide in July, Bank of America has been reviewing Countrywide’s operations and is “confident that our newly combined company will be recognized as a leader in responsible lending practices.”

The spokeswoman also said Bank of America has made several commitments to responsible lending practices, including modifying or working out at least $40 billion in troubled mortgage loans in the next two years to keep customers in their homes; pursuing a 10-year goal to lend and invest $1.5 trillion for community development beginning next year; and no longer originating subprime mortgages — a practice it stopped in 2001.

Write to Chad Bray at

AG seeks foreclosure payback


Hundreds of Connecticut families who lost their homes to Countrywide through foreclosure cases could be getting their houses back, or enough money to buy a new one.Wednesday, Attorney General Richard Blumenthal, with the commissioners of the Department of Banking and Department of Consumer Protection, filed suit in State Superior Court, Hartford, against Countrywide Financial Corp., alleging multiple violations of consumer protection and banking laws.

“Our lawsuit seeks to invalidate loans that violated state law, allowing consumer to shed illegal, unreasonable fees and conditions that leave them at the precipice of foreclosure,” Blumenthal said in a press release. The state is also seeking fines of up to $100,000 per violation of state banking law and up to $5,000 per violation of state consumer protection laws.

In an interview Wednesday, Blumenthal said he would also attempt to return foreclosed homes, when possible, to people who lost them as a result of these unscrupulous loans.

According to the Connecticut Judicial Web site, Countrywide filed more than 400 foreclosure cases in the state, with most between 2006 and 2008. It is unclear how many houses have been taken from their owners.

If the houses have already been sold to other families, Blumenthal said, the state will seek enough compensation to enable those who unjustly lost their houses to get another one.

Blumenthal and the commissioners were not sure exactly how many Connecticut families are

involved, mainly because it’s expected to be a big number.”We’re talking hundreds, likely thousands, of families,” Blumenthal said.

With hundreds of Countrywide foreclosure cases still pending, Blumenthal said he has asked Bank of America, Countrywide’s parent company, to suspend all foreclosure activity until this issue can be resolved.

Bank o f America bought Countrywide in July through a stock swap valued at about $2.5 billion. Bank of America is not being sued.

Shares of Bank of America closed down 13 cents to $33.45 on the New York Stock Exchange.

In an e-mailed response to a request for comment, Bank of America stated it would not comment on pending litigation, but made assurances it is observing good lending practices.

“We are confident that our newly combined company will be recognized as a leader in responsible lending practices,” the bank’s e-mail said. “We are passionate about helping customers purchase a home with the right product for them and helping customers sustain homeownership.”

Blumenthal’s lawsuit said Countrywide encouraged consumers to take out loans it knew, or should have known, those borrowers couldn’t afford. It also claims the lender inflated borrowers’ incomes on financial paperwork to qualify them for loans. And, the suit said, it pulled a sort of bait and switch on borrowers, promising certain terms and conditions but then producing a set of different terms at the closing.

Banking Commissioner Howard Pitkin said the state’s case could suddenly leave a lot of people free of mortgages, as well. He said the state is requesting the court invalidate loans that were issued in violation of state law.

This lawsuit goes beyond subprime loans, which are generally those given to borrowers who have something negative on their credit history, Pitkin and Blumenthal said.

Blumenthal said it also involves people who took equity lines of credit on their houses.

Pitkin noted Countrywide was the state’s largest mortgage lender and one of the biggest sub-prime lenders during the housing market boom that began to fizzle last year in the face of rising loan defaults and falling real estate prices.

According to a June 26 report by the state’s Sub-Prime Mortgage Task Force, Countrywide had 2,412 sub-prime loans in the state.

Under its ownership, Bank of America said, Countrywide will not issue sub-prime loans and certain risky mortgage products that required little or no income documentation.

Consumer Protection Commissioner Jerry Farrell Jr. said his office continues to work with Blumenthal’s. This action, Farrell said, is limited only to Countrywide and no real estate agents or appraisers are involved.

The consumer protection department licenses those professions and Farrell said if any were involved in violations of the law, his office would take action.

But he said the vast majority of agents have acted professionally during the boom and subsequent downturn.

Countrywide is battling lawsuits from other states, including its home state of California.

It is also facing lawsuits from customers, including several in Connecticut.

New Canaan resident Patrick Ferrandino is suing Countrywide for prepayment penalty fees the lender charged Ferrandino when he paid off a $1.7 million loan. Ferrandino’s case is still pending in U.S. District Court of Connecticut, Bridgeport. It was originally filed in State Superior Court but was transferred to federal court.

Rob Varnon, who covers business, can be reached at 330-6216.


LIUNA’s New Report Says More Housing Market Problems Coming in 2010 and 2011

Many Subdivisions are Ticking Time Bombs Waiting for Interest Rate Resets Angry Homeowners Tell Corporate Home Builders to “Fix This Mess”

Last update: 11:30 a.m. EDT Aug. 7, 2008
LOS ANGELES, Aug 07, 2008 (BUSINESS WIRE) — Today the Laborers’ International Union of North America – LIUNA – released a report detailing the implications for homeowners and the nation’s economy when five-year adjustable rate mortgages (ARMs) reset in 2010 and 2011.
The report was released during a news conference outside of the headquarters of KB Home in Los Angeles. LIUNA was joined by six homeowners from a KB Home development in Buckeye, Arizona as well as religious leaders and community representatives who believe the worst is yet to come in the housing and mortgage crisis.
The report, The Ticking Time Bomb: Adjustable Rate Mortgages and Depreciating Home Values in New Subdivisions examines mortgages originated between 2005 and 2006 in Maricopa County, Arizona by the lending subsidiaries of three of the nation’s largest corporate home builders: Richmond American, Lennar, and KB Home. Report findings reveal that more than one third of all the mortgages are five-year ARMs that will reset in 2010 and 2011.
The report indicates that many homeowners with five-year ARMs will be trapped in their loans and unable to refinance before their interest rates reset due to high loan amounts and decreasing home values. According to the report, home values in the area have declined an average of more than $50,000 in just the last year with the value of Lennar homes declining $61,600, KB homes by $55,600 and Richmond American homes by $49,500.
“We need real and immediate action to help struggling homeowners, to bring the creation of good jobs back to the construction industry, to protect our retirement security from tainted investments and to stabilize the mortgage and housing industry,” said LIUNA General President Terence M. O’Sullivan. “Since just last year, foreclosure activity has more than doubled, 493,000 construction workers have lost their jobs and we have an economy that is spiraling towards recession. Congress and regulators must scrutinize those who helped cause this crisis – including corporate home builders – and consider action to both defuse this ticking time bomb and prevent a recurrence.”
Case Study: the KB Home Santarra Development in Buckeye, Arizona
The problems resulting from the mortgage and housing crisis threatens entire communities. The case of the KB Home Santarra development in Buckeye Arizona is an example:
— Fifty-five percent of the mortgages are five year ARMs.
— Sixty-three percent of the purchases had a first and second mortgage.
— Home values have decreased $78,800 in the last year alone.
Many new subdivisions, like the Santarra development, now have an unhealthy number of vacant homes due to foreclosures and speculators who purchased homes intending to flip them. This glut of homes exerts a downward pressure on home values and each new foreclosure brings values down even further. Although the greatest threat looms in 2010 and 2011 when the largest number of loans will have their interest rate reset, many homeowners are currently facing foreclosure or have already lost their homes.
Caught in a Trap
When Joni Lynn bought a KB Home in the Santarra subdivision in 2006, she said she told the Realtor that she wanted a conventional mortgage with a fixed rate and without “bells and whistles.”
When Lynn closed on her home in 2006, Countrywide KB gave her two mortgages. Although she is retired and her income is from Social Security and a pension, the first mortgage is an interest-only ARM with an initial interest rate of 6.5 percent. After five years the interest rate can go as high as 11.5 percent.
Although Lynn is current on her mortgages, she is struggling and is worried about what will happen when her interest rate increases. She now owes about $204,000 between the first and second mortgages. Meanwhile, the Maricopa County tax assessor has lowered the value of Lynn’s house from $210,000 to $148,800 since just last year.
LIUNA Calls for Action to Help Homeowners and Stabilize the Industry
LIUNA was instrumental earlier this year in stopping corporate home builders from receiving billions of dollars in tax breaks under a provision of the Foreclosure Prevention Act being considered by Congress. LIUNA exposed the role that home builders played in creating the current crisis and successfully persuaded Congress to remove the corporate home builder bailout from the final housing bill.
The union is now calling on Congress to take the next step in confronting the housing and mortgage crisis. Lawsuits and whistleblowers have revealed numerous cases of bad lending practices on the part of America’s largest home builders. For example, former Countrywide-KB Home Loans Regional Vice President Mark Zachary has said in court that KB Home pressured its lending joint venture to engage in systematic mortgage fraud to drive sales, including encouraging inflated appraisals, assisting buyers in supplying false income information, and approving loans without review or documentation.
LIUNA is also calling for agencies which buy or securitize mortgages, including Fannie Mae, Freddie Mac and HUD, to exercise greater scrutiny of mortgages originated by corporate home builders or by lenders which home builders control.
The half million members of LIUNA – the Laborers’ International Union of North America – are on the forefront of the construction industry, a powerhouse of 10 million workers who build America.
For copies of The Ticking Time Bomb: Adjustable Rate Mortgages and Depreciating Home Values in New Subdivisions, please contact Dawn Page at (480) 619-9263, or Jacob Hay at (202) 942-2285,
SOURCE: Laborers’ International Union of North America – LIUNA

Laborers’ International Union of North America – LIUNA Dawn Page, 480-619-9263 or Jacob Hay, 202-942-2285

Wall Street Report Tries to Dissect Financial Meltdown

A group of Wall Street executives released a report on Wednesday that outlined how the industry failed to foresee the financial meltdown of the last year and what companies can do to improve risk management.

The 172-page report, written by chief risk officers and senior executives at banks like Lehman Brothers, Merrill Lynch and Citigroup, also provides suggestions about technical issues at the same time as it offers a bit of a mea culpa.

“Virtually everybody was frankly slow in recognizing that we were on the cusp of a really draconian crisis,” said E. Gerald Corrigan, a managing director at Goldman Sachs and a chairman of the Counterparty Risk Management Policy Group III , which released the report.

Wall Street failed to anticipate how wide-reaching problems with mortgage bonds would spread into seemingly distant corners of the financial markets, the report said. Awash in easy money, banks doled out credit without sufficiently charging for the risk. Wall Street also created complex structures that masked connections between asset classes as well as compensation incentives that pushed traders to take risky steps for short-term gain. The industry’s failings have now translated into pain for the broader economy, the report said.

In many ways, the report acknowledged shortcomings that have already been raised by Wall Street’s critics.

Mr. Corrigan, a former president of the New York Federal Reserve, formed the group in April to develop a private-sector plan for minimizing future problems in the financial markets. He said in an interview that he hoped the report’s suggestions would be adopted industrywide within two years.

The report focuses on several issues, including accounting rules for bundles of mortgages, new tests for liquidity and disclosure of risks in complicated financial instruments. The findings have already been presented to Timothy F. Geithner, the president of the New York Federal Reserve.

In a cover letter to Treasury Secretary Henry M. Paulson Jr., the group attributed some of the crisis to human psychology.

“The root cause of financial market excesses on both the upside and the downside of the cycle is collective human behavior — unbridled optimism on the upside — and fear — bordering on panic — on the downside,” the letter said. The panic underlying the collapse of the investment bank Bear Stearns was clearly on the minds of executives as they worked on the report.

They outlined ways to reduce “counterparty risk,” the intricate links that connect financial companies and their trading partners. As Bear Stearns struggled in early March, investors feared that too many of those links would collapse if the bank folded — leading some Wall Street executives to say that Bear Stearns was not too-big-to-fail but rather too-interconnected-to-fail.

The report suggests that the industry create a way to close-out trades, should another major financial player face trouble. It also said the markets may be more “accident prone” because of new ways of doing business like Wall Street’s loan packaging, in which banks that originate loans to consumers then repackage them to sell to investors. And it listed the ability to make bets against credit — a trade that made some investors rich — as a possible cause of market instability.

Mr. Corrigan said a prior version of his group created rules that helped the financial system through recent turbulence. Under those rules, investors could no longer resell derivatives contracts without the permission of the party on the other side of the trade.

Now Mr. Corrigan is pushing for the industry to establish a central clearinghouse for derivatives. The clearing project is supported by the Federal Reserve, but many Wall Street firms are concerned that such a move could open their lucrative over-the-counter trading operations to competition from exchange companies.

Another hotspot in the report is the section about accounting for bundles of mortgages and other loans that have been packaged. Those have been kept off the balance sheet, and many in the industry think that rules that would put the bundles back on the books should apply only to the future. The report suggests putting loan packages from the past — which will force many banks to raise more capital from investors.

Mr. Corrigan said he knows the report presents a challenge, but that Wall Street firms need to adopt more of a spirit of “financial statesmanship.”

The publication of the report, he said, does not signal an end to the crisis.

“Since roughly March, we’ve kind of been bumping along the bottom,” he said. “That’s likely to continue for at least some period in the future.”

Countrywide Dogs Howling Over Bare Bones

The marriage between Bank of America (BAC) and Countrywide Financial (CFC) was supposed to stave off bankruptcy of Countrywide. It might not work out that way. Let’s put together some pieces starting with the Bloomberg report BNY Mellon, Citigroup, JPMorgan, Ambac in Court News.

Bank of New York Mellon Corp., the world’s largest custodian of financial assets, sued Bank of America Corp.’s Countrywide Financial Corp. seeking repayment of $2 billion in notes.

Countrywide failed to inform holders of its Series B floating rate convertible notes due in 2037 that its acquisition by Bank of America on July 1 gave holders the option to keep the notes or cash them in, lawyers for BNY Mellon said July 31 in a complaint filed in Delaware Chancery Court in Wilmington.

Countrywide was required to mail notices explaining the changes by July 16, according to the complaint. BNY Mellon filed the suit as trustee for the holders of the notes.

BNY Mellon is seeking a judicial declaration that Countrywide has defaulted on its obligations under the terms of the indenture. The company is also asking a judge to order Countrywide to immediately purchase the notes surrendered in cash equal to 100 percent of the principal amount plus accrued and unpaid interest.

Implications Of The Lawsuit

The Institutional Risk Analyst discusses the implications of the lawsuit in Is Countrywide Financial Headed for Bankruptcy?

It is remarkable but not surprising that it took this long for BNY Mellon (BK) to recognize BAC’s threatened default and to finally act in its role as fiduciary, but now that it has acted the other creditors of Countrywide, which is now a direct subsidiary of BAC, cannot remain indifferent.

Given the legal filing by BK, it is not impossible that another creditor of Countrywide will decide to file a claim or even an involuntary bankruptcy petition to protect their rights. As more legal claims are filed, a judge may even take notice of the diversity of claimants and suggest bankruptcy as a practical alternative. In the event, the FDIC and other regulators may be faced with the very situation they have tried to avoid via the marriage of BAC and Countrywide, namely the failure of a large depository.

The current situation is unchartered territory to put it mildly. Most of the lawyers and banking experts contacted by The IRA could never recall a situation where the parent of an insured depository institution was made subject to the authority of the bankruptcy court. Indeed, it appears that were a creditor of Countrywide to file an involuntary bankruptcy petition, the FDIC might be forced to intervene as receiver and take control of the bank unit. If a creditor, possibly even including BK, were to file an involuntary petition against Countrywide, BAC could stand to lose the book value of the investment in the bank subsidiary, roughly $7 billion at the end of March 2008.

“Typically the bond holders do not have an incentive to come together to create the demise of an issuer, but this situation is doing just that,” says Joseph Mason, Professor of Finance at Louisiana State University. “The FDIC wanted to avoid a large bank resolution early in the credit crisis, but the legal lose ends in the Countrywide situation may cause precisely that result.”

Dogs Howling Over Bare Bones

Bank of America thought it could strip the assets of Countrywide and toss the bones to the dogs. The lead dog, otherwise known as BNY Mellon is now howling. How long will it be before the rest of the pack starts howling?

And what is unique in this case is the pack of dogs (Countrywide bondholders), now have a vested interest in pushing Countrywide into bankruptcy so they can get some of the meat (Countrywide’s servicing unit), instead or worthless bones (Countrywide’s Debt).

Countrywide has about $38 billion in outstanding debt that the dogs are howling over.

Given that the merger was approve and closed on July 1, albeit under clouds of litigation, perhaps the dogs are barking up the wrong tree. Perhaps not.

The Institutional Risk Analyst concludes with “The possible issues and permutations of such scenarios are too numerous to address here, but suffice to say that the cross-guarantee provisions alone between insured depository institutions within the BAC group could create a legal nightmare if this situation does end up in a bankruptcy litigation. What will be the position of the Office of Thrift Supervision and the FDIC in the event? Just remember that we’re making this up as we go along. And please do stay tuned.”

Indeed, stay tuned. The final chapter on this story has likely not been written.

Mike “Mish” Shedlock

Mozilo defends cashing in Countrywide stock

Angelo Mozilo
Mark Wilson / Getty Images
Angelo Mozilo, founder and chief executive of Countrywide Financial, is sworn today during a House Oversight and Government Reform Committee hearing on executive pay.
The unloading of $141 million in options was in preparation for retirement, the Countrywide founder asserts, denying that he was trying to shield himself from the sub-prime meltdown.
By Jonathan Peterson, Los Angeles Times Staff Writer
March 8, 2008

WASHINGTON — Countrywide Financial Corp. founder Angelo R. Mozilo defended his fortuitous stock trades before a congressional panel Friday, denying that he had manipulated his trading plan to unload about $141 million in stock options before the company collapsed.

“You had good timing,” needled Rep. Henry A. Waxman (D-Beverly Hills), chairman of the House Committee on Oversight and Government Reform.

By making changes to his stock trading plan, Mozilo was able to vastly increase his stock sales before Countrywide shares plummeted during last year’s mortgage meltdown.

Mozilo, 69, maintained that the sales, which have drawn the scrutiny of federal investigators, were prompted by deadlines he faced to exercise stock options as well as the desire to diversify his assets in preparation for his retirement.

“The goal was to reduce my holdings because of my retirement . . . almost all my net worth was in Countrywide,” he said.

Mozilo also said that the timing of his stock sales was unrelated to a stock buyback program Countrywide had at the time. Such programs are sometimes used to shore up a company’s stock value, but Mozilo insisted that there “was absolutely no relationship between the buyback of stock and my sale of options.”

Mozilo’s remarks were made at a congressional hearing on the lofty compensation levels enjoyed by certain chief executives even as their companies were hammered by losses in the sub-prime mortgage market. He was joined at the witness table by Stanley O’Neal, former head of Merrill Lynch & Co., and Charles Prince, former head of Citigroup Inc., along with members of their boards.

O’Neal and Prince were pushed out after their firms suffered billions of dollars in losses tied to ill-fated mortgage securities. Mozilo remains at the helm of Countywide, the company he founded, although he is expected to leave after Bank of America Corp. completes its acquisition of the Calabasas-based lender this year.

The hearing was meant to showcase a chief complaint of corporate critics — that financial rewards for top executives often seem disconnected to the performance of their companies, with the current mortgage crisis offering a particularly stark case study.

Countrywide sold many of the sub-prime loans that are now going under, leading to increasing losses and its eventual agreement to be taken over by Bank of America. Merrill Lynch and Citigroup lost billions of dollars in their own dealings with mortgage-related securities that proved far riskier than advertised.

“The obvious question is this: How can a few executives do so well when their companies do so poorly?” Waxman asked. “Are the extraordinary compensation packages these CEOs received reasonable compensation? Or does the hundreds of millions of dollars they were given represent a complete disconnect with reality?”

Little was resolved Friday. The executives and board members politely defended the pay arrangements; Republicans on the panel argued that the mortgage crisis is rooted in problems more broad based than executive compensation.

“Punishing individual corporate executives with public floggings like this may be a politically satisfying ritual, like an island tribe sacrificing a virgin to a grumbling volcano,” said Rep. Thomas M. Davis III of Virginia, the panel’s senior Republican. “But in the end it won’t answer the questions that need to be answered about corporate responsibility and economic stability.”

Reports that O’Neal received $161 million after being pushed out of Merrill Lynch at a time of record-breaking losses attracted attention as well as stout defense. John Finnegan, chairman of Merrill Lynch’s compensation committee, explained that the $161 million was not intended as payment for the company’s troubles during 2007 but instead reflected benefits O’Neal had built up in the past, including stock and stock options, some dating to 2000 and earlier.

“All were amounts to which Mr. O’Neal was entitled,” Finnegan said.

Said O’Neal: “I received no bonus for 2007, no severance pay, no golden parachute.”

Lawmakers also questioned the $10-million bonus paid to Charles Prince, the former Citigroup leader who was pushed out after the firm also was hammered by losses related to the sub-prime debacle.

The bonus amount “was less than half the bonus he got in his previous year,” said Richard D. Parsons, the chairman of Time Warner Inc. and chairman of Citigroup’s compensation committee.

“I’m proud of my accomplishments,” said Prince, while also conceding he was “ultimately responsible” for the company’s actions, which included a misunderstanding of the risks of mortgage-backed securities.

But attention repeatedly returned to Mozilo, a self-made magnate who helped shape the modern mortgage business. Rep. Eleanor Holmes Norton (D-D.C.) pressed him on a recent committee disclosure that Countrywide had boosted his pay deal after a new consultant hired by the board sought to maximize what Mozilo could receive.

“None of this makes sense to me,” said Norton, alluding to e-mails on the matter that were obtained by the committee. “I want to know how it makes sense to you.”

Harley W. Snyder, the chairman of Countrywide’s compensation committee, said he disagreed with Norton’s interpretation of events, although he did not offer a detailed rebuttal.

During the hearing, Mozilo expressed regret for angry language he had used after being disappointed by a 2006 pay proposal, complaining in an e-mail that year about the “left wing anti business press and the envious leaders of unions.”

The pay proposal was “sharply different than what I expected,” Mozilo said Friday. “I regret the words I used. I tend to be an emotional individual.”

After four hours of give and take, legislators remained deeply divided on whether the executives and their pay packages helped cause the mortgage problems that now threaten the U.S. economy.

“This is a mess,” said Rep. Elijah E. Cummings (D-Md.), referring to executives “with golden parachutes drifting off into the golf field” at the same time that people “are losing their homes.”

But Rep. Darrell Issa (R-Vista) had a different view.

“Mr. chairman, I look forward to finding if something is wrong here,” he told Waxman. “So far you haven’t found it.”


Daily Development for Friday, September 16, 2005
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri

MORTGAGES; FORECLOSURE; PROCEDURE; STANDING TO FORECLOSE:  Florida trial court rules that MERS lacks status to foreclose as representative of lender even when MERS holds the note.

In re Mortgage Electronic Registrations Systems, Inc., Cir. Ct. Pinellas County, Fla., Walt Logan, Judge, 8/18/05) (Numerous case numbers)

As most readers of this list know, the Mortgage Electronic Registration System, MERS, was established about fifteen years ago to facilitate the rapid transfer of mortgages for the purpose of developing large pools to support securitization of mortgages.  All parties participating in the MERS system (primarily mortgage bankers) agree to recognize as the owner of a note and mortgage that party shown on the MERS register.  Although, originally, MERS functioned without recording and without taking possession of the note, more recently MERS has both recorded itself as the record owner of the mortgage at the time of the original loan funding, or shortly thereafter, and has also begun to take possession of a note endorsed in blank.

One assumes that the various parties who rely upon MERS as the registry of ownership of mortgage loans that they make sign agreements that make very plain the powers that MERS has to foreclose in their name. Use of MERS has become the standard for residential mortgages, over 95% of which are securitized, and for securitized commercial mortgage as well.  But this Florida case puts at least MERS’ foreclosure arrangements very much at issue.

This order dismissed foreclosures in 28 pending foreclosures brought by MERS in Pinellas County.  In each case, MERS was listed as a plaintiff or co-plaintiff seeking to collect on a note via mortgage foreclosure.  In the end, the court dismissed all 28 cases for want of a proper party plaintiff.

In each case, MERS acknowledged that it was representing the interest of another corporate entity in the collection effort, and described its role as a “nominee” of the other corporate entity.

The court reviewed the files and stated that it found that the petition for foreclosure, which alleged that MERS “now owns and holds the mortgage note and mortgage” were not supported in the record. It acknowledged that MERS claimed that it was a “nominee” or the corporate entity that owned the note, but claimed that one corporation is not permitted to act for another in bringing a lawsuit.  Rather, lawyers, and not corporations, represent other corporations in lawsuits.

In some of the files,  there was an indication that the note was made out to a particular lender and no indication that it had been transferred to MERS or at least no “chain of transfer” linking the original lender to MERS.  In another files, there was in fact a lost note affidavit filed indicated another owner of the note.  In some files, in the view, MERS had inconsistently listed itself as a nominee of several different owners of the note, but again showed no chain of transfer from any of them.

MERS pointed out in court that it in fact had possession of each of the notes.  It took the position that it was not necessary to show a chain of title of the note from the original payee to MERS, as it was in fact only a nominee.  .  It acknowledged that any foreclosure proceeds would flow through MERS to the real owner of the note as shown on MERS electronic records.   At one point, the court was able to get counsel for MERS to admit that MERS wasn’t sure who the beneficial owner of the note was at that precise moment.

MERS nevertheless claimed that the notes had been endorsed in blank and that they essentially were bearer instruments under the UCC.  Therefore, MERS physical possession of the notes should be enough to permit it to foreclose on the related mortgages, even though it acknowledged in court that it was not in fact the beneficial owner of them.  There was confusing dialogue in the case, however, where the lawyers for MERS may have agreed that they didn’t have the note in court and were relying upon lost note affidavits.

The court made the point that the defendants in these cases might have counterclaims against the real beneficial owners but would be barred from bringing them because they didn’t know who those owners were, and furthermore they were not in court.

In the end, the court concluded that “beneficial interest to sue” cannot exist separately from other beneficial interests in the note.  Since MERS claimed no other beneficial interest, its possession of the note endorsed in blank did not avail it.    It commented that only positive legislation, and not contract, can establish a right to foreclose in someone other than the owner of a secured debt instrument:

“The MERS situation seems to have resulted from the establishment of the corporation and agreements with lenders without the participation of the Florida Legislature or the Supreme Court in its rule making role.  The fact that the market might find it easier to operate with the real party in interest somewhere in the background of a foreclosure lawsuit is not a compelling reason to modify the traditional requirements of a party to establish status to bring litigation.”

Although the court refers to MERS as a “foreclosure agent” rather than a “servicing agent,” it appears that it would also exclude servicing agents from bringing foreclosure actions.

Comment 1: The author is informed that MERS views this case as an aberration, likely resulting from the failure of local counsel to use MERS standard form pleadings, and that it anticipates that it will not have a long standing problem in Florida or anywhere else.

Comment 2: The editor is not familiar enough with MERS practices to know whether MERS typically forecloses on behalf of all registered mortgage owners or only when these mortgages are at some defined step on the way to, or after, securitization.  If others know, an inquiring mind would like the answer.

Comment 3: The presence of MERS has undoubtedly led to huge savings in mortgage securitization by the “private label” process.  It likely is not as critical for FNMA or FHLMC when they engage in their traditional function of acquiring loans directly from originators, but likely FNMA and FHLMC have evolved quite a lot in the current market, so MERS may play a major role in their operations as well.  Whether it is necessary for MERS to perform its function for it to be involved in a foreclosure is another question.  On the other hand, are there any sensible reasons why it shouldn’t be able to carry out the foreclosure?  The editor can’t think of any, nor can he think of any reason why legislation is necessary if MERS’ status as agent can be clearly made out by the contract and it produces the note.

Comment 4: It is difficult to make out all the details of the instant dispute, but it appears that in some cases there was no way to know who the true owner of the note is.  This seems to be completely inconsistent with the basic notion of MERS that the owner is the party shown on MERS computer record.  Consequently, it is hard to know why the owner of the note can’t be named. Therefore, the problem of counterclaims that the court mentions would disappear.  The mortgagee is in the suit through its agent, MERS.

87 Responses

  1. From Consumer Rights Defenders, at 818.453.3585 NEWS FLASH:

    Bank of America to Pay $16.6B to Settle Fraud Claims
    Jenna Greene and Todd Ruger, The National Law Journal
    August 21, 2014

    Attorney General Eric Holder Jr. on Thursday announced Bank of America will pay $16.6 billion to resolve mortgage fraud claims, the largest-ever government deal with a single entity.
    Photo: Todd Ruger/NLJ
    Updated: 11:49 a.m.
    In the largest-ever settlement between the U.S. government and a single company, Bank of America Corp. on Thursday agreed to pay $16.6 billion in penalties and consumer relief for selling toxic mortgage-backed securities.

    Read more:

  2. […] Steve at Consumer Rights Defenders, on February 1, 2013 at 12:30 pm […]

  3. From Consumer Rights Defenders at 818.453.3585….investigate the accuracy of this article for yourself. Call is today for litigation support. ‘

    Jan 30, 2013 – Washington, DC: In October 2012, an historic civil jury verdict in the District of Columbia found that OneWest Bank, which also does business as IndyMac Mortgage Services, violated DC’s consumer protection law by breaching its contract and committing fraud against the plaintiff, Ross Yerger (“the customer”) – a Special Agent with the United States Secret Service. Actual damages were awarded and accompanied by punitive damages and attorney fees. This is the highest level at which any such case has been decided against a financial institution in favor of victory for the plaintiff.
    This case is also being considered by the United States Attorney’s Office for additional action and has already been considered similar in nature to the current Bank of America lawsuit filed by the U.S. Government. The case citation is Yerger v. OneWest Bank, No. 2011 CA 000706 in the Superior Court for the District of Columbia. JR Howell, Esq. of JRH Legal Strategies represented the customer.
    In August of 2009, OneWest Bank, solicited the customer into joining its “Equity Accelerator Program.” Under that program, OneWest promised to debit the homeowner’s mortgage payment in two bi-monthly installments every month for the remainder of the loan. OneWest said that the program would result in over $170,000.00 in interest savings and a gain of nearly $70,000.00 of equity in ten years. OneWest Bank’s promises were reduced to a written agreement.
    The program was not executed as promised. The bank never debited any money from the customer’s account. However, the bank consistently charged the customer hundreds of dollars in late fees. The customer repeatedly cured the bank’s failures by making the mortgage payment manually, including the fees that were charged because the bank failed to make the debits. Each time he made these payments, he was told the debits would continue under the program as agreed. But that never happened.
    Several months later, the customer was threatened with foreclosure. The bank’s lawyers told the customer to pay $9,878.22 to stop the foreclosure in August of 2010. The customer immediately paid this amount, but three weeks later the customer received that payment back from the bank, which said it was refusing to accept the payment. The foreclosure was scheduled for October 21, 2010.
    The bank’s lawyers then demanded over $16,000.00 a few weeks later, otherwise it was going to sell the customer’s home in a foreclosure sale. The customer came up with the money. At trial, several thousands of the dollars were labeled as miscellaneous fees and remained unexplained. Hundreds of dollars were never applied to the customer’s account and remained unaccounted for at trial. A witness for the bank was unable to explain why the customer was charged several thousand dollars in unspecified fees and what the bank did with hundreds of dollars of the customer’s money.
    A few days later, the customer was sent a mortgage statement rife with accounting errors, saying that the customer was a month behind on his mortgage-even though the bank told him that the $16,000.00 payment would bring him current. Even though the bank’s lawyers told him the accounting error was fixed, the following month he was sent a mortgage statement demanded three times his regular mortgage payment. OneWest Bank refused to accept the amount of the regular monthly mortgage payment and demanded the customer pay the full amount that they insisted. In deposition, the witness for the bank confessed that these statements were mistakes. But at trial, the witness recanted this statement and restated that the November 2010 statement was accurate. Neither the bank, nor an independent auditor completed an audit of the customer’s account.
    The lawsuit began in January of 2011. When the summons was served on the bank, the customer’s legal counsel sent a letter with the complaint, explaining that there was no need for litigation to fix this issue and that the parties could negotiate their differences amicably. There was no response to the letter. Instead, OneWest Bank forced the customer to undergo two years of protracted litigation, as well as surveillance on the residence by the bank’s contractors and other harassment.


  5. I wish we had someone like you to tap into in Virginia. Here you can’t even find a lawyer to represent you in an Action to Quiet Title.

    I am a researcher working Pro Bono on the BIGGEST case of fraud I have ever seen. This is the absolute BOMB…including a counterfeit Note.

    This bank went from a loan mod promise, then a loan reinstatement agreement to a trustee sale in 38 days. BAM!!! The pro se litigant was literally forced into Bankruptcy to save his house.

    While the homeowner was trying to recover his senses I began to dig. Welllll…just a few fine points too many to mention but, FDCPA violations galore from the validation notice on. Sent a letter alleging: “We don’t have your Note in our posession at this time.”…on page one of this dunning letter then on pages 2, 3, and 4 had a substitution of trustee and a trustee sale notice all rolled into one envelope…yup it’s true.

    The kicker is that they did not even have an assignment pre foreclosure. Yup they got one 3 months later from a dead lender and included it in a Proof of Claim! Of course they did not notify the pro se about the assignment and tripped TILA.

    They lied in every pleading…

    Oh, did I mention in their 38 day steamroll to foreclosure they forgot they breached § 22 (and others) of the deed of trust.

    The pro se survived the first hearing. Opposing counsel produced the counterfeit Note and the infamous Virginia Hovrath Case and thought she was going to walk out with a dismissal of the QT. The pro se got on the stand and told the judge that she lied about the date of the assignment in her pleadings. The judge said to counsel I want to see a chain of title in 21 days. Well she did not produce a chain of title ONLY a mere “Note History”. She lied on her “note history”. Pro se replied to her allegations…he got a MERS Milestones for his MIN that refuted everything she alleged.

    This judge seems fair BUT he is 74 years old and really doesn’t want to deal with this case. So we will see what happens.

    Pro se went on to file an Objection to the Proof of Claim and a Request for Admissions…waiting for the bank to respond on both.

    Do you have any attorneys in Virginia you could recommend?? We could sure use some help here.

    Thanks for all you do!



  8. February 10, 2012
    WHAT CAUSED THE FORECLOSURE CRISIS??? I implore you to take this story back to the BEGINNING! DIG DEEP and INVESTIGATE the FACTS and tell the WHOLE story.
    WHO is the MOST POWERFUL ENTITY IN AMERICA? THE NEWS MEDIA! Whatever story you tell, and HOW you decide to tell it ultimately becomes the way it is in the eyes of Americans.
    This 18 billion dollar law suit against the 5 major banks only tells me that you can commit PREMEDITATED MAJOR FRAUD that devastates millions of peoples lives, shove the billions of EXTRA money it makes you in your pockets, then IF you get caught, you’ll have enough money to pay off the law makers, then you’re off the hook! WHO CARES ABOUT THE LITTLE PEOPLE YOU DESTROYED? After all, they’re just the BACKBONE of AMERICA! THESE MONSTERS SET OUT TO DECEIVE HOMEOWNERS, approving them for loans for the sole purpose that they would fail, foreclose! Scooping thousands of these doomed loans into a servicing pool to be securitized and then bounced around on Wall Street because these corporate criminals that are way smarter then me, devised a way to multiply there return on doomed investments by getting subsidized 10, 20, 30 times over from multiple insurance policies placed in advance. That would be like me insuring my home with 10 homeowner’s policies, each to pay me $200,000 if my house burns down, all the while knowing it IS GOING TO BURN DOWN because I placed a few faulty wires in the walls of my home. I WOULD BE IN PRISON!!! This is EACTLY WHAT THESE MONSTERS DID TO MILLIONS OF HOMEOWNERS LIKE ME! All of the stories I’ve seen regarding the MORTGAGE FRAUD and FORECLOSURE CRISIS are just FRACTIONS of the complete story! Robo Signers, Docx Company forging thousands of signatures on lost or destroyed loan documents, foreclosed, vacant homes causing vandalism, squatters and the drop in real estate values. This is the first time in my 47 year life that I have more knowledge on a MAJOR, NATIONAL, ECONOMICAL CRISIS then is being reported by YOU, the NATIONAL NEWS MEDIA! The source ALL AMERICANS rely on to bring them the TRUTH of a story and the WHOLE story. One year ago when I first knew I was going to have a fight on my hands to save what means as much to me as life itself, (my home) I was scared, but eager because I learned that I had rights, as an American, governed by laws long ago put into place. When I learned that LAWS WERE BROKEN, and my rights as an American were being violated I was confident that with some self education and ALOT of research, surely I would eventually prevail. My facts are evident, right here in black and white. Just show it to the judge and he will make things right, fair! I didn’t want to ‘WIN’ a free HOME. I just wanted the judge to make the monsters play FAIR! I sit here now, the morning after hearing of the successful suit against the 5 major banks and I am devastated and overwhelmed as it sinks in that the federal lawsuit victory does NOTHING to protect ME or thousands of other people out there in the same boat. In fact, I’m feeling confident that it put the last nail in my coffin because it set a National precedence, just pay your way out of your crimes with the money you gained off of your victims. I am disheartened with our system, it is disgraceful what people in power have done to destroy EVERYTHING this COUNTRY WAS BUILT ON. No wonder this Great Country is being brought to it’s knees. GREED is selling her out and NO ONE WITH ANY POWER IS BRAVE ENOUGH TO EXPOSE IT! Like so many Americans, I am! I would lay down my life TODAY if it would somehow magically expose the Beast because one day, soon, it will all be too late! My home hasn’t been sold out from underneath me yet but I have received a “Notice of Default” telling me I have about 30 days left before a “Trustees Sale”. No court hearing, no judge to make a ruling because I live in California, a Non Judicial State which means Whoever Holds the ORIGINAL “Deed of Trust” on you mortgage has the right to sell your home at public auction if you default on it’s terms. FIRST PROBLEM, when the mortgage was securitized and pooled into a trust with thousands of other mortgages, the ‘Note’ and ‘Deeds’ HAD to be DESTROYED in order to become asset bearing investments. YOU CANNOT HAVE BOTH AVENUES TO GENERATE PROFITS. Known as DOUBLE DIPPING, it is a major IRS tax violation. So why do I keep hearing loan docs were lost, misfiled, and misplaced? THEY WERE PURPOUSLY DESTROYED! These bankers, investors just assumed we would all be too stupid to figure it all out, and even IF some of us did uncover their dirty deeds, what could just a few people do?? NOTHING! We HAVE TO RELY ON OUR NATIONAL NEWS MEDIA! THE ONLY VOICE LOUD ENOUGH TO HAVE ANY EFFECT. WE NEED YOUR HELP! If you choose to do nothing, you are allowing these THUGS to abuse and steel from the powerless and then just walk away. WHY WOULD YOU ALLOW THAT?? HOW CAN YOU JUST LET THEM GET AWAY WITH THAT?? You are our only hope!

  9. Can this be real? Unfortunately it is.

    HOLY BAILOUT – Federal Reserve Now Backstopping $75 Trillion Of Bank Of America’s Derivatives Trades

    “This story from Bloomberg just hit the wires this morning. Bank of America is shifting derivatives in its Merrill investment banking unit to its depository arm, which has access to the Fed discount window and is protected by the FDIC.

    This means that the investment bank’s European derivatives exposure is now backstopped by U.S. taxpayers. Bank of America didn’t get regulatory approval to do this, they just did it at the request of frightened counterparties. Now the Fed and the FDIC are fighting as to whether this was sound. The Fed wants to “give relief” to the bank holding company, which is under heavy pressure.”

  10. Consumer Rights Defenders…where lawyers, paralegals and staff are there to help you. Call Steve or Sara today at 818.453.3585. NOW READ THIS….and rejoice even if for only a moment…..from Forbes:

    Wall Street’s New Nightmare: The Next Wave Of Mortgage-Backed Securities Claims

    Her $8.5 billion Bank of America settlement over bad mortgage deals was just the beginning. Now, backed by bond giants Pimco and BlackRock, Texas lawyer Kathy Patrick is gearing up for a new legal assault on the financial industry.

    Kathy Patrick: The woman Wall Street fears most.

    This article appears in the November 7 edition of Forbes magazine.

    The biggest private legal settlement in the history of Wall Street was a few sentences away from death. In early June a ­little-known Texas lawyer named Kathy Patrick was putting the final touches on her carefully crafted $8.5 billion deal with Bank of America over so-called mortgage put-backs, when she got a last-minute demand from the other side. Sitting in her Houston office, Patrick learned that BofA wanted her clients—a clutch of the world’s most important investment firms, including BlackRock and Pimco—to promise they would not go after the bank with separate claims over the same mortgage pools.

    The Lawsuits Plaguing Bank Of America
    Gallery: The 10 Worst States For Mortgage Fraud No way, she answered. As far as Patrick was concerned, she had made clear such a release was not on the table. Some of her clients had already filed securities claims against Bank of America. “It’s not every day that you write a letter to someone,” the 51-year-old says, “and tell them to take their $8.5 billion and shove it.”

    Bank of America’s gambit turned out to be a bluff. On June 29 the nation’s largest bank announced it had struck the second-biggest legal settlement in American history, trailing only the 1998 tobacco master settlement. Three weeks later BofA reported an $8.8 billion quarterly loss, the start of a long and difficult summer in Charlotte.

    Rather than celebrate a career-capping victory, Patrick viewed it a different way: round one. And that has Wall Street terrified right now.
    Publicly the financial industry and the White House are dancing around a potential $20 billion settlement being forced on the nation’s biggest banks by state attorneys general over improper foreclosure practices. Quietly and without fanfare, Patrick and her 23 bondholding giants—one of the most powerful investor groups ever assembled for litigation—are gearing up for something equally big: a painful new reckoning for the mortgage-lending debacle, with most of Wall Street’s big banks in her cross hairs. “This group did not come together just to deal with Bank of America. They came together because they wanted a comprehensive industrywide strategy and an industrywide solution,” Patrick tells FORBES. “They started with Bank of America because they thought they could achieve a template that they could extend to other institutions.”


  11. From back in the day…..see how real cases can go FOR borrowers:
    Keep us in mind when you are ready to take action. Attorneys, paralegals, staffers. 818.453.3585. It takes courage to call, but no courage to lose your home.

    Montgomery vs Daly

    RE: First National Bank of Montgomery vs. Jerome Daly





    First National Bank of Montgomery,
    Jerome Daly,


    The above entitled action came on before the Court and a Jury of 12 on December 7, 1968 at 10:00 am. Plaintiff appeared by its President Lawrence V. Morgan and was represented by its Counsel, R. Mellby. Defendant appeared on his own behalf.

    A Jury of Talesmen were called, impaneled and sworn to try the issues in the Case. Lawrence V. Morgan was the only witness called for Plaintiff and Defendant testified as the only witness in his own behalf.

    Plaintiff brought this as a Common Law action for the recovery of the possession of Lot 19 Fairview Beach, Scott County, Minn. Plaintiff claimed title to the Real Property in question by foreclosure of a Note and Mortgage Deed dated May 8, 1964 which Plaintiff claimed was in default at the time foreclosure proceedings were started.

    Defendant appeared and answered that the Plaintiff created the money and credit upon its own books by bookkeeping entry as the consideration for the Note and Mortgage of May 8, 1964 and alleged failure of the consideration for the Mortgage Deed and alleged that the Sheriff’s sale passed no title to plaintiff.

    The issues tried to the Jury were whether there was a lawful consideration and whether Defendant had waived his rights to complain about the consideration having paid on the Note for almost 3 years.

    Mr. Morgan admitted that all of the money or credit which was used as a consideration was created upon their books, that this was standard banking practice exercised by their bank in combination with the Federal Reserve Bank of Minneapolis, another private Bank, further that he knew of no United States Statute or Law that gave the Plaintiff the authority to do this. Plaintiff further claimed that Defendant by using the ledger book created credit and by paying on the Note and Mortgage waived any right to complain about the Consideration and that the Defendant was estopped from doing so.

    At 12:15 on December 7, 1968 the Jury returned a unanimous verdict for the Defendant.

    Now therefore, by virtue of the authority vested in me pursuant to the Declaration of Independence, the Northwest Ordinance of 1787, the Constitution of United States and the Constitution and the laws of the State of Minnesota not inconsistent therewith ;
    1.That the Plaintiff is not entitled to recover the possession of Lot 19, Fairview Beach, Scott County, Minnesota according to the Plat thereof on file in the Register of Deeds office.
    2.That because of failure of a lawful consideration the Note and Mortgage dated May 8, 1964 are null and void.
    3.That the Sheriff’s sale of the above described premises held on June 26, 1967 is null and void, of no effect.
    4.That the Plaintiff has no right title or interest in said premises or lien thereon as is above described.
    5.That any provision in the Minnesota Constitution and any Minnesota Statute binding the jurisdiction of this Court is repugnant to the Constitution of the United States and to the Bill of Rights of the Minnesota Constitution and is null and void and that this Court has jurisdiction to render complete Justice in this Cause.
    The following memorandum and any supplementary memorandum made and filed by this Court in support of this Judgment is hereby made a part hereof by reference.


    Dated December 9, 1968
    Credit River Township
    Scott County, Minnesota


    The issues in this case were simple. There was no material dispute of the facts for the Jury to resolve.

    Plaintiff admitted that it, in combination with the federal Reserve Bank of Minneapolis, which are for all practical purposes, because of their interlocking activity and practices, and both being Banking Institutions Incorporated under the Laws of the United States, are in the Law to be treated as one and the same Bank, did create the entire $14,000.00 in money or credit upon its own books by bookkeeping entry. That this was the Consideration used to support the Note dated May 8, 1964 and the Mortgage of the same date. The money and credit first came into existence when they created it. Mr. Morgan admitted that no United States Law Statute existed which gave him the right to do this. A lawful consideration must exist and be tendered to support the Note. See Ansheuser-Busch Brewing Company v. Emma Mason, 44 Minn. 318, 46 N.W. 558. The Jury found that there was no consideration and I agree. Only God can create something of value out of nothing.

    Even if Defendant could be charged with waiver or estoppel as a matter of Law this is no defense to the Plaintiff. The Law leaves wrongdoers where it finds them. See sections 50, 51 and 52 of Am Jur 2nd “Actions” on page 584 – “no action will lie to recover on a claim based upon, or in any manner depending upon, a fraudulent, illegal, or immoral transaction or contract to which Plaintiff was a party.”

    Plaintiff’s act of creating credit is not authorized by the Constitution and Laws of the United States, is unconstitutional and void, and is not a lawful consideration in the eyes of the Law to support any thing or upon which any lawful right can be built.

    Nothing in the Constitution of the United States limits the jurisdiction of this Court, which is one of original Jurisdiction with right of trial by Jury guaranteed. This is a Common Law action. Minnesota cannot limit or impair the power of this Court to render Complete Justice between the parties. Any provisions in the Constitution and laws of Minnesota which attempt to do so is repugnant to the Constitution of the United States and void. No question as to the Jurisdiction of this Court was raised by either party at the trial. Both parties were given complete liberty to submit any and all facts to the Jury, at least in so far as they saw fit.

    No complaint was made by Plaintiff that Plaintiff did not receive a fair trial. From the admissions made by Mr. Morgan the path of duty was direct and clear for the Jury. Their Verdict could not reasonably have been otherwise. Justice was rendered completely and without denial, promptly and without delay, freely and without purchase, conformable to the laws in this Court of December 7, 1968.


    December 9, 1968
    Justice Martin V. Mahoney
    Credit River Township
    Scott County, Minnesota.

    Note: It has never been doubted that a Note given on a Consideration which is prohibited by law is void. It has been determined, independent of Acts of Congress, that sailing under the license of an enemy is illegal. The emission of Bills of Credit upon the books of these private Corporations for the purpose of private gain is not warranted by the Constitution of the United States and is unlawful. See Craig v. Mo. 4 Peters Reports 912. This Court can tread only that path which is marked out by duty. M.V.M.

    JEROME DALY had his own information to reveal about this case, which establishes that between his own revealed information and the fact that Justice Martin V. Mahoney was murdered 6 months after he entered the Credit River Decision on the books of the Court, why the case was never legally overturned, nor can it be.



    FORWARD: The above Judgment was entered by the Court on December 9, 1968. The issue there was simple – Nothing in the law gave the Banks the right to create money on their books. The Bank filed a Notice of Appeal within 10 days. The Appeals statutes must be strictly followed, otherwise the District Court does not acquire Jurisdiction upon Appeal. To effect the Appeal the Bank had to deposit $2.00 with the Clerk within 10 days for payment to the Justice when he made his return to the District Court. The Bank deposited two $1.00 Federal Reserve Notes. The Justice refused the Notes and refused to allow the Appeal upon the grounds that the Notes were unlawful and void for any purpose. The Decision is addressed to the legality of these Notes and the Federal Reserve System. The Cases of Edwards v. Kearnzey and Craig vs Missouri set out in the decision should be studied very carefully as they bear on the inviolability of Contracts. This is the Crux of the whole issue. Jerome Daly.

  12. We are here to help. Call us at 818.453.3585 to schedule a confidential consultation with attorneys who get it. We have a full staff of knowledgeable assistants. Please call us today, and ask for Steve or Sara. Don’t give up the fight homeowners as the trend is showing that the banks are starting to crack from the staggering mass of litigation proving what we have said all along, the banking industry cannot steal from the public any longer!

  13. We cannot verify the below but received it from a reliable source:
    Contact us at Consumer Rights Defenders where lawyers who get it are available to evaluate your foreclosure crisis needs. 818.453.3585 ask for Steve or Sara.
    NOW read this:
    SWAT Teams in St. Louis Protecting Bank of America; Refusing Customer Withdrawals

    TO DO WITH #OccupyWallStreet
    From what we can gather, according to eye witness testimony, St. Louis PD has barricaded the Bank of America building and is refusing customer access to deposits.
    Eye witness account:
    ‘They would not let me get past that barricade, where those three guys are. I talked to the liutenant of the St. Louis Police Department – and he said they [customers?] don’t have a legal right – but he was going to try to work out something, a symbolic gesture where eight people to pull out their money, I being one of them.’
    He came back later and said they [BofA] will not go along with that. You will have to withdraw your money online.’
    Note that the Bank of America web site has been intermittently in and out of service for the last 72 hours, making it difficult, if not impossible for customers to access their accounts
    We view this to be the beginning of the end for the bank corruption….if you contact you state legislatures and demand they pass a “bank corruption prevention act” it just may kickstart what the consumer has needed for 5 years, some PROTECTION from the worst form of organized graff in US history! We are developing a model for this legislation presently and will post it soon.
    God Bless Neil Garfield and God Bless America


    Dear Experts:


    I first want to say thank you for such valuable newsletters. Your expertise has assisted many, for certain.

    I purchased a home in Orange County, California 5 years ago and put 20% down. As you could imagine, I paid an inflated price at that time. As the economy diminished, so did my income. With a 3 year old daughter and wife, I found myself battling the banks for some type of assistance until I could get back on my feet. The battle came to no avail and on September 1st I received the dreadful knock at the door. Within 15 minutes me and my little girl needed to walk out. Not only have I lost a home that I put a lot of hard work into, the place my little girl called home and I lost my initial down payment of 200k.

    Next weekend, I will have to have all of my belongings out.

    Is there anything you can advise me? Are there steps I can take to continue to fight for what is rightfully mine against the deceitful banks? I am prepared to fight!

    Your advise is greatly needed and respected.

  15. If a state court is found to be involved in a massive fraud and collusion involving foreclosure violations of due process rights, could or would that be the basis for a Qui-Tam case?
    We have assembled 100 random sample cases of state court and private bank collusion, intentional due process, nondisclosure and constructive fraud violations and are interested in joinng forces to examine and expose this large scale fraud.
    If you have any interest in this type of case please email your contact information to:

  16. Having read the latest from Neil, and knowing of the thousands of homeowners who have been wrongfully foreclosed on by ignorant and cowardly judges….we must anonymously offer the following advise. Every last Judge that allows a bank to foreclose without showing the bank they have standing with clear documentary evidence of ownership of the note and proper accounting supporting the claim of default on the note, should have a strong complaint made to your state’s Commission on Judicial Performance [or how ever they are designated] for discipline by this body based on bias and prejudice and failure to follow the applicable law. Maybe when the judges get enough complaints against them and they have to hire attorneys to defend their careers, (which is very expensive per complaint) they will wise up. It is pathetic to see the courts align against homeowners

  17. Case 1:1 0-cv-00024-M -LOA Document 27 Filed 08/16/11 Page 1 of 2 PageiD #: 121
    . In re: Mortgage Foreclosure Cases
    Misc. No. 11-mc-88-M-LDA
    I. At the request of the Chief Judge, all mortgage foreclosure cases currently venued
    in the United States District Court for the District of Rhode Island are assigned to Judge John J.
    McConnell, Jr. and to Magistrate Judge Lincoln D. Almond and all mortgage foreclosure cases
    filed here in the future will be assigned to Judge John J. McConnell, Jr. and to Magistrate Judge
    Lincoln D. Almond.
    2. A list of pending mortgage foreclosure cases currently subject to this Order is
    attached hereto as Exhibit A.
    3. All mortgage foreclosure cases (currently filed and to be filed in the future) are
    subject to this Order.
    4. All mortgage foreclosure cases are hereby STAYED and shall remain so until
    further order of the Court. Any deadlines for filings on any issue are hereby suspended. Counsel
    are permitted to file Notices of Appearance.
    5. The Court will establish a Master Docket (11-mc-88-M-LDA) captioned In re:
    Mortgage Foreclosure Cases strictly for the purpose of case management by the Court. Counsel
    shall continue filing all papers in their individual cases only; counsel shall not file anything in the
    Master Docket unless instructed to by the Court.
    Case 1 : 1 0-cv-00024-M -LOA Document 27 Filed 08/16/11 Page 2 of 2 Page I D #: 122
    6. For efficient communication with the Court and administration of these cases,
    counsel shall meet and confer and select liaison counsel (see Manual for Complex Litigation
    (Fourth) § 10.22 (2004)), two for all plaintiffs and two for all defendants. The parties shall notify
    the Court on or before September 2, 2011 oftheir selections.
    7. The Court will require all parties in all mortgage foreclosure cases to engage in
    directed and serious settlement discussions prior to the lifting of the stay in any individual case.
    8. The Court is considering the appointment of a Master pursuant to Fed. R. Civ. P.
    53 in order to assist with pre-trial matters and facilitate settlement in the individual cases. Any
    party wishing to be heard on this matter, including on the suggestion of candidates for
    appointment as Master, shall file such comments on or before September 2, 2011.
    9. The Court will hear argument on the standing issue in Plaintiffs’ Objections to the
    Reports and Recommendations in Fryzel v. Mortgage Electronic Registration Systems, Inc., et
    al. (C.A. No. 10-352-M) and Cosajay v. Mortgage Electronic Registration Systems, Inc., et al.
    (C.A. No. 10-442-M) on September 13, 2011 at 10:00 a.m. in Courtroom 3. Any party subject
    to this Order that is not a party to the aforementioned two individual cases wishing to file an
    amicus brief on the standing issue shall do so by September 2, 2011. Only counsel in the
    aforementioned two individual cases will be allowed to present oral argument.
    John J. McConnell, Jr.
    United States District Judge
    August 16, 2011
    Case 1 :10-cv-00024-M -LOA Document 27-1 Filed 08/16/11 Page 1 of 2 PageiD #: 123
    1. 10-024 Tracy v. Deutche Bank
    2. 10-068 Medeiros v. Option One
    3. 10-160 McLaughlin v. American Home
    4. 10-215 Rezendez v. Option One
    5. 10-268 Pool v. MERS
    6. 10-352 Fryzel v. MERS
    7. 10-442 Cosajay v. MERS
    8. 10-481 Aceto v. American Brokers
    9. 11-004 Moll v. MERS
    10. 11-007 Cerbo v. Argent Mtg.
    11. 11-022 Tavares v. MERS
    12. 11-028 Archibald v. MERS
    13. 11-046 Aceto v. MERS
    14. 11-097 DelDeo v. Option One
    15. 11-123 Boudreau v. Option One
    16. 11-124 Rodriguez v. MERS
    17. 11-170 Schofield v. US Bank
    18. 11-189 Lehoullier v. E. Loan
    19. 11-219 Wu v. Wells Fargo
    20. 11-232 Curl v. Ameriquest Mortgage
    21. 11-237 DiGiorgio v. MERS
    22. 11-241 Neves v. Ameriquest
    23. 11-256 Tavares v. MERS
    24. 11-257 Grena v. MERS
    25. 11-262 Collupy v. MERS
    26. 11-272 Kaskel v. MERS
    27. 11-278 DiNezza v. MERS
    28. 11-283 Hillier v. MERS
    29. 11-284 Rivera v. Option One
    30. 11-285 Fasulo v. MERS
    31. 11-286 Pries v. MERS
    32. 11-288 Averv. MERS
    33. 11-289 Barboza v. MERS
    34. 11-290 MacKay v. MERS
    35. 11-291 Dolan v. MERS
    36. 11-295 Azevedo v. America’s Wholesale Lenders
    37. 11-296 Menta v. MERS
    Case 1:1 0-cv-00024-M -LOA Document 27-1 Filed 08/16/11 Page 2 of 2 PageiD #: 124
    38. 11-300 Pagliaro v. MERS
    39. 11-305 Sullivan v. MERS
    40. 11-306 Forrest v. Wells Fargo
    41. 11-307 Dumouchelle v. Equity Concepts
    42. 11-309 Robles v. MERS
    43. 11-311 Williams v. MERS
    44. 11-312 Boisseau v. National City Bank
    45. 11-316 Jacques v. New Century Mortgage
    46. 11-317 Kinder v. MERS
    47. 11-318 Vargas v. MERS
    48. 11-319 Currier v. MERS
    49. 11-320 Nowling v. MERS
    50. 11-321 Lanning v. MERS
    51. 11-324 Gallagher v. MERS
    52. 11-330 In v. MERS
    53. 11-332 Picard v. MERS
    54. 11-333 Ciccone v. Aurora Loan Services
    55. 11-334 D Knight Real Estate v. MERS
    56. 11-338 Berrillo v. MERS
    57. 11-346 Lopez v. MERS
    58. 11-347 Benjamin v. MERS
    59. 11-353 Santana v. HSBC Bank
    60. 11-358 Guerra v. MERS
    61. 11-363 Mandarelli v. MERS
    62. 11-366 Femminella v. W AMU
    63. 11-369 Newberry v. MERS
    2George Babcock hits home run on all MERS cases in Rhode Island!!!

  18. Dear Mr Garfirld, God knows with all you have to read and access what I have to say may never meet your eyes. Im Elaine an ordinary divorced mum of two now in a relationship with a partner for 4yrs who has a mortgage with a subprime lender. Dear Sir, in Ireland the situtation is dire, yes I know the legal situtation is beyong you, but here inI Ireland, mortgages that are securitised are using a loophole in the Law of property Act, wherein in the state that an assignment in equity only is transfered to the SPV, but the legal title remains with the pretender lender, 2 cases in the UK have failed regarding securitisation, the first is Paradon v Pender 2003, 2005 and Basinghall Finance v Butler 2009. The only way Mr Garfield I am going to be the first person in Ireland to challenge the securitisation of mortgages is by disecting the loan level audit, due to the difference between your country with regard to perfection of title

    Mr Garfield you cant give mr legal advise, that I know, iv spent seven months dat and night trying to teach myself how securitisation works. In Ireland there are no firms to do the securitisation audit, or to check the consumer credit acts that these pretender lenders may have broken. Im on my own big time on this one.

    Please tell me how I can take them down with regard to the money traik as its the only way here to discredit the pretender lenders.

    Truthfully Iv no money, in my divorce case in June of last year, after 4 years of providing for my boys with no support from my x spouse, a judge took my bous from me because my husband had 3 million euros in property in the UK. Mr Garfield the law in Ireland is so very very behind the States. When I was training for my dregree, we were told with regard to new research, Ireland was 5 years behind the UK, and ten years behind the States.

    Im not telling you lies Mr Garfield, iv nothing leth, nothing but the fact that I know, that if I can get them on the monry trail iv some hope, perfection of the legal transfer wont wash here.

    Please, please, someone, draw your attention to my pleas. Im not binding you to legal advise. All I want to know is how to blow them iut of the water with regard to the money trail and if necessary the trustees status in the deal.

    I will not hold you accountable for any advise, iv seen your videos on youtube, you dont act as an expert witness or as councel. none of which I coud afford.

    Please, help me to be the first in this country to break the pretender lenders claims, the use the Law of property act to not register the first charge on the homeowners property, but then do an assignment when default occurs, and the law here permits this. the loan level accounting is the only way I can get them.

    Any thing from you would be appreciated, I know you have millions of poor desperate people over ther who need your help. In a way they are lucky, at least you have proper laws in place to safeguard your citizens. not like in this backward, fear driven country.

    Just a word in the right direction is all I need, an I will do the rest myself.

    To all you American people over there , you are so lucky to have the justice system you have , cause it works, and more so you are fortunate to have a man like Mr Neil Garfield fighting for you. In Ireland we have nothing.

    Im glad when I read Mr Garfields site and I see you winning your cases, it allows me to think that there is justice out there for ordinary poeple, unlike here in Ireland.

    They are taking homes from families with children with learning disabilities and 70 year widows,

    Please Mr Garfield, or anyone on your staff, allow Neil to have sight of this, and even if he tells me no, at leat someone will have heard me, and understand what im talking about, despite the fact I n]may have to do this on my own.

    But after all I thought Blacks Law was the way to go no matter what country you were in.

    Goog luck to you all over there, Im happy to see you win your fights.

    All the best to you all,

    Elaine Wright.

    In Irish my name is Leon Ne Suibne.

    I rejoyce in your victories, it gives me some hope.

    May God let my voice be heard in amongst your pleas for help.


    Speech by SEC Chairman:
    Remarks Before the American Securitization Forum 2011 Annual Meeting

  20. Steve Nelson @ Consumer Rights Defenders, on April 18, 2011 at 12:50 pm said:
    We get it in Calif. Just filed new TRO actions based on new appellate rulings. If the lender FAILS to comply with your Modification plan, that is a material breach and can be used to enforce your TRO. We do the document preparation for much less, but have attorneys if you prefer representation. BK referrals confidentially done on request. Don’t let the lenders take your home.
    818.453.3585. ask for Sara or Steve 9-5 or leave voice mail


  22. NEWS AND BLOGS « Livinglies’s Weblog…

    […]CBS News HOUSE OF CARDS; 9th-circuit-invalidates-mortgage … More Housing Market Problems Coming in 2010 and 2011 … As Bear Stearns struggled in early March, investors …[…]…

  23. We get it in Calif. Just filed new TRO actions based on new appellate rulings. If the lender FAILS to comply with your Modification plan, that is a material breach and can be used to enforce your TRO. We do the document preparation for much less, but have attorneys if you prefer representation. BK referrals confidentially done on request. Don’t let the lenders take your home.
    818.453.3585. ask for Sara or Steve 9-5 or leave voice mail.

  24. I try to always be a positive person, but this just rattles my faith in our country.
    I understand that stated income loans were very fraudulent whether the mortgage broker or the borrower, but the way this ends makes me question our supposed freedoms…….

    View My Blog

    I was told today that the office of Rhode Islands Attorney General will not be investigating Allegation of Mortgage Fraud by Robo-Signers in which they told the press they were on board and we have proof of wrongdoing on Mortgage Assignments and Affadavits that will prove that these recordings have robo wriiten all over them yet now the Attorney Generals office Heather McLaughlin Director of Consumer Unit announces that they are to busy to investigate fraud committed on our citizens of Rhode Island! Shame on all of you as you are lucky to be that busy as thousands of Rhode Islanders would be willing to take your jobs that are losing their homes daily in a state that is non-judicial and can take peoples homes without even a court hearing.



  28. Foreclosure-gate’ adds uncertainty

    01:00 AM EDT on Sunday, October 24, 2010

    By Christine Dunn

    Journal Staff Writer

    Kim Thomas, a former real estate investor, is fighting six different foreclosure actions in court, including his residence in Warwick, behind him, on Strawberry Field Road.

    The Providence Journal / Andrew Dickerman
    WARWICK –– Former real estate investor Kim M. Thomas is a veteran of the foreclosure crisis.

    Thomas and his wife, Lynn M. Thomas, have lost six properties to foreclosure in the past several years, including their own residence in Warwick.

    He said their financial problems began in 2008, when many of their tenants lost jobs and were unable to pay rent. Since that time, he said, his annual income has fallen from more than $200,000 to about $50,000.

    The Thomases are challenging all the foreclosures in court, even in cases in which the properties have been sold to someone else.

    Thomas said he is paying $1,500 a month in rent to the man who bought their house at 120 Strawberry Field Rd. until the case is decided.

    His lawyer is Providence attorney George E. Babcock, who has been seeking to prevent or overturn foreclosures in Rhode Island since the housing crisis began.

    Many of Babcock’s cases involve challenges to the right assumed by MERS, or the Mortgage Electronic Registration System, a private electronic-mortgage registry created by lenders, to foreclose on property.

    And Babcock said some of his pending foreclosure cases involve “robo-signers” — a reference to the recent admissions in depositions by employees of large lenders that they signed off on foreclosure documents without reading them. These admissions have called into question the legitimacy of thousands of foreclosures.

    “Foreclosure-gate,” as the fraudulent foreclosure documentation issue has been called, is not only creating uncertainty in the market for foreclosed properties, but it is giving new hope to the small number of Rhode Islanders who have challenged their foreclosures in court.

    As a result of the scandal, several large banks halted foreclosure actions and/or evictions, and attorneys general in all 50 states have announced a joint investigation into foreclosure fraud.

    On Monday, Bank of America Corp. said it was resuming foreclosure activity in 23 states. The bank said it is still delaying foreclosures in the 27 states, including Rhode Island and Massachusetts, that don’t require a judge’s approval to foreclose.

    The White House’s Financial Fraud Enforcement Task Force has started an investigation of how five of the nation’s largest mortgage companies handled their documents.

    “George has been doing this for three years,” Thomas said of Babcock’s anti-foreclosure practice. “At first, everyone was kind of laughing at him. Now they’re not laughing.”

    In Rhode Island, lenders do not have to go to court to foreclose. Instead, they must provide written notice to the homeowner and publish foreclosure notices in a newspaper prior to holding a public foreclosure auction. To stop or overturn a foreclosure, a homeowner must take their lender to court.

    Babcock said even though Rhode Island is a “nonjudicial” foreclosure state, the law requires lenders to file affidavits when they record foreclosure deeds to assert that they followed state law.

    Meanwhile, Realtors are dealing with the repercussions of the scandal in the marketplace.

    On Oct. 12, Ron Phipps, a Warwick Realtor who is the 2010 president-elect of the National Association of Realtors, and NAR President Vicki Cox Golder, sent a letter about the issue to U.S. Treasury Secretary Timothy F. Geithner, Housing and Urban Development Secretary Shaun Donovan and Edward J. DeMarco, acting director of the federal Housing Finance Agency:

    “The housing recovery, which, even in the nation’s strongest markets is still fragile, could be derailed if potential homebuyers and investors are discouraged from buying because of the turmoil, even if the property is not affected by any possible foreclosure processing errors,” wrote Golder and Phipps.

    “Already, our members are reporting that sales have been canceled or delayed indefinitely, to the detriment of homebuyers and others involved in the transaction … Lenders must assess the situation and correct any problems they identify, as soon as possible, to restore confidence in the system.”

    James J. Caruolo, a Warwick-based real estate lawyer, said he recently advised a client against proceeding with the purchase of a house on the East Side of Providence because of a foreclosure documentation problem.

    Caruolo said the buyer, who was from Maine, had planned to buy a foreclosed property at 196 Pitman St.

    Providence records show the property is owned by Deutsche Bank National Trust.

    Caruolo said the mortgage-assignment document was dated after the foreclosure commenced, which created a problem with the title.

    The client took Caruolo’s advice and withdrew from the sale.

    The listing agent, Thomas Piantadosi of Remax Town & Country, of Cumberland, said the house has since been taken off the market.

    “The foreclosure was not done properly,” he said. “So they have to foreclose again.”

  29. Please subscribe me to your newsletter. Thank you!


  31. I would like to know what seminars are coming.

  32. It is insane how significantly the laws and regulations have changed in regards to credit. Excellent info here.

  33. I would like some advise on what I should do. I filed a complaint against my lender and broker Pro-Per back in October 2007. The basis of my complaint is that my loan documents were forged and was the victim of predatory lending. I filed Pro-Per because I was unable to afford a lawyer. I have been able to survive two different Demurs and Motions to Strike and Motion for Judgement on the Pleadings and have a trial date in March 2010. Over the past two years I was always careful to follow the court’s procedures and comply with all deadlines. In May 2009, I hired a lawyer that read my story that I posted on this website. When I met with her, she was confident that she could help me and was very convincing. I felt she had the same passion that I did to fight against predatory lenders and win my case. I informed her up-front that I did not have much money. I paid her a retainer and she said I could work on her home and also file court papers as she needed me. At the time that I hired her, I was about to attend a deposition by defendant. She attended the depo with me, but she stated that she was unaware of the details of my case, so she was not objecting to anything, so I left the deposition feeling that it did not go well. When I first met with her, I informed her that I needed her to send out discovery and set up depos, She stated that she wanted to Amend the Complaint to add additional defendants and Causes of Actions. None of this has been done as of today. Seven days after I paid her the money, she was threatening to withdraw from my case because she said that I was not complying with her requests for my documents, which was not true. I gave her all the documents that I had. She also said that she was unable to get in touch with me, which was also not true because I had been to her house numerous times to do work. Defendants served a Request for Production of 22 different documents, and the day before they were due, she called and informed us that she was not able to prepare the documents and that we needed to do retrieve the files from her home, which is at least 25 minutes from where we live, put the documents in order and make copies and bring them back to her. She was very verbally abusive toward us and after a confrontation occurred between my girlfriend and her she informed me that I was not to discuss my case with her or she would resign. This made it very hard for me because my girlfriend has helped me from the beginning. She never should have had us doing her job to begin with. We are not attorneys’ and that is why I hired her. She became very negative and said that I was going to lose my case and the judge was going to dismiss it.
    After her first CMC (which she filed the statement late), the judge required a status letter to be filed by a certain date with she did not do. Over the next several months, I was at her home at least every other weekend and during the week, filing documents, all over the bay area, never missing any of her deadlines for her other clients, always available when she needed me. I had requested more than once that we discuss the details of my case and our strategy’s and she refused stating that there was no time for that and she was not going to waste time listening to me. As the next court date approached, she did not file a timely CMC statement or a status letter. I sent her a lenghly e-mail with my concerns that she was not properly representing me and did not treat me with respect. After several attempts to contact her, she finally telephoned me and informed me that she wanted to withdraw from my case, and that I needed to sign a Substitution of Attorney and that the judge would most likely be dismissing my case and trying to intimidate me by saying that I was going to lose my home. I refused to sign anything and told her that I would see her in court. This was the third time she had threatened to withdraw and it had only been three months since I hired her. By the day we appeared in court, she had not filed a substitution of attorney or had she filed the CMC statement. She arrived late to court and immediately informed the judge that she would be resigning. The judge wanted us to try to work it out. As soon as I requested to speak, my attorney said that she would be willing to step outside and talk to me. We worked out our differences and informed the court that she no longer was resigning and the judge assigned my case to mediation. Again my attorney stated that she wanted to amend the complaint to add additional defendants. The judge said that she should do this immediately. The judge ordered that we choose a mediator and inform the court within 30 days and set a Compliance hearing. My attorney again did not comply with this request even though I worked for her again and sent her a reminder email to notify the court. She not only didn’t send a status letter, she also failed to appear at the compliance hearing and now is subject to sanctions. The judge has ordered both attorneys to appear to show cause why she should not sanction them further or dismissal of the actions/striking of the pleadings pursuant to CCP 177.5 and 575.2.
    This is where I stand now. I sent her an e-mail asking her why she had not complied with the court and that I was very concerned because she had not done anything she said she was going to do. I also asked her what the judge meant by that. She said that she had chosen a mediator and did not know why the court did not receive any documents from the mediator. It is not the mediator’s responsibility to notify the court. It was hers. She then informed me verbally of the mediation date. The OSC hearing is set for 11/05/09 and she is to file a declaration by 10/29/09. She has not filed anything in my case since June 8, 2009 which was one week after she was retained. She has not provided me with the legal representation that I am entitled to, nor has she conducted any discovery or responded to any of my requests. I don’t know what my legal rights are. What happens to my case, if she continues to be noncompliant. Would the judge actually dismiss, and if so, what is my recourse?
    I have worked so hard fighting lenders, brokers, and their attorneys. I have gone to the Department of Real Estate, Department of Corporations, District Attorney’s office, Department of Justice, and even appeared on Channel 7 on your side with my story. I have stopped the illegal sale of my home five times, with the last time on the court steps at 12:05 p.m. on the day of the sale. I have never given up and am still in my home and intend to remain here for a long time.
    I believe in what I am fighting for and intend to try to help innocent homeowners who are victims of Predatory Lending Practices and against crooked lawyers who are misleading and taking their monies.
    This is why I am asking you for your advise as to what I should do. I am posting this on your site because this is where she found me and I don’t want this to happen to anyone else.
    I want you especially to become aware that this is happening on your website. I was told that I should not make a complaint with the State Bar while she was still representing me. I do not have money to hire a different lawyer, but can I proceed with a lawyer that I do not trust.

    Neil, thank you for taking the time to read my story. I anxiously await your reply and the comments and advise of your readers.

  34. I have received a notice of sale for June 30, 2009. Time is off the essance. Is it too late to use your approach and stop the sale? What do you suggest I do immediately? Please help!

  35. I keep seeing QWR, but what exactly does that stand for? Can someone please explain….

  36. Bank industry slams Citigroup mortgage deal
    Proposal would let bankruptcy judges modify home loans, avert foreclosure

    WASHINGTON – A top bank industry group Friday said it opposes an agreement between Citigroup Inc. and Democratic senators that would rewrite bankruptcy law to help troubled mortgage borrowers avoid foreclosure.
    The American Bankers Association said the proposal to give bankruptcy judges broad authority to modify mortgage terms could make home loans more expensive.
    Other industry players questioned the motivations behind Citigroup’s about-face on the co-called mortgage “cram-downs,” speculating that the financial giant has been forced to make concessions because it has accepted some $45 billion in federal bailout funds.
    “The big change between now and a couple of months ago is that the government is backing Citigroup’s balance sheet,” said Gary Townsend, a veteran analyst who now runs hedge fund Hill-Townsend Capital. “The government has a lot of leverage that wasn’t there before.”
    Citigroup declined to comment.
    Citigroup said Thursday that it would support a plan put forth by Democratic Sens. Charles Schumer and Richard Durbin, among others, that is aimed at preventing foreclosures.
    Citigroup had previously opposed changing the law to let bankruptcy judges, in some circumstances, cut mortgage debts to help bankrupt homeowners.
    Citigroup, the nation’s third-largest bank, is one of the biggest recipients of federal bailout funds under a deal in which the government has agreed to absorb many of the losses on the bank’s $306 billion portfolio of troubled assets.
    The ABA said it did not participate in Citigroup’s agreement.
    “ABA is opposed to the agreement because it will leave in place overly broad mortgage cram-down authority and other provisions that will harm thousands of banks across the country that have made, and continue to make, good loans,” said Floyd Stoner, ABA’s executive director for public policy.
    As part of a government rescue package in November, Citigroup was forced to adopt a systematic loan modification program for distressed mortgages.
    “The comments I’ve heard from bankers is that Citigroup is seen as suspect, because they’ve received so much money from the government,” said Bert Ely, a longtime banking industry consultant in Alexandria, Va. “If Wells Fargo or Bank of America got on board, it would be a much more powerful endorsement.”
    In 2008, there were an estimated 1 million personal bankruptcy filings. Of those, about 580,000 had mortgage debt, said Stu Feldstein, president of consumer finance research firm SMR Research Corp.
    There are about 50 million residential mortgages outstanding in the U.S., totaling more than $10 trillion of debt.
    This legislation is most likely to affect mortgages that are packaged into bonds, which make up about half of outstanding home loans, according to industry sources. Mortgages that are held on bank balance sheets are more likely to be renegotiated prior to bankruptcy, they said.
    The draft legislation, which has yet to be debated this year, would only apply to existing mortgages, and borrowers would be required to contact their lender before filing for bankruptcy.
    The ABA said the cram-down proposal would “bring additional risk and uncertainty to an already volatile mortgage market and would make home loans more expensive and less available for consumers.”
    Other industry groups, such as the Financial Services Roundtable, also have opposed the proposal, while a coalition of five consumer groups embraced the bill, calling it “urgently needed legislation.”

    A government law retroactively changing lending terms could certainly make lenders less willing to extend credit in the future, Ely said.
    “In many ways it’s an anti-homeownership provision,” Ely said. While reducing homeownership levels makes sense, this law may not be the best way to do it, he added.
    Some lawmakers agree. Last year, Durbin failed to win Senate passage of a similar measure. Opponents, including Republicans, some Democrats and banking and housing industry lobbyists, said the proposal would raise costs for future homeowners.
    Democratic senators said on Thursday they hope to attach the bill to a broad economic stimulus package that is expected to move its way through Congress in the coming weeks.

  37. Greg, just answer the damn thing and get it over with. LOL.

  38. Dan
    You are henceforth knighted on this blog, DAN THE MAN, for you contributions….hope you can make it to Napa CA

  39. Process Server Question – Had a sever at my door tonight. He has been here 5 other times (left cards). One time he left a “notice” that an attorney for the bank had “placed me in foreclosure.” I didn’t answer as I intend to file an answer next week without the personal service hoping to avoid a deficiency judgment. It is my understanding that personal service is a requirement to getting a deficiency judgment. Anyway, he banged on my door for between 10-15 minutes. He shouted things like, ‘I know your in there,’Your’re gonna have to talk to me,’ “I’m not leaving til you come to the door.”‘ This seems excessive to me. I called the police and he was told to leave the property. Is this usual behavior for a process server? Should I pursue a complaint against the Plaintiff for this behavior? Or should I just let it go.

  40. Aurora Loan Services, right off the CA Dept. of Corporations website. No records found for actively licensed company starting with Aurora. This is the list of companies that are no longer licensed (

    Lic. Status: No Longer Licensed as of 3/20/2006 Public Actions Lic. Date: Oct 08 1997
    Lic. Number: 4130177 Lic. Type: Mortgage Banker (Main)

    LITTLETON, CO 80124

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Oct 08 1997
    Lic. Number: 8131182 Lic. Type: Mortgage Banker (Branch)

    Address: 601 FIFTH AVENUE

    Lic. Status: No Longer Licensed as of 6/28/2000 Lic. Date: Nov 02 1998
    Lic. Number: 8131818 Lic. Type: Mortgage Banker (Branch)

    Address: 10375 EAST HARVARD AVENUE, SUITE 450
    DENVER, CO 80231

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Mar 05 2002
    Lic. Number: 8134849 Lic. Type: Mortgage Banker (Branch)

    Address: 3131 SOUTH VAUGHN WAY, SUITE 400
    AURORA, CO 80014

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Sep 03 2003
    Lic. Number: 8136852 Lic. Type: Mortgage Banker (Branch)

    Address: 18200 VON KARMAN AVENUE, SUITE 250
    IRVINE, CA 92612

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Nov 21 2003
    Lic. Number: 8137177 Lic. Type: Mortgage Banker (Branch)

    Address: 2530 SOUTH PARKER ROAD
    AURORA, CO 80014

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Feb 05 2004
    Lic. Number: 8137675 Lic. Type: Mortgage Banker (Branch)

    Address: 120 STONY POINT ROAD, SUITE 130
    SANTA ROSA, CA 95401

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Feb 05 2004
    Lic. Number: 8137676 Lic. Type: Mortgage Banker (Branch)

    Address: 2819 CROW CANYON ROAD, SUITE 100
    SAN RAMON, CA 94583

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Feb 05 2004
    Lic. Number: 8137677 Lic. Type: Mortgage Banker (Branch)

    Address: 1450 FRAZEE ROAD, SUITE 409
    SAN DIEGO, CA 92108

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Feb 05 2004
    Lic. Number: 8137678 Lic. Type: Mortgage Banker (Branch)

    Address: 5655 LINDERO CANYON ROAD, SUITE 303

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Feb 05 2004
    Lic. Number: 8137679 Lic. Type: Mortgage Banker (Branch)

    Address: 990 WEST 190TH STREET, SUITE 550
    TORRANCE, CA 90502

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Feb 05 2004
    Lic. Number: 8137680 Lic. Type: Mortgage Banker (Branch)

    Address: 8880 CAL CENTER DRIVE, SUITE 430
    SACRAMENTO, CA 95826

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Feb 05 2004
    Lic. Number: 8137681 Lic. Type: Mortgage Banker (Branch)

    Address: 1390 WILLOW PASS ROAD, SUITE 340
    CONCORD, CA 94520

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Feb 05 2004
    Lic. Number: 8137682 Lic. Type: Mortgage Banker (Branch)

    Address: 1475 SOUTH BASCOM AVENUE, SUITE 101
    CAMPBELL, CA 95008

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Jun 28 2004
    Lic. Number: 8138408 Lic. Type: Mortgage Banker (Branch)

    Address: 110 STONY POINT ROAD, SUITE 120
    SANTA ROSA, CA 95401

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Jun 28 2004
    Lic. Number: 8138409 Lic. Type: Mortgage Banker (Branch)

    Address: 44 WEST 10TH STREET
    TRACY, CA 95376

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Jun 28 2004
    Lic. Number: 8138410 Lic. Type: Mortgage Banker (Branch)

    Address: 2324 GRAND CANAL BOULEVARD, #7
    STOCKTON, CA 95207

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Jun 28 2004
    Lic. Number: 8138411 Lic. Type: Mortgage Banker (Branch)

    Address: 950-A WAUGH LANE
    UKIAH, CA 95482

    Lic. Status: No Longer Licensed as of 3/20/2006 Lic. Date: Jun 28 2004
    Lic. Number: 8138412 Lic. Type: Mortgage Banker (Branch)

    STOCKTON, CA 95207

  41. What happens when you corner a dog? I guess the dog will fight back.

    My buddy just got sent a Notice of Default Ex Parte.

    They claimed that tenant #1 never filed an answer to the complaint. These lawyers will do anything to continue their fraud. Any suggestions?

  42. Aurora is a product of the Lehman Brothers scheme. It used several front organizations like BNC. But you are right, if they Aurora was the source of funding and they were not registered to do business then there are many avenues of defense including that they should not be allowed to participate or play in foreclosures.

  43. You may be onto something, can you provide anything from CA Dept of Corp that could assist others here….

  44. Aurora Loan Services is not license in the state of california i talk to the department of corporation this is big very big

  45. My understanding of it is that the fed is not buying them from other investors, the fed is acting as an investor.

    A big concern is that the interest rates were dropped to near nothing and yet the rates for new mortgages were not dropping. Part of the problem is that the supply of investors willing to buy mortgage backed securities has somewhat dried up. Fed solution is to act as an investor and buy some up themselves.

    $500 billion over time to get the gears moving again on the credit markets. It is an interesting move. I am no expert on the subject but it strikes me as being a temporary band aid to tide us over until the regime change. I could see in possibly instilling a little confidence and stabilizing the drop in house values a little (allowing more new borrowers by making loans more affordable).

    I don’t really see it doing anything else of real long term benefit.

  46. Gump59 – Why buy performing mortgages? If they are producing income for their owners, why wouldn’t they be held onto?

  47. Eric – My understanding is that the Fed is buying new mortgages (which time will tell if they are toxic), not the sub-prime toxic ones originated over the last few years or so.

  48. Well I agree with your comments, but keep in mind that the credit cards were also securitized and subject to the defense of payment.

  49. I don’t think they know what they’re doing…

  50. In the article above – it talks about lowering consumers credit limits on their credit cards. Ouch… Do they not realize that when they do that it will lower consumers credit scores. People will show that they are close to being maxed out on credit cards, thereby making consumers appear not credit worthy which means no home purchases because they can’t get financed which means lower home value because of increased inventories which means more foreclosures which means …… what a circle f….

  51. How can one find out whether there was a credit default swap for a particular mortgage in default?

  52. Unless, they use the FBI to come and just throw you out, the still need to prove something.

  53. they still need assigments and original notes.

  54. If the government is about to purchase 500 billion dollars worth of toxic back securities, what impact on private banks would this have on all of the foreclosures actions being prosecuted throughout the Country? If the government is buying the toxic mortgage backed securities, isn’t the rightful owner of the mortgage and its debt the Feds? Aren’t they the ones to have legal standing and/or cause of action to foreclose?

  55. Credit Card Companies Willing to Deal Over Debt

    Bank of America says it eased off on more than 700,000 credit card holders in 2008, lowering interest rates and some balances.
    Published: January 2, 2009
    Hard times are usually good times for debt collectors, who make their money morning and night with the incessant ring of a phone.

    Behind Changing Tactics, Mounting Losses
    Times Topics: Credit Crisis — The Essentials

    But in this recession, perhaps the deepest in decades, the unthinkable is happening: collectors, who usually do the squeezing, are getting squeezed a bit themselves.

    After helping to foster the explosive growth of consumer debt in recent years, credit card companies are realizing that some hard-pressed Americans will not be able to pay their bills as the economy deteriorates.

    So lenders and their collectors are rushing to round up what money they can before things get worse, even if that means forgiving part of some borrowers’ debts. Increasingly, they are stretching out payments and accepting dimes, if not pennies, on the dollar as payment in full.

    “You can’t squeeze blood out of a turnip,” said Don Siler, the chief marketing officer at MRS Associates, a big collection company that works with seven of the 10 largest credit card companies. “The big settlements just aren’t there anymore.”

    Lenders are not being charitable. They are simply trying to protect themselves.

    Banks and card companies are bracing for a wave of defaults on credit card debt in early 2009, and they are vying with each other to get paid first. Besides, the sooner people get their financial houses in order, the sooner they can start borrowing again.

    So even as many banks cut consumers’ credit lines, raise card fees and generally pull back on lending, some lenders are trying to give customers a little wiggle room. Bank of America, for instance, says it has waived late fees, lowered interest charges and, in some cases, reduced loan balances for more than 700,000 credit card holders in 2008.

    American Express and Chase Card Services say they are taking similar actions as more customers fall behind on their bills. Every major credit card lender is giving its collection agents more leeway to make adjustments for consumers in financial distress.

    Debt collectors, who are typically paid based on the amount of money they recover, report that the number of troubled borrowers getting payment extensions has at least doubled in the last six months. In other cases, borrowers who appear to be pushed to the brink are being offered deals that forgive 20 to 70 percent of credit card debt.

    “Consumers have never been in a better position to negotiate a partial payment,” said Robert D. Manning, the author of “Credit Card Nation” and a longtime critic of the credit card industry. “It’s like that old movie ‘Rosalie Goes Shopping.’ When it’s $100,000 of debt, it’s your problem. When it’s a million dollars of debt, it’s the bank’s problem.”

    The recent wave of debt concessions is a reversal from only a few years ago, when consumers usually lost battles with their credit card companies. Now, as bad debts soar, it is the lenders who are crying mercy.

    Credit card lenders expect to write off an unprecedented $395 billion of soured loans over the next five years, according to projections from The Nilson Report, an industry newsletter. That compares with a total of about $275 billion in the last five years.

    All that bad debt is getting harder to collect. In the past, troubled borrowers might have been able to pay down card loans by tapping the equity in their homes, drawing on retirement savings, taking out a debt consolidation loan, or even calling a relative for help. But with credit tight, consumers are maxed out.

    “Knowing that the sources of funding have dried up, having someone pay the balance in full isn’t a viable strategy,” said Tim Smith, a senior executive at Firstsource, one of the biggest debt collection companies.

    Lenders are reluctant to admit they will accept less than full payment, lest they encourage good customers to stop paying what they can. Industrywide data is scarce.

    Unlike the huge mortgage loan modification programs that are taking place, which address thousands of mortgages at once, workouts for credit card customers are still being handled on a case-by-case basis.

    In addition to debt forgiveness, debt collectors are allowing many delinquent borrowers to pay down their debt over the course of a year rather than the standard six months.

    Paul Hunziker, the chairman of Capital Management Services, said that before this downturn, his firm put only about a quarter of all borrowers into longer-term repayment plans. Now, it puts about half on such plans.

    Some lenders are also reaching out to borrowers shortly after they fall behind on their payments to try to avoid having to write off the account. Others are reaching out to customers who seem likely to fall behind. Just as lenders competed for years to be the first card to be taken out of the wallet, they are now competing to be the first ones paid back.

    And realizing that millions more consumers are likely to default on their credit card bills in the coming months, the banking industry has started lobbying regulators to make it more advantageous to lenders to extend payment terms or forgive debt.

    In an unusual alliance, the Financial Services Roundtable, one of the industry’s biggest lobbyists, and the Consumer Federation of America recently proposed a credit card loan modification program, which was rejected by regulators.

    Under the plan, lenders would have forgiven about 40 percent of what was owed by individual borrowers over five years. Lenders could report the loss once whatever part of the debt was repaid, instead of shortly after default, as current accounting rules require. That would allow them to write off less later. Borrowers would have been allowed to defer any tax payments owed on the forgiven debt.

    Landmark changes to bankruptcy legislation passed in 2005, for which the industry aggressively lobbied, seem to have hurt card debt collections. Credit card industry data indicate the average debt discharged in Chapter 7 bankruptcy has nearly tripled since 2004. And in Chapter 13 bankruptcies, secured lenders like auto finance companies routinely elbow out unsecured lenders like card companies, trends that have contributed to the card lenders’ willingness to settle.

    Borrowers should not expect sweetheart deals. Card companies will offer loan modifications only to people who meet certain criteria. Most customers must be delinquent for 90 days or longer. Other considerations include the borrower’s income, existing bank relationships and a credit record that suggests missing a payment is an exception rather than the rule.

    While a deal may help avoid credit card cancellation or bankruptcy, it will also lead to a sharp drop in the borrower’s credit score for as long as seven years, making it far more difficult and expensive to obtain new loans. The average consumer’s score will fall 70 to 130 points, on a scale where the strongest borrowers register 700 or more.

    For the moment, it may be easier for troubled borrowers to start negotiating a modification by contacting the card company or collection agency directly. Credit counselors can help borrowers consolidate their debts and get card companies to lower their interest payments and other fees, but they currently cannot get the loan principal reduced.

    Another option is for a borrower to sign up a debt settlement company to negotiate on her behalf. But regulation of this business is loose, and consumer advocacy groups warn that some firms prey on troubled borrowers with aggressive marketing tactics and exorbitant upfront fees.

    More Articles in Business » A version of this article appeared in print on January 3, 2009, on page B1 of the New York edition.


    Perhaps it’s time to look at credit card debt through the prism of TILA and unfair debt collection practices, etc..


  56. Did you hear FDR prolonged the Great Depression?
    Conservatives’ newest talking point — designed to stop Congress from passing an economic stimulus package — is breathtaking.

    By David Sirota

    The Franklin D. Roosevelt Presidential Library & Museum

    President Franklin D. Roosevelt in December 1938. Some conservatives say his New Deal caused a recession that year.

    Jan. 2, 2009 | If you’re like me, you sometimes find yourself speechless when confronted with abject insanity.

    If you’re like me, for instance, you were dumbfounded when “Forrest Gump” beat out “Pulp Fiction” for best picture; when HBO’s “Sopranos” received more accolades than “The Wire”; and when George W. Bush insisted Iraqi airplanes were about to drop WMD on American cities.

    So if you’re like me, you probably understand why I was momentarily tongue-tied last week after running face-first into conservatives’ newest (and most ridiculous) talking point: the one designed to stop Congress from passing an economic stimulus package.

    During a Christmas Eve appearance on Fox News, I pointed out that most mainstream economists believe the government must boost the economy with deficit spending. That’s when conservative pundit Monica Crowley said we should instead limit such spending because President Franklin Roosevelt’s “massive government intervention actually prolonged the Great Depression.” Fox News anchor Gregg Jarrett eagerly concurred, saying “historians pretty much agree on that.”

    Of course, I had recently heard snippets of this silly argument; right-wing pundits are repeating it everywhere these days. But I had never heard it articulated in such preposterous terms, so my initial reaction was paralysis, the mouth-agape, deer-in-the-headlights kind. Only after collecting myself did I say that such assertions about the New Deal were absurd. But then I was laughed at, as if it was hilarious to say that the New Deal did anything but exacerbate the Depression.

    Afterward, suffering pangs of self-doubt, I wondered whether I and most of the country were the crazy ones. Sure, the vast majority of Americans think the New Deal worked well. But are conservatives right? Did the New Deal’s “massive government intervention prolong the Great Depression?”

    Ummm … no.

    On deeper examination, I discovered that the right bases its New Deal revisionism on the short-lived recession in a year straddling 1937 and 1938. But that was four years into Roosevelt’s term — four years marked by spectacular economic growth. Additionally, the fleeting decline happened not because of the New Deal’s spending programs, but because Roosevelt momentarily listened to conservatives and backed off them. As Nobel-winning economist Paul Krugman notes, in 1937-38, FDR “was persuaded to balance the budget” and “cut spending and the economy went back down again.”

    To be sure, you can credibly argue that the New Deal had its share of problems. But overall, the numbers prove it helped — rather than hurt — the macroeconomy. “Excepting 1937-1938, unemployment fell each year of Roosevelt’s first two terms [while] the U.S. economy grew at average annual growth rates of 9 percent to 10 percent,” writes University of California historian Eric Rauchway.

    What about the New Deal’s most “massive government intervention” — its financial regulations? Did they prolong the Great Depression in ways the official data didn’t detect?


    According to Federal Reserve chairman Ben Bernanke, “Only with the New Deal’s rehabilitation of the financial system in 1933-35 did the economy begin its slow emergence from the Great Depression.” In fact, even famed conservative economist Milton Friedman admitted that the New Deal’s Federal Deposit Insurance Corp. was “the structural change most conducive to monetary stability since … the Civil War.”

    OK — if the verifiable evidence proves the New Deal did not prolong the Depression, what about historians — do they “pretty much agree” on the opposite?

    Again, no.

    As Newsweek’s Daniel Gross reports, “One would be very hard-pressed to find a serious professional historian who believes that the New Deal prolonged the Depression.”

    But that’s the critical point I somehow forgot last week, the truism we must all remember in 2009: As conservatives try to obstruct a new New Deal, they’re not making any arguments that are remotely serious.

    © 2009 Creators Syndicate Inc.

    Read all letters (356)
    About the writer
    Bestselling author David Sirota’s latest book is “The Uprising.” He is a fellow at the Campaign for America’s Future and a board member of the Progressive States Network — both nonpartisan organizations. His blog is at

    Current Opinion
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    Let’s get economic history right!


  57. Mortgage ‘Cram-Downs’ Loom as Foreclosures Mount

    Mortgage lenders who wake up Thursday with a New Year’s hangover are likely to face another headache soon: The effort to give bankruptcy judges the power to rewrite mortgages is gaining steam.

    The banking industry hoped the mortgage “cram-down” measure died when Congress removed it from the $700 billion bailout bill that passed in October. But it has been gathering momentum in Democrat-controlled Washington, as evidence emerges that current voluntary foreclosure-prevention programs are falling short.

    More on Mortgage Modification

    A number of different proposals have been floated to assist ailing borrowers and stop the flood of foreclosures. Here’s a look.
    Find foreclosure prevention services, by state.
    Mortgage-relief programs to help stressed borrowers.

    In a cram-down, a judge modifies a loan, often reducing principal so a borrower can afford it. Lenders hate it because they have to absorb the loss. Bankruptcy judges currently have the ability to modify certain personal loans and even mortgages on vacation homes, but they can not cram-down mortgages on primary residences.

    Even staunch opponents acknowledge that mortgage cram-downs for primary residences are likely to be as part of Congress’s economic-stimulus package in early 2009. The National Association of Home Builders used to reject any bill with a cram-down provision outright. Now it is saying the measure is worth a look.

    President-elect Barack Obama and his incoming administration aren’t disclosing details of the much-awaited foreclosure-prevention plans, but during the campaign Mr. Obama called for closing the loophole that prevents bankruptcy judges from restructuring mortgages on primary residences. Lawrence Summers, a top economic adviser of Mr. Obama, publicly voiced support for bankruptcy reform before his appointment.

    “To the extent that nothing else is working, bankruptcy cram-downs are becoming more likely,” says Rod Dubitsky, head of asset-backed-securities research at Credit Suisse.

    The latest embattled foreclosure-prevention program is Hope for Homeowners, which was approved by Congress last summer and supposed to help 400,000 homeowners. Only 357 people have signed up so far for the voluntary program. The Department of Housing and Urban Development, which is administering the program, acknowledges that it has been encumbered by high fees and narrow eligibility requirements.

    Associated Press
    With efforts to stem home foreclosures stagnating, mortgage ‘cram-down’ efforts seem destined to re-emerge under the new Congress. Here, a foreclosed home for sale in Lakewood, Colo., in September.

    Another government program, FHASecure, was intended to help 80,000 homeowners who had fallen behind on their payments after their adjustable interest rates reset. It has helped only 4,100 delinquent borrowers refinance since September 2007 and will stop taking new loan applications as of Wednesday.

    Mortgage lenders also are modifying tens of thousands of loans without government help. But often this hasn’t solved the problem. A report last week by the Office of the Comptroller of the Currency and the Office of Thrift Supervision found that nearly 37% of mortgages modified in the first quarter of 2008 were 60 days or more delinquent after six months.

    “It is absolutely clear that voluntary modification is just not working,” says Rep. Brad Miller, a North Carolina Democrat. “Every plan that Congress has passed, we do it and nothing happens.”

    Mr. Miller intends to introduce a mortgage bankruptcy-reform bill Monday, the first day of the new session. Illinois Democrat Richard Durbin plans to introduce a similar bill in the Senate.

    Lenders warn that mortgage cram-downs will lead to higher interest rates and down payments, as banks seek to mitigate future losses from judicially imposed write-downs. They also are concerned that the reform measure would add to the losses they have already sustained from the housing crisis.

    “Our members have modified 2.8 million loans,” says Francis Creighton, chief lobbyist of the Mortgage Bankers Association, which opposes cram-downs. “Could we do better? We are trying to do better.”

    Proponents of bankruptcy reform say that previous modification efforts are falling short because they have focused on spreading out payment terms and forestalling delinquent payments. But that hasn’t cured a big part of the problem: that one in six houses is now worth less than its mortgage. Only programs that reduce principal amounts are likely to restore equity to millions of homeowners, they say.

    “You have to deal with the systematic problem of underwater mortgages or you are not going to stop foreclosures,” says Harvard University economist Martin Feldstein, who has proposed his own plan to help homeowners with negative equity in their homes, which involves mortgage principal write-downs and replacing part of the original mortgage with a new, lower cost loan.

    Proponents of bankruptcy reform also note that millions of troubled loans aren’t being addressed by current modification programs because they were carved up and sold to investors as securities. Mortgage servicers have been reluctant to aggressively modify these loans because they have been unsure of their legal rights.

    The mere threat of mortgage cram-downs could break the standoff between mortgage servicers and mortgage investors, which has slowed aggressive loan modifications. Investors may be more willing to go along with industry-driven modifications when facing the threat that a judge could ultimately order the amounts of loan principals reduced, forcing them to eat bigger losses.

    “The servicers can argue we have to give this to the borrower otherwise they will get it in bankruptcy court,” Mr. Dubitsky says.

    Lenders argue that loans modified by bankruptcy judges often have high rates of default on the new payment plans. “We should be working on keeping people out of bankruptcy not pushing people into it,” says Mr. Creighton of the Mortgage Bankers trade group

    Bankruptcy reform is likely to be one of many proposals that Congress considers as part of comprehensive foreclosure-prevention effort. Another element is likely to be one that FDIC Chairman Sheila Bair has been proposing. Under her plan, the government and lenders would split the losses on modified loans that go into default.

    Some economists are urging the new administration to go even further. Mark Zandi, chief economist at Moody’s, proposes that the government subsidize the bulk of principal write-downs to the tune of $100 billion, about four times as much as Ms. Bair’s program.

    —Nick Timiraos contributed to this article.


  58. Here are some folks who saw the sky was falling, and called it correctly….


  59. December 31, 2008
    The Many Models of Mortgage Modification

    A number of different proposals have been floated to assist ailing borrowers and stop the flood of foreclosures. Here’s a look:

    Proposal/Plan Description Notes

    Proposal/Plan Description Notes
    Hope for Homeowners Lenders agree to take a loss on the loan, and the government pays off the existing mortgage and refinances into FHA loan. Part of the July housing stimulus bill. Effective from Oct. 1 – Sept. 30, 2011. The government estimated that 400,000 would be helped; 357 people have signed up so far.
    FHA Secure Bush administration program was designed to allow homeowners with good credit who had fallen behind on payments once their loans reset to higher rates to refinance into FHA loans. While officials estimated that it could help some 80,000 delinquent borrowers avoid foreclosure, HUD terminated the program effective Dec. 31, 2008. As of Dec. 18, some 4,100 delinquent borrowers had used the program since Sept. 2007.
    Homeowners Protection Act of 2008 Bill proposes giving bankruptcy judges the power to reduce the principal amounts of home loans — known as a cram down. Introduced earlier this month by Rep. John Conyers Jr. Supporters include the National Association of Home Builders.
    FDIC Modification Plan The government would share in losses resulting from re-defaults on modified mortgages and pay $1,000 to loan servicers for each completed modification. Modeled off of the process used to modify delinquent IndyMac loans. Fed Chairman Ben Bernanke proposed this plan in a recent speech.
    Government Shares Modification Costs Government shares the cost when the borrower’s monthly payment is reduced. Also proposed by Mr. Bernanke, this plan would require the government to incur costs in all modifications not just in re-defaults.
    Government Purchases Delinquent Mortgages Government buys delinquent mortgages in bulk and refinances them into FHA mortgage. Another Bernanke proposal. It could take more time to implement but has potential to reach more borrowers than the other programs.
    Private Sector Modifcation Plans JPMorgan Chase, CitiMortgage and Bank of America have each announced loan modification initiatives. Other banks have also been doing modifications. The 14 largest national banks and thrifts modified nearly 73,000 loans in the first quarter and an additional 114,000 in the second quarter.
    Loading data…

    Sources: Zelman & Associates; WSJ reporting


  60. With so much information unknown to the consumer regarding Mortgage Loan Securitization… the consumer is at a great disadvantage at all times.

    With so many solutions out there such as Loan Modification, Short Sale, and other solutions, many fail to realize that the only way to arrive at the best possible outcome, is to Discover as much information as possible before making any decisions.

    Questions such as:

    Who is the True Owner in Due Course of my Mortgage loan Note?
    (Your Servicer does not own your Mortgage Note!)
    Who is the person authorized to Negotiate MY Loan Modification?
    (It is not the “Lender” or “Servicer”!)
    Where are MY original documents that I signed?
    Do MY loan documents still exist?
    (Recent reports reveal majority of loan documents destroyed)
    Was MY loan pooled and securitized?
    (modifying the terms of your loan without your authorization)
    Predatory or Deceptive Lending Practices Claims… Against Whom do I file?(Appraisal overvaluation, solicitation into unfair loan terms)

    For a successful plan to save your home, place the burden of proof on the parties claiming any interest, by filing a civil lawsuit. You will need professional assistance in the preparation of your documents, and litigation of your case.

    You will also need a professional to analyze and report on what your loan actually is. These professionals are available.

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  61. Was the ‘Credit Crunch’ a Myth Used to Sell a Trillion-Dollar Scam?

    By Joshua Holland, AlterNet

    Posted on December 29, 2008, Printed on December 29, 2008

    There is something approaching a consensus that the Paulson Plan — also known as the Troubled Asset Relief Program, or TARP — was a boondoggle of an intervention that’s flailed from one approach to the next, with little oversight and less effect on the financial meltdown.

    But perhaps even more troubling than the ad hoc nature of its implementation is the suspicion that has recently emerged that TARP — hundreds of billions of dollars worth so far — was sold to Congress and the public based on a Big Lie.

    President George W. Bush, fabulist-in-chief, articulated the rationale for the program in that trademark way of his — as if addressing a nation of slow-witted 12-year-olds — on Sept. 24: “Major financial institutions have teetered on the edge of collapse … [and] began holding onto their money, and lending dried up, and the gears of the American financial system began grinding to a halt.” Bush said that if Congress didn’t give Treasury Secretary Hank Paulson the trillion dollars (give or take) for which he was asking, the results would be disastrous: “Even if you have good credit history, it would be more difficult for you to get the loans you need to buy a car or send your children to college. And ultimately, our country could experience a long and painful recession.”

    For the most part, the press has continued to echo Bush’s central assertion that there’s a “credit crunch” preventing even qualified borrowers — that’s the key point — from getting loans, and it’s now part of the conventional wisdom.

    But a number of economists are questionioning the factual basis of the credit crunch narrative. Columnist David Sirota recently looked at those claims and concluded that Americans “had been punk’d” — that “the major claims about a credit crisis that justified Congress cutting a trillion-dollar blank check to Wall Street were demonstrably false,” and the threat of a systemic banking crash was used by the Bush administration to overcome popular resistance to the “bailout.”

    It’s a reasonable conclusion; this is an administration that used the threat of thousands of al-Qaida sleeper cells in the United States to sell Congress on the Patriot Act, the specter of mushroom clouds rising over American cities to push through the Iraq war resolution and the supposedly imminent crash of the Social Security system to push for privatizing Americans’ retirement savings.

    But the question comes down to what they knew and when they knew it. The analyses that suggest the whole credit crunch narrative is false are based on data that lagged behind the numbers that policymakers had available, in real time, back in September. So the question — probably unanswerable at this point — comes down to whether or not they looked at the situation and in good faith believed that pumping hundreds of billions of dollars into the banking system would contain the damage and save an economy teetering on the brink of collapse.

    What Else Could Be Happening?

    Of course, no one disputes the fact that as the economy has tanked, the number of new loans being issued to American families and businesses has plummeted. But is because credit has dried up for qualified borrowers?

    Economist Dean Baker doesn’t think so. He explains the situation in simple terms: The media, he argues, “are blaming the economic collapse on a ‘credit crunch’ instead of the more obvious problem that consumers just lost $6 trillion of housing wealth and another $8 trillion of stock wealth.” It’s a commonsense argument: much of the economic growth of the Bush era existed on paper only, built on the rise of a massive bubble in real estate values rather than growth in productive industries. When all that ephemeral wealth vaporized — and with the economy shedding jobs like a dog with dermatitis — consumers stopped buying, and businesses, anticipating a long slowdown, stopped seeking the loans that they might have otherwise tapped to expand their operations.

    Whether good borrowers can’t get credit from banks because the latter are hoarding cash or lending has stopped because of a drop-off in demand for new loans is not some wonky academic debate; it’s of crucial significance. Because if lending to qualified parties has truly frozen, then even if the specific implementation of the Paulson Plan was deeply flawed, its broad approach — “recapitalizing” banks in various ways, buying up some of their crappy paper and guaranteeing some of their transactions — is fundamentally sound.

    If, on the other hand, the primary problem is that people are broke and maxed out on debt, and firms aren’t looking for money to expand, then the kind of massive stimulus package being considered by the Obama transition team and congressional Dems — largely designed to stimulate demand from the bottom up, with public works projects, tax cuts for working families, aid to tapped-out state and municipal governments and new money for unemployment and food stamps — is obviously the best approach to take.

    Broadly speaking, these are the parameters of the debate in Washington, and that means that properly diagnosing the underlying problem is crucially important.

    Is the Credit Crunch a Big Lie?

    There’s plenty of evidence that Baker’s right. He points out that even though mortgage rates have plummeted, the number of applications for new loans has dropped to very low levels and argues it’s “the most glaring refutation of the claim that people are unable to get credit.” If creditworthy applicants were being denied loans by banks unable or unwilling to lend, Baker explains, “then the ratio of mortgage applications to home sales should be soaring” as qualified homebuyers apply to multiple banks for a loan. “Since there is no notable increase in this ratio, access to credit is obviously not an issue.”

    Again, this is common sense. Consumer spending drives about 70 percent of the U.S. economy, and in recent years, much of that spending was financed by people taking chunks of home equity out of their properties — people might have been eating in fancy restaurants, but they were essentially eating their living rooms to do so.

    That the American people don’t have the appetite to go deeper into debt than they already are in order to make new purchases is hard to dispute. In November, consumer prices across the board fell at a record rate for the second month in a row. And even with mortgage rates plummeting, so many homeowners are “underwater” — owing more on their homes than they’re worth — that they’re unable to refinance because the equity isn’t there. Paul Schuster, a vice president at Marketplace Home Mortgage, told the St. Paul Pioneer Press, “What I’m really concerned about is the job picture … If (people) don’t feel good about their jobs, rates aren’t going to matter.”

    The National Federal of Independent Business’ November survey of small-business owners found no evidence of a credit crunch to date, concluding that if “credit is going untapped, it’s largely because company operators are not choosing to pursue the credit. It’s not that companies can’t get the extra money, it’s that they don’t want or need it because of the broader slowdown in economic activity.”

    The credit crunch narrative — and the justification for creating Paulson’s $700 billion TARP honeypot — is built on three related assertions: 1) banks, fearing that they’ll be unable to meet their own financial obligations, aren’t lending money to one another; 2) they’re also not lending to the public at large — neither to firms nor individuals; and 3) businesses are further unable to raise money through ordinary channels because investors aren’t eager to buy up corporate debt, including commercial paper issued by companies with decent balance sheets.

    Economists at the Federal Reserve Bank of Minnesota’s research department — V.V. Chari and Patrick Kehoe of the University of Minnesota, and Northwestern University’s Lawrence Christiano — crunched the Fed’s numbers in an examination of these bits of conventional wisdom (PDF), and concluded that all three claims are myths.

    The researchers found that “interbank lending is healthy” and “bank credit has not declined during the financial crisis”; that they’ve seen “no evidence that the financial crisis has affected lending to non-financial businesses” and that “while commercial paper issued by financial institutions has declined, commercial paper issued by non-financial institutions is essentially unchanged during the financial crisis.” The researchers called on lawmakers to “articulate the precise nature of the market failure they see, [and] to present hard evidence that differentiates their view of the data from other views.”

    That finding was backed up by a study issued by Celent Financial Services, a consulting firm, again using the Treasury Department’s own data. According to a story on the report by Reuters, Celent’s researchers concluded that the “data actually suggest world credit markets are functioning remarkably well.” Rather than a widespread banking problem, Celent found that the rot was limited to “a few big, vocal banks and industries such as car manufacturing, which would be in difficulty anyway.”

    There are also some important caveats. Economists at the Boston Federal Reserve responded to the Minnesota Fed’s research (PDF), arguing that the use of aggregate data doesn’t fully reflect the dysfunction in specific subsectors of the economy, nor does it adequately reflect the decline in new loans.

    It’s also the case that single-cause explanations for complex crises usually fail to hit the mark. Banks, having fueled the housing bubble (and similar bubbles before that) with the creation of ever-shadier “exotic” securities, are probably erring on the side of caution in writing new loans. They’re looking at their balance sheets as quarterly reports approach, and the number of foreign investment dollars coming into the U.S. has declined, meaning that some qualified firms may, indeed, have trouble raising cash in the near future.

    Dean Baker, while arguing that “the main story is that people don’t have money and therefore want to spend,” acknowledged that “some banks are undoubtedly anticipating more write-offs from other loans going bad, so they will hang on to their capital now rather than make new loans.” And, as Sirota notes, some of the institutions that are relatively healthy are reportedly holding cash in anticipation of picking up weaker banks on the cheap.

    But one thing is clear: the economic crisis may have woken up Washington’s political class when it hit the banks, but it remains a product of long-term imbalances in the economy, and the idea that it’s primarily a pathology of the banking system in isolation is a misdiagnosis that, if uncorrected, can only result in a longer, deeper and more painful recession than might otherwise be the case.

    Joshua Holland is an AlterNet staff writer.


    “There’s an old saying in Tennessee — I know it’s in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can’t get fooled again.”

    As George W. Bush has so aptly demonstrated, apparently we can be!



    Few places in America have been harder hit by the housing bust than Southern California’s Foreclosure Alley. We sent Charles Bowden to live in one of the loneliest neighborhoods on the planet

    By Charles Bowden; Photograph by Lauren Greenfield

    The voice is educated, smug, and more or less female—that fabled NPR voice, produced in some secret kitchen where ordinary Americans are dipped in tubs of soy milk, white wine, and herbal tea until their vocal cords lose all sense of desire, familiarity, or place. It drills one thing into my innocent freeway head: If you are within the sound of my voice, your home is worth 39 percent less than a year ago.

    What the sweet, soy-dipped intonation does not say: Soon it may not be your home at all.


    COMMENTARY: What a bust! I mean the Southern California real estate market centered around Foreclosure Alley!Not unlike some areas of Florida. An interesting read for those of us regulars on this blog.

    Too bad the residents of the Foreclosure Alleys all over the US don’t yet know of the Garfield Foreclosure Defense BOK! Invite author Charles Bowden in for a look-see!

    Be prepared for some stimulating eye candy in the January issue, as an added bonus, if you cannot resist hard copy. ;-)


  63. From The Sunday Times
    December 21, 2008

    Royal Bank of Scotland mystery threat to grab home
    Elizabeth Colman

    Royal Bank of Scotland, the nationalised bank, has sent threatening letters to homeowners saying that their homes will be repossessed if they fail to repay their entire mortgage within 30 days.

    NatWest, which is owned by RBS, demanded that Peter Addyman, a married pharmacist from Hastings, East Sussex, repay his £226,000 home loan – although he says he has never missed a payment.

    It has refused to give an explanation for its decision, even to the Addymans’ MP. The actions have outraged consumer groups, who say the bank has an obligation to treat customers fairly after accepting £20 billion in a government bailout.

    Michael Foster, the Hastings and Rye MP, said: “There’s no doubt they’ve raised the cost of mortgages since this family was granted one.

    [Related Links
    Bailiffs get power to use force on debtors ]

    75,000 could lose homes in 2009, lenders say
    “I’ve written twice to NatWest but have received a wall of silence. They won’t tell this family what they’ve done wrong. If it comes to it, I think the court would exercise its discretion not to order repossession in this case.”

    In another case, Royal Bank of Scotland wrote to a homeowner who had missed just one payment on his mortgage, ordering repayment within 30 days. Correspondence sent by the bank and seen by The Sunday Times uses identical words to the letter sent to the Addymans. Again, it is understood RBS refused to give a detailed explanation for their decision.

    The Addymans insist they are not in arrears, and have not missed any payments since taking out the interest-only tracker mortgage nine months ago. They have received default notices for credit card debts in the past, and they have a second mortgage on the property. However, the additional mortgage and debts occurred before RBS signed the mortgage in March 2008.

    NatWest first wrote to the Addymans in September and said: “We . . . will no longer provide these facilities for you, which includes mortgage arrangements. The Bank requires a copy of a new mortgage offer within 30 days from the date of this correspondence to avoid further recovery action.”

    A spokesman for Which?, the consumer group, said: “It’s not good enough. This flies in the face of the bank’s and the government’s rhetoric on reposessing homeowners” A spokeswoman for RBS said there were “exceptional circumstances” in the Addymans’ case, but did not explain what they might be. She said: “This is not a move that we take lightly. This case has absolutely nothing to do with our processes for managing customers who are experiencing difficulties.”


    Have your say

    bring on some more of this.

    Hopefully every mortgage issued by UK institutions over the last 5 or 6 years will be reviewed for fraud.

    Their is a lot of it out there.

    steven haigherty, manchester, UK

    Perhaps the customers had obtained mortgages via fraid – i.e. lying on their application forms!

    K Miles, Swindon, UK
    These bank shenanigans across The Pond look frightfully familiar, don’t you agree?


  64. From The Sunday Times
    December 14, 2008

    Exposed: Dick Fuld, the man who brought the world to its knees
    Dick Fuld ran Lehman Brothers as if he were at war. He drove the bank hard and ignored the signs of collapse. Andrew Gowers, former editor of the Financial Times, who was working at the heart of the bank as it brought the global economy to the brink of disaster, reveals the inside story
    Image :1 of 2

    The temperature in the room seemed to drop several degrees as the boss’s voice came on the speaker phone. “I don’t think we’re going bust this afternoon,” he said, “but I can’t be 100% sure about that. A lot of strange things are happening . . .”

    The four of us gathered in Lehman Brothers’ offices at Canary Wharf looked at each other, our eyes widening. We had just spent the day bashing the phones in a frantic effort to reassure journalists, investors, bankers, anyone who would listen. That was our job as members of Lehman’s communications team.

    The bank was fine, we kept saying. It was brimming with cash. Sure, the share price had dropped 48% in New York, but that was a panic reaction to another investment bank’s collapse and nothing to do with us. What’s more, the US authorities had indicated they would not allow another institution to fail.

    Yet here was one of Lehman’s top people admitting privately that even he could not be certain that a sudden, precipitous and contagious loss of market confidence would not sweep his firm, its 26,000-plus employees and its 158-year-old name into oblivion.

    It was only then that it fully dawned on me just how scarily unpredictable my world had become.

    The date was March 17, 2008, the day after Lehman’s smaller New York rival, Bear Stearns, had collapsed into the arms of one of the world’s largest banks, the mighty JP Morgan Chase, in a shotgun marriage that all but wiped out shareholders and cost thousands of highly paid traders their jobs.

    On Wall Street blind panic had ensued and its focus was Lehman Brothers.

    The market has a phrase for this sort of event: the death spiral. Creditors and trading partners take fright at a falling share price and threaten to cut off credit lines. Alarm is magnified by modern, instant communications. Fear feeds on itself and prophecies of doom become self-fulfilling. Our freewheeling, globally integrated financial markets turn out to be built on sand.

    The group of us sitting in Canary Wharf could see the scenario with terrifying clarity that day. The market, cruel and unforgiving, was asking whether Lehman, now the smallest and most vulnerable of the so-called “bulge bracket” of elite global investment banks, was next.

    It was. On September 15, Lehman Brothers Holdings filed in New York for chapter 11 bankruptcy protection. An institution with total assets of $639 billion – more than the gross domestic product of Argentina and roughly 10 times the size of Enron when it filed for bankruptcy protection in December 2001 – had gone up in smoke.

    This was the largest corporate bankruptcy the world had ever seen. A firm that as recently as February had been worth $42 billion was now worth nothing. We know what happened next. Stock markets plunged and a run on funds and financial institutions brought the global financial system close to collapse. Within days, governments around the world pumped hundreds of billions of dollars into keeping banks and other companies afloat – and the world economy lurched into its worst recession in more than 70 years.

    “It is difficult to exaggerate the severity or importance of these events,” said Mervyn King, the governor of the Bank of England, a few weeks later. “Not since the beginning of the first world war has our banking system been so close to collapse.”

    And we now know we will be living with the consequences for many years to come. As one of the world’s leading investors, Mohamed El-Erian, puts it: “The manner in which Lehman Brothers failed disrupted the smooth functioning of market economies. As a result, virtually every indicator of economic and financial relationships exhibits characteristics of cardiac arrest. The situation will get worse before it gets better.”

    How did it come to this? How could an institution as proud and dynamic as Lehman plunge within months from an outward appearance of success to failure on such a colossal scale? And how could the collapse of one financial institution – the smallest of the Wall Street investment banks – bring the world so close to financial Armageddon?

    More broadly, how come the collapse took many of the most sophisticated and powerful financial operators in the world so completely by surprise? Why did no one in authority apparently see the global consequences of Lehman’s failure clearly enough to want to avert it? Could it have been averted or should it have been?

    Quite apart from their global significance, these questions are of more than casual interest to me and to the thousands of other people who used to work at Lehman Brothers. I am still owed a sum I was promised on leaving the bank in September. I will be lucky to see more than a fraction of it – and that only in several years’ time, once the administrators have finished picking through the wreckage.

    LET’S be clear: my part in this seismic story was small. I joined Lehman Brothers in London as head of corporate communications in June 2006 after a long career in financial journalism.

    The firm seemed a confident and attractive place as it surfed a wave of easy money. Asset markets were booming; fat profits from slicing and dicing loans – including, crucially, US mortgage loans – and from proprietary trading were being funnelled into building a truly global investment banking empire. Executives were impatient to take what they regarded as their rightful place alongside Goldman Sachs in the vanguard of this modern growth industry.

    As I quickly discovered, nobody personified this vaulting ambition more clearly than Dick Fuld, the almost unbearably intense man who had been chairman and chief executive of Lehman since 1993.

    In that time – and against considerable odds, including the near failure of the firm in 1998 and the loss of its headquarters in the 9/11 attacks on Manhattan – he had built Lehman Brothers into one of the powerhouses of Wall Street, its annual profits rising year after year from $113m in 1994 to a record $4.2 billion in 2007. Its stock price had multiplied 20-fold.

    Fuld had made a lot of people fabulously rich – shareholders, employees and of course himself. In the eight best years he had taken home a cool $300m – funding five residences, his wife Kathy’s passionate interest in modern art and a host of philanthropic activities.

    To say he was surrounded with a cult of personality would be an understatement. He was the textbook example of the “command-and-control CEO”. More than that, to many employees and to the outside world, he was Lehman Brothers – his character inextricably intertwined with the firm’s.

    Fuld inspired great loyalty and, on occasion, great fear. Those closest to him slaved like courtiers to a medieval monarch, second-guessing his moods and predilections, fretting over minute details of his schedule down to the flower arrangements and insulating him from trouble – from almost anything he might not want to hear.

    His ferocity could be intimidating, his eyebrows beetling tight over his hard eyes, his brutally angular brow appearing to contort in rage. He would regularly upbraid colleagues for minor wardrobe malfunc-tions – in Dick’s book, that tended to mean anything other than a dark suit and a white shirt or, in my case, a beard. “Are you off to the country club?” he would grunt dismissively at a senior executive committee member who looked just a tad too casual.

    Even when in a relatively upbeat mood he seemed to take pleasure in violent imagery. Lehman was “at war” in the market, he would say. Every day was a battle, employees were troops. At an investment banking conference in London last spring, I saw him astonish several hundred of his managing directors with a blood-curdling threat aimed at investors who were selling Lehman shares short – depressing the price.

    “When I find a short-seller, I want to tear his heart out and eat it before his eyes while he’s still alive,” the chairman declared. Histrionics, maybe – but with a purpose. Fuld had used this aggression to consolidate his reputation as the most successful chief executive in the banking business and one of the most respected corporate leaders in America. But the style also contained the seeds of disaster. It meant that nobody would or could challenge the boss if his judgment erred or if things started to go wrong.

    In good times that did not seem to matter too much. Lehman’s financial record spoke for itself: 55 quarters of unbroken profit, a share price performance second to none in the industry, a dexterity and fleetness of foot that enabled it to scale up rapidly in new markets. But it also bred a fatal complacency.

    So when the US mortgage market tanked and the first signs of a credit crunch arrived in July and August 2007, Lehman executives bragged to internal audiences that they were much better placed to weather the storm than, say Bear Stearns, the first competitor to hit real trouble.

    When rivals Merrill Lynch, Citigroup and Morgan Stanley wrote off billions and billions in losses on mortgages and corporate loans in their quarterly results, Fuld and his executives congratulated themselves on Lehman’s clever hedging strategies that limited the damage.

    Even when Lehman’s own quarterly numbers started to take a real hit, the warning signs were drowned out with celebratory reminders that 2007 had been a record year for profits and with sage assurances about the absolute soundness of the bank’s risk management.

    What none of the Fuld team appreciated was that by the beginning of 2008 the world had changed – for Lehman Brothers and for everybody. The unravelling of the US mortgage boom and the contagion of fear this had unleashed in global markets were shaking their business model and their entire raison d’être to the core. THE curious thing was that at some level Dick Fuld knew that trouble was brewing well before the crisis broke. I witnessed him give a fascinating talk about risk at a private lunch with newspaper editors nearly two years ago. With a precision that seems almost uncanny, he virtually prophesied the looming crash.

    It was January 2007 and we were in the Swiss mountain resort of Davos where the world’s elite gathers every year for its annual gab-fest, the World Economic Forum. That year’s Davos was an even more raucous party than usual, with the financial markets surging towards their peak and the Masters of the Universe toasting their own power.

    Fuld, however, was not in a celebratory mood. He was worried, he told his lunch guests with soft-spoken force, worried that “this could be the year when the markets crack”.

    Trouble might come from the US housing market, he said, from the excesses of leveraged finance, or from spiralling oil prices, or a combination of all three. Lehman, true to its tradition of strong risk management and fleet-footed investment decisions, had become more cautious and “taken a bit of money off the table”. The editors went away visibly impressed at the apparent prescience and prudence of Wall Street’s senior statesman.

    There was only one problem with this performance. It bore scant resemblance to the reality of how Lehman Brothers was actually being run, or had been run for several years, despite the tendency in Lehman’s largely admiring press coverage to portray Fuld as a hands-on manager with a strong eye for detail and an obsession with risk management.

    In truth Fuld had become insulated from the day-to-day realities of the firm and had increasingly delegated operational authority to his number two, a long-standing associate named Joe Gregory.

    If Dick was the king, Joe was Cardinal Richelieu. A gregarious sort with a taste for flamboyant displays of wealth – he famously used to fly to work from his out-of-town estate by helicopter and sometimes flew back by seaplane – he was also a ruthless enforcer for the boss. His job was not to encourage debate or intellectual curiosity in subordinates but to bend the bank to Dick Fuld’s will.

    If something went wrong, you could be sure that Gregory would be on the telephone in a towering rage. Even very senior executives would dread getting one of those calls. They would describe the experience as analogous to being provided with “a new asshole” and called him Darth Vader behind their hands.

    Problematically, Joe Gregory was not a detail man or a risk manager. On the contrary, as Fuld was musing to outsiders about his worries concerning risk, Gregory was doing the precise opposite: actively urging divisional managers to place even more aggressive bets in surging asset markets such as the mortgage business and commercial real estate.

    Standing in his way by showing aversion to risk could be fatal to your career. Divisional chiefs who urged caution or tried to rein back on risky bets were swiftly ousted. From the middle of 2007 the leadership of Lehman’s all-important fixed income division became a revolving door, partly as a result of Gregory’s obsession with pushing the envelope. The goal, he would tell subordinates, was to be “number one in the industry by 2012”, no matter what the cost.

    And Fuld himself was not consistent. In June 2007, barely four months after his Davos peroration on risk, I joined him in another background discussion with journalists, this time to coincide with Lehman’s business launch in Dubai. His tune could not have been more different.

    Think of the hundreds of billions of dollars in oil riches gushing into the Middle East, he said. Add the further hundreds of billions in sovereign wealth funds in emerging nations. Multiply all that by the plentiful liquidity and leverage available on financial markets and you had an almost limitless pool for investment banks like Lehman to swim and prosper in.

    At roughly that moment, Lehman was placing some of the riskiest bets it had ever made in the commercial property business. It led a consortium bidding $15 billion for America’s biggest apartment company at the absolute top of the market – a deal signed off by the entire executive committee but subsequently described to me by one of the firm’s executives as “the worst investment Lehman ever made”.

    Only a few weeks later, world markets started to experience the phenomenon known as the credit crunch and those investments – illiquid, all but unsaleable – became a millstone dragging Lehman Brothers inexorably towards bankruptcy.

    So much for risk management. The Lehman culture had become dangerously complacent and insulated from the outside world. While Fuld talked to clients with legendary assiduity, neither he nor Gregory spent much time talking (still less listening) to investors.

    Even within the firm, Fuld’s visits to the trading floor were rare events. So he was shut off from independent sources of information, from challenging questions and from up-to-date views from the front line of Lehman’s daily battle in the markets. He was fed instead with the carefully filtered facts that his inner circle thought he wanted to hear.

    Furthermore, the top team was far from united. Here was another point not visible to the outside eye. Lehman liked to propagate the myth that it was “one firm” devotedly working as a team across geographical borders and departmental boundaries to satisfy its clients’ needs. In reality it was as riven with rivalries and competing egos as a gathering of mafia clans. Many suspected that Joe Gregory liked to keep it that way.

    One faultline was more troublesome than the rest: the tension between headquarters in New York and Lehman’s European hub in London. In part it was a debate about where in the world the firm should place its bets. Russia? Saudi Arabia? Fuld and Gregory tended to hang back, with Jeremy Isaacs, chief executive for Europe and Asia, pressing on the accelerator.

    The rows about whether to go to Moscow were epic and not always very sophisticated. When I asked Fuld at the height of the argument in 2006 what he thought of the Russian market, his brow darkened and he muttered: “Biggest f****** crime syndicate in the world.” Months later, regardless, Lehman opened for business there.

    Underlying it all was a classic power struggle, mirroring the rivalry between New York and London as financial centres. Just as London had alarmed New York by overtaking it by some measures, so Lehman’s London team, now responsible for half Lehman’s revenues, sought commensurate recognition and power. As Isaacs became ever more influential in the firm and placed more of his top lieutenants on the global executive committee, the muttering from New York-based rivals became louder and more dangerous.

    Everyone knew that the battle to succeed Fuld, whenever he decided to step down, had the potential to be a bloodbath. From his London stronghold, Isaacs reckoned that he had a real shot at the job. In New York, another powerful and ambitious banker was determined to stop him. His name was Bart McDade, a man with a good operating track record but more limited domestic horizons. Both were to play a central role in the events leading to Lehman’s collapse.

    Here was a corporate governance structure almost preprogrammed to fail: an overmighty CEO, a top lieutenant eager to please and hungry for risk, an executive team not noted for healthy debate and a power struggle between two key players. Furthermore, the board of directors was packed with nonexecutives of a certain age and woefully lacking in banking expertise. IT is small wonder that Lehman was so ill-equipped to recognise and adjust to the changes in the environment that were dramatically signalled by the collapse of Bear Stearns in March this year.

    With hindsight, that was the point at which Fuld and his executive team should have realised the game was up.

    What the market was saying – and said again repeatedly in the ensuing countdown to disaster – was that Lehman was overloaded with dodgy assets that it could not sell and underendowed with capital to support its huge balance sheet.

    In short, the business was beginning to look like a rickety house built on a perilously thin foundation and unless it took action, to shift “toxic” assets and to raise more capital, confidence in the firm and its management would slide away.

    Management’s response was both half-hearted and confused. True, it started out on something resembling a fire sale of distressed assets in a push to shrink the balance sheet and reduce “leverage” – the scale of borrowing. But Fuld and his fellow executives rattled the market by insisting that they did not need more capital, even as they raised some.

    To make matters worse, they mounted an increasingly shrill campaign against their critics. One particular hedge fund manager, David Einhorn of Greenlight Capital, had been critical of Lehman’s financial disclosures, thus suggesting to some observers that the bank might have something to hide. Einhorn became an obsession for Fuld and his closest hench-men, who speculated openly about hiring investigators to tail him or search his rubbish bins.

    You could say it was a case of shooting the messenger. It was certainly a distraction from the primary business of putting Lehman to rights. But it was typical of the mixture of defiance and paranoia – “us against the world” – with which Fuld drove the firm. I lost count of the number of times I had to listen to senior executives explaining that there was no point in engaging with the press because the press actively wanted Lehman to fail.

    Fuld never tired of telling people that Lehman was built to triumph in adversity. That was his understanding of its history and his way of motivating the 26,000 employees at his command. But it also led him and his closest associates latterly to say things that, while obviously sincere and reflecting genuinely held beliefs, had no connection whatsoever with business reality.

    This delusion – compounded by the powerful and destructive forces of ambition within the bank – was propelling Lehman towards catastrophe. The death spiral beckoned.

    Have your say

    Where was the Board of Directors?? They are culpable as well.

    Karen Ubelhart, New York, USA

    Why no report on # of shorts who failed to deliver the shares in the days leading to the one report it went from less that a million a day in March 08 to an 43mil per in Sept 08! There is much more to this story than you are telling…

    rita, ny,

    Good article. But i do think that people tend to overblame CEOs when companies fail. Kind of like the vitriol Bush has to take. Dick Fuld can’t have been that stupid if he rose to the top at Lehman and has led them to profitability all this time.

    Judd, Clifton, USA

    Shows again that it is very difficult to combine the alpha male personality and corporate governance. It also shows the true nature of a company narrow minded near sociopath motivated by self interest only. Lacking sufficient internal checks and balances society has to do more to protect itself.

    JPHR, Lelystad, Netherlands

    Fascinating article, thankyou

    Alastair, London,


    What happens when CEOs brook no dissent, or insulate themselves from reality. Greed took its toll.


  65. C-SPAN Video Timeline (click on hyperlink on top line to view video)
    Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair talked about how to make responsible home ownership work in the future. She argued for a systematic and streamlined approach to loan modifications that would help reduce loan defaults and foreclosure. Then a panel presented research from the Center for Community Capital at The University of North Carolina on methods for making responsible home ownership work, even among lower-income families by linking borrowers with safe and appropriate mortgage products. The presenters were joined in a discussion, and the panelists responded to questions from members of the audience.

    As you might expect, Bair has this area of expertise down pat. She predicts there’ll be a higher foreclosure rate in 2009 among those who qualified for teaser rates.


    The dilemma facing many Pro Ses like L.A.L. : run with the helpful guiding advice and advocacy offered by the highly educated unlicensed, or suffer in ignorance and confusion the deadly silence of the licensed, reluctant to field specific inquiries for fear they’ll form a lawyer-client relationship with the very distressed they’d otherwise like to organize and rescue. ;->


  66. Dear Mr. Garfield

    Is there a heavy duty quiet title action pleading samples available in the blog?

  67. Mr. Houchins is properly educated but at present not licensed in any jurisdiction.

  68. My Story Thus Far:
    With the help of a friend that led me to this website, and Ron Houchins, a lawyer “who gets it” (P.O. Box 1848, LaGrange, GA 30241, (706) 416-9996,, I have been defending myself in foreclosure court.

    I was made aware of the fact that on my summary judgment, the promissory note was “lost, missing, or whereabouts unknown.” With Mr. Houchin’s help, I filed an answer with the court requesting the promissory note documentation. I am representing myself in court, as well as filing the motions at the courthouse, but Mr. Houchin’s is writing the motions and advising me on what I need to do. This seems to be working in my favor as the judge seemed to be extremely sympathetic toward me. The judge made it very clear to the lawyer representing my lender that he needed to come into court with a copy of the note. In fact, she scolded him twice about this. Since then, I have filed a motion for Discovery, and will soon be filing a motion to compel and requesting a hearing.

    With Mr. Houchin’s assistance, I am moving forward one step at a time. Even though I do not live in the same state as Mr. Houchin’s, he has been able to successfully assist me thus far. I am confident that we will continue to prevail, and advise anyone that is considering defending themselves to contact Mr. Houchin’s for advise as he has been enormously helpful to me.

  69. HUD Chief Blames Congress for Hope for Homeowners’ Failings

    December 17, 2008 12:00 PM ET | Luke Mullins

    More details on Hope for Homeowners’ wildly underwhelming start: only 312 applications so far and–you guessed it–congress and the administration are blaming each other for its shortcomings.

    From The Washington Post:

    The three-year program was supposed to help 400,000 borrowers avoid foreclosure. But it has attracted only 312 applications since its October launch because it is too expensive and onerous for lenders and borrowers alike, Preston said in an interview.

    “What most people don’t understand is that this program was designed to the detail by Congress,” Preston said. “Congress dotted the i’s and crossed the t’s for us, and unfortunately it has made this program tough to use.”

  70. A Second Mortgage Disaster On The Horizon?

    60 Minutes: New Wave Of Mortgage Rate Adjustments Could Force More Homeowners To Default

    Dec. 14, 2008

    The Mortgage Meltdown

    Scott Pelley reports on the mortgage crisis that’s far from over, with a second wave of expected defaults on the way that could deepen the bottom of the U.S. recession.

    Eye On The Economy

    In-depth features on U.S. markets, taxes, employment and the Federal Reserve.

    Barney Frank On Bailouts, Welfare
    House Of Cards: The Mortgage Mess

    (CBS) When it comes to bailouts of American business, Barney Frank and the Congress may be just getting started. Nearly two trillion tax dollars have been shoveled into the hole that Wall Street dug and people wonder where the bottom is.

    As correspondent Scott Pelley reports, it turns out the abyss is deeper than most people think because there is a second mortgage shock heading for the economy. In the executive suites of Wall Street and Washington, you’re beginning to hear alarm about a new wave of mortgages with strange names that are about to become all too familiar. If you thought sub-primes were insanely reckless wait until you hear what’s coming.


    One of the best guides to the danger ahead is Whitney Tilson. He’s an investment fund manager who has made such a name for himself recently that investors, who manage about $10 billion, gathered to hear him last week. Tilson saw, a year ago, that sub-prime mortgages were just the start.

    “We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we’re probably about halfway through the unwinding and bursting of the bubble,” Tilson explains. “It may seem like all the carnage out there, we must be almost finished. But there’s still a lot of pain to come in terms of write-downs and losses that have yet to be recognized.”

    In 2007, Tilson teamed up with Amherst Securities, an investment firm that specializes in mortgages. Amherst had done some financial detective work, analyzing the millions of mortgages that were bundled into those mortgage-backed securities that Wall Street was peddling. It found that the sub-primes, loans to the least credit-worthy borrowers, were defaulting. But Amherst also ran the numbers on what were supposed to be higher quality mortgages.

    “It was data we’d never seen before and that’s what made us realize, ‘Holy cow, things are gonna be much worse than anyone anticipates,'” Tilson says.

    The trouble now is that the insanity didn’t end with sub-primes. There were two other kinds of exotic mortgages that became popular, called “Alt-A” and “option ARM.” The option ARMs, in particular, lured borrowers in with low initial interest rates – so-called teaser rates – sometimes as low as one percent. But after two, three or five years those rates “reset.” They went up. And so did the monthly payment. A mortgage of $800 dollars a month could easily jump to $1,500.

    Now the Alt-A and option ARM loans made back in the heyday are starting to reset, causing the mortgage payments to go up and homeowners to default.

    “The defaults right now are incredibly high. At unprecedented levels. And there’s no evidence that the default rate is tapering off. Those defaults almost inevitably are leading to foreclosures, and homes being auctioned, and home prices continuing to fall,” Tilson explains.

    “What you seem to be saying is that there is a very predictable time bomb effect here?” Pelley asks.

    “Exactly. I mean, you can look back at what was written in ’05 and ’07. You can look at the reset dates. You can look at the current default rates, and it’s really very clear and predictable what’s gonna happen here,” Tilson says.

    Just look at a projection from the investment bank of Credit Suisse: there are the billions of dollars in sub-prime mortgages that reset last year and this year. But what hasn’t hit yet are Alt-A and option ARM resets, when homeowners will pay higher interest rates in the next three years. We’re at the beginning of a second wave.

    “How big is the potential damage from the Alt As compared to what we just saw in the sub-primes?” Pelley asks.

    “Well, the sub-prime is, was approaching $1 trillion, the Alt-A is about $1 trillion. And then you have option ARMs on top of that. That’s probably another $500 billion to $600 billion on top of that,” Tilson says.

    Asked how many of these option ARMs he imagines are going to fail, Tilson says, “Well north of 50 percent. My gut would be 70 percent of these option ARMs will default.”

    “How do you know that?” Pelley asks.

    “Well we know it based on current default rates. And this is before the reset. So people are defaulting even on the little three percent teaser interest-only rates they’re being asked to pay today,” Tilson says.

    That second wave is coming ashore at a place you might call the “Repo Riviera” – Miami Dade County. Oscar Munoz used to sell real estate; now his company clears out foreclosed homes.

    “Business is just going through the roof for us. Fortunately for us, unfortunately for the poor families who are going through this,” Munoz explains.

    “I wonder do you ever come to houses where the people are still here?” Pelley asks.

    “Absolutely,” Munoz says. “That’s really a sad situation. I’d rather not meet the people.”

    Asked why not, Munoz says, “It’s not easy to come in and move a family out. It’s just our job to do it for the bank. It’s just the nature of what’s going in the market right now.”

    Munoz says his company alone gets about 20 to 30 assignments per day. “And we’re one of the few companies right now who are hiring. We have to hire people because the demand is so high,” he tells Pelley.

    People who’ve been evicted tend to leave stuff behind. The next house is usually much smaller. Banks hire Munoz to move the possessions out where, by law, they remain for 24 hours. Often the neighbors pick through the remains.

    Once the homes are empty the hard part starts – trying to find buyers in a free-fall market.

    Miami real estate broker Peter Zalewski talks like a man with a lot of real estate to move. “We have 110,000 properties for sale in South Florida today, 55,000 foreclosures, 19,000 bank owned properties. Sixty-eight percent of the available inventory is in some form of distress. They need someone to clean it up.”

    Asked what the name of his company is, Zalewski says, “It’s called Condo Vultures Realty.”

    What does that mean?

    “That in times of distress, and in times of downturn, there’s opportunity. And you know, vultures clean up the mess. A lot of people seem to think they kill, but they don’t actually kill, they clean,” he says.

    The killing, in Miami, was done by the developers back when it seemed that the party would never end. They sold hyper-inflated condos at what amounted to real estate orgies-sales parties for invited guests who were armed with option ARM and Alt-A loans. “There were red ropes outside. They had hired cameramen, and they had hired photographers to almost set the scene of a paparazzi,” Zalewski remembers.

    “They were hiring fake paparazzi? To make the customers feel like they were special?” Pelley asks.

    “You were selling a lifestyle,” Zalewski says.

    Asked what roles these exotic mortgages played, Zalewski says, “They were essential. They were necessary. Without the Alt A or option ARM mortgage, this boom never would’ve occurred.”

    It never would have occurred because without the Alt As and the option ARMs, many buyers never would have qualified for a loan. The banks and brokers were getting their money up front in fees, so the more they wrote, the more they made.

    “They stopped checking whether the income was even real. They turned to low and no-doc loans, so-called ‘liar’s loans’ and jokingly referred to as ‘ninja loans.’ No income, no job, no assets. And they were still willing to lend,” Tilson says.

    “But help me out here. How does that make sense for the lender? It would seem to be reckless, in the extreme,” Pelley remarks.

    “It was,” Tilson agrees. “But the key assumption underlying, the willingness to do this was that home prices would keep going up forever. And in fact, home prices nationwide had never declined since the Great Depression.”

    On the way up, everyone wanted in. No one expected to feel any pain. People like acupuncturist Rula Giosmas became real estate speculators.

    Giosmas says she bought about six properties in this last five-year period as investments. She says she put 20 percent down on each. Now they’re all financed with option ARM loans.

    Asked what she understood about the loans, Giosmas says, “Well, unfortunately, I didn’t ask too many questions. I mean in the old days, I would shop around. But because of the frenzy, and I was so busy looking to buy other properties, I didn’t really focus on shopping around for mortgage brokers.”

    “But if you’re investing in real estate, you’re buying multiple properties, you should be asking a lot of questions,” Pelley remarks. “Why didn’t you ask?”

    “I was busy. I was really busy looking at property all the time, all day long,” she replies.

    She also acknowledges that she didn’t read the paperwork. Now she’s losing money on every property.

    “You know that there are people watching this interview who are saying, ‘You know, she was just foolish. She was greedy and foolish. She was buying small apartment buildings and wasn’t paying enough attention to how they were financed,'” Pelley points out.

    “My full-time job is I’m an acupuncturist. So, this was just a side thing,” she says.

    Giosmas says she was misled and she hopes to renegotiate her loans. But many other buyers have simply walked away from their properties. One Miami luxury building was a sellout, but when 60 Minutes visited, a quarter of the condos were in foreclosure.

    Zalewski says one of those condos was originally purchased in October 2006 for $2.4 million. Now he says the asking price from the lender is $939,000.

    And there are tough years to come because, just like the sub-primes, the Alt-A and option ARM mortgages were bundled into Wall Street securities and sold to investors.

    Sean Egan, who runs a credit rating firm that analyzes corporate debt, says he expects 2009 to be miserable and 2010 also miserable and even worse.

    Fortune Magazine cited Egan as one of six Wall Street pros who predicted the fall of the financial giants.

    “This next wave of defaults, which everyone agrees is inevitably going to happen, how central is that to what happens to the rest of the economy?” Pelley asks.

    “It’s core. It’s core, because housing is such an important part. We’re not going to get the housing industry back on track until we clear out this garbage that’s in there,” Egan explains.

    “That hasn’t cleared out yet. We haven’t seen the bottom,” Pelley remarks.

    “It’s getting worse,” Egan says. “There are some statistics from the National Association of Realtors, and they track the supply of housing units on the market. And that’s grown from 2.2 million units about three years ago, up to 4.5 million units earlier this year. So you have the massive supply out there of units that need to be sold.”

    “What with the housing supply increasing that much, what does it mean?” Pelley asks.

    “It means that this problem, the economic difficulties, are not going to be resolved in a short period of time. It’s not gonna take six months, it’s not gonna 12 months, we’re looking at probably about three, four, five years, before this overhang, this supply overhang is worked through,” Egan says.

    In the next four years, eight million American families are expected to lose their homes. But even after the residential meltdown, Whitney Tilson says blows to the financial system will keep coming.

    “The same craziness that occurred in the mortgage market occurred in the commercial real estate markets. And that’s taking a little longer to show. But there are gonna be big losses there. Credit cars, auto loans. You name it. So, we’re still, you know, we’re maybe halfway through the mortgage bubble. But we may only be in the third inning of the overall bursting of this asset bubble,” Tilson says.

    “Does that mean that the stock market is gonna continue plunging as we’ve seen the last several months?” Pelley asks.

    “Actually we’re the most bullish we’ve been in 10 years of managing money. And the reason is because the stock market, for the first time I can say this, in years, has finally figured out how bad things are going to be. And the stock market is forward looking. And with U.S. stocks down nearly 50 percent from their highs, we’re actually finding bargains galore. We think corporate America’s on sale,” Tilson says.


    The stock market will still have a lot of figuring to do with more troubling news on the horizon. The mortgage bankers association says one out of 10 Americans is now behind on their mortgage. That’s the most since they started keeping records in 1979.

    Play the program which includes Barney Frank.

    Neil, would you be amenable to appearing on 60 Minutes?


  71. Reuters Summit-T2 shifts to distressed mortgage bonds

    12.08.08, 03:52 PM EST

    By Al Yoon

    NEW YORK (Reuters) – Hedge fund T2 Partners LLC on Monday for the first time was buying distressed U.S. mortgage securities on bets that losses on underlying loans will fall far short of expectations, founder Whitney Tilson said.

    “For the first time in our 10-year history we are buying distressed debt, and we are selling equities to do it, Tilson said at the Reuters Investment Outlook Summit in New York.

    The $100 million fund put between 10 percent and 25 percent of its capital in the mortgage securities, which include pools of subprime home loans that triggered the global financial crisis, he said.

    For T2, traditionally a stock investor, mortgage debt has surfaced as one of the best investment areas in years since forced selling has pushed prices below levels that signal even catastrophic losses, he said. Many of the bonds that were once rated “AAA” are trading at 30 cents to 40 cents on the dollar, and offer “enormous” returns on capital, he said.

    Tilson’s shift to mortgage securities comes as a U.S. recession is threatening to prolong a housing crisis already in its third year. While that recession will probably last through 2009, the mortgage “crud” has been excessively maligned as insurance companies, pension funds and college endowments are being forced to dump bonds at distressed prices, Tilson said.

    The most senior securities are still paying interest, so the fund is getting cash back “very, very rapidly,” he said.

    After batterings by rating downgrades, year-end tax-loss selling, liquidations and and redemptions “it would be hard to find a more tainted asset, and of course therein lies opportunity for people who can do the work on it and who don’t care what the rating is,” he said.

    To make an investment, T2 might assume as much as 98 percent of the loans will default, and then total losses to the bonds of up to 75 percent, he said. But prices on the bonds are now so low that T2 can still make 30 percent to 70 percent on its capital, he said.

    Opportunities may fade in the new year since most managers that have to sell are likely to do so before Dec. 31, he said. But the risky bonds may still have upside, especially if the Obama administration accelerates efforts to halt the record foreclosures plaguing the housing market, he said.

    They are “pools of the most toxic mortgages ever written,” he said. “The characteristics of these would really make your jaw hit the floor.”

    (For summit blog: (For more on the Reuters Investment Outlook 2009 Summit, see [ID:nN08508681]) (Editing by Leslie Adler)

    Copyright 2008 Reuters, Click for Restriction


  72. My hard work is paying off many people are finding Lawyers and getting help or helping themselves and we are moving forward.

    Neil started this and he did well having had the foresite in the beginning to offer this site to assist people and put Lawyers to work and it all is working just fine.I am so happy to help.

  73. by Philip Elliott | The Associated Press

    Saturday December 13, 2008, 3:54 PM

    CHICAGO — Promising a prominent role for his housing department, President-elect Barack Obama on Saturday named a Harvard-educated architect to lead an agency dealing with the mortgage mess that dragged the country into a recession.

    Former Clinton aide: New York Housing Preservation and Development Commissioner Shaun Donovan has a national reputation for developing affordable housing.With one in 10 U.S. homeowners delinquent on mortgage payments or in foreclosure, Obama said New York City housing commissioner Shaun Donovan will bring “fresh thinking, unencumbered by old ideology and outdated ideas” at the Housing and Urban Development Department to help resolve the housing and economic crisis.

    “We can’t keep throwing money at the problem, hoping for a different result,” Obama said during his weekly address on radio and YouTube. “We need to approach the old challenge of affordable housing with new energy, new ideas, and a new, efficient style of leadership. We need to understand that the old ways of looking at our cities just won’t do.”

    Donovan, head of the New York’s Housing Preservation and Development Department, is former Clinton administration HUD official with a national reputation for curtailing low-income foreclosures, developing affordable housing and managing the nation’s largest housing plan.

    If confirmed by the Senate, Donovan would become the nation’s top housing official in the midst of the worst recession in decades. Falling home values and stricter lending standards have ensnared millions of U.S. households. More than 259,000 homes received a foreclosure-related notice in November, up 28 percent from a year earlier. The Federal Reserve is predicting that new foreclosures this year will reach 2.25 million, more than double pre-crisis levels.

    Conrad Egan, president of the nonpartisan National Housing Conference, said Obama’s selection of Donovan signals that he recognizes HUD can play a big role in the economic recovery.

    “It really needs to be a seat at the Cabinet table that is the principle point where housing and community development issues are brought together and resolved successfully,” Egan said. “HUD has been perceived as a second-tier participant in meeting that challenge.”

    Congressional Democrats, with support from Obama, have sought to use part of the $700 billion banking bailout to help homeowners facing foreclosure. The Bush administration has resisted those efforts.

    Obama has been reluctant to dive into the details of the plans. Since winning the presidency, he has asked his advisers to develop a plan that would save or create some 2.5 million jobs in the next two years and include the largest public works program in a half century. He said Saturday he sees HUD playing an important role

    “This plan will only work with a comprehensive, coordinated federal effort to make it a reality. We need every part of our government working together,” Obama said, adding that “few will be more essential to this effort” than HUD.

    Donovan, a 42-year-old New York native, told the Senate Banking, Housing and Urban Affairs Committee in May that HUD’s programs have led to “a feast-famine cycle, in which our program grows to the allowed size and then contracts so we don’t go above our authorized level.”

    Obama said Donovan “understands that we need to move past the stale arguments that say low-income Americans shouldn’t even try to own a home or that our mortgage crisis is due solely to a few greedy lenders. He knows that we can put the dream of owning a home within reach for more families, so long as we’re making loans in the right way, and so long as those who buy a home are prepared for the responsibilities of homeownership.” said.

    As New York Mayor Michael Bloomberg’s top aide for housing, Donovan kept foreclosures to a minimum in the city’s low- and moderate-income home ownership plan, with just five of 17,000 participating homes falling. He oversaw the creation of the $200 million New York Acquisition Fund, a collaboration involving the city, foundations and financial institutions. It is intended to help small developers and nonprofit groups compete for land in the private market.

    Obama’s selection of Donovan marks the 11th post he has filled in his Cabinet, in just over a month since his election as the nation’s first African American president. Still to come are the Central Intelligence Agency, the Environmental Protection Agency, and the departments of energy, education, interior, labor, transportation and agriculture.

    The rollout of the selection — announced at 6 a.m. Saturday via e-mail and later in Obama’s Saturday radio address — also was a surprise. Obama had introduced all previous Cabinet appointments at televised news conferences, where he also took questions from reporters.

    Most speculation had centered on Miami Mayor Manny Diaz, Atlanta Mayor Shirley Franklin or Bronx borough President Adolfo Carrion Jr.

    HUD often has been led by someone who is a minority; Donovan is white. Latino groups were pushing heavily for Diaz, following in the footsteps of Clinton appointee Henry Cisneros of San Antonio. Bush picked Mel Martinez of Florida, a Hispanic, and Alphonso Jackson of Texas, an African-American.

    This HUD appointment bodes well for housing, and addressing the Mortgage Meltdown.


  74. Maher, your passion is commendable. I’m sure it’s not intended, but your NLS site is unclear when it seems to encourage modifications and settlement, though you DO suggest borrowers first perform a lender compliance audit for leverage, and aim to eliminate future liability.


    1) You may want to modify your loan to bring down your monthly payments! We offer that advice for free!

    2) Maybe you do not want to stay in the home ?

    There are many options to a lender forced foreclosure.You may want to consider a deed in lieu or short sale. But first establish the argument for settlement with a compliance audit.

    Then seek to eliminate any future liability and avoid the exposure of a deficiency judgment.”



  76. Hi Neil,

    Here is a link from a law firm that representd mostly financial institutions in which they downplay the significance of the Boyko decision and instruct their clients to make sure, in a nutshell, that the assignment paperwork is in order prior to moving to foreclose.

    Exec had mortgage racket down to an art

    Orson Benn has gone to prison for falsifying applications, but a former associate in Homestead still sells mortgages.
    Borrowers Betrayed Part 4
    Orson Benn’s network of mortgage brokers wrote thousands of subprime loans in Miami-Dade which have gone into foreclosure.

    Borrowers Betrayed Part 4
    Orson Benn’s network of mortgage brokers wrote thousands of subprime loans in Miami-Dade which have gone into foreclosure.
    Borrowers Betrayed Part 4


    Related Content
    Legacy of tainted home loans: vacancy, vandalism, foreclosure
    Read the full Herald investigation Borrowers Betrayed
    Orson Benn, once a vice president at the nation’s largest subprime lender, spent three years during the height of the housing boom tutoring Florida mortgage brokers in the art of fraud.

    From his office in New York, he taught them how to doctor credit reports, coached them to inflate income on loan applications, and helped them invent phantom jobs for borrowers.

    When trouble arose — one broker got caught, another got cold feet — Benn called his trusted fixer in Miami to remove the problem and get the loan approved: Yvette Valdes.

    The 48-year-old Valdes was a key figure in helping Benn tap into one of the country’s most lucrative mortgage markets during his run with Argent Mortgage, The Miami Herald found.

    Benn and several associates were convicted of racketeering this year, but Valdes still sells mortgages from a nondescript storefront in Homestead.

    While prosecutors looked at roughly $100 million in loans written by Benn and a cadre of co-workers, that represents just a portion of the loans they approved during his aggressive expansion into Florida.

    The Miami Herald found that Benn’s network approved more than $550 million in home loans from Tampa to West Palm Beach to Miami, according to an analysis of court records.

    In Miami-Dade County alone, Benn’s office approved more than $349 million in loans on 1,913 homes — more than one in three have since fallen into foreclosure, the analysis shows.

    Valdes brokered at least 100 of those loans worth $22 million — nearly all based on false and misleading financial information, the newspaper found.

    One borrower claimed to work for a company that didn’t exist — and got a $170,000 loan. Another borrower claimed to work a job that didn’t exist — and got enough money to buy four houses.

    In a brief interview with The Miami Herald, Valdes blamed the borrowers, refusing to comment further. Her lawyer, Glenn Kritzer, said she has done nothing illegal.

    With so many of Benn’s loans now in foreclosure, Miami-Dade County is littered with still more empty homes. Squatters inhabit some; crack dens occupy others. At least one has been stripped to the ground, leaving only the foundation.

    ”It’s like a desert,” said Reynaldo Perez, 41, who lives in a Homestead town house financed by Benn three years ago. “Just on my street, there are five or six homes being foreclosed.”

    Although the Office of Financial Regulation — the state agency entrusted with policing the mortgage industry — was alerted to Valdes’s role in Benn’s network at least three years ago, it never launched an investigation, the newspaper found.

    Since 2005, the agency has had copies of some of the same misleading loan applications that The Miami Herald reviewed.

    Terry Straub, the OFR’s director of finance, acknowledged that his agency had evidence against Valdez. ”I don’t have any explanation for why we didn’t pursue it,” he said.

    In fact, state regulators ignored more than a dozen written warnings about brokers in Benn’s network, the agency’s records show.

    Despite a law banning criminals from getting licensed — created after a Miami Herald series was published this summer — two brokers in Benn’s network who pleaded guilty in May to conspiracy charges in the case remain licensed.


    The path to Valdes and other brokers began in 2002, when Benn was hired by Argent Mortgage, which would become the nation’s largest provider of loans to people with low credit scores.

    Known as ”Big O,” the six-foot three-inch, 280-pound Benn grew up as the son of a subway mechanic in one of Brooklyn’s toughest neighborhoods. Even without a formal banking education, he needed just three years to advance from a clerical job to vice president.

    At first, his job was to trouble-shoot problems that cropped up in loan applications, court records and interviews show.

    Argent made money bundling the mortgages and selling them to investors on Wall Street, not by collecting monthly checks and depending on the borrowers’ ability to pay. The accuracy of loan applications was not a priority, Benn later testified.

    With control over hundreds of millions of dollars in loans, Benn launched a subprime empire that would soon cover most of Florida.

    After four months on the job, Benn flew to Tampa to meet with brokers who courted him with a luxury box at a Tampa Bay Lightning hockey game, football tickets and strip-club outings, court records show.

    He taught one of those brokers, Scott Almeida, a convicted cocaine trafficker, to prepare phony income statements and doctor credit reports.

    A few months later, Almeida introduced Benn to Tampa brokers David Tuggle and Eric Steinhauser.

    After Benn taught them to prepare phony documents, they began to write millions of dollars in loans.

    Along the way, the brokers showed their gratitiude. DHL envelopes stuffed with cash — a total of hundreds of thousands of dollars — routinely arrived at Benn’s million-dollar house in the New York suburbs. In slightly more than two years, Tuggle and Steinhauser alone paid Benn between $70,000 and $100,000, they told police.


    As the scheme grew riskier, it extended south, almost 300 miles, to Yvette Valdes in Homestead.

    Benn told Steinhauser to create a phony deed to help a borrower get a loan. But Steinhauser said he had trouble finding someone in Tampa willing to help him because the deed would be filed in court.

    So, Benn referred him to Valdes at Sandkick Mortgage.

    For 16 months, Valdes and her co-workers were a mainstay of Benn’s lucrative Miami-Dade operations, writing more than $1 million worth of loans in a typical month.

    The Miami Herald obtained every loan application that Sandkick sent to Argent between May 2004 and September 2005, for mortgages totaling $22 million.

    The documents include the personal and financial information about the borrower supplied by the broker.

    Out of 129 applications, 103 contained red flags: non-existent employers, grossly inflated salaries and sudden, drastic increases in the borrower’s net worth.

    The simplest way for a bank to confirm someone’s income is to call the employer. But in at least two dozen cases, the applications show bogus telephone numbers for work references, the newspaper found.

    On three applications, Valdes provided her own private cellphone number, even though the borrowers did not work for her.

    Another application included a letter from ”Community Bank,” saying the borrower had $63,000 in his account. The phone number on the letter does not belong to a financial institution, however. It belongs to Bill Rieck, a Key West city employee, who told The Miami Herald that he was surprised his number was used.

    ”I ain’t no community bank,” he said, adding that the cell number has been his for six years.


    When Kendale Lakes couple Monica Gaviria and Stacy Duthely applied for a loan through Sandkick in January 2005, they declared a combined income of $68,000 a year. She was a hair stylist; he, an interpreter.

    When the loan went through a few months later, the documents showed more than a fivefold increase, to $384,000.

    Gaviria said that figure is grossly inflated, but said she knew nothing about the change on her mortgage application until this year when she fell behind on her payments and the bank called her.

    She said the bank representative demanded, “What’s the problem? You make $17,000 a month.”

    As the months went by, Valdes began to write more loans for Benn, records show. She started small with an $87,000 loan in May 2004, but the next month, her numbers rose to $750,650. By that September, she hit $1 million.

    The following year, she went on a tear, breaking the $1 million mark seven times.

    Along the way, some borrowers came back for more.

    One Sandkick customer, Erica Wright, bought her first house in July 2004, when she was 21. Her loan application said she was the office manager at Weldon Industries, a Tampa fence manufacturer, for four years. The job paid $40,000 a year.

    But when reached by The Miami Herald last month, the company’s general manager, Scott Franzen, said, “We’ve never had anyone here by that name.”

    In September 2004, Wright bought three more houses using Weldon as the employer, even claiming a big raise to $78,840.

    Wright could not be reached for comment. All four properties have fallen into foreclosure, leaving $501,677 in unpaid debt.

    While Valdes was flooding Miami-Dade with risky loans, Benn’s network drew the attention of state regulators several times.

    One of the brokerages doing business with Benn — Total Mortgage of Tampa — incurred 10 complaints in just two years.

    In four of those cases, state regulators confirmed that the company provided false and misleading information to get loans. The company owner put false data in her own mortgage application in 2004, regulators found.

    Instead of pressing for disciplinary action, including suspending or revoking the license, the state closed the cases.

    The company kept going, brokering two more loans — later investigated by police — that went directly to Benn’s chief co-conspirator, Argent banker Sam Green.

    Green managed to get two mortgages to buy one home. He used one loan to pay for the property, and illegally pocketed the other — $79,000, he later admitted to police.


    While Benn and his co-workers approved more than half a billion dollars’ worth of mortgages during their run at Argent, it was a complaint filed by an elderly Tampa borrower over a disputed loan that drew the attention of police in 2004.

    As other borrowers stepped forward with similar complaints, Benn’s network slowly unraveled.

    Investigators from the humble Hillsborough County Consumer Protection Agency began to review Argent loans and discovered irregularities in the tens of millions of dollars.

    One by one, Tampa area brokers pointed the finger at Orson Benn.

    Last year, statewide prosecutors charged Benn in Polk County with racketeering. At least seven others have been arrested in the same scheme, including the other Tampa area brokers.

    Argent succumbed to the troubles of the subprime market and was bought by Citibank last year.

    Despite a crackdown on Benn’s Tampa brokers, nothing happened to the Miami network where most of the loans were written, The Miami Herald found.

    Benn, who has begun an 18-year prison sentence, did not respond to a request for comment. Neither did Tuggle or Steinhauser, both of whom pleaded guilty in the mortgage scheme and await sentencing.

    Both are still listed with ”approved” licenses on the OFR website, the only place consumers can check the status of brokers.

    Although state regulators have known about Valdes’s involvement for three years, they never took action against her or Sandkick Mortgage.

    The agency identified her as an associated target in a fraud investigation of another broker in the Benn network in 2005, records show.

    In addition, the file contains two Sandkick loan applications with bogus claims: one showing an inflated salary and the other a phony job.

    Terry Straub, director of finance for the OFR, said he can’t explain the lack of action.

    Valdes and her co-workers wrote their last loan with Benn in late 2005. Since then, 40 percent of the properties have slipped into foreclosure, the newspaper found.

    Some have fallen into disrepair, dragging property values down around them. Others are abandoned. One, in Liberty City, has been razed, leaving nothing but a weed-strewn lot.

    Last week, Miami Herald reporters visited Valdes at her Homestead office, now known as Best Mortgage Choice. She refused to discuss the newspaper’s findings.

    When asked about the misleading information in her customers’ loan applications, Valdes said, “That’s their problem.”

    1 Attached Images

  78. thank you for considering to help us on short notice. this is a home we had hoped to keep in the family for generations to come.

    we are in the 75 day redemption period in the state of colorado that happens to end on monday. the trustee gives the title certificate to the lender dlj mortgage on that day. we filed a few weeks back a “seperate” complaint and petition to set aside foreclosure (basically a lost note defense) against dlj as well as against the trustee. we filed a motion for production as well as a motion for admissions. we then filed a motion to combine companion cases, a notice of new case to all parties, a motion for a forthwith status conference/hearing (because the response to production of our new suit would overlap the end of the redemption period on monday). we also filed a motion to suspend redemption period during pendancy of new case and a restraining order preventing the trustee to hand title to the bank. the judge is looking at these motions today and the law clerk is helpful and sympathetic, but NEEDS some colorado case history to help jthe udge make her decision. so my question is: is there colorado case history that stopped a redemption because a new suit was filed in a seperate case (seperate from the original foreclosure suit)? my second question is: does a bankruptcy stop transfer of title during the redemption period “after” the foreclosure sale commenced? thank you Steve

  79. Hello to anyone,could someone read my question i left on the FAQ page,i may have put it on the wrong page.I would be very thanksful if someone could read it and answer it if they can.I can be contacted at
    Thank You




    ADVOCATES TEAM just stopped Countrywide’s foreclosure of homeowner in the San Bernadino, CA. area today. A temporary restraining order was granted stopping the scheduled foreclosure sale for Oct. 20th.

    A preliminary hearing is set for Nov. 3rd on the issue of a preliminary injunction, the stopping of the sale until the merits of the client’s case are heard. The three attys., Advocates expert and support experts worked together to provide: referral to a local representative attorney, Advocate’s expert support and consultation to that atty., an extensive 35 page compliance audit report of the relative mortgage industry player’s misconduct, statutory and actual damages and common law claims for bait and switch, equity stripping and misrepresentation, among others, along with a Summary of Key Issues and list of Points and Arguments for the local attorney to argue in the court, a report of personal interviews with the clients, a comprehensive written and oral historical and chronological account of the facts involving all aspects of the consumer’s mortgage loan, effectual judicial documents and the local attorney’s appearance at the court today.

    The aforementioned consumer/homeowner, a poster-child for the AG’s extensive Complaint against Countrywide for abusive lending practices, still has some hurdles to jump; but is now on his way. There are still some important battles to fight. However, the ADVOCATES team has prepared a legal and effective professional defense with care for the client; and is providing a entirely legitimate opportunity for the homeowner to stay in his home… as it is the particular homeowner’s objective.

    The homeowner’s claims involve a claim for spurious open-end credit/HELOC for over $60,000. Unbeknownst to the homeowner, the entire HELOC credit line was exhausted before he used it; part of which was applied to approximately $15,000 in prepayment penalty fees to the same lender, Countrywide. Moreover, the homeowner’s car and furniture was paid off by the loan without the homeowner’s knowledge. He is now paying for his car and furniture for a period of 30 years.

    The application has mortgage broker notations showing that the homeowner’s car and furniture accounts/payments were not included in the underwriting guideline ratios. Therefore the loans had to be paid off in order for the homeowner to qualify for the loan. It also appears that the homeowner’s income was overstated on the loan application.

    As often is the case, this particular homeowner did not receive certain pre-disclosures pursuant the requisite time provided by consumer protection statutes nor did he receive a complete Settlement Statement, all three pages of the HUD 1, which would have shown the $5000, in round numbers, for the prepayment penalty for the second lien. The $10,000 prepayment penalty on the first lien was embedded in the total payoff amount found on the first page of the Settlement Statement.

    AFJ requested the homeowner obtain the final HUD 1 from the applicable title company. The title company summarily provided the HUD 1 sending a copy directly to AFJ. In finality and in violation of RESPA, the homeowner did not receive the HUD 1 until approximately two years after consummation.

    The HELOC was actually required, based on the way the loan was structured and applicable fees and charges, for the homeowner to qualify for the first lien loan.

    Due to the fact that the Attorney General of California filed a lawsuit against Countrywide and that CW subsequently and recently agreed to pervasively modify loans, the AFJ team is hopeful that this consumer can keep his home with terms he can afford…eventually.

    One of the objectives of this homeowner is to stay in his home as long as possible before the time of settlement. However, the next hurdle is to first to be granted a preliminary injunction in the first week of November.

    The four previously-mentioned professionals and the auxiliary associates invested approximately 30-40 hours collectively preparing the homeowner’s defense. Many attorneys have been known to charge near $10,000 – $20,000 and/or more for similar services…and the case still requires significant hours of investment in the form of document preparation, case analysis, strategizing and consultation, including possibly a number court appearances and discussions with the lenders/servicers as the case nears settlement … to continue to fight. Advocates fees range from $5000 -$7000 which includes the local attorney’s retainer fee, typically. Limited-payment plans may be available based on the status of the case.

    Sometimes the struggle lasts for years, other times…months, depending on the unique facts of each case, the temperament of each court and other existing and intervening factors. Certain challenges can arise on the American Mortgage Battlefield but certain members on the ADVOCATES team have years of experience and are wholly prepared to defend and contend.

    The ADVOCATES TEAM is working on another CA case, near Fontana, where the homeowner was set up by a multi-level marketing mortgage brokerage with a bogus employer. The brokerage charged the homeowner $600 for the ‘service.”
    Additionally the homeowner paid approximately $11,000 in Yield Spread and $11, 000 in prepaid penalties.

    We will be filing an Original Complaint in the next few weeks and will keep you updated.

    ADVOCATES reported several weeks ago that we had successfully defended against the lender’s eviction petition. The court required a $10,000 bond in the event the lender wanted to file an appeal. Approximately a year and a half ago, this consumer was paying $9,000 per month including payments for the rental in which he was living. The consumer/homeowner has not paid a house payment during the time AFJ has been defending him. Approximately a year ago, AFJ stopped Ameriquest’s attempt to foreclosure on the night before the trustee’s sale. AFJ negotiation’s resulted in the homeowner paying $7,000 up front and monthly payments thereafter. Homeowner has not paid a payment since that time.

    Time has expired for the lender to file their appeal and the homeowner will revisit the issue of quiet title as he tries to sell or refinance his home, which the homeowner states has $300,000 equity in his $700,000 home. To get a more complete picture of this particular situation, it is prudent to state that this case has other atypical muddled concerns that complicate the title and note holder issues.

    Also, several weeks ago, ADVOCATES reported that ADVOCATE’S TEAM had successfully stopped an Option One foreclosure base on a wrongful eviction. Since then Option One pulled the foreclosure from their foreclosure-mill attorneys indefinitely. Subsequently Option One approved the short sale and agreed to pay all closing costs requested.

    We are slowly addressing complicated issues involving another Texas property where Option /American Home Mortgage Servicing, Inc. OO/AHMS wrongfully foreclosed, selling the homeowner’s home, even after the default had been cured. OO/AHMS responded by returning the bona fide purchaser’s check to the buyer. However, the buyer returned the check to AHMS. As a result the entire property is in a state of flux, as AHMS ‘is working on it.”

    Only recently has ADVOCATES intervened by placing certain phone calls to AHMS’s legal department ,as advised by the Home Retention Department. We were given the name of the Associate General Counsel in AHMS legal department.

    We are hoping to settle the case for money damages and avoid litigation. AFJ will keep you posted. We represent the homeowner and comparative investors who had an agreement with the homeowners to purchase the house before the wrongful foreclosure trustee’s sale.

    At this time, OO/AHMS has admitted that they dropped the ball and have requested that we confer with the parties who have rights and determine what they want for remedy.

    Among the remedies proposed was: a new house, an REO house in OO/AHMS’s inventory. Additionally, we discussed that generous loan modification would have been applicable had AHMS responded in a more timely manner to resolve the issue.

    FYI, the title of the property remains in the name of the bona fide purchasers who are also investors. At this time, the ball is in our ballpark. We are conferring with the prospective attorney for the homeowners and their agents.

    Will keep you posted as to the settlement.

    We have cases in both St. Louis, MO and Indianapolis, Indiana, that ADVOCATES and their attorneys have defended for over two years nearing three. Each of the attorneys on the cases had not taken any Consumer Mortgage Defense cases before. The consumer paid ADVOCATES’ fees to consult and support the attorneys on each case.

    An AFJ case involving military personnel here in Texas resulted in Wells Fargo offering a $40,000 reduction in the obligation… to walk away. This particular client’s goal was to modify the ARM to a fixed. The walk-away price will render the homeowner house-less since his credit is such that he cannot get refinanced.

    At the time ADVOCATES began defending the consumer’s property/mortgage when he was only approximately thirty (30) days behind. His case has been in the works for about nine months without making monthly payments. The attorney has gone back to the lender with the homeowner’s counter offer; to modify the loan changing the current interest rate back to the original introductory fixed rate so he can afford stay in the home. We will keep you posted as additional facts are available.

    Wells Fargo in the above case had violated various TILA. RESPA and Texas Constitution statutory violations. Additionally, allegations for bait and switch were unquestionably applicable. The homeowner states that he was ambushed at closing with payments $300 higher than he was told or expected. As often the case in a bait and switch case, the homeowner was missing important disclosures.

    At closing, the homeowner, thinking it was too late to back out, or that contending would cause the lender to rescind their offer to lend, did his best to make payments for almost two years until his second source of income was significantly reduced. At that point he was referred to AFJ to seek possible remedies to address the issue of rising ARM payments.

    Whatever provider you chose to help you through this tenuous time, the ADVOCATES team wishes you peace and a life of well-being.

    Best Regards,
    Linda J. Rougeux
    Consumer Advocate

  82. I found something interesting in the Texas Finance Code for Texans in foreclosure. (Texas Finance Code Chapter 392 Section 306). This area of the finance code states:

    A creditor may not use an independent debt collector if the creditor
    has actual knowledge that the independent debt collector repeatedly
    or continuously engages in acts or practices that are prohibited by
    this chapter.”

    The attorney firm that is foreclosing on my home has been sanctioned multiple times in Texas for failing to verify defaults before initiating foreclosures.

    To make sure that my mortgage servicer (posing as my “lender”) had ACTUAL KNOWLEDGE that they were using the services of a debt collector that is known to violate Texas debt collection laws, I sent them a certified letter to give them ACTUAL KNOWLEDGE of this fact.

    Here is my letter:

    First Horizon Home Loans
    4000 Horizon Way
    Irving, TX 75063 October 17, 2008

    To Whom It May Concern,

    It is a violation of Texas law (Texas Finance Code Chapter 392 Section 306) to knowingly employ an independent debt collector that continually or repeatedly engages in acts or practices that are prohibited under Texas debt collection laws.

    The attorney firm of Barrett Daffin Frappier Turner & Engle, L.L.P. (also known as Barrett Burke Wilson Castle Daffin & Frappier, L.L.P.) located at 15000 Surveyor Boulevard Suite 100 Addison, Texas 75001 has been sanctioned multiple times in the state of Texas for its violation of debt collection practices.

    This letter is official notice of this information.

    Your subsequent continued employment of this attorney firm for your debt collection purposes is a violation of Texas law.

    Angella Soileau
    9195 Gross Street
    Beaumont, TX 77707

    (When pushed into a corner, we are sometimes forced to swing a punch…)

  83. Friday, September 19, 2008

    RE: New Financial Reform

    After 1986 tax reform, I found myself utilizing some of my real estate knowledge, in a very small way, assisting in the drafting of the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), and the subsequent Resolution Trust Corporation (RTC) Congress adopted in 1989. I understood the real estate component, and I became to better understand the Resolution Trust Corporation financial structure.

    Later, I purchased some of the assets placed under the control of the RTC. I understood and supported the processes which evolved in dealing with that Resolution Trust Corporation (RTC) “toxic” assets. I understood the underlying value of those assets. I understood the relationship of those asset values to the passage of time.

    In contrast, the “toxic assets” in the current financial environment resulted from a devised formula beginning with the sale to the initial individuals and institutional investors in the mortgage-backed securities (MBS) market incorrectly assumed that they actually invested in a security associated directly with “real estate”.

    However, we now hear counsel to the purveyors of this MBS paper echoing the words of Sgt. Schultz in Hogan’s Heroes, “I know nothing” when quizzed about their clients “collateralized” position(s).

    Mort(imer) Gage

  84. This case was reversed and remanded on appeal.

    Mortgage Electronic Registration Systems, Inc. v. Azize
    Fla.App. 2 Dist.,2007.

    District Court of Appeal of Florida,Second District.
    AZIZE; No. 2D05-4544.

    Feb. 21, 2007.

    Background: Mortgagee that alleged that it was the owner and holder of lost note secured by the mortgage brought action against mortgagor and others to reestablish the note and foreclose the mortgage. The Circuit Court, Pinellas County, Walt Logan, J., dismissed the complaint with prejudice for failure to state a cause of action, finding that mortgagee lacked standing. Mortgagee appealed.

    Holding: The District Court of Appeal, Davis, J., held that fact that mortgagee lacked the beneficial interest in note did not deprive it of standing.

    Reversed and remanded.

  85. Good stuff, wish more would happen to these scummy companies and their employees, lawyers and CFO’s!

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