OREGON REAL ESTATE ROUND TABLE

Tag: Foreclosure

  • MERS Enters Self-Preservation Mode, Issues Press Release To “Clarify” Its Role In Foreclosure Fraud, by Tyler Durden, Zerohedge.com


    As more people realize that the fake title transfer aspect of foreclosure fraud is just the tip of the iceberg which runs, via MERS (Mortgage Electronic Registration Systems) conduits all the way to the core of the securitization system, and thus $10 trillion in first level debt (and who knows how much in 3rd and 4th level layering of debt on top of this: think CDO-squared and cubed), we expect an increasing number of denials from the enablers in the explosion of securitization over the past ten years. Such as MERS. Which is why it is not surprising that late last night, it was precisely MERS who not only acknowledged for the first time its involvement in this whole fiasco (by a press release and a “fact and rebuttal” session), but has made it all too clear just how deep the problem truly runs. We would like to highlight just how very alike is the defense prepared by the High Frequency Signing Lobby to that by the High Frequency Traders out there: it is all just technological advancement, and if you want to blame it on someone, blame it on Intel and their fast fast chips: “What we’re seeing now is that the foreclosure process itself was not designed to withstand the extraordinary volume of foreclosures that the mortgage industry and local governments must now handle.” Obviously the volume only exploded once failed systems such as MERS appeared on the scene: it is precisely in this aspect that MERS served as an enabling catalyst to let loose the wave of exponential re-re-securitization. It continues: “The MERS process of tracking mortgages and holding title provides clarity, transparency and efficiency to the housing finance system.” And here is where MERS basically puts the ball back in the corrupt legal system’s court: “We are committed to continually ensuring that everyone who has responsibilities in the mortgage and foreclosure process follows local and state laws, as well as our own training and rules.” Because why not blame the entire judicial system, when one could just acknowledge the burden of having failed at doing their own job properly… One thing is certain: someone is going down for this biggest snafu in the history of mortgages/securitization.

    Follows the full MERS press release:

    Statement by CEO of Mortgage Electronic Registration Systems (MERS) RESTON, Va.–(BUSINESS WIRE)–

    October 09, 2010

    Mortgage Electronic Registration Systems (MERS) Chief Executive Officer R.K. Arnold today issued the following statement regarding the organization and clarifying certain aspects of its operations:

    “MERS is one important component of the complex infrastructure of America’s housing finance system. Billions of dollars of mortgage money flow through the financial system every year. It takes many, often-unseen mechanical processes to properly get those funds into the hands of qualified homebuyers.

    Technology designed to reduce paperwork has a very positive effect on families and communities. They may not see it, but these things save money and time, creating reliability and stability in the system. That’s important to keep the mortgage funds flowing to the consumers who need it. [ZH: odd how almost identical this defense is to the one prepared by the HFT lobby. Perhaps, it should now be called High Frequency Signing and Trading?]

    With millions of Americans facing foreclosure, every element of the housing finance system is under tremendous strain. What we’re seeing now is that the foreclosure process itself was not designed to withstand the extraordinary volume of foreclosures that the mortgage industry and local governments must now handle.

    MERS helps the mortgage finance process work better. The MERS process of tracking mortgages and holding title provides clarity, transparency and efficiency to the housing finance system. We are committed to continually ensuring that everyone who has responsibilities in the mortgage and foreclosure process follows local and state laws, as well as our own training and rules.”

    Facts about MERS

    FACT: Courts have ruled in favor of MERS in many lawsuits, upholding MERS legal interest as the mortgagee and the right to foreclose.

    This legal right springs from two important facts:

    1) MERS holds legal title to a mortgage as an agent for the owner of the loan 2) MERS can become the holder of the promissory note when the owner of the loan chooses to make MERS the holder of the note with the right to enforce if the mortgage loan goes into default.

    MERS does not authorize anyone to represent it in a foreclosure unless both the mortgage and the note are in MERS possession. In some cases where courts have found against MERS, those cases have hinged on other procedural defects or improper presentation of MERS’s legal interests and rights. Citations can be found at the end of this document.*

    FACT: MERS does not create a defect in the mortgage or deed of trust

    Claims that MERS disrupts or creates a defect in the mortgage or deed of trust are not supported by fact or legal precedents. This is often used as a tactic by lawyers to delay or prevent the foreclosure. The mortgage lien is granted to MERS by the borrower and the seller and that is what makes MERS the mortgagee. The role of mortgagee is legal and binding and confers to MERS certain legal rights and responsibilities.

    FACT: The trail of ownership does not change because of MERS

    MERS does not remove, omit, or otherwise fail to report land ownership information from public records. Parties are put on notice that MERS is the mortgagee and notifications by third parties can be sent to MERS. Mortgages and deeds of trust still get recorded in the land records.

    The MERS System tracks the changes in servicing rights and beneficial ownership. No legal interests are transferred on the MERS System, including servicing and ownership. In fact, MERS is the only publicly available comprehensive source for note ownership.

    While this information is tracked through the MERS System, the paperwork still exists to prove actual legal transfers still occurred. No mortgage ownership documents have disappeared because loans were registered on the MERS System. These documents exist now as they have before MERS was created. The only pieces of paper that have been eliminated are assignments between servicing companies because such assignments become unnecessary when MERS holds the mortgage lien for the owner of the note.

    FACT: MERS did not cause mortgage securitization

    MERS was created as a means to keep better track of the mortgage servicing and beneficial rights as loans were getting bought and sold at a high rate during the late 1990s.

    At the height of the housing market, low interest rates prompted some homeowners to refinance once, twice, even three times in the space of months. Banks were originating loans at more than double their usual rate. Assignments – – the document that names the holder of the legal title to the lien — primarily between servicing companies, were piling up in county land record offices, awaiting recording. Many times the loans were getting refinanced before the assignments could get recorded on the old loan. The delay prevented lien releases from getting recorded in a timely manner, leaving clouds on title.

    MERS was created to provide clarity, transparency and efficiency by tracking the changes in servicing rights and beneficial ownership interests. It was not created to enable faster securitization. MERS is the only publicly available source of comprehensive information for the servicing and ownership of the more than 64 million loans registered on the system. The Mortgage Identification Number (MIN), created by MERS, is similar in function to a motor vehicle VIN, which keeps track of these loans. Without MERS the current mortgage crisis would be even worse.

    FACT: Lenders cannot “hide” behind MERS

    MERS is the only comprehensive, publicly available source of the servicing and ownership of more than 64 million loans in the United States. If a homeowner needs to identify the servicer or investor of their loan, and it is registered in MERS, they can be helped through the MERS website or via toll-free number at 888-679-6377.

    FACT: MERS fully complies with recording statutes

    The purpose of recording laws is to show that a lien exists, which protects the mortgagee and any bona fide purchasers. When MERS is the mortgagee, the mortgage or deed of trust is recorded, and all recording fees are paid.

    *NOTABLE LEGAL VICTORIES:

    a. IN RE Mortgage Electronic Registration Systems (MERS) Litigation, a multi- district litigation case in federal court in Arizona who issued a favorable opinion, stating that “The MERS System is not fraudulent, and MERS has not committed any fraud.”

    b. IN RE Tucker (9/20/2010) where a Missouri bankruptcy judge found that the language of the deed of trust clearly authorizes MERS to act on behalf of the lender in serving as the legal title holder.

    c. Mortgage Electronic Registration Systems, Inc. v. Bellistri, 2010 WL 2720802 (E.D. Mo. 2010), where the court held that Bellistri’s failure to provide notice to MERS violated MERS’ constitutional due process rights.

     


     

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  • Refinancing, Not Foreclosures, is the Issue; Richard Alford on Bill Dudley and QEII, The Institutional Risk Analyst Blog


    One good rule thumb in trying an understand what’s happening with the [global] economy is listen to what Mr. Geithner says, and know that’s not possibly right. So, last week when Mr. Geithner states there’s no currency wars, that pretty much means it’s raging full scale, and the Fed’s dropping the biggest bombs.

     

    Joe Costello
    archein21@googlegroups.com
     

    One of the deepest, most sincere human illusions is the faith that there is (or can be) “real money” as opposed to “unreliable” money that does not hold a certain value and purchasing power. I discovered long ago from reading the history of money that this kind of certitude has never been the case except for very brief periods. Money is man-made and therefore subject to all the myriad fluctuations and follies in human arrangements. Obviously, this upsets people, especially goldbugs. They need to get over it though I doubt they ever will. I suspect Chris (maybe Joe) would like to get back to the Gold Standard, though he is too practical to say so directly. That regressive choice would be our true road to serfdom. If gold is the only “real” money, then working people should be paid for their labors in real gold, not paper certificates. 

    William Greider
    “The Last Word on Funny Money”
    9/29/10

     

    In this issue of The Institutional Risk Analyst, we return to a subject which we have awaited for nearly three decades and which many of the inhabitants of Wall Street have only recently discovered, namely the imperfection of collateral liens on mortgages underlying asset backed securities or ABS. The failure on the part of the largest banks to perfect the liens on the home, office building or other real property that underlies a securitization is turning out to be not merely a legal headache — and it is — but also the operational catalyst for the next crisis in financials. But the foreclosure mess is not — repeat not — the crux of the biscuit, to paraphrase the late great composer Frank Zappa.

     

    We also feature a comment by our contributor Dick Alford on the recent speech by NY Fed President William Dudley regarding the resumption of quantitative easing or “QE.” Suffice to say that Dudley has adopted the happy face messaging seen in use by Fed Chairman Ben Bernanke and other members of the compliant Federal Open Market Committee in Washington. Yet as we shall be telling an audience later today at American Enterprise Institute, the best part of the financial crisis lies ahead.  Click here to download the slide deck, “Pictures of Deflation.”

     

    We noted in previous comments that the Fed’s zero interest rate policy or “ZIRP,” in conjunction with QE, is draining something on the order of $1 trillion annually in income from individual and corporate savers to subsidize the banking sector. The key thing to understand about the continuing crisis in the mortgage sector is that the process of foreclosing on homes is reducing assets of commercial banks by an amount that is far larger than the $1 trillion in total tangible capital of the U.S. banking industry.  Read that last sentence again.

     

    While the Fed has been attempting to refloat these same banks — and their bond holders — on a sea of cheap money, the central bank is ignoring the larger, structural problems in the real estate sector. Forget mere valuations losses on ABS and derivatives on same. The real surprise heading for Washington and Wall Street is when everyone realizes that the big risk facing the U.S. economy is not from the foreclosure crisis, but from the actions of the “Big Five” financial monopolies — Fannie Mae, Freddie Mac, Bank of America (BAC) (Q2 2010 Stress Rating “C”), Wells Fargo (WFC) (Q2 2010 Stress Rating “B”) and JP MorganChase (JPM) (Q2 2010 Stress Rating “C”) to prevent tens of millions of American homeowners from refinancing their performing mortgages.

     

    But first, let’s take a stroll down memory lane.

     

    A few years back, a young analyst from the FRBNY named Chris Whalen went to work at the London branch of Bear, Stearns & Co. During the morning we sold German bunds and the other debt issued by what are now the EU member nations.  In the afternoon we sold mortgage-backed securities. Terms like CMO and convexity were soon heard on the trading floor as we vigorously stuffed large quantities of these very early private label RMBS into every open orifice on the European continent, including a number of large Japanese banks and insurance companies. Thus was coined the term “yield to commission.”

     

    During this period, we stayed in touch with our colleagues at the Fed, particularly a courageous attorney named Walker Todd , who was then working at the FRBNY. We described in previous comments how members of the Fed’s Washington staff persecuted Todd and other Reserve Bank officials for having the temerity to object to some of the more ridiculous policy positions pursued during the tenure of Fed Chairmen Paul Volcker and Alan Greenspan (See “IndyMac, FDICIA and the Mirrors of Wall Street’, January 6, 2009”). There is an entire chapter devoted to the good works of Chairman Volcker and his protege, Gerald Corrigan, in the upcoming book, Inflated: How Money and Debt Built the American Dream.”  And we answer the question: Is Paul Volcker the father of “Too Big To Fail?”  Click here to see the new target page for inflated.

     

    The Fed’s Washington staff was particularly infuriated by Todd’s writings regarding the amendments to the Federal Reserve Act contained in the FDICIA legislation in 1991. The amendment pushed by then-Fed staff director Donald Kohn was adopted without vote during a late-night Senate conference committee session chaired by none other than Christopher Dodd (D-CT). In a very real sense, Dodd, Kohn and armies of Wall Street attorneys from the large banks who drafted the amendment are the authors of the great bank bailout of 2008.

     

    One of the topics we discussed at length with Todd in the mid-1980s was the way in which Wall Street firms underwriting of residential mortgage backed securities or “RMBS” failed to perfect the collateral lien of the securities against the home or other real estate. This was a serious legal problem, especially if you believe in property rights and due process of law. Yet because the value of the real estate that served as collateral was rising pretty much continuously during the past several decades (Hello — What’s wrong with this picture?), the issue of imperfect collateral liens in ABS received little attention from the Fed or other regulators. See our comment: “No True Sale: Interview with Joseph Mason’, March 3, 2008”

     

    Now let’s walk through the process of creating an RMBS to illustrate the problem facing many home owners, lenders and investors. We’ll use the actual example of IRA cofounder Christopher Whalen. Back in 1998, Chris and his wife bought a home in Westchester County NY. The primary mortgage was originated by and independent broker and placred with Roslyn Savings Bank, which retained the paper for its own portfolio. In 2001, Chris refinanced with the Bank of New York Mellon (BK) (Q2 2010 Sress Rating: “A”), which immediately sold the “Alt-A” loan to the firm formerly known as Lehman Brothers. But that was only the start of this mortgage’s journey.

     

    The loan was then resold by Lehman Brothers to a special purpose vehicle (SPV) and then sold again to a Delaware trust created to securitize the mortgage into an ABS. Lehman controlled the trust, but the vehicle was administered as though it were in fact separate. Servicing was provided by Aurora Loan Servicing, a wholly owned subsidiary of Lehman, which is now being liquidated. When the time came to sell bonds to investors, the trustee for the Delaware vehicle issuing the securities repeated the process performed thousands of times before and merely took the documentation describing the mortgages into a file folder and went on to the next deal.

     

    Here’s the problem. If you go down to the Courthouse in White Plains, New York, and pull up the title record for the property purchased a decade ago by the Whalens, the only indication of any encumbrance over the collateral that is supposed to back up the securitization sold to investors by Lehman Brothers is the original assignment to Roslyn Savings and later to the Bank of New York. There is no change in recordation of the collateral lien on the property to Lehman Brothers much less the SPV or the Delaware trust that acted as the securitization vehicle in the ABS.

     

    In the event of a default, it could be argued that Lehman Brothers never owned the loan and thus never had the power to assign ownership to the SPV or the Delaware trust. Indeed, in plain legal terms, Bank of New York (and now JPMorgan, the successor to the Bank of New York retail business), is the only party with legal standing to enforce the lien on the property. But as far as Bank of New York is concerned, the loan was sold to Lehman Brothers more than a decade ago.

     

    Now you are probably wondering why the good people at Lehman Brothers never bothered to send a paralegal to the New York State Courthouse in White Plains to record a change in the collateral lien — at least regarding the sale to Lehman Brothers. The cost of perfecting the lien on the hundreds or even thousands of loans in a typical ABS costs money, but in aggregate would have added less than half a point to the cost of the deal. But the investment bankers at Lehman Brothers took that half point as profit instead of doing their jobs. No doubt claims for fraud, RICO and other misdemeanors are possible against Lehman and other RMBS underwriters, as with the civil RICO lawsuit againstCitigroup (C) (Q2 2010 Stress Rating “C”) and Ally Financial (Q2 2010 Stress Rating “A+”).

     

    You can argue that the banks were greedy and stupid for failing to perform their legally required duties as securities dealers and fiduciaries. You can also argue rightly that many banks are doing stupid things in foreclosures as they are being overwhelmed by mortgage defaults. But these very real concerns miss the larger issue. The bigger point that members of the media and the other happy campers who are following the foreclosure mess need to understand is that a poorly managed documentation trail does not change the fact that the loans are bad.  Focusing on the foreclosure mess at the expense of paying attention to the larger, secular threat from the deflation of the mortgage sector could be a fatal choice for American consumers, banks and the nation as a whole.

     

    House Speaker Nancy “Red” Pelosi (D-CA) and all of the other politicians clamouring for inquiries of bad home foreclosures are simply playing to their ill-informed audience. Neither Pelosi, most members of Congress nor the vast majority of Americans understand that the real crime by the Big Five banks is not the failure to perfect the loan documents on a mortgage a decade ago, but the active steps being taken today to prevent millions of American households from exercising their contractual right to refinance their mortgages when interest rates fall.

     

    The focus by Washington on the very real mortgage foreclosure mishaps committed by many lenders is the functional equivalent of putting Al Capone away for tax evasion. The real, continuing act of racketeering and criminality being committed by the Big Five banks is the cartel behavior which prevents home refinancing for performing borrowers and also renders Fed monetary policy largely ineffective. Instead of suing American Express (AXP), the Department of Justice should be suing the Big Five for anti-trust violations, price fixing and criminal RICO. Until the blockade erected by Fannie Mae and Freddie Mac to prevent refinancing of performing mortgages is removed, Fed monetary policy will be stymied and no amount of QE will be effective in stabilizing much less re-inflating the U.S. economy.

     

    Why Does Bill Dudley Want More QE?
    By Richard Alford

    New York Federal Reserve Bank President William Dudley gave a very well received speech last week. It is easy to see why Wall Street applauded the speech. It promised further steps by the Fed to support asset prices. It is less clear why anyone outside Wall Street would applaud the speech, as it contained arguments that were disingenuous, logically inconsistent and possibly dangerous.

     

    Dudley addressed a number of questions, including: “How much would the Fed have to purchase to have a given impact on the level of long-term interest rates and economic activity? Dudley asserts that recent experience suggests: “that $500 billion of purchases would provide about as much stimulus as a reduction in the federal funds rate of between half a point and three quarters of a point.” This was the take-away money passage and was quoted frequently in the press.

     

    However, the full answer is neither as precise nor as certain. A little later in that discussion Dudley went on to say: “Suppose the Fed was indeed successful in reducing long-term interest rates further-what then? Some claim that lower rates would have no effect on economic activity-that the Fed would be ‘pushing on a string.’ This is too dark a view. Although the responsiveness of demand to reductions in interest rates is probably lower in a world in which balance sheet constraints are important, the responsiveness is not zero. I believe that it remains significant.”

     

    Dudley asked: “How much would the Fed have to purchase to have a given impact on the level of long-term interest rates and economic activity? And asserting without qualification that QE is stimulative (and stimulative is generally understood to imply increase economic activity) in the first statement, Dudley backtracks in the second statement even as he dismisses the opposing view with an unsupported assertion: “This is too dark a view.”

     

    After presenting a precise quantitative link between QE and long-term rates, the best Dudley can offer in regard to the link between changes in long-term rates and economic activity is: “I believe that it is significant”. In fairness to Dudley, it is the best any supporter of QE can do. Given the failure of QE to stimulate the Japanese economy, there is no evidence that QE will stimulate economic activity in the US today.

     

    We need to recognize that assertions regarding the effectiveness QE are just part of a belief system unsupported by data — the definition of most modern religions.  This is troubling enough, but Dudley goes on to sketch the mechanism by which he believes that QE would support economic activity:

     

    “Even in today’s challenging circumstances; lower long-term rates would support the economy through a number of channels. Lower long-term rates would support the value of assets, including houses and equities and household net worth. Lower long-term rates would make housing more affordable and support consumption by enabling households to refinance their mortgages at lower rates. This would increase the amount of income left over for other spending.”

     

    In short, Dudley supports QE partly because he believes that it would lead to a policy-based, higher asset-price, easier credit, consumption-driven boom much like but more widely based than either the NASDAQ technology stock or more recent real estate bubbles. This ought to be very troubling as it suggests that the Fed has not learned from past mistakes.  The Fed believed that the financial markets without serious oversight were efficient and robust enough to weather a prolonged period of a near zero real and then unusually low Fed funds rates, as well as a tidal wave of financial innovation. The Fed’s fundamentalist faith in efficient markets was misplaced, as shown when risks they had dismissed were realized. Currently, the markets is pricing-in the Fed ushering in QE2 with “shock and awe” after the next FOMC meeting. It appears that the Fed will expose the economy to risks it has cavalierly dismissed as “too dark” in pursuit of returns that it “believes” exist. The public deserves better. It deserves a good faith analysis and honest presentation of both the upside and downside risks attached to QE.

     

    Early in the speech, Dudley applauded the rise in the personal savings rate and deleveraging as necessary steps to restore sustainable growth. However, late in the speech he argues that QE will work because it will depress savings and encourage the re-leveraging of the economy. But how can we re-leverage the economy when, as discussed above, banks are shrinking because neither the Treasury or the Fed have the courage to immediately restructure these institutions?  Logical consistency ought to be a necessary component of policy and explanations of policy, but apparently not at the Fed.

     

    Dudley remains mute on a number of ancillary issues. For example, he does not mention the transference of more than three-quarters of a trillion dollars annually from savers to the banks due to low rates even though this decreases the amount of income available for consumption spending. He also remains mute on the blurring of the distinction between the Fed and Treasury. From the Fed financing the public ownership of AIG to the apparent willingness to commit to monetizing (though QE) of the fiscal deficit, the Fed has moved in the direction of allowing both the Executive and Legislative branches of government to avoid their responsibilities.

     

    It is October in an election year. One expects speeches such as this from candidates running for public office, but not from Fed officials.

     

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  • After Foreclosure, a Focus on Title Insurance, Ron Lieber, Nytimes.com


    When home buyers and people refinancing their mortgages first see the itemized estimate for all the closing costs and fees, the largest number is often for title insurance.

    This moment is often profoundly irritating, mysterious and rushed — just like so much of the home-buying process. Lenders require buyers to have title insurance, but buyers are often not sure who picked the insurance company. And the buyers are so exhausted by the gauntlet they’ve already run that they’re not interested in spending any time learning more about the policies and shopping around for a better one.

    Besides, does anyone actually know people who have had to collect on title insurance? It ultimately feels like a tax — an extortionate one at that — and not a protective measure.

    But all of the sudden, the importance of title insurance is becoming crystal-clear. In recent weeks, big lenders likeGMAC Mortgage, JPMorgan Chase and Bank of Americahave halted many or all of their foreclosure proceedings in the wake of allegations of sloppiness, shortcuts or worse. And a potential nightmare situation has emerged that has spooked not only homeowners but lawyers, title insurance companies and their investors.

    What would happen if scores of people who had lost their homes to foreclosure somehow persuaded a judge to overturn the proceedings? Could they somehow win back the rights to their homes, free and clear of any mortgage? But they may not be able to simply move back into their home at that point. Banks, after all, have turned around and sold some of those foreclosed homes to nice young families reaching out for a bit of the American dream. Would they simply be put out on the street? And then what?

    The answer to that last question may depend on whether those new homeowners have title insurance, because people who buy a home without a mortgage can choose to go without a policy.

    Title insurance covers you in case people turn up months or years after you buy your home saying that they, in fact, are the rightful owners of the house or the land, or at least had a stake in the transaction. (The insurance may cover you in other instances as well, relating to easements and other matters, but we’ll leave those aside for now.)

    The insurance companies or their agents begin any transaction by running a title search, sifting through government filings related to the property. They do this before you buy a home or refinance your mortgage to help sort out any problems ahead of time and to reduce the risk of your filing a claim later.

    But sometimes they miss things, and new issues can arise later.

    For instance, the person doing the title search may not notice that a home equity loan is still outstanding or that a contracting firm filed a lien against the owner years ago. That could create problems for you later, when you try to sell the home.

    Then there are the psychodramas that can ensue. The previous owner’s long-lost heirs or a previously unknown love child could show up, saying that they never agreed to the sale of the property. Or perhaps there was fraud against a seller who was elderly or had a mental disability, or forgery of an estranged spouse’s signature. It’s rare, but it happens, and when it does, your title insurance company is supposed to provide legal counsel or settle with whomever is making a claim.

    Title insurance companies would like you believe that they are the good guys standing behind you. After all, you are the customer who owns the policy.

    In fact, many of the title insurance companies are more concerned about the real estate agents, lawyers and lenders who can steer business their way. The title insurance companies are well aware that most people do not shop around for title insurance, even though it’s possible to do so — say through a Web site like entitledirect.com.

    While the title insurers are not supposed to kick back money directly to companies or brokers that send business their way, various government investigations over the years have turned up all sorts of cozy dealings that make you shake your head in disgust.

    But since you have to buy the insurance if you need a mortgage, there is not much you can do except hold your nose.

    That’s what John Kovalick did in January when he bought a foreclosed house in Deltona, Fla., for $102,000 from Deutsche Bank. But in recent weeks, he’s seen the headlines about other banks halting foreclosures and wondered whether something might have gone wrong with the foreclosure on his new house. A spokesman for Deutsche Bank declined comment.

    Mr. Kovalick is not the only one pondering what could go wrong. While the banks were pressing the pause button on many foreclosures, some title insurers were growing concerned as well.

    On Oct. 1, Old Republic National Title Insurance Company released a notice forbidding any agents or employees to issue new policies on homes that had been recently foreclosed by GMAC Mortgage or Chase.

    Clearly, the title insurer was also worried about a situation in which untold numbers of former homeowners have their foreclosures overturned. At that point, those individuals might claim the right to take back their old homes, but they’d also be responsible for, say, a $400,000 loan on a home that is worth half that.

    So what would happen next? The banks that foreclosed might start the process over again. At that point, lawyers for the people who had been foreclosed upon might take the next logical step and try to show that the banks never had the documents to prove ownership of the mortgage in the first place. The banks might settle at that point, writing checks to everyone who had gone through a disputed foreclosure in exchange for each of them giving up the title.

    But if banks did not settle, or the evicted homeowners refused to settle and fought on and won, they might end up owning their homes once again and not owing the bank either.

    Or banks might agree to slice a big chunk off the remaining balance in exchange for a release from any liability for the errors it made.

    At that point — and again, this is what Old Republic and investors in other title insurers fear — those homeowners might actually want to move back in. But some foreclosed homes were sold by the banks to others who now live there. And those new residents would have big, fat title insurance claims if their predecessors ever turned up at their doorsteps, proclaimed them trespassers and told them to leave.

    “All of these Joe Schmos who did everything legally would then be in the middle of it, too,” said Mr. Kovalick, who manages an auto repair shop and is now hoping not to be one of those Schmos.

    “Now, you’d have two total disasters,” he said. “How would you like to be the judge to get that first case?”

    While homeowners like Mr. Kovalick may have title insurance, it generally covers them only for the purchase price of the home. When you buy a home out of foreclosure, however, it often needs a lot of work. “If I bought it at $200,000 and it’s a steal but I had to gut it and sink $100,000 more in, my recovery is limited if there is a problem,” said Matthew Weidner, a lawyer in St. Petersburg, Fla.

    Indeed, this possibility has occurred to Mr. Kovalick, who has plans to put an addition on his home and is asking how he could extract that investment if someone ever turned up on his doorstep and asked him to leave. “What do I do, take the paint off the walls and the custom blinds off the windows?”

    Chances are, it will not come to that. After all, title insurers could settle with the previous residents, allowing them to walk away with a big check to restart their lives elsewhere.

    Still, for anyone considering buying a bargain home out of foreclosure anytime soon, consider asking your title insurer if any special riders are available that can cover appreciation on your home in the event of a total loss.

    That said, if you can possibly help it, stay away from foreclosed homes until the scene shakes out a little bit.

    Some people will undoubtedly make a fortune investing in these properties in the next few months. But if your down payment represents most of what you have in the world, it’s hard to justify betting it all on a situation like this one.

     

     

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  • BofA Extends Freeze on Foreclosures to All 50 States, by Michael J. Moore, Lorraine Woellert and Dakin Campbell, Bloomberg.com


     

    DAVOS/SWITZERLAND - Brian T. Moynihan, Preside...
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    Bank of America Corp., the biggest U.S. lender, extended a freeze on foreclosures to all 50 states as concern spread among federal and local officials that homes are being seized based on false data.

    “We just want to clear the air,” Bank of America Chief Executive Officer Brian T. Moynihan said today in a speech to the National Press Club in Washington.

    Bank of America, JPMorgan Chase & Co. and Ally Financial Inc. already froze foreclosures in 23 states where courts supervise home seizures amid allegations that employees used unverified or false data to speed the process. Bank of America’s new policy extends its moratorium to the entire nation, and the announcement spurred more demands from public officials and community groups for other banks to follow suit.

    “All mortgage providers should follow the example of Bank of America and review their practices to ensure that they are not unfairly targeting homeowners in Nevada and across the nation,” Senate Majority Leader Harry Reid, a Democrat from Nevada, said today in a statement.

    PNC Financial Services Group Inc. halted sales of foreclosed homes for a month to review documents in its mortgage servicing procedures, according to an Oct. 4 memo the Pittsburgh-based bank sent to lawyers handling the lender’s foreclosures.

    Bank of America fell 13 cents, or 1 percent, to $13.18 at 4 p.m. in New York Stock Exchange composite trading. The shares have lost 12 percent this year.

    States Investigating

    “We will stop foreclosure sales until our assessment has been satisfactorily completed,” the Charlotte, North Carolina- based company said today in a statement. “Our ongoing assessment shows the basis for foreclosure decisions is accurate.”

    At least seven states are investigating claims that home lenders and loan servicers took shortcuts to speed foreclosures. Attorneys general in Ohio and Connecticut have said some of the practices used by banks to take away homes may amount to fraud. Acting Comptroller of the CurrencyJohn Walsh last week asked the nation’s seven biggest lenders to review foreclosures for defective documents, spokesman Bryan Hubbard said.

    “Bank of America has done the right thing by stopping foreclosures in all 50 states,” North Carolina Attorney General Roy Cooper said today in a statement. “Other banks that have questionable procedures should do the same while the investigation continues.”

    President Barack Obama’s administration didn’t pressure the bank to enact the freeze, Moynihan said.

    Record Foreclosures

    Lenders took possession of a record 95,364 homes in August and issued foreclosure filings to 338,836 homeowners, or one of every 381 U.S. households, according to RealtyTrac Inc., an Irvine, California-based data vendor.

    Wells Fargo spokeswoman Vickee Adams said the lender is still processing foreclosures and referred to a statement the bank put out earlier this week, saying “our affidavit procedures and daily auditing demonstrate that our foreclosure affidavits are accurate.”

    Thomas Kelly, a spokesman for New York-based JPMorgan, and Gina Proia, spokeswoman for Detroit-based Ally, declined to comment.

    “Bank of America has made the right choice given the circumstances of this scandal,” said Kevin Stein, associate director of the California Reinvestment Coalition in San Francisco. “The primary concern for all of these banks should be to figure out where they are handling foreclosures illegally before they erroneously and unfairly take another family’s home.”

    Lawmakers React

    In Washington, dozens of lawmakers in Congress have called for a freeze on foreclosures and are seeking investigations. House Oversight and Government Reform Committee ChairmanEdolphus Towns yesterday demanded a moratorium and asked New York State Attorney General Andrew Cuomo to investigate allegations of fraud. Towns, a New York Democrat, led hearings last year into Bank of America’s federal bailouts.

    “The implications of ignoring the foreclosure problems are far too great to be ignored,” Towns said in a statement. “Bank of America did the right thing today and I expect to see every other responsible banking institution follow their lead.”

    On Wednesday, two members of the House Financial Services Committee, Luis Gutierrez of Illinois and Dennis Moore of Kansas, asked the Special Inspector General of the Troubled Asset Relief Program to investigate foreclosure practices.

    ‘Unwarranted Foreclosures’

    “There is already enough evidence of unwarranted foreclosures and irregularities by lenders and servicers to warrant full investigations into the practices of these financial institutions,” the lawmakers wrote in a letter.

    A coalition of community organizer groups and labor unions, including the National People’s Action and the Service Employees International Union, called for a national freeze on foreclosures.

    “It is unconscionable that Wall Street banks continue to use a corrupt and fraudulent procedure to flood the housing market with illegal foreclosures that are throwing millions of American families out of their homes,” the groups said in a statement today. “It’s the latest example of a predatory industry.”

    To contact the reporters on this story:
Michael J. Moore in New York at
mmoore55@bloomberg.net;
Lorraine Woellert in Washington at
lwoellert@bloomberg.net;
Dakin Campbell in San Francisco at
dcampbell27@bloomberg.net.To contact the editors responsible for this story:
Alec D.B. McCabe in New York at
amccabe@bloomberg.net;
Rick Green in New York at
rgreen18@bloomberg.net.
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  • The Foreclosure Mess MBS Hate Triangle Emerges: Junior Versus Senior Bondholders Versus Servicers, by Tyler Durden, Zerohedge.com


    The WSJ has an article that does a great job of qualifying the impact of what the foreclosure halt will do to the traditional cash waterfall priority schedule inherent in every MBS deal. To wit: junior bondholders will rejoice as they will receive payments for the duration of the halt/moratorium (these would and should cease upon an act of foreclosure), while senior bondholders will suffer, as the deficiency money will come out of the total “reserve” in the pooling and servicing agreement set up by the servicers. As for the servicers themselves, they should be “reimbursed by funds in the trust for all costs related to litigation and extra processing of foreclosures, provided they follow standard industry practices.” In other words, it will now become “every man, sorry, banker for themselves” as each party attempts to preserve as much capital as possible given the new development: juniors will push for an indefinite foreclosure halt, seniors will seek an immediate resumption of the status quo, while the servicers stand to get stuck with billion dollar legal and deficiency fees if it is found that “standard industry practices” were not followed. Alas, it would appears that the servicers have by far the weakest case, and the impact to the banks, whose sloppy standards brought this whole situation on, will be in the tens if not billions of dollars. Oh, and suddenly both junior and senior classes will be embroiled in very vicious, painful, and extended litigation with the servicers. Lots of litigation.

    More from the WSJ on the conflict between juniors and seniors:

    When houses that have been packaged into a mortgage bond are liquidated at a foreclosure sale—the very end of the foreclosure process—the holders of the junior, or riskiest debt, would be the first investors to take losses. But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

    The latest events thus set up an odd circumstance where junior bondholders—typically at the bottom of the credit structure—could actually end up better off than they expected. Senior bondholders, typically at the top, could end up worse off.

    Not surprisingly, senior debt holders want banks to foreclose faster to reduce expenses. Junior bondholders are generally happy to stretch things out. What is more, it isn’t entirely clear how the costs of re-processing tens of thousands of mortgages will be allocated. Those costs could be “significant” said Andrew Sandler, a Washington, D.C., attorney who represents mortgage companies.

    “This is sort of an extraordinary situation,” said Debashish Chatterjee, a vice president for Moody’s Investors Service who covers structured finance. By delaying foreclosures, “it means the subordinate bondholders don’t get written down for a much longer period of time, and they keep getting payments.”

    This, however, ignores the class that will impacted the most by all this: servicers.

    Typically, mortgage servicers enter into contracts called pooling and servicing agreements with bondholders that spell out the servicers’ obligations to manage the loans in the best interests of the investors. These agreements provide that the servicers be reimbursed by funds in the trust for all costs related to litigation and extra processing of foreclosures, provided they follow standard industry practices.

    Servicing companies hope the reviews will be quick. At GMAC Mortgage, a unit of Ally Financial Inc., the vast majority of these affidavits will be resolved in the coming weeks and before the end of the year,” a spokeswoman for the company said. A spokesman for J.P. Morgan Chase & Co. said the company’s review process is expected to take “a few weeks.”

    But the problems could be magnified if the reviews uncover a lack of proper documentation or other substantive problems rather than simple procedural errors. The furor over servicer practices is also likely to trigger additional legal challenges from borrowers facing foreclosure and more judicial scrutiny, which could further slow the process and increase foreclosure costs.

    And the explanation for why one day soon the XLF will open limit down, as soon as Wall Street sellside research gets their cranium out of their gluteus:

    “It’s very hard to see how the servicers can avoid reimbursing the trusts for losses caused by taking short cuts,” said David J. Grais, an attorney in New York who represents investors. Investors could press trustees to investigate servicer conduct, sue the servicers to recoup damages or replace a servicer, he said.

    As we said: lots of litigation… playa.

    And since Wall Street continues to refuse to touch this topic with a ten foot pole (here is the bottom line for those who may not have been paying attention: huge hits to bank EPS) Zero Hedge is in the process of quantifying just how many billions of dollars each day, week and month of halted foreclosures will bring to the juniors, and how many more billions servicers will be on the hook for unless they manage to convince each of the hundreds of judges in thousands of upcoming lawsuits that all the mortgage fraud (for lack of a better word) was “standard industry practice.”

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  • In foreclosure controversy, problems run deeper than flawed paperwork, by Brady Dennis and Ariana Eunjung Cha, Washingtonpost.com


    Sign of the times - Foreclosure
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    Millions of U.S. mortgages have been shuttled around the global financial system – sold and resold by firms – without the documents that traditionally prove who legally owns the loans.

    Now, as many of these loans have fallen into default and banks have sought to seize homes, judges around the country have increasingly ruled that lenders had no right to foreclose, because they lacked clear title.

    These fundamental concerns over ownership extend beyond those that surfaced over the past two weeks amid reports of fraudulent loan documents and corporate “robo-signers.”

    The court decisions, should they continue to spread, could call into doubt the ownership of mortgages throughout the country, raising urgent challenges for both the real estate market and the wider financial system.

    For struggling homeowners trying to avoid foreclosure, it could mean an opportunity to challenge the banks they argue have been unhelpful at best and deceptive at worst. But it also threatens to leave them in prolonged limbo, stuck in homes they still can’t afford and waiting for the foreclosure process to begin anew.

    For big banks, “there’s a possible nightmare scenario here that no foreclosure is valid,” said Nancy Bush, a banking analyst from NAB Research. If millions of foreclosures past and present were invalidated because of the way the hurried securitization process muddied the chain of ownership, banks could face lawsuits from homeowners and from investors who bought stakes in the mortgage securities – an expensive and potentially crippling proposition.

    For the fragile housing market, already clogged with foreclosure cases, it could mean gridlock and confusion for years. And there is concern in Washington that if the real estate market and financial institutions suffer harm, it could force the government to step in again. Attorney General Eric H. Holder Jr. said Wednesday he is looking into the allegations of improper foreclosures, and Sen. Christopher J. Dodd (D-Conn.), chairman of the Senate banking committee, said he plans to hold hearings on the issue.

    At the core of the fights over the legal standing of banks in foreclosure cases is Mortgage Electronic Registration Systems, based in Reston.

    The company, known as MERS, was created more than a decade ago by the mortgage industry, including mortgage giants Fannie Mae and Freddie Mac, GMAC, and the Mortgage Bankers Association.

    MERS allowed big financial firms to trade mortgages at lightning speed while largely bypassing local property laws throughout the country that required new forms and filing fees each time a loan changed hands, lawyers say.

    The idea behind it was to build a centralized registry to track loans electronically as they were traded by big financial firms. Without this system, the business of creating massive securities made of thousands of mortgages would likely have never taken off. The company’s role caused few objections until millions of homes began to fall into foreclosure.

    In recent years, the company has faced numerous court challenges, including separate class-action lawsuits in California and Nevada – the epicenter of the foreclosure crisis. Lawyers in other states have also challenged the company’s legal standing in court.

     

    Kentucky lawyer Heather Boone McKeever has filed a state class-action suit and a federal civil racketeering class-action suit on behalf of homeowners facing foreclosure, alleging that MERS and financial firms that did business with it have tried to foreclose on homes without holding proper titles.

    “They have no legal standing and no right to foreclose,” McKeever said. “If you or I did this one time, we’d be in jail.”

    Judges in various states have also weighed in.

    In August, the Maine Supreme Court threw out a foreclosure case because “MERS did not have a stake in the proceedings and therefore had no standing to initiate the foreclosure action.”

    In May, a New York judge dismissed another case because the assignment of the loan by MERS to the bank HSBC was “defective,” he said. The plaintiff’s counsel seemed to be “operating in a parallel mortgage universe,” the judge wrote.

    Also in May, a California judge said MERS could not foreclose on a home, because it was merely a representative for Citibank and did not own the loan.

    On the other hand, Minnesota legislators passed a law stating that MERS explicitly has the right to bring foreclosure cases. And on its Web site and in e-mails, MERS cites numerous court decisions around the country that it says demonstrate the company’s right to act on behalf of lenders and to undertake foreclosures.

    “Assertions that somehow MERS creates a defect in the mortgage or deed of trust are not supported by the facts,” a company spokeswoman said.

    But that’s precisely what lawyers are arguing with more frequency throughout the country. If such an argument gains traction in the wake of recent foreclosure moratoriums, the consequences for banks could be enormous.

    “It’s an issue of the whole process of foreclosure having been so muddied by the [securitization] process,” said Bush, the banking analyst. “It is no longer a straightforward legalistic process, which is what foreclosures are supposed to be.”

    Janet Tavakoli, founder and president of Tavakoli Structured Finance, a Chicago-based consulting firm, said that for much of the past decade, when banks were creating mortgage-backed securities as fast as possible, there was little time to check all the documents and make sure the paperwork was in order.

    But now, when judges, lawyers and elected officials are demanding proper paperwork before foreclosures can proceed, the banks’ paperwork problems have been laid bare, she said.

    The result: “Banks are vulnerable to lawsuits from investors in the [securitization] trusts,” Tavakoli said.

    Referring to the federal government’s $700 billion Troubled Assets Relief Program for banks, she added, “This problem could cost the banks significantly more money, which could mean TARP II.”

    dennisb@washpost.com chaa@washpost.com

     

     

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  • U.S. Justice Dept. probing foreclosure processes, Yahoo.com


    Pelli's Wells Fargo Center, Minneapolis, Minne...
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    WASHINGTON (Reuters) – The U.S. Justice Department said on Wednesday it was probing reports the nation’s top mortgage lenders improperly evicted struggling borrowers from their homes as part of the devastating wave of foreclosures unleashed by the financial crisis.

    Amid mounting political outrage over the U.S. mortgage mess, key members of U.S. congressional banking committees joined calls for probes into the foreclosure activities of banks accused of tossing homeowners out without proper review.

    At least three banks have already halted eviction proceedings, and various lawmakers have called for an industry-wide moratorium on home repossessions until the problems are fixed. Attorney General Eric Holder said the Justice Department would look into media reports that loan servicers improperly have used “robo-signers” to push through thousands of foreclosure orders.

    Holder’s move, and the rising chorus of fury among lawmakers, comes ahead of November congressional elections and takes aim at one of the most visible signs of the U.S. economic crisis as hundreds of thousands of families have lost their homes as unemployment surged.

    The moves on foreclosures risk further slowing the U.S. economic recovery, leaving banks unsure whether they will ever claw back losses and the housing market overshadowed by a mounting inventory of homes still likely to face foreclosure in future.

    U.S. House of Representatives Speaker Nancy Pelosi and fellow Democrats wrote to Holder earlier this week asking the Justice Department to look into banks’ actions after receiving reports from thousands of homeowners about their foreclosure woes.

    On Wednesday, the lead Republican on the Senate Banking Committee, Senator Richard Shelby, called on federal regulators to review the foreclosure practices of JPMorgan Chase and Co (JPM.N), Bank of America Corp (BAC.N) and Ally Financial Inc, formerly known as GMAC, and said a congressional investigation should also be started.

    Two senior Democratic members of the House Financial Services Committee also said it was time to examine whether the banks broke the law based on their participation in the law that governed the Troubled Asset Relief Program, the $700 billion bailout of financial firm.

    “The American people helped out these companies and the least they deserve is a guarantee of due process and fairness,” Representatives Luis Gutierrez and Dennis Moore said.

    Banks are expected to take over a record 1.2 million homes this year, up from about 1 million last year, according to real estate data company RealtyTrac Inc.

    Federal and state officials have pushed to suspend foreclosures after reports that banks signed large numbers of foreclosure affidavits without conducting proper reviews.

    Banks and loan servicers, companies that collect monthly mortgage payments, reportedly have used “robo-signers” — middle-ranking executives who signed thousands of affidavits a month claiming they were knowledgeable of the cases.

    Separately on Wednesday, Wells Fargo & Co (WFC.N) agreed to pay eight states $24 million after allegations of deceptive marketing practices at its home loan unit. The firm said it would also alter its foreclosure prevention practices that could benefit struggling homeowners by more than $700 million.

    Wells Fargo Home Mortgage‘s chief financial officer, Franklin Codel, told Reuters that his unit did not cut corners to speed the foreclosure process. He said he was “confident that the paperwork is being properly produced.”

    STATES TAKE ACTION

    The issue on improper handling of foreclosures came to the fore last month when Ally Financial said officials had signed thousands of affidavits without having personal knowledge of borrowers’ situations.

    Ally suspended evictions and post-foreclosure proceedings in 23 states last month, followed by similar moves by JPMorgan Chase & Co and Bank of America.

    The foreclosure issue and the battered state of the U.S. housing market have weighed on the Obama administration ahead of the November congressional elections in which the Democrats already face the possibility of big losses.

    Any broader push to solve the foreclosure crisis, such as the wholesale forgiveness of principal debt of struggling homeowners, is unlikely to find support among lawmakers because of the cost and the potential for political backlash from any move seen as rewarding reckless behavior by banks or borrowers.

    The focus on bank procedures has thrown a new twist into the saga.

    North Carolina Attorney General Roy Cooper on Wednesday became the latest state official to ask lenders to suspend home repossessions as he probes foreclosure practices.

    Democratic Senator Robert Menendez earlier this week raised the idea of a national foreclosure moratorium.

    Ally Financial and its GMAC Mortgage unit also were targeted by Ohio’s attorney general, Richard Cordray, on Wednesday, who announced a lawsuit alleging fraud and violations of Ohio’s consumer law.

    Cordray also said he has sought meetings with Citibank (C.N), Bank of America, JPMorgan Chase and Wells Fargo to try to ascertain whether their foreclosure processes include any of the “mass” signing of official papers that are the subject of the suit against GMAC Mortgage.

    Gina Proia, a spokeswoman for Ally Financial, said there was nothing fraudulent or deceitful about GMAC Mortgage’s practices. She said the company will “vigorously defend” itself, and expects to be fully vindicated by the Ohio courts.

    GMAC Mortgage said in a statement it “believes there was nothing fraudulent or deceitful about its foreclosure practices. If procedural mistakes were made in the completion of certain legal documents, GMAC Mortgage reacted proactively to the issue and immediately undertook steps to remedy the situation.”

    (Writing by Corbett B. Daly and Andrew Quinn; Editing by Leslie Adler)

     

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  • Citigroup, Ally Sued for Racketeering Over Database, by Margaret Cronin Fisk and Thom Weidlich, Bloomberg.com


    Map of USA with Kentucky highlighted
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    Citigroup Inc. and Ally Financial Inc. units were sued by homeowners in Kentucky for allegedly conspiring with Mortgage Electronic Registration Systems Inc. to falsely foreclose on loans.

    The lawsuit, filed as a civil-racketeering class action on behalf of all Kentucky homeowners facing foreclosure, also names as a defendant Reston, Virginia-based MERS, the company that handles mortgage transfers among member banks. The suit claims that through MERS the banks are foreclosing on homes even when they don’t hold titles to the properties.

    “Defendants have filed foreclosures throughout the state of Kentucky and the United States of America knowing that they were not the ‘owners’ or beneficiaries of the loan they filed foreclosure upon,” the homeowners wrote in their complaint filed Sept. 28 in federal court in Louisville, Kentucky.

    The homeowners claim the defendants filed or caused to be filed mortgages with forged signatures, filed foreclosure actions months before they acquired any legal interest in the properties and falsely claimed to own notes executed with mortgages.

    The lawsuit is one of multiple cases against MERS and banks alleging that the process allows wrongful foreclosures. Several of these cases, combined in a multidistrict litigation in Phoenix, were dismissed Sept. 30, with the judge allowing the plaintiffs to re-file their complaints.

    ‘Inflammatory’

    “The allegation is inflammatory and without merit and we intend to defend our position fully in a court of law,” Gina Proia, a spokeswoman for Ally, said in an e-mailed statement.

    Mark Rodgers, a spokesman for Citigroup, declined to comment. Karmela Lejarde, a spokeswoman for MERS, didn’t have an immediate comment.

    The Kentucky suit claims MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime.

    “RICO comes in because the fraud didn’t just happen piecemeal,” Heather Boone McKeever, a Lexington, Kentucky-based lawyer for the homeowners, said in a phone interview today. “This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

    The suit, which includes claims of fraud, also names as defendants other banks, real-estate law firms and document- processing companies.

    In the Phoenix litigation, U.S. District Judge James A. Teilborg found that the mortgage banks properly named MERS as the nominee for the original lenders and that the plaintiffs didn’t include enough detail in their allegations that the banks formed MERS to conspire to deprive homeowners of their property.

    ‘Straw Man’

    Last year, the Kansas Supreme Court found that MERS’s relationship to the lenders is “akin to that of a straw man” and that it didn’t have rights over the mortgage at issue.

    “Having a single front man, or nominee, for various financial institutions makes it difficult for mortgagors and other institutions to determine the identity of their lenders and mortgagees,” the Kansas court said.

    The case is Foster v. Mortgage Electronic Registration Systems Inc., 10-cv-611, U.S. District Court, Western District of Kentucky (Louisville).

    To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, atmcfisk@bloomberg.net; Thom Weidlich in Brooklyn, New York, federal court attweidlich@bloomberg.net.

    To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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  • Multi-Billion-Dollar Class Action Suits Filed Against Lender Processing Services for Illegal Fee Sharing, Document Fabrication; Prommis Solutions Also Targeted, Nakedcapitalism.com


    Welcome to our new readers from the FCIC.

    Lender Processing Services, a crucial player in the residential mortgage servicing arena, has been hit with two suits seeking national class action status (see here and here for the court filings). If the plaintiffs prevail, the disgorgement of fees by LPS could easily run into the billions of dollars (we have received a more precise estimate from plaintiffs’ counsel). To give a sense of proportion, LPS’s 2009 revenues were $2.4 billion and its net income that year was $276 million.

    These suits, one of which was filed late last week, the other Monday, appear to be the proximate cause for the sharp drop in LPS stock, which fell 5% on Friday and 8% Monday (trading was halted just prior to the close of the trading day).

    Those close to the foreclosure process have lodged many complaints against LPS. But the two suits we highlight here level the most serious and wideranging allegations thus far.

    By way of background, we’ve described issues with foreclosure mills and the flaws in the securitization process at some length in previous posts (see here and here for some recent posts which contain overview material). As evidence about problems with the foreclosure process have surfaced at more and more servicers, one of the common themes has been that a substantial portion of the foreclosure process was outsourced to various processing companies. Foreclosure defense attorneys have cited one firm, called Lender Processing Service (LPS) as one of the largest as well as more problematic firms in the outsourced foreclosure business. In addition, by 2008, LPS had purchased a company called DocX, the company responsible for the“document production” price sheet cited here earlier.

    LPS is effectively in three lines of business (which are organized in two divisions): Technology, Data, and Analytics; Loan Services, and Default Services. The suits focus on the practices of the Default Services operation, which contributed $1.137 billion, or 48% of total revenues. The allegations set forth in the suits involve its Default Services, which organizes and manages foreclosures (including property management and REO auctions) on behalf of servicers.

    But the rub in this line of business is that the servicers are technically not the clients. LPS acts a sort of general contractor, farming out various tasks to both internal staff as well as outside firms. But LPS’s business pitch to the servicing industry was that it would come in and use a technology platform and provide (if desired) a turnkey solution, FOR NO ADDITIONAL COST than what the servicers were already paying on foreclosures.

    How could that be? All of LPS’s revenues in Default Services come from the lawyers in the national network of foreclosure mills that LPS has developed over time. Note that these cases may be filed in state court or federal bankruptcy court, depending on the situation of the borrower. In a routine foreclosure, all legal actions will be filed in state court. If the borrower has filed for a Chapter 13 bankruptcy, the Federal bankruptcy court has jurisdiction. In theory, the bankruptcy filing stops the actions of all creditors until the borrower has worked out a payment plan with the court. But in these cases, LPS and its network firms are seeking to break the bankruptcy court time out and grab the borrower’s house (the legal procedure is “motion for relief of stay”).

    To illustrate the degree of control LPS exercises over its network: we have been told by an LPS insider that the software that LPS uses to coordinate with all law firms in its network, LPS Desktop, incorporates a scoring system called 3/3/30. When LPS sends a referral on a foreclosure, the referee is expected to respond in three minutes. When it accepts the referral, it is auto debited (ACH or credit card). In three days, it is expected to have filed the first motion required in pursing the case, and it is expected to have resolved the case in 30 days. Firms are graded according to their ability to meet these time parameters in a green/yellow/red system. Firms that get a red grade are given a certain amount of time to improve their results or they are kicked out of the network.

    The cases describe the many fees between LPS and the network law firms. The terms of standard agreements provide for the payment of $150 at the time of referral (the first 3 in the 3/3/30 standard above). Network firms allegedly pay other fees as various milestones are reached, and these are couched as fees for technology, administrative review, document execution, and other legitimate-sounding services. We’ve also been told separately by LPS insiders that LPS and network law firms split the fee for the motion for relief of stay in bankruptcy court, as well as the fee on a small filing called a proof of claim.

    What, pray tell, is wrong with this business model? The two suits attack LPS’s very foundations. One case was filed late last week in Federal bankruptcy court in Mississippi and the other in state court in Kentucky. Both make similar allegations, but the Federal case is broader in some respects (it includes a company called Prommis Solutions a firm backed by Great Hill Partners, that like LPS, provides services to foreclosure mills, including one named in this case as defendant along with LPS).

    The Kentucky case includes on the RMBS trust issue that we have discussed in this blog. First, it contends that the mortgage assignment attempted by the the local law firm to allow the trust foreclose was a void under New York law, which governs the trust. Hence the foreclosure was invalid. Second, it claims that the defendants (the local law firm and LPS) fabricated documents. Third, the plaintiffs claim that the defendants (LPS and the local law firm) conspired together to practice systemic fraud upon the court and engage fee sharing arrangements, which is tantamount to the unauthorized practice of law (It is illegal for a law firm to split fees with a non-lawyer or to pay a non-lawyer for a referral; it’s considered to be the unauthorized practice of law). And this leads to some very serious conclusions. Per the Kentucky case:

    This attempt by the Trust to take Stacy’s real property is most analogous to stealing since this Trust cannot provide any legal evidence of ownership of the promissory note in accordance with the requirements of New York law which governs and controls the actions of the Trust and the Trustee acting on behalf of the trust.

    But the real meat in these cases are the class action claims, and they are real doozies. Both allege undisclosed contractual arrangements for impermissible legal fee splittings, which are camouflaged as various types of fees we described earlier. The suits describe the considerable lengths that LPS has gone to to keep these illegal kickbacks secret, including requiring that all attorneys who join the network keep the arrangement confidential. as well as using dubious “trade secret” claims to forestall their disclosure in discovery.

    As bad as this fact pattern is, it has even more serious implications for the bankruptcy court filing in Mississippi. In a bankruptcy case, any attorney pleading before the court must disclose every disbursement pursuant to a case, no matter how minor. Yet the payment of fees to LPS have never been disclosed to a single bankruptcy judge in the US, since LPS requires they be kept confidential. LPS and its network lawyers are thus engaged in a massive, ongoing fraud on all bankruptcy courts in the US.

    The Prommis Solutions/Great Hill charges are included only in the Mississippi case. Prommis is broadly in the same business as LPS’s Default Services unit (”leading provider of technology-enabled processing services for the default resolution sector of the residential mortgage industry”). And Prommis and its investor Great HIll, like LPS, are not a law firms, which means their participation in foreclosure-related legal fees constitutes illegal fee sharing. Prommis filed a registration statement (it planned to go public) this past June. Consider this section from its “Risk Factors” discussion (boldface theirs):

    Regulation of the legal profession may constrain the operations of our business, and could impair our ability to provide services to our customers and adversely affect our revenue and results of operations.

    Each state has adopted laws, regulations and codes of ethics that grant attorneys licensed by the state the exclusive right to practice law. The practice of law other than by a licensed attorney is referred to as the unauthorized practice of law. What constitutes or defines the boundaries of the “practice of law,” however, is not necessarily clearly established, varies from state to state and depends on authorities such as state law, bar associations, ethics committees and constitutional law formulated by the U.S. Supreme Court. Many states define the practice of law to include the giving of advice and opinions regarding another person’s legal rights, the preparation of legal documents or the preparation of court documents for another person. In addition, all states and the American Bar Association prohibit attorneys from sharing fees for legal services with non-attorneys.

    The common remedy for illegal fee sharing is disgorgement. Remember the magnitude of this business: it accounts for nearly half of LPS’s revenues. LPS is a pretty levered operation, with a debt to equity ratio of over 3:1. It isn’t hard to see that success in either of these cases would be a fatal blow to LPS. Similarly, if the allegations are proven true it could have ramifications for all servicers who do business with Fannie and Freddie since they are not supposed to be involved in referring work to a vendor who pays a kickback for a referral.

  • Mortgage investor group wants loans ensnared in robo-signing snafu repurchased, by JASON PHILYAW, Housingwire.com


    The Association of Mortgage Investors wants trustees of residential mortgage-backed securities “to hold servicers accountable for negligence in maintaining the assets of trusts.”

    The Washington firm, which advocates on behalf of institutional and private MBS investors, said in a press release that the recently uncovered robo-signing debacle – first reported by HousingWire two weeks ago – “undermines the integrity and the operational framework of the housing finance and mortgage system as it exists today.”

    Most of the nation’s largest mortgage lenders, includingBank of America, Ally Financial, formerly GMAC Mortgage, and JPMorgan Chase, have suspended foreclosures to amend faulty affidavits that may have been signed without looking at the documents or a notary present.

    The AMI wants bond trustees to investigate the process and assure investors that mortgages bundled and sold into MBS are repurchased by the loan originators, who failed in their “fiduciary responsibilities [to] protect millions of American pensioners and retirees.”

    “The capacity constraints at our nation’s largest servicers continue to be an issue of great concern to investors,” said Chris Katopis, executive director of the AMI. “We urgeAlly, JPMorgan Chase, and all other servicers to invest the time and resources necessary to improve their operational infrastructure and to avoid situations where efficient mortgage servicing and collection practices are compromised.”

    He said the may snafus may cause inaccurate legal filings for the mortgages and underlying properties in the MBS pools.

    “The unfortunate and little-known consequence of these operational breakdowns is the destruction of capital needed to sustain fixed-income investors reliant upon cash flow from pensions and retirement accounts,” Katopis said.

    Write to Jason Philyaw.

    Related Articles

  • Wells Fargo Curtailing Short Sale Extensions, by Kate Berry, Americanbanker.com


    In a move that will expedite some foreclosures, Wells Fargo & Co. has stopped granting extensions for certain distressed homeowners to complete short sales.

    The change last month preceded recent revelations of faulty documentation at two major mortgage servicers — JPMorgan Chase & Co. and Ally Financial Inc. — that suspended thousands of foreclosure actions to review their processes. Wells said it does not have the same problems as those servicers.

    The company said it changed its policy on short sales at the behest of investors for whom it services mortgages, including the government-sponsored enterprises.

    Early last month, Fannie Mae told its servicers to stop unnecessarily delaying foreclosures. The GSE said it would hold servicers responsible for unexplained delays to foreclosures with fines and on-site reviews.

    In a memo e-mailed to short sale vendors last month and obtained by American Banker, Wells said it will no longer postpone foreclosure sales for those who do not close short sales by the date in their approval letter from the company. Only extension letters dated Sept. 14 or earlier would be honored, Wells said.

    Mary Berg, a spokeswoman for Wells, confirmed that the memo was genuine. But she said it had “caused confusion,” and stressed that Wells still grants extensions on loans in its own portfolio (including those it acquired with Wachovia Corp.) and in cases where investors allow it. For those two categories, Berg said, Wells allows one foreclosure postponement, provided these conditions are met: a short sale has been approved by Wells, by junior lienholders and by mortgage insurers; the buyer has proof of funds or approved financing; and the short sale can close within 30 days of the scheduled foreclosure sale.

    Berg would not say how often Wells’ investors allow extensions.

    The new policy on short sales was put in place “over the past couple of months … in response to various investor changes,” Berg said. Those investors “would include the GSEs, HUD and those investing in private-label” mortgage-backed securities.

    In a short sale, a home is sold for less than the amount owed on the mortgage and the lender accepts a discounted payoff. The transactions are often less costly to the lender than seizing and liquidating the home.

    “As long as there is a short sale possibility, the loss will always be less,” said Rayman Mathoda, the president and chief executive of AssetPlan USA, a Long Beach, Calif., provider of short sale training and education. “Basically foreclosure sales should be delayed for any responsible homeowner that has a real buyer available.”

    Wells’ decision also follows efforts by the Obama administration to encourage short sales for borrowers who do not qualify for loan modifications.

    “It makes no business sense why they are doing this, since it’s wrong for the borrowers and for the government,” said Eli Tene, the CEO of IShortSale Inc., a Woodland Hills, Calif., firm that advises distressed borrowers.

    But experts on short sales said that in recent months servicers have been reluctant to approve the transactions out of concern that they will fall through, further prolonging the process.

    “There is also a growing issue with the new buyer and financing issues, either losing their jobs ahead of closing or the new lender not being ready to close, which then gives rise to the buyer running out of patience and walking,” said Jim Satterwhite, executive vice president and chief operating officer of Infusion Technologies LLC, a Jacksonville, Fla., provider of short sale services.

    Satterwhite said many servicers have reached the point where they know which borrowers do not qualify for a modification and are moving those borrowers through to foreclosure to deal with the backlog of inventory. “A lot of servicers are just falling in line with Fannie,” he said.

    Moreover, the expectation that housing prices will fall further is forcing servicers — and the GSEs — to push for a quicker resolution through foreclosure, since short sales can involve further delays. “Values are dropping faster and that also means the losses on short sales are going up,” Satterwhite said.

    Of course, the recent reports of “robo-signing” at Ally Financial’s GMAC Mortgage and at JPMorgan Chase could gum up the foreclosure works again. For example, on Friday, Connecticut Attorney General Richard Blumenthal asked state courts to freeze all home foreclosures for 60 days to “stop a foreclosure steamroller based on defective documents.” The day before, Acting Comptroller of the Currency John Walsh said he had told seven major servicers, including Wells, to review their foreclosure processes.

    Another Wells spokeswoman, Vickee J. Adams, said the company’s “policies, procedures and practices satisfy us that the affidavits we sign are accurate.”

  • Prices rise for homes in foreclosure or sold by banks, by Alejandro Lazo, Los Angeles Times (Latimes.com)


    The increase underscores the degree to which the mortgage crisis has spread to more affluent neighborhoods.

    Prices for homes either in foreclosure or sold by banks rose in the second quarter, according to a real estate group, underscoring competition in the market for distressed properties and the degree to which the mortgage crisis has spread to more affluent neighborhoods.

    FOR THE RECORD:
    Homes in foreclosure: A chart accompanying an article in some editions of the Sept. 30 Business section contained errors in illustrating the rise in the average price of homes sold during or after foreclosure in Southern California, the state and the nation. The chart listed prices for 2009 and 2010 but failed to note that the time frame was the second quarter of each year. The data, credited to Bloomberg, were compiled by RealtyTrac of Irvine. And the numbers presented for 2009 were incorrectly transcribed from RealtyTrac’s original data. A corrected version of the chart appears on Page B2 of the Business section. —

    In the second quarter, 248,534 U.S. properties were sold by banks or by owners who had fallen into foreclosure, RealtyTrac of Irvine said. That was an increase of 4.9% from the previous quarter, but a 20.1% decline from the same quarter last year, when discounted bank-owned homes flooded the market.

    The average price for these properties was $174,198, RealtyTrac said, up 1.6% from the previous quarter and 6.1% from the same quarter last year.

    “We are seeing the tail end of the foreclosure crisis caused by bad loans,” said Rick Sharga, senior vice president of RealtyTrac. “We are seeing the beginning of the wave of foreclosures caused by unemployment, which means you are seeing, in a lot of cases, a more expensive property in foreclosure than you would see, say, based on a subprime loan.”

    The price increase was more pronounced in California, according to RealtyTrac. The average price was $256,833 for homes sold by banks or by homeowners who had at least received a notice of default from their lenders. That was an increase of 4.2% from the previous quarter and 17.5% from the same quarter last year.

    The sales tracked by RealtyTrac included only properties sold to third parties, either investors or consumers, and not sales of properties sold back to lenders at trustee sales or through other transactions.

    Overall home sales during the three-month period captured by the report were boosted by a popular federal tax credit for buyers. Since then, sales of U.S. homes have weakened considerably, and many experts are predicting a decline in home valuations.

    “It is tempered a little bit by the fact that it covers the period of the tax credit, and everything looked fine, and since then the market has dropped off,” said Gerd-Ulf Krueger, principal economist at Housingecon.com. “We need to watch this a little more and what it shows under the slower market conditions.”

    Banks have been repossessing homes at a record clip this year, pushing properties through foreclosure that had been delayed by several moratoriums last year as well as the Obama administration’s efforts to help troubled borrowers. In recent weeks, the practices of banks taking back homes through foreclosure have increasingly become a concern.

    Wall Street titan JPMorgan Chase said Wednesday that it was delaying foreclosure proceedings after it discovered that some employees signed affidavits about loan documents on the basis of file reviews done by other people instead of personally reviewing those files.

    The New York bank said it was working with independent counsel to review documents in foreclosure proceedings and has requested that the courts not enter judgments in pending matters until it has completed the review. Those foreclosures only apply to properties in so-called judicial foreclosure states, which require a court order for a foreclosure. The vast majority of foreclosures in California are conducted without a court order.

    The JPMorgan Chase foreclosure delay follows a similar move by Ally Financial Inc. last week, when its GMAC Mortgage unit suspended evictions and foreclosures in 23 states while it conducted a review of its processes.

    The Detroit company, formerly known as GMAC Inc., didn’t suspend evictions in California because almost all foreclosures in the state by it and other lenders don’t require a court order. Nevertheless, Atty. Gen. Jerry Brown has told the company to halt foreclosures unless it could prove it was observing the state’s laws.

    alejandro.lazo@latimes.com

  • Mortgage Refinance: Proposed Home Refinance Bill Could Allow Almost Everyone to Refinance, by Rosemary Rugnetta, Freerateupdate.com


    (FreeRateUpdate.com) – Although the current low mortgage interest rates have helped numerous homeowners torefinance into better terms, many have not be able to take advantage of these deals. Tighter lending guidelines have left many homeowners with no where to turn for help. In an effort to help save homeownership for many Americans, Representative Dennis Cardoza of California has proposed a home refinance bill that could allow almost everyone to refinance.

    H.R. 6218 is called The Housing Opportunity and Mortgage Equity Act of 2010 (HOME). It is designed to offer refinances directly to homeowners who need help. As other foreclosure prevention programs have failed to prevent further defaults, this bill can possibly reduce foreclosures drastically and reward those who have continued to make their monthly mortgage payments even through economic struggles. With reduced mortgage payments, consumers will have more available cash to spend each month thus stimulating a dragging economy. In addition, this type of refinance can help eliminate strategic defaults and loan modifications.

    Following are some of the details of the bill:

    -A qualified mortgage is one that is current or in default as long as it is the borrower’s primary residence and is owned or guaranteed by Fannie Mae or Freddie Mac, This residence can be a single family dwelling, one to four family dwelling, condominium or a share in a cooperative ownership housing association.

    -Any penalties for prepayment or refinancing and penalties due to default or delinquency would be waived or forgiven.

    -The term of the new refinance could be no longer than 40 years.

    -The servicer cannot charge the borrower any fees for refinancing.

    -Fees for title insurance coverage will be reasonable in comparison with fees for the same coverage available. Any fees associated with the refinance would be rolled into the mortgage.

    -The enterprise (Fannie Mae and Freddie Mac) will pay the servicer a fee not to exceed $1,000 for each qualified mortgage that is refinanced.

    -There will be no appraisal required.

    -In order to pay for this, the old mortgages will be paid off when refinanced. The new refinances will be funded by selling new mortgage securities.

    Although lenders believe that they will lose too much money if this bill is adopted, it can probably be the best solution given to date to halt the endless foreclosure issue. It will be interesting to see how this bill develops, what will be added and what will be taken away or even if it will pass. According to Congressman Cardoza’s website, there are about 30 million mortgages guaranteed by Fannie Mae and Freddie Mac. The savings from this program could be tremendous and have been estimated by Morgan Stanley and JP Morgan Chase to be an annual reduction of approximately $50 billion in mortgage payments. While the success of the available current programs is still questionable, this proposed bill which allows almost everyone to refinance could be the answer to accelerating the economy.

  • Chase Halts Foreclosures In Process, by Thetruthaboutmortgage.com


    JP Morgan Chase has halted foreclosures until a review of its document-filing process is completed, according to the WSJ.

    The New York City-based bank said the move affects roughly 56,000 home loans in some stage of the foreclosure process.

    Chase spokesman Tom Kelly announced that there were cases where employees may have signed affidavits about loan documents on the basis of file reviews done by other personnel.

    As a result, the bank and mortgage lender must now re-examine documents tied to loans already in foreclosure to verify if they “meet the standard of personal knowledge or review” where required.

    Back in May, law firm Ice Legal LP dropped Chase document-signer Beth Ann Cottrell after it became known that she signed off on roughly 18,000 foreclosure affidavits and other documents each month without actually reviewing the files.

    And last week, GMAC Mortgage told brokers and agents to immediately stop evictions, cash-for-keys transactions, and lockouts in 23 states after the company warned it could need to take corrective action in connection with some foreclosures.

    Sign of the times…a year ago it was all about foreclosure moratoriums to help borrowers in need, and now it’s all about lenders making sure they don’t get into hot water over their suspect loss mitigation activities.

  • Loan Modifications Are Getting Better, thetruthaboutmortgage.com


    It appears as if more recently completed loan modifications are performing better than their predecessors, according to the latest Mortgage Metrics Report from the OCC.

    More than 90 percent of loan modifications implemented during the second quarter of 2010 reduced borrowers’ monthly principal and interest payments, while 56 percent reduced payments by more than 20 percent.

    And that focus on sustainable and affordable monthly mortgage payments resulted in lower post-modification delinquency rates (much lower than that 75 percent re-default rate we we’re worried about).

    Six months after modification, roughly 32 percent of the modifications made in 2009 were seriously delinquent or in somewhere in the foreclosure process, compared with more than 45 percent of loan mods made in 2008.

    And the performance of modifications made this year suggests the trend is continuing.

    At three months after modification, just 11 percent of the 2010 modifications were seriously delinquent, compared with 20 percent of modifications made last year and 32 percent of 2008 modifications.

    HAMP Modifications Outperforming Other Loan Mods

    Nearly all modifications made under the Making Home Affordable program (HAMP) reduced borrower principal and interest payments, and 78.9 percent reduced monthly payments by 20 percent or more

    HAMP modifications made during the quarter reduced monthly mortgage payments by an average of $608, while other loan mods reduced payments by just $307 on average.

    As a result, HAMP modifications implemented through the first quarter of 2010 had fewer re-default rates than other modifications implemented during the same period.

    At six months after modification, 10.8 percent of HAMP modifications made in the fourth quarter of 2009 were 60 or more days delinquent, compared with 22.4 percent of other modifications made during that quarter.

    Similarly, 10.5 percent of HAMP modifications made in the first quarter of 2010 were 60 or more days delinquent three months after modification, compared with 11.6 percent of other modifications.

    So perhaps HAMP ain’t so bad after all…and maybe loan modifications actually do work.

  • Multnomahforeclosures.com: Updated Notice of Default Lists and Books for the Week of September 24th, 2010


    Multnomahforeclosures.com was updated today with the largest list of Notice Defaults to date. With Notice of Default records dating back nearly 2 years. Multnomahforeclosures.com idocuments the fall of the great real estate bust of the 21st century.

    All listings are in PDF and Excel Spread Sheet format.

    Multnomah County Foreclosures
    http://multnomahforeclosures.com

  • Fannie mae to provide mortgage payment forbearance for certain military homeowners, Thetruthaboutmortgage.com


    Government mortgage financier Fannie Mae announced today new measures to help those serving in the military avoid foreclosure.

    The company said it will provide mortgage payment forbearance for up to six months where the death or injury of a service member on active duty leads to a hardship for military families with a mortgage obligation.

    Fannie has also created a hotline, 877-MIL-4566, available to all service members looking to receive guidance about their mortgage options and subsequent assistance.

    “The men and women of our Armed Forces have shown extraordinary commitment to our country while facing unique challenges as a result of their service,” said Jeff Hayward, Senior Vice President of Fannie Mae’s National Servicing Organization, in a release.

    “No family impacted by a death or injury in the line of duty should have to face the additional burden of foreclosure as a result of the hardship. We want to do all that we can to provide support to these families at a time of need as we honor their sacrifices and service to our country.”

    Service members or surviving spouses who may be eligible for the special forbearance should contact their bank or mortgage lender.

    Any forbearance will be granted under Fannie Mae’s “Unique Hardships” guidelines with Fannie Mae’s approval.

    Under forbearance, the bank or lender may reduce or suspend the borrower’s monthly mortgage payments for the specified period.

    Credit bureau reporting will also be suspended during the forbearance period to minimize any negative credit scoring impact.

  • GMAC Halts Evictions Related to Foreclosures in 23 States When News of Forged and Robo-Signed Documents Comes Out, by Mandelman


    I’m sorry, but is GMAC… no, wait… Ally Financial… I keep forgetting they’re my “ally” now… run by a 40 Mule Team of morons?  Don’t answer that, it was clearly rhetorical.

    Okay, so here’s the story… some attorneys representing homeowners in foreclosure noticed that GAMC was saying things that weren’t true, which is sometimes referred to as “lying,” and then in a deposition it came out that a middle manager at GMAC was actually signing 10,000 foreclosures a month without reading the paperwork like he was supposed to… or, one might consider… like any normal human being would do given they had a job signing 10,000 of anything each month.  I mean… what the… can you even imagine?

    Well, here’s your job.  We’ll need you to sit here and sign your name roughly 10,000 times a month.  So, if there are 21.67 work days per month, which there are, according to Amswers.com, then that would mean signing your name about 462 times per day, or 58 per hour, assuming one were to work eight hours a day without breaks of any kind.  That’s one per minute, and it assumes there’s some sort of catheter involved.

    No problem you say.  Except how will I be able to read what I’m signing? “Oh, no need for that, silly rabbit,” your boss says… “kicks are for trids.”  What in the world was going on here, pray tell?  Why, it’s time to play “Fraudulent Foreclosure Mill,” of course.  It’s the game where laws don’t matter and all the houses go back to the bank no matter what!  I’m not sure, but it sounds like something that might have been developed by Saddam Hussein, no?  Or, maybe Vikram Pandit and Jamie Dimon, I suppose.

    NPR reported: “The company recently halted evictions in dozens of states, after news of the robo-signer came to light.”

    Oh come on… I HATE it when people treat me like I’m six.  Is this “news” to GMAC, or any of the other banksters?  That’s what I’m to believe?  Really?  Well I don’t usually say what I’m about to say but this is my blog and I don’t work for anyone but me, so… GMAC… F#@k you.

    I worked in corporate America for some 20 years, and quite a few of those years I even worked for banksters, including JPMorgan, and there’s absolutely NO CHANCE whatsoever that this is “news” to anyone there.  I absolutely guarantee you that there are secretaries at GMAC that know about this practice… they’ve been having meetings about it for years.  There are enough CYA memos floating about at GMAC that if you stacked them on top of each other they’d be taller than Shaquille O’Neal standing on Lord Blankcheck’s throat in a pair of 4” stilettos while on the roof of a Yukon, an image that I’d go pay-per-view to see, I don’t know about you.

    No, it’s not “news,” although I guess I have to be happy that the lamebrain media has finally caught on that something might be amiss in Foreclosure Land.  And it’s about damn time.  As I recently said to a producer at American Public Television: “Thanks for coming, media people, you’re a little late, but come on in, there’s still plenty of food.”

    No, even though NPR, the Washington Post, the New York Times, and just about every news site, publication and blog on the planet reported on the story, it’s not “news,” except that perhaps because it’s us the taxpayers that actually own most of GMAC, it is.  Yep, it’s “us” that are paying that robo-signer to sign his name a gazillion times a month, thus creating fraudulent documents that are then used by lawyers with fewer ethics than pond scum to throw “US” our of our homes illegally.

    We, the taxpayers, have given GMAC $17.2 billion in TARP funds, none of which have been repaid, by the way.  And I love the way the media reports that the “Treasury invested” in GMAC.  The U.S. Treasury doesn’t have any money, folks.  That’s U.S. citizen paid or borrowed tax payer money they’re “investing”.  And if we the tax payers are going to invest in companies, why do we have to invest in all the shitty ones?  (I apologize for my language in this article, but it’s just not a good day for me to play nice.)

    NPR also reported that:

    “The case — which could allow thousands of homeowners to challenge their evictions — has triggered other reports this week of sloppy foreclosure practices.”

    Now I happen to like NPR, I’ve been listening to them on the radio for years.  But, “sloppy foreclosure practices?”  “SLOPPY?”  “SLOPPY?”  What the hell, have we all forgotten how to use the English?

    Fraudulent, forged, bogus, fake, illegal, spurious, sham, false, phony, suppositious, illicit, unlawful, criminal, immoral, sinful, vicious, evil, iniquitous, peccant, wicked, wrong, vile, in violation of the law… damn it, don’t make me go find my thesaurus.

    It reminds me of when that Senator was molesting that 16 year-old boy… the White House page, by at the very least, sending him repulsive, repugnant emails, and Newt Gingrich referred to them as “naughty emails”.  I mean… OH MY GOD!  “Naughty,” Newt?

    Even the venerable Financial Times chimed in a couple of days ago saying:

    “An official at JPMorganChase said in a deposition earlier this year that she signed off on thousands of foreclosures without verifying the details.”

    Wow, really?  Who could have possibly known about that?  Oh wait… ME, among God-only-knows-how-many-others.  Here’s my story on the JPMorganChase robo-signer from LAST JUNE 4th, 2010.  Yepsiree… they call me “Scoop Mandelman,” yes they do… Oh, please.

    And the Washington Post had their two cents to add:

    “And an employee of a Georgia document processing company falsely claimed to work for dozens of different lenders while signing off on tens of thousands of foreclosure documents over the course of several years.”

    Here’s what GMAC… oh, that’s right they’re my “ally,” had to say:

    “Ally says that its review of the GMAC Finance issue has ‘revealed no evidence of any factual misstatements or inaccuracies’ in the documents that weren’t properly reviewed. And the company says it has fixed its process for reviewing foreclosure documents.”

    Pardon me?  Did you just… I mean, what the… I can’t believe I just heard you say… what the… somebody oughta give you such a…  And what about the other 27 states?  Are they all fine and dandy?  People have lost homes here… God damn it…

    Alright… STOP.

    Look, there’s more to this story and you can bet your boots that I’m going to write about it all weekend… in great detail.  I’m going to tell you WHY they’re having to forge documents in order to foreclose on homes all over the country.  And you’re going to hate this even more than the forgeries themselves.

    (Attorney Max Gardner and attorney April Charney, of Jacksonville Legal Aid, are the country’s leading experts on this and related injustices, and they’ve been gracious enough to give me enough information to write a book covering this topic on a scale of Gone With the Wind, the Next Ten Years.  I’m going to run my next piece by them before I post, but it’ll be up this weekend if it kills me.  Don’t miss it.)

    But not right now, because right now I’m going to head down to my local watering hole to toss back a couple of pints.  Then I’m going to ask a friend of mine to back over me with his car to make the pain go away.

    Oh, and what follows is GMAC’s “CONFIDENTIAL” memorandum… they labeled it “privileged & confidential,” but anyone want to guess how much I care about that?  Read it and weep… I know I did.

    Mandelman out.

    Urgent: GMAC Preferred Agents

    Privileged & Confidential 9/17/10

    Attorney/Client Privilege

    Dear GMAC Preferred Agents:

    GMAC Mortgage has determined that it may need to take corrective action in connection with some foreclosures in the following states:

    Connecticut
    Florida
    Hawaii
    Illinois
    Indiana
    Iowa
    Kansas
    Kentucky
    Louisiana
    Maine
    Nebraska
    New Jersey
    New Mexico
    New York
    North Carolina
    North Dakota
    Ohio
    Oklahoma
    Pennsylvania
    South Carolina
    South Dakota
    Vermont
    Wisconsin

    As a result of the above, effective immediately and until further notice, please take the following actions only in the states identified above:

    Evictions:

    Do not proceed with evictions, cash for keys transactions, or lockouts. All files should be placed on hold, regardless of occupant type.

    REO Closings:

    Do not proceed with REO sale closings. GMAC Mortgage will communicate instructions to the assigned agent regarding the management of the properties in Pending status. If the contract has already been executed by both parties, the Asset Manager will request an

    amendment to extend the closing date by 30 days or as otherwise designated by the Asset Manager. Please provide appropriate notice to the REO purchaser that, pursuant to Section

    1 of the GMAC Mortgage Addendum to Standard Purchase Contract, GMAC Mortgage is exercising its sole discretion to extend the Expiration Date of the Agreement by 30 days at this time. If the REO purchaser wishes to cancel the contract, GMAC Mortgage will terminate the Agreement and return the earnest money deposit.

    You will receive further instructions regarding the status and handling of these assets from your asset manager. There could be asset level exceptions and you will receive direct communication from GMAC on the handling of those exceptions. Please send any questions or concerns regarding these matters to your asset manager.

    Please ensure your staff is aware of these requirements immediately.

    GMAC Mortgage

    GMAC Mortgage LLC 2711 N. Haskell Ave, Suite 900, Dallas, TX 75204

    http://mandelman.ml-implode.com/

  • Refinance Boom or Bust: The Scoop from Melissa Stashin of Pacific Residential Mortgage LLC


    Melissa Stashin, Pacific Residential MortgageMelissa Stashing

    Pacific Residential Mortgage, LLC
    4949 Meadows Road, Suite 150
    Lake Oswego, OR  97035

    (503) 699-LOAN (5626)
    (503) 905-4999    Fax

    Over the last few months refinancing has seen what could be deemed a “boom” in our current lending climate; yet, according to the Bloomberg report, the refinance index decreased 3.1 % in the beginning of September, so why the recent slow? When I turn on the radio, open a paper or see a pop-up in my email, I am bombarded with phrases like; “Lowest Levels on Record! Historic Lows! Lower Your Payment! Rates as Low As.”  Mortgage companies are using confidence boosting words to create hype in their marketing strategies, and this is important, but more crucial is providing information and education to consumers so they understand their options.  In a time when we have some of the best rates in history, getting the word out about refinancing options is fundamental.

    One of the best things you can do is dig through your file cabinet, find your mortgage statement and check your current interest rate. If it’s anything over 4.5% it’s worth a phone call. Just like your mom said, “you won’t know until you ask” and really, there are a lot of options. Many consumers who refinanced two years ago may have an incentive to refinance again and this is a good thing. From a local perspective, when consumers seek a lower monthly payment it increases disposable income which creates consumer spending and helps Oregon’s economy as a whole.

    So here’s the scoop, there are programs that allow you to refinance without equity in your property or very little. There are options for large loan amounts and those for small. Each program has its own set of guidelines which we, the mortgage banker, will walk you through. Credit issues may not disqualify you if they can be resolved; it’s just a matter of looking at everything carefully. It’s our job to determine the best program for your situation and your ability to repay. The magic recipe for low rate bliss requires four basic ingredients from you: assets, income, credit and property. Although this may seem daunting, if you tell us what your situation is and we can verify it, you may be able to save a significant amount of money. The reality is that rates still are historically low and there is a lot of opportunity for consumers to improve their interest rates. Choosing a local company like Pacific Residential Mortgage helps make for a smart consumer because we have the skills and local expertise to educate our borrowers. In this new mortgage market, the difficulty isn’t in qualifying our consumers it’s simply a matter of gathering information, stirring the ingredients together, and you may be the one that takes the cake!

    ~ Melissa Stashin

    Sr. Mortgage Banker/Branch Manager

    NMLS# 40033

  • Multnomahforeclosures.com: Updated Notice of Default Lists and Books for the Week of September 17th, 2010


    Multnomahforeclosures.com was updated today with the largest list of Notice Defaults to date. With Notice of Default records dating back nearly 2 years. Multnomahforeclosures.com idocuments the fall of the great real estate bust of the 21st century.

    All listings are in PDF and Excel Spread Sheet format.

    Multnomah County Foreclosures
    http://multnomahforeclosures.com