Archive for 'Foreclosures'

September 3, 2015 4:49PMforeclosure_forsale_sign

 

In total, Fannie Mae increased the maximum number of allowable days for a foreclosure sale for 33 states, effective for foreclosure sales on or after Aug. 1.

Fannie Mae made the announcement Thursday in an email to its servicers.

According to the announcement, Fannie Mae increased the maximum number of allowable days for the following jurisdictions: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Nevada, New Mexico, New Hampshire, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.

As part of its servicing guide, Fannie Mae establishes time frames under which it expects routine foreclosure proceedings to be completed.

According to Fannie Mae, the maximum number of allowable days takes represents the maximum allowable time lapse between the due date of the last paid installment and the completion of the foreclosure sale.

The allowable time frame also signifies the time typically required for what Fannie Mae calls a “routine, uncontested” foreclosure proceeding.

The allowable time frame reflects the legal requirements of the applicable jurisdiction, and takes into consideration delays that may occur outside of the control of the servicer, Fannie Mae said.

If the number of days to complete a foreclosure sale exceeds stated maximum number of allowable days and the servicer does not provide an adequate explanation to Fannie Mae as to the reasons for the delay, Fannie Mae requires the servicer to pay a “compensatory fee.”

According to Fannie Mae, the list of “reasonable explanations” includes:

  • Bankruptcy
  • Probate
  • Military indulgence
  • Contested foreclosure
  • The mortgage loan is currently in review for HAMP
  • The mortgage loan is in an active mortgage loan modification trial plan or unemployment forbearance
  • Recent legislative, administrative, or judicial changes to existing state foreclosure laws, provided that the servicer is diligently working toward resolution of the delay to the extent feasible

Fannie Mae noted in its announcement that there is currently a compensatory fee moratorium for Washington D.C., Massachusetts, New York and New Jersey and stated that the moratorium will last, “at a minimum,” until Dec. 31.

 Could This Be The Start Of A Nationwide Trend?

Are Big Banks Bullying Efforts Paying Off or Is Our Court System Scared Of The Tsunami of Mortgage Fraud Cases Smothering Their Dockets?

Theresa Edwards and June Clarkson had headed up investigations on behalf of the Florida attorney general’s office for more than a year into the fraudulent foreclosure practices that had become rampant in the Sunshine State. They issued subpoenas and conducted scores of interviews, building a litany of cases that documented the most egregious abuses.

That is, until the Friday afternoon in May when they were called into a supervisor’s office and forced to resign abruptly and without explanation.

“It just came out of nowhere,” said Edwards, who had worked in the attorney general’s economic crimes section for more than three years. “We were completely stunned.”

Less than a month before they were forced out, a supervisor cited their work as “instrumental in triggering a nationwide review of such practices.” Now, Edwards is convinced their sudden dismissals will have “a chilling effect” on those probes into the shoddy foreclosure practices that caused national outrage when they made headlines last fall.

Although similar abuses have occurred throughout the country, they have been particularly rampant in Florida, which was ground zero for the housing bust and is home to a collection of large law firms that were hired by the financial industry to relentlessly churn out foreclosures in recent years. That made the investigations headed by Edwards and Clarkson among the earliest and most closely watched by officials across the country.

A spokeswoman for Florida Attorney General Pam Bondi declined to comment on what she cited as internal personnel matters but said in an e-mail that the foreclosure investigations remain a top priority.

Before the uproar last fall, Edwards and Clarkson were already investigating the problems plaguing foreclosure filings in the state. Working under then-attorney general Bill McCollum, they created a 98-page presentation entitled “Unfair, Deceptive and Unconscionable Acts in Foreclosure Cases,” which detailed such far-ranging problems as fake and forged affidavits and falsified mortgage ownership records.

Their inquiry led them to focus on “foreclosure mill” law firms that were filing foreclosures for their clients at lightning speed, as well as to the practices of other companies in the mortgage industry. It also led to calls from other attorneys general offices across the country that were beginning to scrutinize similar problems.

“We were farther along in our investigation because we had dug a little deeper than anybody else,” Edwards said. “We kept opening up more and more investigations, more and more cases.”

Their work won them accolades. In the evaluation provided by Edwards, a supervisor wrote that the pair had “achieved what is believed to be the first settlement in the United States relating to law firm foreclosure mills” — a multimillion-dollar settlement a month earlier with a Fort Lauderdale firm.

Despite that praise, Edwards and Clarkson said in separate interviews that they sensed a change when Bondi took office in January. Almost immediately, they said, supervisors began to question their findings and demand details about how they were gathering information.

Both women say they were summoned into a meeting on the afternoon of May 20 and told they could either resign or be fired. Either way, they would no longer be employed come 5 p.m. They had to come back over the weekend to pick up their things, they said.

“No two weeks’ notice, no severance, no nothing,” Clarkson said. “I have no idea why it happened.”

Added Edwards, “We didn’t even have a chance to go over our cases with anybody. We were just locked out.”

A spokeswoman for Bondi, Jennifer Krell Davis, said the economic crimes division “continues to actively pursue the investigations into foreclosure law firms.” She said the division’s director, Richard Lawson, is leading the inquiry into one of the state’s largest foreclosure firms and is supervising other cases.

“The division has made these investigations a top priority and will continue to actively pursue all of our investigations into foreclosure law firms,” Davis said in an e-mail, adding that Lawson had assigned 14 attorneys and investigators to work on the cases that belonged to Edwards and Clarkson.

As for their hasty departure, she wrote, “We do not comment on personnel matters. However, the Florida Attorney General’s Office is always striving to make sure that we have the best staff working to serve and protect the people of Florida.”

Edwards and Clarkson, whose dismissals were first detailed this week by The Palm Beach Post, have since opened a private law firm together in South Florida focused largely on foreclosure defense. They expressed doubts about how aggressively the cases they left behind will be pursued, saying the other attorneys in their division are dedicated and hardworking but that each already had a full caseload.

For her part, Clarkson said she worries about the work left undone, the potential misdeeds left undiscovered, even as state and federal officials negotiate a settlement with banks to end some of the worst practices.

“There is so much paperwork that came in due to our subpoenas that I didn’t even get a chance to look at,” she said, adding, “I looked at enough to know that there’s a lot more problems out there.”

By Brady Dennis, Published: July 14
from Washington Post Business

Forwarded by Gold Member Roger Taylor

HUD has implemented a program that allows unemployed borrowers to remain in their homes for an extended period of time without having to make a mortgage payment.

The FHA has always taken exceptional steps to assist borrowers who have become delinquent in their loan payments. For example, borrowers who have fallen behind in payments are urged to contact a HUD approved housing counselor. There are a variety of programs available to help delinquent homeowners. The HUD housing counselor can provide specific guidance to each delinquent homeowner on the best course of action to take.

Commencing in August, the FHA will make changes to its Special Forbearance Program. Loan servicers will be required to Click Here for Full Video/Article (Members Only)

Wells Fargo, one of the nation’s biggest banks and the largest consumer lender, said Wednesday that its fourth-quarter earnings rose 21 percent, helped by an improving loan portfolio and withdrawals from its capital reserves.

The bank, which is based in San Francisco, earned $3.4 billion, or 61 cents a share, in the fourth quarter, up from $2.8 billion, or 8 cents a share, in the year-earlier period, matching analysts’ forecasts. For the year, Wells Fargo reported net income of $12.36 billion in 2010, compared with $12.28 billion in 2009.
The bank’s full-year revenue fell to $85 billion, however, from $88.7 billion in 2009, as new federal regulations limited the overdraft fees that banks can charge on checking accounts.
Still, compared with the third quarter, the bank generated revenue growth in roughly two-thirds of its businesses.
“As the U.S. economy showed continued signs of improvement, our diversified model continued to perform for our stakeholders, as demonstrated by growth in loans and deposits, solid capital levels and improving credit quality,” John G. Stumpf, the bank’s chairman and chief executive, said in a statement.
Despite its heavy hand in the lending industry, which has been hit by losses for three years,

Wells Fargo has quietly emerged from the financial crisis as one of the nation’s strongest banks.
The report from Wells is an important step for the bank as it looks to increase its dividend, which has been stuck at 5 cents for nearly two years.
Wells Fargo Press Release
When the financial crisis struck, Wells, JPMorgan Chase and other industry giants cut dividends as they moved to bolster their capital. Now, two years later, banks are eager to give money back to shareholders — if the government will let them. The Federal Reserve must first complete a second round of bank stress tests, whose results are expected in March.
JPMorgan, which last week reported a $17 billion profit for 2010, has said it hopes to raise its dividend as much as a dollar in the coming months.
Wells Fargo has been more coy about its plans. Mr. Stumpf, in a conference call with investors, said he was eager to raise the dividend.
But Brian Foran, a senior bank analyst with Nomura Securities International, noted, “They historically have been cagey about saying anything before they know it.”
The bank’s dividend outlook has improved on the back of its lending operation.
Wells Fargo picked up new borrowers in the fourth quarter, particularly businesses, and it released $850 million from its reserves, thanks to the improving loan portfolio.
The bank’s provision for credit losses was cut nearly in half, to $2.99 billion in the fourth quarter from $5.91 billion a year earlier.
Shares of Wells Fargo fell 68 cents, or 2.1 percent, on Wednesday, closing at $31.81.
Although the bank’s mortgage shop reported a 19 percent drop in income from 2009, it originated $128 billion in home mortgages in the fourth quarter, up from $94 billion in the fourth quarter of 2009.
“You can see the momentum building as economic activity is returning,” said Marty Mosby, a managing director at Guggenheim Partners.
Yet Wells Fargo still faces problems surrounding its mortgage portfolio.
On Jan. 7, the highest state court in Massachusetts ruled that Wells Fargo and US Bancorp had wrongly foreclosed on two homes, because they could not prove they owned the mortgages.
Regulators in all 50 states have begun investigations into whether hundreds of thousands of foreclosures made in recent years were invalid.
Some banks temporarily suspended foreclosures last year during the controversy.
Wells Fargo officials say they have largely avoided the documentation problems and have decided not to halt foreclosures.
“At the end of the day, the litigation will be less of an impact on Wells Fargo than people fear,” said Lawrence Remmel, a partner at the law firm Pryor Cashman, where he leads the firm’s banking and financial institutions group.
Wells Fargo has also moved to distance itself from litigation over soured loans that banks securitized and sold to investors.
Fannie Mae and Freddie Mac, the government-controlled mortgage finance companies, are demanding that Wells Fargo and other big banks buy back loans sold at the height of the mortgage bubble.
In the fourth quarter, the bank recorded a $464 million provision for future mortgage repurchases, up from $370 million in third quarter.
But the bank’s chief financial officer, Howard I. Atkins, said Wednesday that Wells Fargo did not plan to settle its dispute with Fannie and Freddie. Mr. Atkins said the bank’s mortgage securities were of higher quality than those generated by its competitors.
“This is a diminishing issue, not an increasing issue,” Mr. Atkins said in an interview.
Eric Dash contributed reporting.
By Ben Protess
For more: http://nyti.ms/eP7Rd8

Thanks to Nick Capra in Vegas for this very informative and interesting report.

Pass the word and share this one

—————————————————————

Hey Mike,

 The attached report is very good.

88 Page Fraud Assignment Report

(Click Above Link to View / Download)
Even more trouble is coming because, Mers conducted some of their fraudulent assignments to avoid recording fees, now local recorders all over the country are going after them as well.
 
Fraudulent recordings are also considered to be a crime committed directly against the state… so a real can of worms.
 
Now, we’ll see, with all of the hard evidence; will the government support the People, or will they find some way to let the criminals off the hook.
 
The more people that are aware of what’s going on, the harder it is for them to continue committing such blatent crimes
 
 
"…justice should not only be done, 
but should manifestly and undoubtedly 
be seen to be done." 
 
Lord Chief Justice Hewart, CJ 
 
God Bless,
Nick

Even as investors put aside their worries on Friday about the effect of the foreclosure mess on bank stocks, new signs emerged of what is likely to be a long and expensive legal battle for the financial services industry over mortgages gone bad.

 
Citigroup disclosed in a regulatory filing that it was being sued by several investors, including Charles Schwab and the Federal Home Loan Bank of Chicago, in an effort to force Citigroup to buy back soured mortgages that the investors contended did not conform to proper underwriting standards.
 
Meanwhile, Wells Fargo said in a filing that it “cannot estimate the possible loss or range of loss” from these cases, and Bank of America said in a filing that investors holding $375 billion worth of mortgage securities had filed similar suits.
 
In a separate announcement, however, Bank of America said a lawsuit brought by the Maine State Retirement System and other investors was dismissed on Thursday by a federal court in California, reducing that $375 billion figure to $54 billion. But that news came after the S.E.C. filing had already been prepared.
 
The dismissal is a significant victory for Bank of America and underscores the legal challenges in trying to force banks to buy back defaulted mortgages.
 
“The court’s ruling demonstrates the strict legal hurdles plaintiffs face in bringing these sorts of claims,” said Brian E. Pastuszenski, counsel for Bank of America’s Countrywide unit.
 
Still, Bank of America faces a different effort by other investors, including the Federal Reserve Bank of New York and Pimco, the giant money management firm, to force it to buy back a portion of roughly $47 billion in mortgages they hold. Neither the $375 billion nor the $54 billion figure reflects this push, because those investors have yet to sue.
 
On Thursday, Bank of America’s lawyers sent a strongly worded letter to the lawyer leading the $47 billion effort, rejecting her claims as “utterly baseless.” The bank contends the any loss of value stemmed from the economic downturn rather than an underlying problem with how the mortgages were sold to investors or have been serviced.
 
Bank of America and other large institutions like JPMorgan Chase and GMAC Mortgage have been criticized for pursuing foreclosures without the proper paperwork or with signatures by so-called robo-signers.
 
But on Wall Street, the worry is that efforts to force the banks to buy back defaulted mortgages could actually be a longer and more expensive fight for the industry. Some analysts estimate the eventual cost could total tens of billions of dollars, and that worry pushed down shares of the big banks sharply last month.
 
Indeed, Bank of America’s chief executive, Brian T. Moynihan, has signaled that the threat of forced buybacks will not be resolved quickly — or cheaply.
 
“It’s loan by loan, and we have the resources to deploy in that kind of review,” he said last month, during a conference call to discuss the bank’s financial results for the third quarter. “We’d love never to talk about this again and put it behind us, but the right answer is to fight for it.”
 
Despite the disclosures, bank stocks rallied for the second day in a row. Bank of America shares closed up 23 cents, at $12.36, while Citigroup rose 16 cents, to $4.49, and Wells Fargo jumped $1.76, to $29.22.
 
By NELSON D. SCHWARTZ
For more: http://nyti.ms/aQgZUD
When Michael Gazzarato took a job that required him to sign hundreds of affidavits in a single day, he had one demand for his employer: a much better pen.
 
Lisa Krantz for The New York Times
Linda Almonte of San Antonio has filed a wrongful termination suit against JPMorgan Chase, where she flagged defects in a portfolio of debt Chase was trying to sell.
 
Luke Sharrett/The New York Times
In July, the Federal Trade Commission, led by Jon Leibowitz, issued a report critical of the debt-collection system, saying banks were selling account information that can be riddled with errors.
“They tried to get me to do it with a Bic, and I wasn’t going — I wasn’t having it,” he said. “It was bad when I had to use the plastic Papermate-type pen. It was a nightmare.”
 
The complaint could have come from any of the autograph marathoners in the recent mortgage foreclosure mess. But Mr. Gazzarato was speaking at a deposition in a 2007 lawsuit against Asset Acceptance, a company that buys consumer debts and then tries to collect.
 
His job was to sign affidavits, swearing that he had personally reviewed and verified the records of debtors — a time-consuming task when done correctly.
 
Sound familiar?
 
Banks have been under siege in recent weeks for widespread corner-cutting in the rush to process delinquent mortgages. The accusations have stirred outrage and set off investigations by attorneys general across the country, prompting several leading banks to temporarily cease foreclosures.
 
But lawyers who defend consumers in debt-collection cases say the banks did not invent the headless, assembly-line approach to financial paperwork. Debt buyers, they say, have been doing it for years.
 
“The difference is that in the case of debt buyers, the abuses are much worse,” says Richard Rubin, a consumer lawyer in Santa Fe, N.M.
 
“At least when it comes to mortgages, the banks have the right address, everyone agrees about the interest rate. But with debt buyers, the debt has been passed through so many hands, often over so many years, that a lot of time, these companies are pursuing the wrong person, or the charges have no lawful basis.”
 
The debt in these cases — typically from credit cards, auto loans, utility bills and so on — is sold by finance companies and banks in a vast secondary market, bundled in huge portfolios, for pennies on the dollar. Debt buyers often hire collectors to commence a campaign of insistent letters and regular phone calls. Or, in a tactic that is becoming increasingly popular, they sue.
 
Nobody knows how many debt-collection affidavits are filed each year, but a report by the nonprofit Legal Aid Society found that in New York City alone more than 450,000 were filed by debt buyers, from January 2006 to July 2008, yielding more than $1.1 billion in judgments and settlements.
 
Problems with this torrent of litigation are legion, according to the Federal Trade Commission, led by Jon Leibowitz. The agency issued a report on the subject, “Repairing a Broken System,” in July. In some instances, banks are selling account information that is riddled with errors.
 
More often, essential background information simply is not acquired by debt buyers, in large part because that data adds to the price of each account. But court rules state that anyone submitting an affidavit to a court against a debtor must have proof of that claim — proper documentation of a debt’s origins, history and amount.
 
Without that information it is hard to imagine how any company could meet the legal standard of due diligence, particularly while churning out thousands and thousands of affidavits a week.
 
Analysts say that affidavit-signers at debt-buying companies appear to have little choice but to take at face value the few facts typically provided to them — often little more than basic account information on a computer screen.
 
That was made vividly clear during the deposition last year of Jay Mills, an employee of a subsidiary of SquareTwo Financial (then known as Collect America), a debt-buying company in Denver.
 
“So,” asked Dale Irwin, the plaintiff’s lawyer, using shorthand for Collect America, “if you see on the screen that the moon is made of green cheese, you trust that CACH has investigated that and has determined that in fact, the moon is made of green cheese?”
 
“Yes,” Mr. Mills replied.
 
Given the volume of affidavits, even perfunctory research seems impossible. Cherie Thomas, who works for Asta Funding, a debt buyer in Englewood Cliffs, N.J., said in a 2007 deposition that she had signed 2,000 affidavits a day. With a half-hour for lunch and two brief breaks, that’s roughly one affidavit every 13 seconds.
 
By DAVID SEGAL
 
For more: http://nyti.ms/9TxTra
 

 Battle Lines Forming in Clash Over Foreclosures

 
That clash — expected to be played out in courtrooms across the country and scrutinized by law enforcement officials investigating possible wrongdoing by big lenders — leaped to the forefront of the mortgage crisis this week as big lenders began lifting their freezes on foreclosures and insisted the worst was behind them. 
 
Battle Lines Forming in Clash Over Foreclosures
 
 
About a month after Washington Mutual Bank made a multimillion-dollar mortgage loan on a mountain home near Santa Barbara, Calif., a crucial piece of paperwork disappeared.
 
Cynthia Veintemillas, a lawyer in Florida, met with a client, Patrick Jeffs, on Wednesday.
 
Herbert Newlands Jr. of Temple Terrace, Fla., getting foreclosure advice from his lawyer on Tuesday. Florida has been hit hard by foreclosures.
 
But bank officials were unperturbed. After conducting a “due and diligent search,” an assistant vice president simply drew up an affidavit stating that the paperwork — a promissory note committing the borrower to repay the mortgage — could not be found, according to court documents.
 
The handling of that lost note in 2006 was hardly unusual. Mortgage documents of all sorts were treated in an almost lackadaisical way during the dizzying mortgage lending spree from 2005 through 2007, according to court documents, analysts and interviews.
 
Now those missing and possibly fraudulent documents are at the center of a potentially seismic legal clash that pits big lenders against homeowners and their advocates concerned that the lenders’ rush to foreclose flouts private property rights.
 
That clash — expected to be played out in courtrooms across the country and scrutinized by law enforcement officials investigating possible wrongdoing by big lenders — leaped to the forefront of the mortgage crisis this week as big lenders began lifting their freezes on foreclosures and insisted the worst was behind them.
 
Federal officials meeting in Washington on Wednesday indicated that a government review of the problems would not be complete until the end of the year.
 
In short, the legal disagreement amounts to whether banks can rely on flawed documentation to repossess homes.
 
While even critics of the big lenders acknowledge that the vast majority of foreclosures involve homeowners who have not paid their mortgages, they argue that the borrowers are entitled to due legal process.
 
Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel A. Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”
 
Others are more sanguine about the dispute.
 
Joseph R. Mason, a finance professor who holds the Louisiana Bankers Association chair at Louisiana State University, said that concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.
 
“You borrowed money,” he said. “You are obligated to repay it.”
 
After freezing most foreclosures, Bank of America, the largest consumer bank in the country, said this week that it would soon resume foreclosures in about half of the country because it was confident that the cases had been properly documented. GMAC Mortgage said it was also proceeding with foreclosures, on a case-by-case basis.
 
While some other banks have also suggested they can wrap up faulty foreclosures in a matter of weeks, some judges, lawyers for homeowners and real estate experts like Mr. Cole expect the courts to be inundated with challenges to the banks’ actions.
 
“This is ultimately going to have to be resolved by the 50 state supreme courts who have jurisdiction for property law,” Professor Cole predicted.
 
Defaulting homeowners in states like Florida, among the hardest hit by foreclosures, are already showing up in bigger numbers this week to challenge repossessions. And judges in some states have halted or delayed foreclosures because of improper documentation. Court cases are likely to hinge on whether judges believe that banks properly fulfilled their legal obligations during the mortgage boom — and in the subsequent rush to expedite foreclosures.
 
The country’s mortgage lenders contend that any problems that might be identified are technical and will not change the fact that they have the right to foreclose en masse.
 
“We did a thorough review of the process, and we found the facts underlying the decision to foreclose have been accurate,” Barbara J. Desoer, president of Bank of America Home Loans, said earlier this week. “We paused while we were doing that, and now we’re moving forward.”
 
Some analysts are not sure that banks can proceed so freely. Katherine M. Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.
 
“The misbehavior is clear: they lied to the courts,” she said. “The fact that they are saying no one was harmed, they are missing the point. They did actual harm to the court system, to the rule of law. We don’t say, ‘You can perjure yourself on the stand because the jury will come to the right verdict anyway.’ That’s what they are saying.”
 
Robert Willens, a tax expert, said that documentation issues had created potentially severe tax problems for investors in mortgage securities and that “there is enough of a question here that the courts might well have to resolve the issue.”
 
As the legal system begins sorting through the competing claims, one thing is not in dispute: the pell-mell origination of mortgage loans during the real estate boom and the patchwork of financial machinery and documentation that supported it were created with speed and profits in mind, and with little attention to detail.
 
Once the foreclosure wheels started turning, said analysts, practices became even shoddier.
 
For example, the foreclosure business often got so busy at the Plantation, Fla., law offices of David J. Stern — and so many documents had to be signed so banks could evict people from their homes — that a supervisor sometimes was too tired to write her own name.
 
When that happened, Cheryl Samons, the supervisor at the firm, who typically signed about 1,000 documents a day, just let someone else sign for her, court papers show.
 
“Cheryl would give certain paralegals rights to sign her name, because most of the time she was very tired, exhausted from signing her name numerous times per day,” said Kelly Scott, a Stern employee, in a deposition that the Florida attorney general released on Monday. A lawyer representing the law firm said Ms. Samons would not comment.
 
Bill McCollum, Florida’s attorney general, is investigating possible abuses at the Stern firm, a major foreclosure mill in the state, involving false or fabricated loan documents, calling into question the foreclosures the firm set in motion on behalf of banks.
 
That problem extends far beyond Florida.
 
As lenders and Wall Street firms bundled thousands of mortgage loans into securities so they could be sold quickly, efficiently and lucratively to legions of investors, slipshod practices took hold among lenders and their representatives, former employees of these operations say.
 
Banks routinely failed to record each link in the chain of documents that demonstrate ownership of a note and a property, according to court documents, analysts and interviews. When problems arose, executives and managers at lenders and loan servicers sometimes patched such holes by issuing affidavits meant to prove control of a mortgage.
 
In Broward County, Fla., alone, more than 1,700 affidavits were filed in the last two years attesting to lost notes, according to Legalprise, a legal services company that tracks foreclosure data.
 
When many mortgage loans went bad in the last few years, lenders outsourced crucial tasks like verifying the amount a borrower owed or determining which institution had a right to foreclose.
 
Now investors who bought mortgage trusts — investment vehicles composed of mortgages — are wondering if the loans inside them were recorded properly. If not, tax advantages of the trusts could be wiped out, leaving mortgage securities investors with significant tax bills.
 
For years, lenders bringing foreclosure cases commonly did not have to demonstrate proof of ownership of the note. Consumer advocates and consumer lawyers have complained about the practice, to little avail.
 
But a decision in October 2007 by Judge Christopher A. Boyko of the Federal District Court in northern Ohio to toss out 14 foreclosure cases put lenders on notice. Judge Boyko ruled that the entities trying to seize properties had not proved that they actually owned the notes, and he blasted the banks for worrying “less about jurisdictional requirements and more about maximizing returns.”
 
He also said that lenders “seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance.” Now that their practices were “put to the test, their weak legal arguments compel the court to stop them at the gate,” the judge ruled.
 
Yet aside from the actions of a few random judges, little was done to force lenders to change their practices or slow things down. Since March 2009, more than 300,000 property owners a month have received foreclosure notices or lost their home in a foreclosure, according to RealtyTrac, which tracks foreclosure listings.
 
What finally prompted a re-examination of the foreclosure wave was the disclosure in court documents over the last several months of so-called robo-signers, employees like Ms. Samons of the Stern law firm in Florida who signed affidavits so quickly that they could not possibly have verified the information in the document under review.
 
Lenders and their representatives have sought to minimize the significance of robo-signing and, while acknowledging legal lapses in how they documented loans, have argued that foreclosures should proceed anyway. After all, the lenders say, the homeowners owe the money.
 
People who have worked at loan servicers for many years, who requested anonymity to protect their jobs, said robo-signing and other questionable foreclosure practices emanated from one goal: to increase efficiency and therefore profits. That rush, they say, allowed for the shoddy documentation that is expected to become evidence for homeowners in the coming court battles.
 
For example, years ago when banks made loans, they typically stored promissory notes in their vaults.
 
But the advent of securitization, in which loans are bundled and sold to investors, required that loan documents move quickly from one purchaser to another. Big banks servicing these loans began in 2002 to automate their systems, according to a former executive for a top servicer who requested anonymity because of a confidentiality agreement.
 
First to go was the use of actual people to determine who should be liable to a foreclosure action. They were replaced by computers that identified delinquent borrowers and automatically sent them letters saying they were in default. Inexperienced clerical workers often entered incorrect mortgage information into the computer programs, the former executive said, and borrowers rarely caught the errors.
 
Other record-keeping problems that are likely to become fodder for court battles involve endorsements, a process that occurs when notes are transferred and validated with a stamp to identify the institution that bought it. Eager to cut costs, most institutions left the notes blank, with no endorsements at all.
 
Problems are also likely to arise in court involving whether those who signed documents required in foreclosures actually had the authority to do so — or if the documents themselves are even authentic.
 
For example, Frederick B. Tygart, a circuit court judge overseeing a foreclosure case in Duval County, Fla., recently ruled that agents representing Deutsche Bank relied on documents that “must have been counterfeited.” He stopped the foreclosure. Deutsche Bank had no comment on Wednesday.
 
Cynthia Veintemillas, the lawyer representing the borrower in the case, Patrick Jeffs, said the paperwork surrounding her client’s foreclosure was riddled with problems.
 
“Everybody knows the banks screwed up and loaned out money to people who couldn’t pay it back,” she said. “Why are people surprised that they don’t know what they are doing here either?”
 
Meanwhile, another judge on Wednesday indicated that the courts would not simply sign off on the banks’ documentation. Jonathan Lippman, the chief judge of New York’s courts, ordered lawyers to verify the validity of all foreclosure paperwork.
 
“We cannot allow the courts in New York State to stand by idly and be party to what we now know is a deeply flawed process, especially when that process involves basic human needs — such as a family home — during this period of economic crisis,” Judge Lippman said in a statement.
 
For more: http://nyti.ms/clFAba
 

 Mortgage Mess May Cost Big Banks Billions

 
“I don’t see how it can be cleared up in a short period of time,” said Richard X. Bove, an analyst with Rochdale Securities. “The moratorium won’t last that long but the problem will last at least four or five years, maybe a decade.” In the short term, he said, “it could easily cost $1.5 billion per quarter.” 
 
After scratching their heads for weeks over how much the foreclosure mess will hurt banks’ bottom lines, investors got out their calculators Thursday to tally the potential costs — and sent bank stocks plunging.
 
Analyst estimates of the possible toll varied widely, but the fear was evident in the stock market. The share price of Bank of America fell 5.2 percent, while shares of JPMorgan Chase sank almost 2.8 percent.
 
“The market never likes uncertainty, and it seems like every day we’re adding to the list of things we need to worry about with the financials,” said Jason Goldberg, an analyst with Barclays Capital. “The industry needs to work quickly to put this issue behind them.”
 
Wall Street initially hoped the banks would do just that but as the political furor grew, a quick end to the crisis was looking less and less likely. On Wednesday, 50 state attorneys general announced they were investigating the practices of the mortgage servicing industry, while Florida’s attorney general subpoenaed the nation’s largest mortgage processor, L.P.S., as part of a broader investigation.
 
In some cases, officials at mortgage servicers signed hundreds of documents a day with barely a chance to review them — the so-called robo-signers — while doubts have arisen about the veracity of the original documents compiled as part of the foreclosure process.
 
“I don’t see how it can be cleared up in a short period of time,” said Richard X. Bove, an analyst with Rochdale Securities. “The moratorium won’t last that long but the problem will last at least four or five years, maybe a decade.” In the short term, he said, “it could easily cost $1.5 billion per quarter.”
 
Meanwhile, the foreclosure machinery in many states has ground to a halt. Major institutions like Bank of America, JPMorgan and GMAC Mortgage have halted foreclosures in many states, and have not said when they would resume. As a result, foreclosed homes will remain on the bank’s books while racking up thousands of dollars a month in extra costs.
 
Until Thursday, Wall Street regarded the foreclosure issue as a risk to the banks’ reputations, rather than their bottom lines. Indeed, some analysts insisted it was unlikely that wide-scale abuses would be found.
 
“It’s inexcusable that the banks didn’t staff up to meet the surge in foreclosures,” said Christopher Kotowski, an analyst with Oppenheimer. “On the other hand, we need to look at whether they are filing foreclosures on a massive basis against people who are not delinquent. So far, I haven’t seen any evidence that they are.”
 
Inside the investment houses, several traders said nerves were frazzled further by worries that banks could face much bigger mortgage related losses, not from foreclosures, but because of questions about how the money was lent in the first place. If it turns out that mortgages were bundled together and sold improperly, more holders could sue the banks and force them to buy back tens of billions in mortgage-backed securities.
 
An alarming report on Bank of America, compiled by Branch Hill Capital, a San Francisco hedge fund, circulated widely on Wall Street on Thursday. Branch Hill suggested that the bank, the nation’s largest, could be facing more than $70 billion in losses from mortgage securities that it may have to repurchase from Fannie Mae and Freddie Mac, as well as private investors.
 
“We think this is a very important issue, and the liability will be substantial,” said Manal Mehta, a partner at Branch Hill. “There has been pervasive bad behavior throughout the system.” The fund is betting that Bank of America shares could decline because of the potential liability.
 
Bank of America declined to comment Thursday. But the company’s chief executive, Brian T. Moynihan, said last month at an investor conference that adequate reserves had been taken to protect against any losses that could materialize if it was forced to repurchase mortgage securities. “This will be manageable over time, but it has cost us a lot of money so I’m not making light of it,” he said. “We’ll continue to manage it.”
 
On Wednesday, JPMorgan said it had added $1 billion to its reserves to cover faulty home loans that it was obligated to repurchase from Fannie Mae, Freddie Mac and private insurers. It has set aside a total of $3 billion for potential repurchases.
 
Even if the larger losses envisioned by Mr. Mehta do not materialize, the foreclosure issue remains a worry. In a report, Paul Miller, an analyst with FBR Capital Markets, forecast that the controversy would cost the banking industry $6 billion to $10 billion. He estimated that each month’s delay cost the banks $1,000 per home loan, so if there was a three-month delay on the roughly two million homes currently in foreclosure, that translated into a $6 billion hit.
 
In addition to the losses directly caused by the delay, Mr. Miller foresees additional charges totaling $3 billion to $4 billion to cover lawsuits stemming from faulty foreclosure procedures.
 
For now, bank executives are not making any predictions how long the foreclosure halt will last.
 
“If you’re talking about three or four weeks it will be a blip in the housing market,” said Jamie Dimon, chief executive of JPMorgan Chase, in a conference call on Wednesday. “If it went on for a long period of time, it will have a lot of consequences, most of which will be adverse on everybody.”
 
For more: http://nyti.ms/diFs2w

 

 
The FBI report draws attention to one type of fraud that has grown considerably since the bubble burst: borrowers on the brink of foreclosure who hope to avail themselves of financial assistance related to federal stimulus legislation. 
 
October 14, 2010 /24-7PressRelease/ — Once the dust had cleared from the recent economic collapse, the media focused a great deal of blame on one group: financial professionals involved in real property transactions who were accused of fudging documents, lying to buyers, falsifying appraisals and other illegal activities. New data from one federal agency reveals a growing interest in investigating all types of mortgage fraud and helping the Department of Justice pursue convictions.
 
The latest annual mortgage fraud report from the Federal Bureau of Investigation (FBI) reveals that the agency has taken a greater interest in crimes involving financing of homes and other real estate. From 2008 to 2009, investigations rose over 70 percent. The stakes are high: two-thirds of pending investigations during 2009 involved losses totaling more than $1 million.
 
When the real estate bubble was swelling at double-digit rates, some industry professionals padded profits by encouraging borrowers to maximize their debt load by entering into unsustainable adjustable rate mortgages (ARMs). The FBI report draws attention to one type of fraud that has grown considerably since the bubble burst: borrowers on the brink of foreclosure who hope to avail themselves of financial assistance related to federal stimulus legislation. "Vulnerabilities associated with these and similar programs include the lack of transparency, accountability, oversight and enforcement that predisposes them to fraud and abuse," the FBI stated in its report.
 
The FBI indicated five states with the worst mortgage fraud problems: California, Florida, Illinois, Michigan and Arizona. In light of journalistic investigations revealing that a significant number of ex-criminals had received mortgage licenses, Florida state regulators have responded with a variety of measures to minimize risks, including annual criminal background checks for brokers and lenders.
 
Assembling Straw Buyers for Profit
 
Financial institutions are not the only parties who may be accused of making material misstatements, misrepresentations or omissions during the mortgage application process. One typical scheme perpetrated against banks and other lenders is the use of "straw buyer" scams, which involve using a stand-in to purchase property. Straw buyers can be used to obtain mortgage approval for an otherwise unattractive borrower, or to eliminate a paper trail on fraudulent investments and other scams.
 
One such situation recently investigated by the Tampa office of the FBI involved Mark J. Moncher, an Orlando man who posed out-of-state family members as buyers to channel mortgage funds to his business, Dream Home Management. Moncher was recently sentenced to 57 months in federal prison after pleading guilty to conspiracy to commit mail and wire fraud as part of a larger mortgage fraud scheme. His cadre of straw buyers all defaulted after obtaining more than $3.7 million in loans from various financial institutions. In addition to several years of incarceration, Moncher must pay nearly $2 million in restitution.
 
As this case reveals, the basic accusation behind a mortgage fraud case can be surprisingly simple: falsifying a borrower’s identity, income, employment, assets or other information can lead a mortgage lender to approve an application that would otherwise be denied. While lenders have become much more wary since the mortgage meltdown, there is still ample room for dishonest hustlers to game the system. At the same time, simple misunderstandings, honest mistakes and creative accounting can lead to baseless accusations of criminal intent and protracted legal struggles.
 
Protecting Your Interests by Avoiding Mortgage Fraud Accusations
 
Criminal allegations can arise at any stage of a real estate transaction. For example, appraisers can be suspected of mortgage fraud on behalf of either the seller or the lender by inflating the value of the property. Lenders or brokers can be accused of changing details in the paperwork, amending contracts after they are signed or failing to disclose pertinent information. Entrepreneurial buyers who quickly fix and sell homes can face allegations of illegal property flipping.
 
Federal and state authorities will continue to aggressively investigate and prosecute mortgage fraud involving everything from loan origination, builder bailouts, and offshore transactions to equity skimming, short sales, reverse mortgages and loan modifications. But the facts surrounding even the most basic property transaction are complex, and parties who suspect that they may be under investigation should act swiftly to protect their interests and head off a prosecution before it gets off the ground.
 
The FBI, DOJ and other federal and state government agencies have tremendous resources to draw from to investigate and prosecute financial crimes. A defense attorney who has experience in federal white collar criminal cases can assess your situation, explain your rights, represent you in an investigation and defend your rights in the event that federal criminal charges are filed.
 
Article provided by Law Offices of Mark L. Horwitz, P.A.
 
For more: http://bit.ly/cuwFpf
 
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