Archive for 'J.P. Morgan Chase'

As the nation’s housing market continues to teeter, the Treasury Department on Thursday penalized three of the nation’s largest banks for subpar performance in administrating a government-sponsored program to modify mortgage loans for distressed homeowners.

As part of a new assessment of mortgage servicers, Treasury officials said they would withhold incentive payments for the three banks — Bank of America, JPMorgan Chase and Wells Fargo — until the problems are resolved. At that point, those payments would be made, a Treasury spokeswoman said.

In May, the three banks received $24 million in incentives as part of the modification program.

The Treasury Department has previously withheld payments from mortgage servicers, but Thursday’s action focused on some of the biggest players in the program. Called the Home

Affordable Modification Program, or HAMP, it is voluntary for mortgage servicers. Nearly all of the nation’s largest banks have signed contracts to participate.

The Obama administration has long been criticized as being too easy on the mortgage servicers, and Thursday’s announcement did little to quiet that criticism.

Neil M. Barofsky, who resigned in March as special inspector general for the bank bailout, described the assessments and penalties as a “lost opportunity” to hold lenders more accountable.

“It further reaffirms Treasury’s long-running toothless response to the servicers’ disregard of their contract with Treasury, and by extension, the American taxpayer,” Mr. Barofsky said in an e-mail.

Timothy G. Massad, assistant Treasury secretary, defended the approach. He said the assessments of banks and other mortgage servicers “will serve to keep the pressure on servicers to more effectively assist struggling families.”

“We need servicers to step up their performance to meet the needs of those still struggling,” he said in a statement.

The mortgage servicers were evaluated on a scale of one to three stars during the first quarter on whether they had identified and searched for eligible homeowners; assessed homeowners’ eligibility correctly; and maintained effective program management, governance and reporting.

Bank of America received the lowest grade, one star, on four of seven areas that were evaluated; Wells received one star in three areas; and Chase, in one.

A fourth mortgage servicer, Ocwen Loan Service, was also assessed as needing substantial improvement, but Treasury said it would not withhold payments to Ocwen because it was negatively affected by a large acquisition of mortgages to service.

Six other mortgage servicers were graded as needing moderate improvement. There were no servicers deemed as needing only minor improvement.

Wells Fargo issued a statement saying it was “formally disputing” the Treasury’s findings.
“It paints an unfairly negative picture of our modification efforts and contradicts previous written assessments shared with us by the Treasury,” said spokeswoman Vickee J. Adams, who said the criticisms were dated and did not reflect recent improvements.

Chase said it too had made significant improvements. “The bank respectfully disagrees with the assessment,” the company said in a statement.

Dan B. Frahm, a spokesman for Bank of America, said that the bank was “committed to continually improving our processes to assist distressed homeowners” through the federal modification program and its own internal program. But he added, “We acknowledge improvements must be made in key areas, particularly those affecting the customer experience.”

The modification program was created using $50 billion that was set aside from the bank bailout to help distressed homeowners. The idea was that the Treasury Department would provide incentives to mortgage servicers and investors to modify mortgages for struggling homeowners, rather than foreclose on them.

The administration predicted that three million to four million Americans would benefit, but so far, only 699,053 permanent modifications have been started.

To date, Treasury has spent about $1.34 billion on HAMP. One problem was that the mortgage servicers, at least initially, were not prepared to handle the onslaught of modifications, and homeowners complained that paperwork had been routinely lost and trial modifications had dragged on for months.

by Andrew Martin with New York Timeshttp://www.nytimes.com/2011/06/10/business/10hamp.html?_r=1

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
Bank executives who were hoping for a quiet end to this fall’s controversy over irregularities in the foreclosure process are facing a new threat: state judges. 
 
The chief justice of New Jersey’s Supreme Court, Stuart Rabner, announced Monday that the state’s courts would stop foreclosures by big banks if they cannot show they’re following state law when foreclosing. 
 
Rabner made the announcement after assigning a judge to oversee foreclosure matters. That judge, Mary C. Jacobson, issued an order Monday requiring six banks – Ally Financial, Bank of America, J.P. Morgan Chase, Wells Fargo, OneWest Bank and Citigroup – to appear in court and explain why she shouldn’t suspend foreclosures. 
 
The New Jersey action stems from the controversy over questions surfaced over the legality of documents submitted to courts in foreclosure proceedings. 
 
"Today’s actions are intended to provide greater confidence that the tens of thousands of residential foreclosure proceedings underway in New Jersey are based on reliable information," Rabner said in a statement. "Nearly 95 percent of those cases are uncontested, despite evidence of flaws in the foreclosure process." 
 
The six banks must by Jan. 19 show the court why it should not suspend foreclosures. The order said the banks were chosen "based on a public record of questionable practice." 
 
Only one bank would comment on Monday. Mark Rodgers of Citigroup said the bank would review the judge’s order and ensure that it is in compliance. 
 
Banks are expected to argue that problems in the foreclosure process have been minor and the vast majority of those facing foreclosure lost their homes because they didn’t pay their mortgages for many months. 
 
They’re also likely to say that a protracted freeze in foreclosures could have a negative effect since it would keep those vacant homes out of the market. 
 
But homeowner advocates and others will likely argue that banks’ problems with following the letter of the law in foreclosure proceedings reflect a range of harmful practices that have hurt borrowers trying to avoid foreclosures. 
 
 
By Zachary A. Goldfarb 
For more: http://wapo.st/gxhd7G

 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

 When most people think of mortgage fraud, they think of a clever borrower conning an unwitting banker into extending him a loan he cannot afford. But this isn’t really how fraud usually works in the mortgage business. According to the FBI, 80% of mortgage fraud is committed by lenders.

 

There are two types of financial outrages: acts that are outrageously illegal, and acts that are, outrageously, legal. Yesterday’s Senate hearing on the rise and fall of Washington Mutual was a rare examination of the former outrage, documenting the pervasive practice of fraud at every level of the now-defunct bank’s business.

All of Washington Mutual’s sketchy practices can be traced back to rampant fraud in its mortgage lending offices. The company repeatedly performed internal audits of its lending practices, and discovered multiple times that enormous proportions of the loans it was issuing were based on fraudulent documents. At some offices, the fraud rate was on new mortgages over 70%, and at yesterday’s hearing, the company’s former Chief Risk Officer James Vanasek described its mortgage fraud as "systemic."

When most people think of mortgage fraud, they think of a clever borrower conning an unwitting banker into extending him a loan he cannot afford.

But this isn’t really how fraud usually works in the mortgage business.

According to the FBI, 80% of mortgage fraud is committed by the lender, so it shouldn’t be surprising that WaMu’s internal audits concluded that its widespread fraud was being "willfully" perpetrated by its own employees. The company also engaged in textbook predatory lending across all of its mortgage lending activities–issuing loans based on the value of the property, while ignoring the borrower’s ability to repay the loan.

These findings alone are pretty bad stuff in the world of white-collar crime. For several years, WaMu was engaged in fraudulent lending, WaMu managers knew it was engaged in fraudulent lending, and didn’t stop it. The company was setting up thousands, if not millions of borrowers for foreclosure, while booking illusory short-term profits and paying out giant bonuses for its employees and executives. During the housing boom, WaMu Chairman and CEO Kerry Killinger took home between $11 million and $20 million every single year, much of it "earned" on outright fraud.

But the WaMu scandal gets much worse. WaMu is routinely referred to as a pure mortgage lender, one whose simple business model can be contrasted with the complex wheelings and dealings of Wall Street titans like Lehman Brothers and Bear Stearns. That characterization is grossly inaccurate. WaMu was very heavily engaged in the business of packaging mortgages into securities and marketing them to investors. This is a core investment banking function, something ordinary mortgage banks like WaMu were legally barred from engaging in until 1999, when Congress repealed the Glass-Steagall Act, a critical Depression-era reform.

Securitization is immensely profitable, and under the right circumstances, it allows banks to dump risky mortgages off their books at a profit. That’s exactly what WaMu did. Even after internal audits flagged specific loans as fraudulent, WaMu’s securitization shop still went ahead and packaged those exact same loans into securities, and sold them to investors. Knowingly peddling fraudulent securities is a straightforward act of securities fraud, one made all the more severe by the fact that WaMu never told its investors it had sold them securities full of fraudulent loans. The only question now is whether anyone will be personally held accountable for the act.

So far, we’ve got fraud on fraud– but wait!

The WaMu saga actually gets worse still.

When the mortgage market started falling apart, WaMu ordered a study on the likelihood that one if its riskiest mortgage products, the option-ARM loan, would begin defaulting en masse.

The report concluded that, indeed, option-ARMs were about to default like crazy, within a matter of months.

Option-ARMs feature a low introductory monthly payment for a few years, often so low that borrowers actually end up going deeper into debt, despite making their regular payments. After a few years, the monthly payment increases dramatically–sometimes by as much as 400 percent. Suddenly this cheap loan is outrageously unaffordable, and if home prices decline, borrowers are immediately headed for foreclosure.

Now, most would-be homeowners are not very interested in this kind of loan. It seems dangerous, because it is dangerous. So WaMu actively coached its loan officers to persuade skeptical borrowers into accepting this predatory garbage instead of an ordinary mortgage.

This assault on its own borrowers is only half of WaMu’s option-ARM hustle.

For a while, Wall Street investors really liked option-ARMs. They were inherently risky, which meant they were much more profitable, if you ignored the risk that they might someday default, and Wall Street was all too happy to engage in this kind of creative accounting.

But when WaMu conducted its study on looming option-ARM defaults, the prospect of heavy, imminent losses did not convince the company to abandon the business. Instead, WaMu began issuing as many option-ARMs as it could. The idea was to jam as many of these loans into its securitization machine as it could before investors decided to stop buying option-ARM securities altogether.

That means WaMu was knowingly setting up both borrowers and investors for a fall. The company was actually trying to extend loans that it knew would be disastrous for its borrowers–and then selling them to investors that it knew would end up taking heavy losses. Whether or not this constitutes illegal fraud will depend on some technicalities, but it is clearly an act of outrageous deception.

When the securitization markets finally froze up, WaMu got stuck with billions in terrible, terrible loans it had issued, and the company failed spectacularly. One of the few good calls the U.S. government made during the financial crisis was the decision not to extend bailout funds to WaMu, not to save the jobs of its executives, and allow the company to fail. It was seized by the FDIC in late September 2008, and immediately sold to J.P. Morgan Chase, at no cost to taxpayers.

But WaMu’s story is nevertheless rife with implications here for Wall Street reform.

First, regulation matters.

Everything WaMu did could have been stopped not only by an engaged regulator who worried about the company’s bottom line, but by a regulator who cared about consumer protection in any degree whatsoever. WaMu’s regulator, the Office of Thrift Supervision, didn’t care about either, but it was particularly uninterested in consumer protection rules, because those often conflict with bank profitability.

If we establish a new regulator that is charged only with writing and enforcing consumer protection rules, it won’t worry about how profitable consumer predation might be, it will simply crack down on it. In the process, it could actually protect the company’s bottom line (Salon’s Andrew Leonard has been emphasizing this point for some time).

Second, at yesterday’s hearing, former WaMu Chief Risk Officer James Vanasek acknowledged that his bank would not have been able to wreak so much economic destruction without the repeal of Glass-Steagall, which barred any mixing between complex Wall Street securities dealings and ordinary, plain-vanilla banking. He even went so far as to offer a tepid endorsement for reinstating the law.

A lot of predatory mortgage firms didn’t run their own securitization shops–they sold their loans directly to Wall Street firms, which handled the securitization on their own. So proponents of the Glass-Steagall repeal (most of them employed at one point or another by a major banking conglomerate) argue that the crisis would have occurred with our without the repeal. That argument is basically a distraction, as the WaMu case reveals. Over the course of just a few years, WaMu’s entire mortgage banking operation transformed from a boring, profitable, plain-vanilla enterprise, into a feeding trough for its risky securitization activities. There is simply no way that transformation could have occurred without the lure of easy in-house securitization profits. It is possible to conceive of a mortgage crisis taking place without the repeal of Glass-Steagall, but it is utterly impossible to imagine a mortgage crisis as severe as the one we are still living through.

It will be very surprising if criminal charges are not soon filed against some of WaMu’s former executives. But WaMu isn’t the only bad actor from the financial crisis. This is basically how the entire U.S. mortgage market operated for at least five years. Dozens of lenders who are still active, many of them saved by generous taxpayer bailouts, were engaged in similar activities. There’s only one way to churn out billions of dollars worth of lousy mortgages for several years, and it involves a prolonged campaign of fraud and deception.

 

This keeps getting uglier and uglier. I’m not trying to promote "doom and gloom" so don’t shoot the messenger. My objective is to keep  you on top of today’s insane turbulent real estate market.

"He Who Masters The New Rules Firstest, WINS The MOSTEST"

 

 

Foreclosure Furor Rises; Many Call for a Freeze

By DAVID STREITFELD and GRETCHEN MORGENSON
Published: October 5, 2010
 
The uproar over bad conduct by mortgage lenders intensified Tuesday, as lawmakers in Washington requested a federal investigation and the attorney general in Texas joined a chorus of state law enforcement figures calling for freezes on all foreclosures.
 
Flawed Paperwork Aggravates a Foreclosure Crisis (October 4, 2010)
 
Representative Nancy Pelosi, the House speaker, and 30 other Democratic representatives from California told the Justice Department, the Federal Reserve and the comptroller of the currency that “it is time that banks are held accountable for their practices.”
 
In a request for an investigation into questionable foreclosure practices by lenders, the lawmakers said that “the excuses we have heard from financial institutions are simply not credible."
 
Officials from the federal agencies declined to comment.
 
Texas Attorney General Greg Abbott, a Republican, sent letters to 30 lenders demanding they stop foreclosures, evictions and the sale of foreclosed properties until they could provide assurances that they were proceeding legally.
 
Both developments indicated that scarcely two weeks after the country’s fourth-biggest lender, GMAC Mortgage, revealed that it was suspending all foreclosures in the 23 states where the process requires judicial approval, concerns about flawed foreclosures had mushroomed into a nationwide problem.
 
Some of the finger-pointing was also being directed back at Congress. The Ohio secretary of state, Jennifer Brunner, suggested in a telephone interview on Tuesday that a bill passed by Congress last week about notarizations could facilitate foreclosure fraud.
 
Dubious notary practices used by banks to justify foreclosures have come under scrutiny in recent weeks as GMAC and other top lenders suspended homeowner evictions over possible improper procedures.
 
Ms. Brunner, who has recently referred possible cases of notary fraud in her state to federal authorities, worries that the legislation would allow the lowest standard for notaries to become a nationwide practice. She said she also worried that the changes were coming in the middle of a foreclosure storm where people could lose their homes improperly.
 
“A notary’s signature is that of a trusted, impartial third party, whose notarization bolsters the integrity of the document,” Ms. Brunner said. “To take away the safeguards of notarization means foreclosure procedures could be more susceptible to fraud.”
 
As banks’ foreclosure practices have come under the microscope, problems with notarizations on mortgage assignments have emerged. These documents transfer the ownership of the underlying note from one institution to another and are required for foreclosures to proceed.
 
In some cases, the notarizations predated the preparation of the legal documents, suggesting that signatures were not reviewed by a notary. Other notarizations took place in offices far away from where the documents were signed, indicating that the notaries might not have witnessed the signings as the law required.
 
Notary practices vary from state to state and the bill, sponsored by Representative Robert B. Aderholt, a Republican from Alabama, would essentially require that one state’s rules be accepted by others. If one state allows its notaries to sign off on electronic signatures, for example, documents carrying such signatures and notarized by officials in that state would have to be recognized and accepted in any state or federal court.
 
Ms. Brunner pointed out that some states had adopted “electronic notarization” laws that ignored the requirement of a signer’s personal appearance before a notary. “Many of these policies for electronic notarization are driven by technology rather than by principle, and they are dangerous to consumers,” she said.
 
Mr. Aderholt had introduced the bill twice before and both times it passed the House of Representatives but not the Senate. Mr. Aderholt reintroduced the bill last October and it passed the Senate on Sept. 29. It is awaiting President Obama’s signature.
 
Mr. Aderholt’s press secretary, Darrell Jordan, said there was no connection between the timing of the bill and the current notarization problems with foreclosures. In a statement announcing the bill’s passage, Mr. Aderholt said: “This legislation will help businesses around the nation by eliminating the confusion which arises when states refuse to acknowledge the integrity of documents notarized out of state.”
 
Last week, JPMorgan Chase and Bank of America joined GMAC in suspending foreclosures in the states where they must be approved by a judge. The judicial states do not include California or Texas. But Mr. Abbott, the Texas attorney general, told lenders in letters dated Oct. 4 that if they used so-called robo-signers — employees who signed thousands of foreclosure affidavits a month, falsely attesting that they had reviewed the material — it would be a violation of Texas law.
 
As a result, he wrote, “the document and therefore the foreclosure sale would have been invalid.”
 
The three lenders who are at the center of the controversy, GMAC Mortgage, JPMorgan Chase and Bank of America, declined to comment. Other lenders singled out by Mr. Abbott include Wells Fargo, CitiMortgage, HSBC and National City.
 
Meanwhile, shares of a major foreclosure outsourcing company, Lender Processing Services of Jacksonville, Fla., fell 5 percent on Tuesday, adding to a slide that began last week.
 
The company’s documentation practices are stirring questions, including how the same employee can have wildly varying signatures on mortgage documents. L.P.S. blamed a midlevel manager’s decision to allow employees to sign forms in the name of an authorized employee. It says it has stopped the practice.
 
The United States Attorney’s Office in Tampa began investigating L.P.S. in February. An L.P.S. representative could not be reached Tuesday for comment.
 
Other calls for investigations came from Senators Al Franken, a Democrat from Minnesota, and Robert Menendez, a Democrat from New Jersey.
 
 

 This article from http://www.nytimes.com/2010/10/06/business/06mortgage.html

 How Will This Foreclosure Mess Affect You & Your Business?
(15 min Video)

 


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Your Comments are very valuable and important

 Hey Mike,

 
Here’s a good one, there is a company called DocX, that, for a fee researches mortgages for banks, find  what the defects are in the paperwork, then, they create new docs to make it appear everything has been done correctly. 
They even have a price list for the various docs that would need to be "created" have a look at this http://bit.ly/bcNlQC
Take care,
Nicholas Capra
 
 
SUNDAY, OCTOBER 3, 2010
4ClosureFraud Posts Lender Processing Services Mortgage Document Fabrication Price Sheet
A bombshell has dropped in mortgage land.
 
We’ve said for some time that document fabrication is widespread in foreclosures. The reason is that the note, which is the borrower IOU, is the critical instrument to establishing the right to foreclose in 45 states (in those states, the mortgage, which is the lien on the property, is a mere “accessory” to the note).
 
The pooling and servicing agreement, which governs the creation of mortgage backed securities, called for the note to be endorsed (wet ink signatures) through the full chain of title. That means that the originator had to sign the note over to an intermediary party (there were usually at least two), who’d then have to endorse it over to the next intermediary party, and the final intermediary would have to endorse it over to the trustee on behalf of a specified trust (the entity that holds all the notes). This had to be done by closing; there were limited exceptions up to 90 days out; after that, no tickie, no laundry.
 
Evidence is mounting that for cost reasons, starting in the 2004-2005 time frame, originators like Countrywide simply quit conveying the note. We are told this practice was widespread, probably endemic. The notes are apparently are still in originator warehouses. That means the trust does not have them (the legalese is it is not the real party of interest), therefore it is not in a position to foreclose on behalf of the RMBS investors. So various ruses have been used to finesse this rather large problem.
 
The foreclosing party often obtains the note from the originator at the time of foreclosure, but that isn’t kosher under the rules governing the mortgage backed security. First, it’s too late to assign the mortgage to the trust. Second. IRS rules forbid a REMIC (real estate mortgage investment trust) from accepting a non-performing asset, meaning a dud loan. And it’s also problematic to assign a note from the originator if it’s bankrupt (the bankruptcy trustee must approve, and from what we can discern, the note are being conveyed without approval, plus there is no employee of the bankrupt entity authorized to endorse the note properly, another wee problem).
 
We finally have concrete proof of how widespread document fabrication was. For some reason the ScribD embeds aren’t working correctly, you can view the entire Lender Processing Services price sheet here, and here are the germane sections.
 
 Picture 21
 
 
Picture 22 
 
 
Not only are there prices up for creating, which means fabricating documents out of whole cloth, and look at the extent of the offerings. The collateral file is ALL the documents the trustee (or the custodian as an agent of the trustee) needs to have pursuant to its obligations under the pooling and servicing agreement on behalf of the mortgage backed security holder. This means most importantly the original of the note (the borrower IOU), copies of the mortgage (the lien on the property), the securitization agreement, and title insurance.
 
Also notice that there is a price for creating allonges. We discussed earlier that phony allonges have become the preferred fix for the failure to convey notes properly:
 
The cure for the mortgage documents puts the loan out of eligibility for the trust. In order to cure, on a current basis, they have to argue that the loan goes retroactively back into the trust. This is the cure that the banks have been unwilling to do, because it is a big problem for the MBS. So instead they forge and fabricate documents.
 
The letter in particular mentions an allonge. An allonge is a separate sheet of paper which is attached to a note to allow for more signatures, in this case, endorsements, to be added. Allonges have had a way of magically appearing in collateral files while trails are in progress (I’ve seen it happen in cases I was tracking; it’s gotten so common that some attorneys warn judges to be on the alert for “ta dah” moments).
 
The wee problem with an allonge miraculously being discovered is that the allonges that show up are inherently in violation of UCC (Uniform Commercial Code) provisions (UCC has been adopted by all states, a few states have minor quirks, but the broad provisions are very similar).
 
An allonge is NOT to be used unless all the space on the original note, including the margins and the back side of pages, has been used up. This is never the case. Second, an allonge has to be so firmly attached to the original document as to be inseparable. Thus an allonge suddenly being discovered is an impossibility (well impossible if it were legit), yet it seems to happen all the time.
 
This revelation touches every major servicer and RMBS trustee in the US. DocX is a part of of Lender Processing Services. Lender Processing Services has three lines of business, the biggest of which is “default services”, representing close to half its revenues of this over $2 billion in revenues company. DocX is its technology platform it uses to manage its national network of foreclosure mills. Note that DocX closed one of its offices in Alpharatta, Georgia earlier this year, per StopForeclosures:
 
On April 12, 2010, Lender Processing Services closed the offices of its subsidiary, Docx, LLC, in Alpharetta, Georgia. That office was responsible for pumping out over a million mortgage assignments in the last two years so that banks could foreclose on residential real estate. The law firms handling the foreclosures were retained and largely controlled by Lender Processing Services, according to a Sanctions Order entered by U.S. Bankruptcy Judge Diane Weiss Sigmund (In re Niles C. Taylor, EDPA, Case 07-15385-sr, Doc. 193). Lender Processing Services, the largest “default management services company” in the country, has already made at least partial admissions that there were faults in the documents produced by the Docx office – although courts and homeowners were never notified. According to Lender Processing Services, over 50 major banks use their default management services. The banks that especially need the services provided by Lender Processing Services include Deutsche Bank, Citibank, Wells Fargo and U.S. Bank, acting as trustees for mortgage-backed securitized trusts. These trusts, in the rush to securitize mortgages and sell them to investors, often ignored the critical step of obtaining mortgage assignments from the original lenders to the securities companies to the trusts. Now, years later, when the companies “servicing” the trusts need to foreclose, they retain Lender Processing Services to draft the missing documents. The mortgage servicers, including American Home Mortgage Services, Saxon Mortgage Services, and American Servicing Company, never disclose that the trusts are missing essential documents – they just rely on Lender Processing Services to “fix” the problems. Although the Alpharetta office has been closed, Lender Processing Services continues to mass produce “replacement” assignments from its Jacksonville, Florida, and Dakota County, Minnesota offices. Law firms retained by Lender Processing Services also often use their own employees, posing as officer of Mortgage Electronic Registration Systems, to produce the needed Assignments.
 
So wake up and smell the coffee. The story that banks have been trying to sell has been that document problems like improper affidavits are mere technicalities. We’ve said from the get go that they were the tip of the iceberg of widespread document forgeries and fraud. This price sheet provides concrete proof that the practices we pointed to not only existed, but are a routine way of doing business in servicer and trustee land. LPS is the major platform used by all the large servicers; it oversees the work of foreclosure mills in every state.
 
And this means document forgeries and fraud are not just a servicer problem or a borrower problem but a mortgage industry and ultimately a policy problem. These dishonest practices are so widespread that they raise serious questions about the residential mortgage backed securities market, the major trustees (such as JP Morgan, US Bank, Bank of New York) who repeatedly provided affirmations as required by the pooling and servicing agreement that all the tasks necessary for the trust to own the securitization assets had been completed, and the inattention of the various government bodies (in particular Fannie and Freddie) that are major clients of LPS.
 
Amar Bhide, in a 1994 Harvard Business Review article, said the US capital markets were the deepest and most liquid in major part because they were recognized around the world as being the fairest and best policed. As remarkable as it may seem now, his statement was seem as an obvious truth back then. In a mere decade, we managed to allow a “free markets” ideology on steroids to gut investor and borrower protection. The result is a train wreck in US residential mortgage securities, the biggest asset class in the world. The problems are too widespread for the authorities to pretend they don’t exist, and there is no obvious way to put this Humpty Dumpty back together.

 

Another article sent from Roger

 

Flawed Paperwork Aggravates a Foreclosure Crisis

By GRETCHEN MORGENSON
Published: October 3, 2010
 
As some of the nation’s largest lenders have conceded that their foreclosure procedures might have been improperly handled, lawsuits have revealed myriad missteps in crucial documents.
 
Jay LaPrete/Associated Press
Jennifer Brunner, the secretary of state of Ohio, has highlighted examples of what her office considers possible notary abuse.
The flawed practices that GMAC Mortgage, JPMorgan Chase and Bank of America have recently begun investigating are so prevalent, lawyers and legal experts say, that additional lenders and loan servicers are likely to halt foreclosure proceedings and may have to reconsider past evictions.
 
Problems emerging in courts across the nation are varied but all involve documents that must be submitted before foreclosures can proceed legally. Homeowners, lawyers and analysts have been citing such problems for the last few years, but it appears to have reached such intensity recently that banks are beginning to re-examine whether all of the foreclosure papers were prepared properly.
 
In some cases, documents have been signed by employees who say they have not verified crucial information like amounts owed by borrowers. Other problems involve questionable legal notarization of documents, in which, for example, the notarizations predate the actual preparation of documents — suggesting that signatures were never actually reviewed by a notary.
 
Other problems occurred when notarizations took place so far from where the documents were signed that it was highly unlikely that the notaries witnessed the signings, as the law requires.
 
On still other important documents, a single official’s name is signed in such radically different ways that some appear to be forgeries. Additional problems have emerged when multiple banks have all argued that they have the right to foreclose on the same property, a result of a murky trail of documentation and ownership.
 
There is no doubt that the enormous increase in foreclosures in recent years has strained the resources of lenders and their legal representatives, creating challenges that any institution might find overwhelming. According to the Mortgage Bankers Association, the percentage of loans that were delinquent by 90 days or more stood at 9.5 percent in the first quarter of 2010, up from 4 percent in the same period of 2008.
 
But analysts say that the wave of defaults still does not excuse lenders’ failures to meet their legal obligations before trying to remove defaulting borrowers from their homes.
 
“It reflects the hubris that as long as the money was going through the pipeline, these companies didn’t really have to make sure the documents were in order,” said Kathleen C. Engel, dean for intellectual life at Suffolk University Law School and an expert in mortgage law. “Suddenly they have a lot at stake, and playing fast and loose is going to be more costly than it was in the past.”
 
Attorneys general in at least six states, including Massachusetts, Iowa, Florida and Illinois, are investigating improper foreclosure practices. Last week, Jennifer Brunner, the secretary of state of Ohio, referred examples of what her office considers possible notary abuse by Chase Home Mortgage to federal prosecutors for investigation.
 
The implications are not yet clear for borrowers who have been evicted from their homes as a result of improper filings. But legal experts say that courts may impose sanctions on lenders or their representatives or may force banks to pay borrowers’ legal costs in these cases.
 
Judges may dismiss the foreclosures altogether, barring lenders from refiling and awarding the home to the borrower. That would create a loss for the lender or investor holding the note underlying the property. Almost certainly, lawyers say, lawsuits on behalf of borrowers will multiply.
 
In Florida, problems with foreclosure cases are especially acute. A recent sample of foreclosure cases in the 12th Judicial Circuit of Florida showed that 20 percent of those set for summary judgment involved deficient documents, according to chief judge Lee E. Haworth.
 
“We have sent repeated notices to law firms saying, ‘You are not following the rules, and if you don’t clean up your act, we are going to impose sanctions on you,’ ” Mr. Haworth said in an interview. “They say, ‘We’ll fix it, we’ll fix it, we’ll fix it.’ But they don’t.”
 
As a result, Mr. Haworth said, on Sept. 17, Harry Rapkin, a judge overseeing foreclosures in the district, dismissed 61 foreclosure cases. The plaintiffs can refile but they need to pay new filing fees, Mr. Haworth said.
 
The byzantine mortgage securitization process that helped inflate the housing bubble allowed home loans to change hands so many times before they were eventually pooled and sold to investors that it is now extremely difficult to track exactly which lenders have claims to a home.
 
Many lenders or loan servicers that begin the foreclosure process after a borrower defaults do not produce documentation proving that they have the legal right to foreclosure, known as standing.
 
As a substitute, the banks usually present affidavits attesting to ownership of the note signed by an employee of a legal services firm acting as an agent for the lender or loan servicer. Such affidavits allow foreclosures to proceed, but because they are often dubiously prepared, many questions have arisen about their validity.
 
Although lawyers for troubled borrowers have contended for years that banks in many cases have not properly documented their rights to foreclose, the issue erupted in mid-September when GMAC said it was halting foreclosure proceedings in 23 states because of problems with its legal practices. The move by GMAC followed testimony by an employee who signed affidavits for the lender; he said that he executed 400 of them each day without reading them or verifying that the information in them was correct.
 
JPMorgan Chase and Bank of America followed with similar announcements.
 
But these three large lenders are not the only companies employing people who have failed to verify crucial aspects of a foreclosure case, court documents show.
 
Last May, Herman John Kennerty, a loan administration manager in the default document group of Wells Fargo Mortgage, testified to lawyers representing a troubled borrower that he typically signed 50 to 150 foreclosure documents a day. In that case, in King County Superior Court in Seattle, he also stated that he did not independently verify the information to which he was attesting.
 
Wells Fargo did not respond to requests for comment.
 
In other cases, judges are finding that banks’ claims of standing in a foreclosure case can conflict with other evidence.
 
Last Thursday, Paul F. Isaacs, a judge in Bourbon County Circuit Court in Kentucky, reversed a ruling he had made in August giving Bank of New York Mellon the right to foreclose on a couple’s home. According to court filings, Mr. Isaacs had relied on the bank’s documentation that it said showed it held the note underlying the property in a trust. But after the borrowers supplied evidence indicating that the note may in fact reside in a different trust, the judge reversed himself. The court will revisit the matter soon.
 
Bank of New York said it was reviewing the ruling and could not comment.
 
Another problematic case involves a foreclosure action taken by Deutsche Bank against a borrower in the Bronx in New York. The bank says it has the right to foreclose because the mortgage was assigned to it on Oct. 15, 2009.
 
But according to court filings made by David B. Shaev, a lawyer at Shaev & Fleischman who represents the borrower, the assignment to Deutsche Bank is riddled with problems. First, the company that Deutsche said had assigned it the mortgage, the Sand Canyon Corporation, no longer had any rights to the underlying property when the transfer was supposed to have occurred.
 
Additional questions have arisen over the signature verifying an assignment of the mortgage. Court documents show that Tywanna Thomas, assistant vice president of American Home Mortgage Servicing, assigned the mortgage from Sand Canyon to Deutsche Bank in October 2009. On assignments of mortgages in other cases, Ms. Thomas’s signatures differ so wildly that it appears that three people signed the documents using Ms. Thomas’s name.
 
Given the differences in the signatures, Mr. Shaev filed court papers last July contending that the assignment is a sham, “prepared to create an appearance of a creditor as a real party in interest/standing, when in fact it is likely that the chain of title required in these matters was not performed, lost or both.”
 
Mr. Shaev also asked the judge overseeing the case, Shelley C. Chapman, to order Ms. Thomas to appear to answer questions the lawyer has raised.
 
John Gallagher, a spokesman for Deutsche Bank, which is trustee for the securitization that holds the note in this case, said companies servicing mortgage loans engaged the law firms that oversee foreclosure proceedings. “Loan servicers are obligated to adhere to all legal requirements,” he said, “and Deutsche Bank, as trustee, has consistently informed servicers that they are required to execute these actions in a proper and timely manner.”
 
Reached by phone on Saturday, Ms. Thomas declined to comment.
 
The United States Trustee, a unit of the Justice Department, is also weighing in on dubious court documents filed by lenders. Last January, it supported a request by Silvia Nuer, a borrower in foreclosure in the Bronx, for sanctions against JPMorgan Chase.
 
In testimony, a lawyer for Chase conceded that a law firm that had previously represented the bank, the Steven J. Baum firm of Buffalo, had filed inaccurate documents as it sought to take over the property from Ms. Nuer.
 
The Chase lawyer told a judge last January that his predecessors had combed through the chain of title on the property and could not find a proper assignment. The firm found “something didn’t happen that needed to be fixed,” he explained, and then, according to court documents, it prepared inaccurate documents to fill in the gaps.
 
The Baum firm did not return calls to comment.
 
A lawyer for the United States Trustee said that the Nuer case “does not represent an isolated example of misconduct by Chase in the Southern District of New York.”
 
Chase declined to comment.
 
“The servicers have it in their control to get the right documents and do this properly, but it is so much cheaper to run it through a foreclosure mill,” said Linda M. Tirelli, a lawyer in White Plains who represents Ms. Nuer in the case against Chase. “This is not about getting a free house for my client. It’s about a level playing field. If I submitted false documents like this to the court, I’d have my license handed to me.”
 
Link to Article
http://www.nytimes.com/2010/10/04/business/04mortgage.html

Gold Member Roger Taylor emailed me this article in the New York Times.

This is huge and will greatly affect the real estate market across America.

Chew on this a bit, not only will this slow down and halt foreclosures creating a massive stockpile of defaults, but there will also be many other critical issues for both homeowners and investors alike.

For Example:

Title Companies will stop writing title insurance. Old Republic has already announced it will not insure any properties having a GMAC mortgage.

Investors and Homeowners alike, who have already purchased "bank owned" real estate or HUD properties, may find themselves with a toxic property because it may have an unmarketable title due to all of the huge lenders and law firms having openly admitted falsifying documents during the foreclosure process.

Homeowners in default, by the masses, will be filing all kinds of action demanding lenders produce all of the original and real documents involving their mortgage. Keep in mind, a California bankruptcy court has already ruled that "MERS" is NOT sufficient proof of ownership of notes and mortgages. In other words, the lender who claims to own the note and mortgage, must be able to produce the original promissory note and documents. (Notes and mortgages were sliced, diced, and chopped up and sold on the secondary market using MERS without any concern for the physical documents themselves. 

Stay Tuned…

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Bank of America to Freeze Foreclosure Cases

By DAVID STREITFELD
Published: October 1, 2010 in NYT
 
Bank of America, the country’s largest mortgage lender by assets, said on Friday that it was reviewing documents in all foreclosure cases now in court to evaluate if there were errors.
 
It is the third major lender in the last two weeks to freeze foreclosures in the 23 states where the process is controlled by courts.
 
But Bank of America went further than the first two lenders, GMAC Mortgage and JPMorgan Chase, which have said they will amend paperwork only in cases they think were improperly done. So far, that has amounted to only a handful of cases.
 
Bank of America, in an e-mailed statement, said it would “amend all affidavits in foreclosure cases that have not yet gone to judgment.”
 
That could mean tens of thousands of foreclosure cases would be in limbo for months or, if the consumers in default hire lawyers, years.
 
Spokesmen for the bank said that they were uncertain how many cases the lender currently had in court. They provided no timeline or explanation for the freeze, saying only that the bank planned to eventually resubmit all the cases.
 
The moratorium is likely to further fuel the uproar over the foreclosure tactics of the big lenders, which continued to have political ramifications on Friday.
 
Before Bank of America’s announcement, Richard Blumenthal, the Connecticut attorney general, asked judges in his state to put a halt to all foreclosures for 60 days. Connecticut is one of the 23 states where foreclosure is a judicial matter. Others include Illinois, Florida, New Jersey and New York.
 
Mr. Blumenthal, who is running for senator in Connecticut, said the freeze “should stop a foreclosure steamroller based on defective documents and enable effective remedies.”
 
California’s attorney general, Jerry Brown, said that Chase should stop any foreclosures in the state until it proved that it was following the law. Mr. Brown, who is a candidate for governor, earlier made the same demand of GMAC.
 
In California, lenders generally pursue foreclosures outside of the court system, so they are presumably still proceeding with evictions. Chase declined to say whether it would comply with Mr. Brown’s comments.
 
Chase said this week that it had frozen 56,000 foreclosure cases. GMAC, which is largely owned by the Treasury after receiving $17 billion in federal bailout money to prevent its collapse, has repeatedly declined to say how many cases it is halting.
 
The nation’s two other major lenders, Citi and Wells Fargo, have issued statements maintaining they have no problems with their cases.
 
The problem for all the lenders that have announced moratoriums stems directly from their attempt to deal with an unprecedented number of foreclosures.
 
According to LPS Applied Analytics, a mortgage data firm, 2 million households are in foreclosure. Another 2.37 million households are seriously delinquent and waiting for their lender to take action.
 
Sometimes these loans are still owned by the lender but often, the banks are merely the loan servicer acting on behalf of the owner. Many of the loans are owned by Fannie Mae and Freddie Mac, the mortgage holding companies now controlled by the Treasury. In other cases the loans have been sold to private investment pools.
 
Confronted with so many cases, the lenders tried to process them on a wholesale basis, with the goal of avoiding the expense of a full trial and instead getting summary judgments.
 
The tool for doing this was the so-called robo-signers, in which midlevel bank executives would sign thousands of affidavits a month attesting that they had personal knowledge that the facts of the case were as presented. The affidavits were prepared by lawyers who were paid a flat fee, which also placed a premium on volume.
 
When defense lawyers started deposing these robo-signers, they acknowledged that they could not possibly have knowledge of all the cases. The banks say this is a technicality and they will refile the proper affidavits. The defense lawyers say the practice calls the cases, and indeed the entire process, into question.
 
Thomas Lawler, a housing economist, said the current mess was predictable and probably inevitable. Lenders made their money by making loans and then simply and efficiently servicing them by collecting the checks every month. They were never prepared to deal with the labor-intensive problems of delinquency and foreclosure.
 
“However, the foreclosure crisis is now almost three years old, and not having staffed up sufficiently to deal with the problems with inadequate staffing borders on criminal,” Mr. Lawler said. “I mean, jeepers, look at the unemployment rate; how hard would it have been to hire more folks?”
 
Mark Stopa, a Florida lawyer who represents defaulting homeowners, said the magnitude of the current troubles depends on how title insurance companies react. If those firms begin to shy away from insuring foreclosed properties because they think those properties are vulnerable to claims, he said, the entire housing market could suffer.
 
“Judges have to force banks to do foreclosures correctly,” Mr. Stopa said. But he noted that would require a significant increase in staff. “I’ll believe it when I see it,” he said.
 
Stocks of the major title insurance companies dropped on Friday amid concern that their business would suffer as a result of the foreclosure freezes. Fidelity National Financial fell more than 4 percent, while First American Financial dropped 3 percent.
 
One firm, Old Republic National Title, said this week it would not issue policies on GMAC foreclosures until further notice.

 

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