Tag: Foreclosure Fraud

Cross posted from The Stars Hollow Gazette

Some encouraging news in the on going call for an investigation into foreclosure fraud, Sen Maria Cantwell (D-WA) called for Attorney General Eric Holder to investigate the fraud before letting the bank off with a pitiful settlement $20 billion and a “get out of jail” card for criminal charges, She also demanded a full investigation into robo-signing scandal and ‘pump and dump’ mortgage bubble scheme:

I am concerned that recently reported settlement proposals will effectively absolve these financial institutions of substantial civil and criminal liability in one of the largest alleged fraud schemes during the financial crisis. Specifically, I am concerned that the proposed settlement includes a release from liability that may be far too sweeping, does not adequately compensate victims, does not require enough of banks to reform the system that led to the crisis in the first place, and is being made before all the facts are known and without the backing of a full inquiry into the size and scope of the alleged fraud.

…

Without a thorough investigation, it is impossible to truly estimate just how pervasive the defects in the foreclosure and securitization process are. Continued reports of wrongful foreclosures, forged documents, and an inability of servicers and banks to prove chain of title and the legal right to foreclosure, raises the very alarming possibility that these defects were endemic to the mortgage servicing industry across the country. The sheer magnitude of the potential fallout from these defects demands that we undertake a full investigation to uncover the true scope of wrongdoing before providing blanket immunity to the perpetrators.

I am also concerned that reports of a settlement in the range of $20 billion, as recently reported, may not adequately compensate the victims of the foreclosure crisis. As a result of the pump-and-dump scheme perpetrated by the nation’s largest banks that inflated – and burst – the housing bubble, an estimated 14 million Americans are underwater, owing $700 billion more on their homes than those homes are worth. A $20 billion settlement is woefully inadequate to compensate the wrongfully evicted or homeowners struggling to stay in their homes. Much more should be required of banks to provide meaningful help underwater homeowners and compensate foreclosure fraud victims.

And some good news for homeowners facing foreclosure in Florida:

WEST PALM BEACH – Home­owners in foreclosure may have a better chance of getting a true trial, instead of a quickie judgment, following a 4th District Court of Appeal decision that requires banks to prove ownership of the note at the time they file for repossession.

The ruling Wednesday in Palm Beach County was heralded by foreclosure defense attorneys who said it may even force banks to dismiss some cases and start over with new paperwork.[..]

Wednesday’s ruling was on the case of Robert McLean vs. JPMorgan Chase, and involved a 2009 Broward County foreclosure.

According to the decision, which reversed a lower court’s verdict in favor of the bank, Chase originally filed the foreclosure claiming the note – basically the IOU from the borrower – was “lost, stolen or destroyed.”

The claim has been made thousands of times as lenders rushed without the proper documentation to take back homes tangled up in the real estate boom’s securitization frenzy.

Although most notes are found before a final foreclosure judgment is entered, the 4th DCA said the note also must be correctly dated and endorsed to show ownership before the foreclosure was initially filed – something that Chase didn’t have, according to the ruling. The court also questioned a mortgage assignment made to Chase that was dated three days after the foreclosure was initially filed.

If there is substantial doubt about the note, the bank should dismiss and refile the case or the home­owner should be entitled to an evidentiary hearing instead of a more hasty “summary judgment,” the ruling said.

Cross posted from The Stars Hollow gazette

Massachusetts Attorney General Martha Coakley filed a law suit against five major banks and MERSover deceptive mortgage practices. One of those entities, GMAC, the mortgage lender of Ally Financial Inc., decided to stop mortgage lending in Massachusetts. The nation’s fifth-largest mortgage originator said it “has taken this action because recent developments have led mortgage lending in Massachusetts to no longer be viable,”. Seriously, they are not going to play in the state because Martha wants them to play by the rules. How dare she!

Yves Smith at naked capitalism says that in essence GMAC Mugs Massachusetts for Insisting on the Rule of Law, Suspends Mortgage Lending in the State

This move by GMAC, now Ally, is remarkably brazen. GMAC has effectively said that Massachusetts must hew to its demands of how to deal with foreclosures. It announced it is withdrawing from mortgage lending in the state in an effort to bring it to heel. [..]

GMAC is trying to get other big banks to follow suit. I hope the state and other groups that do substantial financial business with banks (largish churches are also attractive clients) make it clear than any effort to punish the state for enforcing the law will be met by moving their accounts to smaller institutions that respect the law. [..]

Sorry, for the first decade plus of the private mortgage securitization business, banks and servicers did hew to the requirements of state law. It was only in the late 1990s through 2004 or so that they started to fail to comply with the requirements of their own contracts (the breakdown appears to have taken place over time, with the biggest decay taking place during the 2002-2003 refi boom). That’s what has put their foreclosures on shaky footing, which in turn has led to wideranging legal abuses to get around the mess they created.

The insolence of the securitization industry continues to be astonishing. They act as if they have an imperial right to dictate to governments, and refuse to admit any role in a disaster of their own creation. I hope those of you who do business with Ally close your accounts immediately and tell the bank that it is due to their Mafia style move in Massachusetts.

If you’re a GMAC customer in Massachusetts, it’s time to move your loan.  

Cross posted from The Stars Hollow Gazette

Another state attorney general is suing five major banks and Mortgage Electronic Registration System Inc. and its parent company over deceptive foreclosure practices. Massachusetts Attorney General Martha Coakley  filed the suit on Wednesday seeking redress from Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., and Ally Financial.

Ms. Coakley joins a small group of state attorney generals from larger states that have been hit the hardest by the foreclosure/mortgage fraud scandal:

Ms. Coakley, whose reputation was tarnished after her loss to a Republican for the late Ted Kennedy’s senate seat, has been strong on tightening state regulations and force banks to assist financially stressed homeowners save their homes:

Coakley spoke in support of legislation she filed in January with state Senator Karen Spilka, an Ashland Democrat, and Representative Steven M. Walsh, a Lynn Democrat. The proposed law, which they call An Act to Prevent Unlawful and Unnecessary Foreclosures, focuses on mortgage loans that are considered to be risky, including those with interest-only payment and adjustable rates.

The bill would require lenders to analyze a borrower’s financial information to determine whether modifying the loan to a more affordable payment would be more beneficial financially to the lender than going through the lengthy and costly process of taking the property through foreclosure. Many lenders already undertake such a study before deciding whether to foreclose, but the bill would permit homeowners to file a lawsuit if the process does not occur, according to Coakley’s staff.

The proposed law also would force lenders to prove they are the legal owner of mortgages before foreclosing, incorporating the findings of recent foreclosure-related decisions from the state’s Supreme Judicial Court.

These five state attorney generals are doing the hard work that should be done by the US Attorney General Eric Holder. Instead Mr. Holder is still clinging to Iowa AG Tom Miller’s stalled negotiations with the banks to settle the fraud for a mere $25 billion and exoneration from criminal prosecution. Mr. Holder has made protecting banks and corporations his priority and just recently announced a new initiative to prosecute intellectual property rights thefts by the public. This is not what Americans elected this administration to do.

Cross posted from The Stars Hollow Gazette

Apparently, US Attorney General Eric Holder thinks it is far more important to protect corporations from intellectual property (IP) theft than to protect us from predatory and fraudulent banking practices that has led to collapse of the economy. He is more concerned that you or your neighbor are illegally downloading movies or songs from the internet or receiving pharmaceuticals from Canada.

On November 29, Mr. Holder held a press conference to announce a serious crack down on IP theft:

As our country continues to recover from once-in-a-generation economic challenges, the need to safeguard intellectual property rights – and to protect Americans from IP crimes – has never been more urgent. But, in many ways, this work has also never been more difficult.

Recent technological advances – particularly in methods of manufacturing and distribution – have created new opportunities for businesses of all sizes to innovate and grow. But these quantum leaps have also created new vulnerabilities, which tech-savvy criminals are eager to exploit. As a result, we’re seeing an alarming rise in IP crimes – illegal activities that can not only devastate individual lives and legitimate businesses, but undermine our nation’s financial stability and prosperity.

Make no mistake: IP crimes are anything but victimless. For far too long, the sale of counterfeit, defective, and dangerous goods has been perceived as “business as usual.”   But these and other IP crimes can destroy jobs, suppress innovation, and jeopardize the health and safety of consumers.   In some cases, these activities are used to fund dangerous – and even violent – criminal enterprises and organized crime networks. And they present a significant – and growing – threat to our nation’s economic and national security.

But we are fighting back – in bold, comprehensive, and collaborative ways.

One of those “bold, comprehensive, and collaborative ways” is a series of series of television, radio, and Internet public service announcements that will ask the public to spy on their neighbors.

We shouldn’t be surprised by this since, as reported in the Wired:

The Justice Department under President Barack Obama has seen a sea change in attitude when it comes to intellectual-property enforcement, which could have been predicted by the number of former Recording Industry Association of America attorneys appointed by the Obama administration. (Hollywood votes and donates Democratic).

Meanwhile, as Matt Stoller writes, mortgage fraud continues unabated and unprosecuted:

In 2004, the FBI warned Congress of an “epidemic of mortgage fraud,” of unscrupulous operators taking advantage of a booming real estate market. Less than two years later, an accounting scandal at Fannie Mae tipped us off that something was very wrong at the highest levels of corporate America.

Of course, we all know what happened next. Crime invaded the center of our banking system. Wall Street CEOs were signing on to SEC documents knowing they contained material misstatements. The New York Fed, riddled with conflicts of interest, shoveled money to large banks and tried to hide it under the veil of central bank independence. Even Tim Geithner noted that Lehman had “air in the marks” in its valuations of asset-backed securities, as the bankruptcy examiner’s report showed that accounting manipulation to disguise the condition of the balance sheet was a routine management tool at the bank. [..]

And yet, no handcuffs. [..]

And what happens when this kind of fraud goes unprosecuted? It continues, even today. The same banks that ran the corrupt home mortgage securitization chain are now committing rampant fraud in the foreclosure crisis. Here’s New Orleans Bankruptcy Judge Elizabeth Magner discussing problems at Lender Processing Services, the company that handles 80 percent of foreclosures on behalf of large banks. [..]

The bad behavior is so rampant that banks think nothing of a contractor programming fraud into the software. This is shocking behavior and has led to untold numbers of foreclosures, as well as the theft of huge sums of money from mortgage-backed securities investors.

It would be nice if the Obama Justice Department devoted the same man power, resources and efforts into prosecuting the banks and mortgage service lenders who pushed fraudulent loans and have illegally foreclosed on thousands of homes. The attitude of Obama administration continues to be that they must bail out banks and protect corporations while the public gets sold out by the government that is suppose to protect us.

Cross posted from The Stars Hollow Gazette

In case you missed it (I strongly suspect you did), Yves Smith of naked capitalism appeared as a guest on the PBS News Hour to discuss why there have been so few prosecutions of ceo’s or bankers in the recent banking scandal.

The other guests are:

Lynn Turner is a former chief accountant for the Securities and Exchange Commission. He’s now a managing director at the consulting firm Litinomics.

Anton Valukas is a former U.S. attorney. He’s now in private practice and issued a bankruptcy report examining the collapse of Lehman Brothers.

Mark Calabria is a former Republican staff member of the Senate Committee on Banking, Housing and Urban Affairs. He’s now at the libertarian think tank, the Cato Institute.

In Aftermath of Financial Crisis, Who’s Being Held Responsible?

The full transcript is here.

Cross posted from The Stars Hollow Gazette

Ten leading US lenders may have unlawfully foreclosed on the mortgages of nearly 5,000 active-duty members of the US military in recent years, according to data released by a federal regulator.

JPMorgan Chase and Bank of America this year reached legal settlements in which they agreed to pay damages to nearly 200 service members who claimed that their homes had been improperly seized.

Data released last week by the Treasury’s Office of the Comptroller of the Currency, which regulates national banks, shows that 10 lenders – including BofA, but not JPMorgan, which was not part of the study – are reviewing nearly 5,000 foreclosures of homes belonging to service members and their families to see if they complied with the law.

Pat Garofalo reported this at Think Progress:

Back in April, JPMorgan Chase, which was not one of the 10 banks that the OCC examined, agreed to a $56 million settlement over allegations that it had overcharged members of the military on their mortgages. Chase Bank has even auctioned off the home of a military member the very day that he returned from Iraq. Two other mortgage servicers agreed in May to settle charges of improperly foreclosing on servicemembers.

Even without the banks illegally foreclosing, military members have been hard hit by the foreclosure crisis. Last year alone, 20,000 members of the military faced foreclosure, a 32 percent increase over 2008. The newly created Consumer Financial Protection Bureau is tasked with ensuring that military members are treated fairly by financial services companies – a job that is obviously necessary – but Republicans in Congress have, so far, refused to confirm a director for the agency, leaving it unable to fulfill all of its responsibilities.

Up Date: New York State Attorney General Eric Schneiderman has launched an investigation into military foreclosures under a NY State consumer protection law, the Martin Act, that gives him broad powers to investigate fraud.

Also, Congress is getting on the bandwagon, Sen. Jack Reed (D-RI), a member of the Senate Banking Committee, will be requesting hearings. From David Dayen at FDL:

It looks like even Congress is getting involved, or at least a few of them, because systematic illegal foreclosures on everyday people can be ignored, but systematic foreclosures on members of the military cannot. Jack Reed, a member of the Senate Banking Committee, will request a hearing on the matter. Brad Miller, who has actually been great on this issue and who sees it as a lever to open up a host of inquiries on foreclosure fraud, had a great statement yesterday:

   It is hard to see this as anything except a flagrant disregard for a law that has been on the books continuously since the First World War. The Servicemembers Civil Relief Act is very clear: if you’re in harm’s way in our nation’s military, you can devote your whole energy to our nation’s service without worrying what’s happening in a courthouse back home. And if you have a claim against someone in our military, you can wait until they get home and can defend themselves.

   The SCRA is not some obscure legal technicality that might just have escaped the attention of mortgage servicers. Those servicers are all affiliates of the biggest banks, but they’re huge and specialized. Servicing mortgages is all they do, and they really don’t have that many laws to keep up with. They have got to have known what the law required, and consciously decided that they could just ignore it, the same way they apparently decided it was okay to file false affidavits in legal proceedings.

   The continued failure to pursue criminal charges in the face of flagrant violations of the criminal law is destroying Americans’ faith in their government and democracy. In a democracy, no one is too big to prosecute.

Schneiderman is doing the job that we would expect Eric Holder to be doing. Just where is Mr. Holder? We know where the president is, campaigning.

Cross posted from The Stars Hollow Gazette

While Iowa Attorney General Tom Miller and his merry band of AG sell outs push for an agreement to settle the mortgage fraud, it looks like California Attorney General, Kamala Harris, is sticking to her plan to hold the worst of the abusers feet to the fire.

The Miller agreement, which is also being backed by US Attorney General Eric Holder, could result in an even smaller settlement than the $25 million and would still leave the banks open to legal claims in the states that do not sign on to the agreement. While California is the state with the largest number of foreclosures, not signing onto the agreement would mean that homeowners would have to wait longer for relief but, as AG Harris has stated, it “would allow too few California homeowners to stay in their homes…. After much consideration, I have concluded that this is not the deal California homeowners have been looking for.”

Ms. Harris has been under considerable pressure from the Obama administration, who has considered her a replacement for Eric Holder should Obama be reelected. However. many community organizations, unions and liberal groups have urged to her not to sign on to the Miller agreement unless there is a larger monetary settlement or, that failing, the states are allowed to prosecute the banks for crimes they may have committed. Neither of those two stipulations appears to have happened, nor are they likely.

Along with New York’s Eric Schneiderman, Delaware’s Beau Biden, Nevada’s Catherine Cortez Masto and a couple of other state attorney generals, Ms. Harris’s position is good policy for the state, as well as, good politics for her. She has stood by the people who put her in office, the people she will need to support her should she run for governor or the US Senate. We could use a few like her in that body.

Cross posted from The Stars Hollow Gazette

On of the biggest frauds that has been perpetrated in the housing collapse that has precipitated the foreclosure crisis has been robosigning especially done by MERS, Mortgage Electronic Registration Systems, a privately held company that operates an electronic registry designed to track servicing rights and ownership of mortgage loans in the United States. The current negotiations by the state attorney generals in conjunction with the Obama Justice Department will in all likelihood exonerate the banks of any criminal liability and allow them to continue using the fraudulent MERS to foreclose on homes that the banks may not legally own. Gretchen Morgensen wrote in the New York Times that “The deal being discussed now may also release the big banks that are members of MERS, the electronic mortgage registry, from the threat of some future legal liability for actions involving that organization.”  Matt Stoller and Mike Lux point to an even bigger issue, robosigning has not stopped:

What makes these discussions so utterly absurd, so ridiculous, and farcical, is that robo-signing, an abuse the banks have admitted to and clam they’ve ceased, is still going on. The AP reported this in July; mortgage servicers in Nevada have stopped foreclosing because of a law explicitly criminalizing robo-signing. Yes, the banks are asking for a release of claims on acts, or perhaps crimes, that are ongoing. And these abuses are extensive: lying to investors about the quality of the mortgages; violating their own contracts by failing to convey mortgages properly to securitization trusts; charging fees that are impermissible under Federal law and the contracts; making a mess of property records and engaging in deceptive consumer practices through the use of MERS; and engaging in document forgeries and fabrications in foreclosures. All these people trying to give the banks “a settlement” are in fact immunizing banks against acts they are committing and will commit going forward. Only in the future, when a voter complains to his or her state AG, that official will have to explain to that voter that his/her rights have been given away.

We’re talking about an ongoing case of criminal theft of private property by mortgage servicers charging illegal fees and then using fraudulent documents to foreclose. Now, a settlement implies that this practice is over, and that the banks are remediating past wrongs. It isn’t over, but the AGs and Federal regulators are treating it as if it is. Think about this incentive – why should a bank change its mortgage servicing once it has immunity for robo-signing, origination, pyramiding of fees, etc? The last consent decrees weren’t enforced, why would this one be enforced?

   A dozen banks would contribute a grand total of $3.5 to 5 billion toward the settlement, pocket change for massive companies that apparently approved their foreclosure mill law firms likely committing over 1,000,000 counts of perjury in the robo-signing process. The rest of the money, about $20 billion, would come in the form of “credits” banks essentially give themselves if they agree to reduce a certain amount of the principal owed on mortgages. We don’t know the details yet, but given that all banks in the home lending industry write down some mortgages, unless the details are tough on the banks (a phrase not generally heard of among regulators in this era), this will be giving banks credit for mortgages they would be writing down anyway. And if they don’t end up writing down as much as they project, they probably won’t end up being penalized for it given the history of programs like HAMP […]

   If the administration rams through this ultimate in Wall Street sweetheart deals – a laughably pocket change fine combined with “credit” for what they would have done anyway, at the expense for a get out of jail free card for 1 million counts of perjury and a wide range of other potential fraud – they will have zero credibility to run as the tough on Wall Street candidate. ZERO.

   This makes no sense. For example, for the Obama administration to be leaning so hard on California Attorney General Kamala Harris to sign off on this is truly politically suicidal, both for them and for her after she so strongly announced she was pulling out a couple of weeks ago. Yet they continue to push her. Why are they pushing so hard for this? It all boils down to Treasury Secretary Tim Geithner. It is apparent that Geithner believes the only thing that matters in terms of fixing the economy is to keep the big banks in good financial shape, which is ironic given that in public he claims that everything is fine with the banking sector now.

Yves Smith at naked capitalism suggests we make some phone calls:

It’s important to keep the pressure up, particularly on state AGs who might walk from a too bank friendly deal. States whose AGs might decamp include Oregon, Washington, Arizona, and Colorado. It’s also key to let the AGs in states who have left the talks and are under pressure to return that voters are watching and will be unhappy if they reverse themselves. Those states are New York, Delaware, Massachusetts, Kentucky, Nevada, Minnesota, and of course, California. You can find their phone numbers here.

The Obama administration, congress and the state attorney generals who refuse to hold the banks to the letter of the law hold this country’s economic future. If this passes it will destroy the housing market and this economy for decades.

Cross posted fromThe Stars Hollow Gazette

The latest proposal to come from of the State Attorney Generals investigating mortgage and foreclosure fraud is just a another band-aid on a hemorrhage that lets the banks off and does nothing to help homeowners who are underwater on their mortgage or behind in their payments. It appears that this is just a ploy to bring the California Attorney General “back into the fold.” Diana Olick, CNBC Real Estate Reporter, has tis analysis:

As first reported by the Wall Street Journal, the AG’s are proposing a refinance plan for underwater borrowers, trying to get banks to bring down interest rates on mortgages for those who owe far more than their homes are presently worth; that’s around 10.9 million borrowers, according to CoreLogic, but sources say it wouldn’t be all of them. It would, “target a finite number of borrowers who are current on their mortgages,” according to my source.

My source then went on to explain that this is a plan previously pushed by the California state attorney general, who has dropped out of the negotiations over issues surrounding banks’ release from future liability (the California AG did not comment in the WSJ article but claimed they had not seen said proposal). New York and Massachusetts have done the same. Apparently this could, “bring California back to the table,” says my source, because the California AG finds it, “intriguing.”

Ms. Olick also points out that this is the same plan that the Obama administration has proposed for Fannie Mae and Freddie Mac. The plan will only affect about 20% of homeowners with bank mortgages. While it would give some, who can afford the loans, a little extra cash, it doesn’t “change the fact that these folks still have no hope of seeing their home equity again any time soon, and it doesn’t address the greater ills of today’s housing market that are keeping true recovery at bay.”

David Dayen at FDL expounds further:

But wait! This is supposed to be a penalty on the banks. Is it a penalty on the banks when an eligible borrower with a bank-owned loan refinances? No, that’s just an option that the borrower has. Extending that option is supposed to be a penalty for committing systemic fraud on state courts? I don’t necessarily mind the Fannie/Freddie plan as a source of potential stimulus. I don’t consider it a penalty. And when you’re talking about 20% of the market, tops (and not all of those loans are underwater, so this is smaller), the benefits are miniscule (sic).

They’re just grabbing at straws to try and get a flawed settlement across the line that the remaining AGs can hold a press conference about. And economic stimulus, not accountability, is the main goal. Keep in mind that anything that leads to a round of sped-up foreclosures will not aid the housing market. It will bring prices down, just as a function of supply and demand. This will bring borrowers more underwater. So the idea that there’s a tension between the rule of law and helping people presumes that the only thing standing between America and a recovery is Kamala Harris and Eric Schneiderman. That’s just not true. There are tools at the disposal of the relevant regulators right now to foster recoery (sic), they’re just not choosing to do it.

Delaware Attorney General Beau Biden spoke with MSNBC’s Dylan Ratigan about fight to investigate the banks.

The biggest problem that is the gorilla in the room is chain of title. In a detailed article that is well worth the read, Yves Smith at naked capitalism:

And as we anticipated, the inducement that had led the Miller camp to hope it might clinch a deal is a juicy release. From Reuters:

   Originally, the states were only considering immunity for shortcuts taken during mortgage servicing and foreclosures, including the so-called “robo-signing” of documents to evict people behind on their mortgages.

   In recent days, the state attorneys general agreed to release major banks from claims that they made legal errors when first originating the loans, such as approving loans for borrowers without verifying any income, according to two people familiar with the talks.

   In exchange, banks would agree to refinance mortgages for borrowers who are current on their payments but owe more than their homes are currently worth, the sources said.

This is very troubling. Investors should be up in arms. Any release the banks get here is worth multiples of what the banks will pay for this (note that because investors are conservative creatures and have ongoing relationships with banks, having attorneys general pave the way is particularly important for them).

The failure to verify income is the tip of the iceberg of origination abuses. The most serious is chain of title, where the banks promised to investors to take a series of steps to convey the mortgages properly to the securitization trusts within a stipulated time frame. For reasons we’ve explained in gory detail in earlier posts, retroactive fixes or waivers simply won’t work. That is why the banks have resorted to widespread forgeries and document fabrication.