Nov
30

Adam Levitin | HARP’s Dirty Little Secret: Most HARP Refis are of Positive Equity Mortgages

HARP’s Dirty Little Secret: Most HARP Refis are of Positive Equity Mortgages So the Administration has announced that it is expanding the HARP refinancing program to help underwater borrowers. Originally, HARP enabled borrowers with up to 125% loan-to-value (LTV) ratios to refinance (105% for adjustable rate loans). The revised program removes the LTV cap for … Read more Related posts:
  1. Official Press Release | FHFA, Fannie Mae and Freddie Mac Announce HARP Changes to Reach More Borrowers
  2. Adam Levitin | The Multistate Foreclosure Settlement
  3. Negative Equity: How Many Loans are Underwater in Your State?
Nov
30

Massachusetts | RBS Financial Settles Subprime Loans Case for $52m

Bank settles subprime loans case for $52m Deal will aid 700-plus struggling homeowners A Royal Bank of Scotland subsidiary will pay $52 million to settle claims related to its role in the state’s “subprime mortgage meltdown,’’ Attorney General Martha Coakley said yesterday, an agreement that will benefit more than 700 borrowers in Massachusetts. RBS Financial … Read more Related posts:
  1. Morgan Stanley to Pay $102 Million for Role in Massachusetts Subprime Mortgage Meltdown Under Settlement with AG Coakley’s Office
  2. Breakin the Law | HUD Settles Respa Kickback Case In the Matter of Fidelity National Financial, Inc. Settlement Agreement
  3. Federal Reserve Orders $85M Civil Penalty Against Wells Fargo for Steering Potential Prime Borrowers Into More Costly Subprime Loans and Falsifying Income
Nov
29

HARP’s Dirty Little Secret: Most HARP Refis are of Positive Equity Mortgages

So the Administration has announced that it is expanding the HARP refinancing program to help underwater borrowers.  Originally, HARP enabled borrowers with up to 125% loan-to-value (LTV) ratios to refinance (105% for adjustable rate loans).  The revised program removes the LTV cap for fixed-rate loans, reduces some refi fees, permits refis of loans that have been mildly delinquent recently, and extends the eligibility date.  All the news accounts have stated that the number of HARP refinancings is expected to roughly double, from about 900,000 refinancings to perhaps 1.8 million refinancings. This is trumpeted as a boon for underwater homeowners.  

The revised program may well help some underwater homeowners lower their monthly payments. Unfortunately, the 900,000 and 1.8 million numbers are seriously deceptive.  Most of the HARP refinancings to date have been for borrowers with positive equity.  HARP has refinanced very few underwater borrowers.  As of 2Q 201192% of HARP refinancings (776,009 of 838,441) were of loans between 80% LTV and 105% LTV. Only 62,432 refis were between 105% and 125% LTV.  In other words, HARP has provided very little help for underwater borrowers.

(It's not clear to me what makes a refi of a <100% LTV loan a HARP refi in the first place--it's defined by FHFA as a "Fannie Mae to Fannie Mae and Freddie Mac to Freddie Mac first lien refinance loans with limited and no cash out that are owner occupied with LTV's over 80 to 125." That means that an 80% Fannie to Fannie no cash out refi is counted as HARP, but that just looks like a regular refi to me.  But that's another story.)

Recognizing that HARP hasn't helped very many underwater homeowners to date makes me skeptical that an increase in the HARP LTV limit will make a difference.  If you can't get the 120% LTV homeowner to refi, what will get the 140% LTV homeowner in the door?  (Indeed, since the 140% LTV mortgage isn't REMIC eligible, making the refinacing less attractive from the GSE end).

Recognizing that HARP hasn't helped very many underwater homeonwers also underscores a critical problem with the program:  it's not a foreclosure prevention program.  HARP refi recipients generally aren't avoiding foreclosure via because of HARP.  If there's a job loss, a 4% mortgage is going to be hard to carry, just like a 6% mortgage. Instead, what's going on here is stimulus via subsidy.  These homeowners are getting a new mortgage at a very low rate, subsidized ultimately by the taxpayer.

That might be great as a stimulus move, but I worry that it will set an expectation for homeowners going forward of 4% mortgages and that such an expectation will constraint the restructuring of the US housing finance system. What's worse is that it's a bailout of the wrong homeowners--HARP is directing help not to the homeowners most in need, but to those who are likely to hang on.  If we're going to bail out homeowners, let's at least target the right ones.  

 

Nov
18

I, Robosigner… A three act play about affidavit fraud in AG Masto’s Nevada

ACT ONE – The shot across all bank bows

As the month of August came to a close, Nevada’s attorney general, Catherine Masto, filed her second amended complaint against Bank of America and friends.  Yves Smith provided the analysis in her post on Naked Capitalism, Nevada Lawsuit Shows Bank of America’s Criminal Incompetence, and all I can tell you is that it reads like a John Grisham or even a Robert Ludlum novel, I don’t know if it quite rises to the level of a John le Carre, but it’s a great read.  Oh, and spoiler alert… there’s going to be a sequel.

She says that the litigation by the attorney general is “significant not merely due to the damages and remedies sought, but because it paves the way for private lawsuits.”  So, that I like the sound of that… private lawsuits are good where Bank of America is concerned.  Here’s what she had to say about the complaint itself…

And make no mistake about it, this filing is a doozy. It shows the Federal/state attorney general mortgage settlement effort to be a complete travesty. The claim describes, in considerable detail, how various Bank of America units engaged in misconduct in virtually every aspect of its residential mortgage business.

The complaint describes abuses from the very outset of the securitization process: how borrowers were mis-sold mortgages (it describes how entire products were effectively predatory), how investors were misled as to their quality, how they were not conveyed properly to securitization trusts, how borrowers were subject to abusive servicing (as in charged improper and impermissible fees), how promises made under the old consent decree regarding mortgage modifications were violated (for instance, even though interest rate reductions were promised, instead modifications often resulted in HIGHER interest rates), and the filing of fraudulent paperwork to execute foreclosures.

Metaphorically, this complaint was a shot across all the bank bows.

ACT TWO – A robo-felony is born

Next, on November 7, 2011, the Wall Street Journal, in its article titled: Nevada Foreclosure Filings Dry Up After ‘Robo-Signing’ Law, described a new felony law that Nevada’s state Assembly passed and that took effect on October 1, 2011, that’s designed to crack down on “robo-signing.”  That’s what we call it when bank employees sign off hundreds of thousands of legal filings, lying about having personally reviewed each case.

The new law holds individuals criminally liable for such false representations and provides for civil penalties of $5,000 for each violation.

Early results say the law is working. In fact, during the first month after the law took effect, notices of default fell from 5,380 to just over 600, a drop of 88 percent, according to data tracked by ForeclosureRadar.com.

The new law also bans trustees from handling foreclosures if a subsidiary of the foreclosing bank, which means that Bank of America’s use of subsidiary, Recon Trust, in Nevada, is no longer allowed.  And ReconTrust didn’t file any NODs in October, about which a Bank of America spokesliar declined to comment.

Of course, the banking lobby is going with the SOP, claiming that the law is going to slow foreclosures, which we all know, hurts everyone.  And then I’m sure there was something about how there’s going to be no lending in Nevada in the future, and stuff like that.

Those behind the bill cleverly, if transparently, say that it’s not about stopping foreclosures, it about guarding against potential title defects that can lead judges to later invalidate foreclosures, as has happened in both Michigan and Massachusetts.  Tisha Black Chernine, a real-estate lawyer in Las Vegas who helped draft the bill, was quoted by the WSJ as having said the following when talking about healing the housing markets…

“This is not at all about preventing foreclosures. It is about helping end users.  We need to make sure foreclosures are done properly.  People taking title pursuant to a bad foreclosure run the risk of having no title at all.”

Okay, so that her story and she’s sticking to it, I suppose.  And if people are buying that, and it’s working with the bank, then I’m in favor of saying it.  Heck, I’d tell BofA scary bedtime stories about all sorts of thing every night all year if I thought it would get them to do a Scrooge-like turnaround as far as the foreclosure crisis is concerned.

So, while Nevada’s NODs dropped by 88 percent, foreclosures picked in the other 49 states.  Looking at loans bundled and sold as mortgage-backed securities without any government guarantees, Fitch ratings attributed the spike in foreclosures to making up for time lost pretending to investigate robo-signing, which started during the fall of 2010, and caused intermittent delays for several months.

ACT THREE – Let’s get criminal, criminal…

And now, for the first time, but likely not the last, … National Mortgage News is reporting that the State of Nevada filed its first criminal charges in conjunction with robo-signing against two individuals accused of filling tens of thousands of false documents.  John Kelleher, the state’s chief deputy attorney general, told National Mortgage News that he expects that more indictments in the future.

The defendants in the case allegedly allowed others to forge their signatures and then submit the fraudulent documents to the county recorder, but curiously the indictment doesn’t say for which servicer Gary Trafford and Gerri Sheppard worked.  Although, KLAS-TV in Las Vegas, after producing a lengthy series on robo-signing, reported that Trafford and Sheppard worked for Lender Processing Services (“LPS”) of Jacksonville, Florida.

If you want into the pool I’ve started it’s $25 per square, you can buy up to four, and the winner get’s half the pot, which is expected to be over $1 million, thanks to the use of leverage.  The contest’s loser will also win a purse expected to be almost $2,000,000, due not only leverage, but also because of the incorporation of synthetic derivatives, and credit default swaps, which is sort of like “loser insurance.”

Bail has been set at $500,000 each, with the two defendants facing over 600 counts including both felonies and gross misdemeanors.

No allegations against the actual banks are included.  Again, according to Kelleher…

“We simply don’t know if the major banks were aware of what these individuals were doing.”

Yeah, me either.  It was probably a rogue employee of LPS, taking it upon themselves to forge and record hundreds of thousands of fraudulent affidavits on behalf of the largest banks in the world because… well, whatever.  Regardless, I could certainly see why we might give LPS the benefit of the doubt, where there any doubt to be found anywhere near this case.

I’ll tell you the answer to this question: Yes the bank knew… all the way up to the CEO’s office they knew.  No one would ever open a document forgery department at JPMorgan or Bank of America without the blessing of the bosses, you can trust me on that.

ACT FOUR – ???

Well, believe it or not, how this act goes is going to depend on “us.”  Attorneys general, it should come as no surprise, are largely political beings… at least most are.  That’s one of the major reasons that no settlement has been… or perhaps can ever be, reached.  Kamala Harris in California has certainly been shone to be cognizant and reactive to public opinion.

In fact, the same thing is true about members of the House of Representatives.  If you’re skeptical, just consider the issue that actually motivates people to action… executive bonuses… just about anywhere, like most recently at Fannie Mae and Freddie Mac.  Hearings and held in a hurry, legislators ask tough questions and in many instances, things do happen.

For example, this week the House Financial Services Committee approved legislation to suspend executive compensation packages and halt future bonuses at Fannie and Freddie, only about a week since the news of the bonuses hit the headlines.

That’s not because those in congress all have a natural passion to deal with compensation issues, they most certainly do not.  But, the American people have become visible and vocal on this issue and congress both sees and hears them loud and clear.  And so things happen.

Remember a bill that was introduced right before the midterms in 2010 that would have made out of state notary okay?  Well, Obama decided to pocket veto it with a day or two.  It was here and then it was gone.  Why?  Because bloggers involved in the foreclosure fight all told their readers to write in now and enough did.

The fight over Elizabeth Warren is another example.  The powers that be were united that Warren was not going to be the one to head up the Consumer Financial Protection Bureau, and eventually they prevailed, but it wasn’t easy… and that’s because of the pressure of public opinion.

We may not realize it soon enough and may not take action in time as a result, but the truth of the matter is that were “we the people” to push today, we’d likely find that someone is already kneeling down behind them and they fall easier than anyone thought they would.  I’ve tried to say this before, but the answer lies in things like coordinated letter writing campaigns that are targeted, concentrated and laser focused as to their message.

Just imagine if 300,000 American voters all contacted their representatives in the House (i.e. targeted) at the same time (i.e. concentrated) and asked that congress take immediate action… let’s just say, to correct the country’s property records as a result of MERS… or more generally, to take immediate action to create jobs (i.e. focused).  The media would, of course, cover it… and pollsters would be dispatched around the country to determine just how many people shared the view.

If enough people were involved, and by enough I mean that representatives receive at least hundreds of like messages from constituents.  At 500 of such messages the resulting in them becoming concerned about their prospects for reelection, then things would happen.

I see the key obstacles today, at least as related to the foreclosure crisis, as being threefold:

  1. People are overwhelmed with their own lives and want an answer, but the game is one where you win by hitting singles, not home runs, and because the things that are singles aren’t as exciting as would be home runs… it is therefore hard to get enough people motivated to take action on something when that thing alone is not perceived as capable of solving someone’s problems today.
  2. People involved in the foreclosure crisis are ashamed of their situation and therefore they don’t tell anyone about their situation or share their views on the subject for fear of being branded “an irresponsible borrower.”  As a result, the grass roots efforts haven’t spread from person to person, because although individuals join, they don’t recruit their friends or family members.
  3. Consider what’s missing from the foreclosure crisis.  Even with over 3,000 evictions going on seven days a week, 365 days a year… and 10,000 foreclosure notices going out every day as well… do you see even one Hollywood movie or rock star on public service messages talking about the tragic nature of the foreclosure crisis?  You don’t, do you?  No you don’t.  The “irresponsible borrower” stereotype, while changing slowly to be sure, continues to block progress and prevent people from learning more.

So, what happens in ACT FOUR is going to be a reflection of what we-the-people do… or don’t do.  We cannot change what’s going on in a macro sense if we are exclusively focused on our individual micro situations.  Individual fights do not win a battle, just as individually fought battles don’t win a war.

So, meanwhile… while we wait to see what’s behind the curtain that goes up on ACT FOUR… I give you Nevada’s Attorney General Catherine Masto!

… Faster than a NINJA loan originating at Wamu… More powerful than an unlimited warehouse line at Lehman Bros… able to see swaps and synthetics even when inside an SPE… Look, up in the sky… It’s a bird… It’s a plane… no it’s Nevada’s own, Catherine Masto… Super AG!

HEY WAIT… I HAVE AN IDEA!

My DOERS are used to writing letters and emails expressing frustration and anger to bankers who are doing things wrong and harming people.  And they’re very effective letter writers.  Well, now I’d like to suggest that we all send emails to Catherine Masto to tell her how pleased we all are to see her standing up for the people of her state and how we wish she was our AG too!  I’m serious, if enough of us do it, the media might even pick up the story because NO ONE ever sends nice letters to state AGs… I’ll bet you anything.

SEND E-MAIL IN SUPPORT OF NEVADA’S AG - CLICK HERE.

Obviously, in California our AG has not yet come to realize that the fraud and forgery of robo-signing in this state is something worth going after, perhaps because it’s not as concentrated a problem as it is in Nevada.  Harris hasn’t even talked about filing such a suit, as far as I can tell.

Frankly, I think we should do something about that obvious inequity.  Or, we could just wait a few years until California’s housing market looks closer to what Nevada’s does today, and then everyone will speak up as they have in Nevada, believe you me.

Here’s how you reach California’s Attorney General Kamala Harris… call or send letter telling her that you want and very much expect her to prosecute servicers for the fraud that is “robo-signing,” just as her counterpart in Nevada is doing.

Contact California’s Attorney General

Attorney General’s Office

California Department of Justice

Attn: Public Inquiry Unit

P.O. Box 944255

Sacramento, CA 94244-2550

Voice: (916) 322-3360 or

Toll-free in California: (800) 952-5225

Fax: (916) 323-5341

###

AND JUST TO MAKE SURE YOU’RE NOT MISSING MY POINT…

It goes to show you… all you have to do is make the crime of affidavit fraud a felony, and it immediately stops 88 percent of foreclosures.  What does that say about 88% of the past foreclosures in Nevada?  I guess it says that they were dependent on fraudulently signed documents, right?

Looks like that to me… but then the bankers all said the robo-signings were just isolated incidents.  Doesn’t seem right to me, in fact it looks to me as if foreclosing legally is the isolated incident.

I do know this for sure… we just need more like AG Masto… quite a few more.

Mandelman out.

Nov
15

2004 GAO Report | Federal and State Agencies Face Challenges in Combating Predatory Lending

Executive Summary Purpose Each year, millions of American consumers take out mortgage loans through mortgage brokers or lenders to purchase homes or refinance existing mortgage loans. While the majority of these transactions are legitimate and ultimately benefit borrowers, some have been found to be “predatory”—that is, to contain terms and conditions that ultimately harm borrowers. … Read more Related posts:
  1. Subprime Standardization: How Rating Agencies Allow Predatory Lending to Flourish in the Secondary Mortgage Market
  2. 2004 Report on Predatory Lending & Servicing Practices & Their Effect on Corporate Compliance, Conduct, Ethics & Accounting
  3. Predatory Grizzly “Bear” Attacks Innocent, Elderly, Poor, Minorities, Disabled & Disadvantaged With Predatory Lending Scams & Frauds!
Nov
08

Abigail Field | Policy Makers: Bank and Wall Street Greed, Not “Irresponsible Homeowners”, Caused Our Crisis

  Policy Makers: Bank and Wall Street Greed, Not “Irresponsible Homeowners”, Caused Our Crisis Somehow the banking industry has convinced much of the public and most of our political leaders that our housing and foreclosure crisis is the fault of irresponsible borrowers despite the overwhelming evidence that greedy bankers are to blame. Since good policy … Read more Related posts:
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  2. Financial Crisis Commission Finds Cause For Prosecution Of Wall Street
  3. Abigail Field | Schneiderman Sues BNY; Homeowners Validated; Will Deutsche Bank Be Next?
Nov
05

Get your Independent Foreclosure Review!

OCC and the Federal Reserve announced this week that banks who service mortgages will be sending letters to homeowners this month and next, offering them an opportunity to request review of any 2009 or 2010 foreclosure.  Every homeowner who asks gets a full independent review by a foreclosure auditor.  A homeowner who was in any stage of foreclosure in 2009 or 2010 is eligible for review and possible compensation.  The request for review runs to five pages, and the web site is not exactly user-friendly.  There is also a toll-free number to apply:  888-952-9105.

Compensation will be paid (in the amount determined by the independent reviewers discussed on this blog previously) for financial injuries resuting from errors, misrepresentations or deficiencies in the foreclosure process.  Examples include foreclosures during bankruptcy or against an active-duty service member, improper legal or other fees, or foreclosure while a homeowner is in trial or permanent modification plan.  The deadline to request a review is April 30, 2012.  A request for review will not stop foreclosure, and redress payments will not require borrowers to release claims or affect any pending foreclosure litigation or bankruptcy proceeding.  The foreclosure reviews are being done by consulting firms, such as Price Waterhouse and Promontory.

However weak or unreliable this process may be, homeowners have nothing (other than some time) to lose by applying for a review.  Borrowers in foreclosure litigation or bankruptcy might also want to seek discovery of their audit/review files to see what deficiencies were identified (or missed).

Nov
04

Our FAQ on the Foreclosure Reviews

Our FAQ on the Foreclosure Reviews by Paul Kiel ProPublica, Nov. 4, 2011, 10:37 a.m. As we reported today [1], federal banking regulators have launched a foreclosure review process. Certain current or former homeowners who were the victims of abuses or errors by mortgage servicers will be eligible for compensation. Regulators have provided a bare-bones … Read more Related posts:
  1. 4.5 Million Fraudclosed Borrowers May be Eligible for Reviews
  2. Foxes Guarding the Hen House | Analysis: Bank-Picked Experts Take On U.S. Fraudclosure Reviews
  3. Independent Foreclosure Review | Flaws Jeopardize New Attempt to Help Homeowners
Nov
04

Is the Independent Foreclosure Review Really Independent?

“If you have to put “Independent” in the title, then it probably isn’t.” ~ Is the Independent Foreclosure Review really independent? Is the “Independent Foreclosure Review” a real help to borrowers, or the latest program announced by the feds in a long series of faux efforts to make it appear the government is responding to the … Read more Related posts:
  1. Federal Reserve’s Independent Foreclosure Review and HAMP Escalations Review
  2. PB Post | Bondi Seeks an Independent Review of Fraudclosure Investigators’ Dismissal
  3. Federal Agencies LPS Consent Order Allows for SERVICER Restitution
Nov
04

FHFA Director Praises Principal Paydown Plan for Undersecured Mortgages

FHFA Director Praises Principal Paydown Plan as “Promising” and “Credible” Pledges to Provide Members an Assessment in Two Weeks Washington, DC (Oct. 26, 2011)—During a meeting today with 19 Members of Congress, Edward DeMarco, the Acting Director of the Federal Housing Finance Agency (FHFA), praised a principal reduction proposal by Rep. Zoe Lofgren and pledged … Read more Related posts:
  1. Principal reduction plan for struggling homeowners could be part of settlement between lenders and states
  2. Fannie BofA Probe | Letter From Rep Issa to FHFA Director DeMarco
  3. Official Press Release | FHFA, Fannie Mae and Freddie Mac Announce HARP Changes to Reach More Borrowers
Nov
01

Foreclosure Fraud Review Begins Today by Homeowner Request

“I’m skeptical of any program implemented by the banks and servicers to examine their prior errors, omissions and intentional or unintentional criminal acts” ~ Foreclosure review begins today by homeowner request A massive review of as many as 4 million foreclosures nationwide began Tuesday as mortgage servicers seek out borrowers whose cases contain flaws. The … Read more Related posts:
  1. Rep Soto, Sen Sobel Letters RE The Request for Review of Potential Wrongful Termination of Theresa Edwards and June Clarkson by the Florida Attorney General’s Office
  2. Ratings FAIL – Moody’s to Review JPMorgan Chase Servicer Rating After Foreclosure Suspension
  3. And so it Begins – GMAC, Jeffrey Stephan Sued by Vindictive Homeowner
Oct
31

A TIME FOR GOOD JUDGEMENT: The jury is in AND we need judges to modify the way banks behave.

Originally published on December 7, 2009.  How depressing is that.  Two years later and it’s just as current now as it was then.  How does it feel to be absolutely running in place.  Are you having fun yet?


Okay, first of all… you’re not buying any of this “the recession has ended” nonsense, are you?  Because if you’re one of “them,” then I’m really not sure there’s a whole lot I can say to you except maybe… well, no… actually there’s nothing I can say to you that you’ll find interesting.  Just go back to trading your stock portfolio, buying REOs, and loading up on Citigroup, or whatever it is that you guys do these days.

To everyone else… I have a question: At this stage of the foreclosure crisis, is there any doubt that we need some sort of lender and mortgage servicer reform?  I’m only asking because it’s hard for me to imagine that there’s anyone, at this stage of what’s definitely not a game, that wouldn’t readily agree, the American Bankers and Mortgage Bankers Associations, Financial Services Roundtable, and American Securitization Forum, et al, notwithstanding.

In point of fact, I don’t think there can be any doubt that lenders and mortgage servicers in this country are working solely in their own best interests, and it should be just as clear that those interests are not aligned with the interests of anyone else; not the investors they’re supposed to protect, not the borrowers whose lives have been torn apart but will someday recover, and certainly not our nation as a whole.  The Obama administration has tried to address this situation, but to be entirely candid, their efforts to-date have been limited to a voluntary program, offering what many would describe as meager financial incentives, some stern language and a few public relations efforts.  And let’s not dress this thing up… it’s not working.

In August, the administration made public the servicer “report cards,” the thinking being that the servicers would be publicly shamed into improving their performance relative to their peers, and were the servicing industry capable of shame, or in other words, if the servicers gave a hoot what regular people thought of them, it might have been effective to some degree.

As it is, however, all it should have done was show the country that no one, not even the President of the United States, is capable of making the lenders and servicers do what they don’t want to do.  President Obama, Secretary Geithner, and just about everyone in Congress tell them to modify mortgages… they write them a check for a few hundred million… and the lenders and servicers say “no problem,” and then return to doing pretty much whatever they darn well please.  And why shouldn’t they?  What’s the president or anyone else going to do to them?  I mean, absent government support, they’re already insolvent.  And they know he’s not going to let them fail no matter what.

Of course, that’s not how the servicers would describe it… they’d say, to borrow a line from ex-President Bush: “It’s hard work.”  And there’s no shortage of highly compensated apologists running about explaining that servicers are “overwhelmed,” as if there should be an outpouring of sympathy from the general public.  Poor servicers… having to deal with all those “irresponsible homeowners” who didn’t see the absolute destruction of the capital markets coming around the corner the way nobody else did.  Being a servicer is hard.  Boo-hoo.

Judging Servicers

I see, so Bank of America expects us to believe that they simply cannot figure out how to answer the phone.  Anything over a few thousand calls a day and the place basically shuts down.  I understand… it’s hard to answer the phone… all those buttons, don’t you know.

Chase?  Well poor Chase can’t seem to hire anyone.  They’re having a dickens of a time finding good help.  Understandable.  The financial sector is running at full employment, after all.  And as to Wells Fargo?  Well, the banking types at Wells just can’t stop losing borrower submitted paperwork… over and over again.  It must be hard to stop bank employees from misplacing things.

I can’t even listen to this drivel anymore.  Bank of America has 40 million credit card holders, and you can call the toll-free number on the back of their cards 24/7, get a live person within a couple of minutes, and he or she can tell you how much interest you paid in 2005 and where you bought gas last Thursday… even if you’re calling on Christmas Eve.  Chase could have hired every man, woman and child in the state of Florida by now if they’d wanted to.  And Wells Fargo?  Okay, fair enough.  I have no trouble believing that Wells is telling the truth when they say they can’t stop losing stuff.

The story of servicers being overwhelmed might have been mildly interesting 18 months ago… maybe, but today?  We’ve given them enough money to float the Titanic, which is metaphorically exactly what they are in terms of their financial realities.  So, if they wanted to be efficiently modifying loans, you can bet your soon-to-be-foreclosed farm that they’re more than capable of doing so right now.

And who could ever forget the dumbest argument of the new millennium: “Loan modifications don’t work because a huge percentage of borrowers re-default.”  We should all understand that the term “loan modification” is a synonym for “lower your monthly payment,” so to say “they” don’t work is evidence of a beautiful mind.  I remember how I felt when I learned that more than half of the modifications in 2008 resulted in borrowers having a higher monthly payment.  I thought to myself: “Hmmm… I wonder if that could be why they’re “not working.  Maybe someone should study that.”  Morons.

The next installment in the servicer’s excuse-of-the-month club was the very popular: “It’s not our fault, the investors made us say no.”  Oh, did they now?  Which investors would those be?  Must be the ones that refuse to maximize their own returns?  That makes about as much sense as Bank of America being phone challenged.  Why would an investor refuse to modify an underwater mortgage in this market, when the alternative is almost always more costly?  It’s absurd, and I hate being treated like I’m six.

Nonetheless, almost everyone bought into this lie over this past summer, and I think the bankers figured that since you had to read a 600 page pooling and servicing agreement to determine whether they were full of crap or not, no one would.  It worked for a while, but now having read quite a bit more on the subject, I’ve come to realize that the vast majority of investors have about the same amount of clout with servicers as do borrowers.

Servicers essentially never get fired.  And unless there’s some creepy hedge fund lurking in the finely manicured hedges, what it says in most servicing agreements is basically that the servicer must take steps to maximize the returns for investors, something they almost never do.  In a phrase, it’s not the investors that are holding things back.

Further proof of this could be seen in September when Impac Funding, an investor that uses Bank of America Home Loans and GMAC to service many of their mortgages, started contacting borrowers directly with offers to help homeowners modify their loans.  It seems that Impac had grown tired of sitting back watching their servicers foreclose instead of modify, and in at least one case, a borrower’s loan was modified in 72 hours.  When you think about all of the millions of foreclosures that have already transpired, that is absolutely sickening.  And according to a source close to Impac, the results have already improved their returns, so what do you know about that.

So, what’s the next faux impediment to modifications going to be?  Rumor has it that the banks are starting to pull credit reports in conjunction with applications for loan modifications, so that should slow things down pretty good right there.

What’s the answer?  Well, we could ask Sec. Geithner to give the lenders and servicers another stern talking to, but we’ve just ended our sixth straight month of foreclosures above the 300,000 mark, with August coming in at 356,000, give or take, so it’s not exactly a plan likely to inspire widespread confidence.  As it stands, we’re forecasted to end 2009 with a staggering 3.6 million foreclosures for the year, and all forecasts point to even more in 2010 and 2011.

We could allow the banks, that absent the fairytale accounting rules that shun mark-to-market, and the trillions in government support provided in one form or another, to fail and then impose strict requirements that…  oh yeah… sorry… never mind.  I was dreaming there for a minute.

Here Comes the Judge

The answer is to reform the bankruptcy code to allow ‘judicial foreclosures,” which is simply another way of saying to lenders and servicers: “If you won’t do what you’re supposed to, we’re telling Dad.”

A bill that would allow bankruptcy court judges the discretion to write down mortgages on primary residences for homeowners filing bankruptcy has already been defeated twice.  These judges are already allowed to do this on just about every other loan… second homes, commercial property… but not on primary residences.

I have to admit something… I ignored the bankruptcy reform bills both times.  I didn’t even get it.  One side called it the “cram down,” which didn’t sound all that appealing to my ears at the time.  I was focusing all of my attention on what the administration was going to do to stop the foreclosure crisis and I had no time for “cram down” bills.  Shrewd thinking on my part, I’m aware.

Here’s the really interesting thing about this proposal that I’ve only recently come to understand: If judges were allowed to write down primary mortgages for those in bankruptcy… they’d rarely if ever be given the chance to do so.

The truth about this proposed change to the bankruptcy laws is that it simply creates a meaningful threat to lenders and servicers who refuse to modify mortgages, a big fat stick, if you will.  If the $50 billion in incentives that the Making Home Affordable program offers lenders and servicers for modifying mortgages represents a “carrot,” then allowing bankruptcy judges to write down mortgages on primary residences is “the stick”.  And I think it’s pretty clear that today’s lenders and servicers need to be hit with a stick in order to get them to do what we, as a nation, very much need them to do.  Nothing else has worked, and we are all suffering as a result.

“It’s very discouraging at times,” says attorney Tim McFarlin of McFarlin & Geurts, whose offices are in Southern California.  McFarlin is an experienced bankruptcy attorney who expanded his practice to help homeowners in need to loan modifications over a year ago.  “We get them done… eventually,” Tim explains, “but that can mean five, six, seven months or longer.”

“It’s clear that the servicers aren’t motivated to do anything quickly, there’s often no rhyme or reason to their behavior, and they do everything possible to give attorneys a hard time.  I don’t see that changing without some sort of reform that allows for judicial modifications.  Unless they see themselves potentially standing before a judge in the future, they’re not going to play nice on their own… why would they?  Homeowners in distress are hardly prepared to file lawsuits against giant financial institutions.  And the financial institutions know that.  They can do pretty much whatever they want with impunity,” explains McFarlin.

If it has been said once, it has been said so many times that its hard to believe that it’s not front page news every single day… our economy cannot recover without the foreclosure crisis coming to an end.  Foreclosures destroy property values… everyone’s property values.  And they breed more foreclosures, because people spend less… corporate profits drop, prices begin to fall… companies layoff workers, unemployment rises and foreclosures increase.  Today, more than 40% of foreclosures are being caused by unemployment.

There’s no such thing as a jobless recovery, and even if by someone’s definition there is, it’s not something anyone would enjoy.  Bernanke’s latest proclamation that the recession is “probably over,” which was largely based on a recent increase in retail sales, failed to mention that the “Cash for Clunkers” program, higher oil prices, and the seasonal impact of back-to-school shopping fueled that rise.  Remove those factors and retail sales fell that month by more than they have since my mother was listening to the Andrew Sisters performing live at Atlantic City’s Steel Pier.

Unemployment continues to rise, property values continue to fall, and if it weren’t for the $8,000 real estate tax credit, it’s highly unlikely that home sales would be having their fleeting moment in the sun.  I know… the stock market has been going up, but one would be wise to remember that markets that go up without fundamental basis have the very definite tendency to reverse their course abruptly, and often in mid-autumn.  I’m not giving advice, by any means, I’m just saying.

All of that notwithstanding, the simple fact is that foreclosures are continuing to destroy the value of the mortgage backed securities that are still right where they were last fall… on the balance sheets of our nation’s banks.  At some point, we the taxpayers are going to have to buy those assets so our nation’s banks can begin returning to some semblance of normalcy, and the lower the value of those assets, the higher the hit will be to taxpayers.

To-date, servicers and most investors have refused to take any losses whatsoever, which is why principal reductions are as rare as Sarah Palin supporters at MoveOn.org, or union leaders at the RNC.  And even though most lenders and servicers are participating in the president’s Making Home Affordable program, the decision as to whether a given loan will be modified or its principal reduced, is still voluntary, which is a euphemism for “you’ve got to be kidding”.

Judgment Day

As of July’s end, when the administration published the “report cards” showing how each servicer was doing related to their efforts to modify loans, everyone on the list was shown to be an underachiever.  And we’re not just talking about ‘C’ students here, we’re talking 9% of an eligible 2.7 million homeowners who had received loan modifications; Bank of America, the “Bank of Opportunity,” as I recall, and one of the country’s largest mortgage holders, came in dead last at 4%.

We gave the banks a chance to volunteer, we gave them so much money it’s impossible to fathom, and they basically said… “Yawn”… and continued to foreclose at will.

The Obama Administration’s plan was to involve a carrot and a stick.  The stick was judicial foreclosures; bankruptcy judges being allowed to write down loans on primary residence mortgages for borrowers filing bankruptcy so they could remain in their homes.  Candidate Obama promised that he would support this legislation, and President Obama, as recently as last February when he introduced his foreclosure rescue plan, said that it was a crucial component of his new plan as well.

But that’s the last anyone has heard from the President on the matter.  He didn’t allow its inclusion in the economic stimulus bill, and now it seems that he doesn’t even allow it to come up at press conferences.  He said the proposal would have to stand alone, which was another way of saying that it would be doomed to failure.  And in case that wasn’t enough, the banking lobby was standing by prepared to spend tens of millions to defeat it.

In the second quarter of this year alone, the powerful Mortgage Bankers Association spent $761,000 on lobbying efforts.  And that’s when the United States Senate defeated the legislation that would have saved hundreds of thousands of homeowners from foreclosure by allowing judges to modify mortgages.  The lending industry saw it as a major victory,

A victory?  For whom?  I’m not sure these guys understand what “victory” means, or at the very least, they appear to have trouble distinguishing between “battle” and “war”.

The bankers say that allowing judges to modify mortgages will increase the number of bankruptcy filings and cause interests rates to rise, but these are two of the weakest arguments ever put forth because the alternative, which is what we’re all living through now, is a deflationary spiral that continues to drag our economy down and lasts for perhaps a decade or longer.

Just imagine what this country will look like, if for the next two years things just get progressively worse… and then it really gets bad.  Don’t kid yourself… if we don’t stop the foreclosure crisis and soon, that’s exactly where we’re headed.  A recent research report published by Deutsche Bank estimated that something like half of all the homeowners in the United States are going to find themselves underwater by 2011, so woo-hoo!

Stan Lockhart, an experienced real estate attorney who has represented homeowners trying to obtain loan modifications and also handles bankruptcies, commented:

“Bankruptcy reform can’t harm investors because they have nothing now.  The market is where the market is.  And if homeowners have no hope, if there’s no hope of equity in the future, then homeownership in this country is on borrowed time and perhaps for en entire generation.  Can our economy survive under those circumstances… I don’t think it can and that can’t be very attractive to investors, can it?”

Judging the Political Climate

Sen. Richard Durbin (D-IL), along with New York’s Sen. Chuck Schumer, have been championing the bill through both of its defeats.  The last time it sailed through the House… Citigroup even crossed banking lines to support the bill, and then it died in the Senate at the hands of the banking lobby.

To get Citigroup to support the bill, Sen. Durbin agreed to three… um… modifications, pun intended.

One: It would apply only to mortgages already in existence at the time the bill passes, and not to loans made after that date.  One would think that this compromise would put an end to the objection voiced by lenders that applying it prospectively would result in higher borrowing costs for all homebuyers.

Two:  In order to qualify for a judicial loan modification, homeowners would be required to contact their lender or servicer at least 10 days before filing for bankruptcy, which would give that lender or servicer one final chance to be, in a word, a Mensch.

Three: Violations of the Truth in Lending Act, or TILA, wouldn’t allow for the debt to be wiped out, as was the case in the original bill.  Instead, such violations would result in a fine, which is how the statute already works outside bankruptcy court.

The response by the banking industry?  “Thank you for playing, but sorry… no.”  And the arguments behind the industry’s latest objections make even less sense than their earlier smokescreen.  Try this one: The bill would even apply to million dollar homes, or homes where the homeowner isn’t behind on their payments.  This makes me wonder whether perhaps they’ve forgotten that the bill has to do with bankruptcy, and is not simply a way to shop for a lower payment.

Or how about: The bill imposes no time limit, so lenders are worried that they could still be dealing with this issue 30 years from now.  My personal response would be to say… fine, and give them a 10-year window, if that will make them feel better, but that’s just me.  And the industry’s third latest objection?  Under certain circumstances related to TILA violations, the entire debt could be forgiven.  Supporters point out that this provision only mirrors the penalties for abusive lending that exist outside bankruptcy court.  And I would like to add… have these people ever met a judge?  And if so, did that judge seem like the kind of guy who’s prone to giving away houses willy nilly?  I met a pretty nice judge in traffic court once, but even he only reduced my fine from $280 to $160.

Norma Hammes, a bankruptcy attorney who’s practiced for 31 years and now helps homeowners obtain loan modifications, is more than familiar with how lenders and servicers are handling homeowners at risk of foreclosure.  According to Hammes: “They (lenders and servicers) are trying to separate the attorneys from their clients.  It’s clear that the banks and servicers don’t want homeowners to be represented by counsel.  If they were really serious about loan modifications, they’d put the actual contact information of the HAMP Modification Department on their Websites.  As it stands, you have to call and call and then wait on the phone for hours before talking to anyone.”

“And that’s just the tip of the iceberg,” explains Hammes.  “In the Treasury Department’s FAQs, which seem to be the closest thing to published rules, there seems to be a requirement that the lender postpone a foreclosure while a homeowner is under consideration for a HAMP modification, but that’s far from being something on which a homeowner can count.  It happens far too often.”

Even HUD-approved housing counselors, who the government has consistently praised as being the frontline professionals trying to modify mortgages for distressed homeowners, express high levels of frustration at the number of brick walls, bureaucratic incompetence, and seemingly unending bewilderment about the program’s rules that they say are all ubiquitous at lenders and servicers.

The Obama Surprise

I have to say that most of what I’ve learned about bankruptcy reform and judicial loan modifications, on one side has seemed like common sense, and on the other, predictable resistance.  It’s obvious that the lenders and servicers aren’t going to act in anyone’s interests but their own, no matter what they’re asked nicely to do.  And it should come as absolutely no surprise that if they’re not threatened by what a judge might do, then there’s no consequence to their actions.

Our country is in crisis, and we can’t expect the banks to act for the overall good of our society… that’s not their role… that’s the role of the elected representatives who serve in our government.  No surprises there, right?

What’s incredibly surprising, to me anyway, is who has aligned themselves with the banking lobby in opposing judicial loan modifications: Ladies and Gentlemen introducing the Obama administration.

In late September, Assistant Treasury Secretary Michael Barr, speaking to reporters, said that, “Bankruptcy reform is an additional tool, but it’s not the focus of our efforts to keep people in their homes.”  The Wall Street Journal interpreted Barr’s comment as meaning that proponents of the reform should forget about it, because it ain’t happening.  The administration talks tough about stopping foreclosures, but then all it does is talk.  Now, instead of picking up the stick, all it’s going to try is increasing the number of carrots, and embracing short sales, which has about the same chance of working as the Hope-for-Homeowners program implemented by President Bush that has modified about the same number of mortgages as exist on my block.

Short sales are always a problem, because the lender or servicer has to agree that a borrower can sell the home for less than owed, and forgive the difference.  If that sounds a lot like getting a bank to agree to a principal reduction or loan modification, you’re right.  So, why would offering lenders or servicers a financial incentive that amounts to little more than a couple of sheckles for agreeing to do what they’re not doing now be effective?  Well, it wouldn’t silly.

I do have some sympathy for the Obama administration.  They don’t have an easy job, and Secretary Geithner unquestionably has his hands full trying to deal with bankers that are acting like spoiled children in oh, so many ways.  But he’s creating some of that by not taking a tougher stance, and it could be that the reason for this is that the Democrats don’t want to ruffle any of Wall Street’s financial feathers before the midterm elections in 2010.  They remember what happened to Bill Clinton in 1994, and they don’t want to see that happen again.

Geithner’s allowing the banks to ignore the accounting rules that forced banks to mark their assets to the market value, and FDIC Chair, Sheila Bair has said that forcing them to comply with FASB’s rules at this point makes little sense.  That’s laugh out loud funny… to me anyway.  I guess it makes more sense to allow the banks to have balance sheets that are pure fiction.  Well, alrighty then.  I suppose that is better, especially when you consider that the alternative is National Socialism… I mean nationalization.

I understand the nature of the problems faced by the administration, but I have to say that the way they’re handling it does bother me.  If a bank can foreclose on a home, and accounting regulations allow that bank to keep that mortgage on their books at its original, albeit now fictional value until the home is actually sold, then you’re allowing the bank to benefit from the foreclosure for some time, anyway.  But if, at the same time, you’re telling the country that you’re encouraging loan modifications, well… it seems disingenuous… to me, anyway.

In essence, you’re allowing that bank to temporarily re-capitalize itself on the backs of foreclosed homes, and that may be a preferable alternative to going back to congress for more money for banks in advance of the midterms, and I may even understand that political reality.  But I’m pretty sure that the families losing their homes won’t be nearly as understanding once inside the voting booth next fall.

It may not be something that shows up in the polls today, but the Obama administration, while it won’t be held accountable for everything that happened before, will absolutely be held accountable for fixing the foreclosure crisis.

In that regard they have thus far failed, and I think they’re likely to continue to fail unless they change their tune on judicial loan modifications.

Of course, I’m just thinking out loud over here.  Usually, I’m not one to judge.

Mandelman out.

Oct
28

Financial Stability Board Calls for Effective Consumer Finance Protection

The Financial Stability Board, an international organization operating under the auspices of the G20 countries, this week issued its Report on Consumer Finance Protection. http://www.financialstabilityboard.org/publications/r_111026a.pdf FSB emphasizes the link between international financial stability and consumer protection, particularly in the mortgage markets. It calls for regulation to assure assessment of borrowers’ ability to pay and to police credit product features that increase risk. The report engages in some comparative analysis and identifies national regulatory architecture that has been particularly effective, such as that of Australia. The report is part of an initiative to stimulate more international discussion of effective means of consumer protection, particularly concerning credit. FSB increasingly sees consumer protection as part of its mission to assess and address vulnerabilities in the international financial system. The report is worthy and sensible. Of course, implementation, primarily by domestic regulation of financial institutions, is a huge challenge.
Oct
27

KABOOM | Mortgage Electronic Registration System (MERS) Sued by Delaware Attorney General

MERS Mortgage Registry Sued by Delaware Attorney General Oct. 27 (Bloomberg) — The Delaware attorney general’s office sued Merscorp Inc., which runs a national mortgage registry used by banks, saying its practices are deceptive and hide information from borrowers. The MERS database, which tracks ownership interests in mortgages, obscures information from borrowers and impeded their … Read more Related posts:
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Oct
27

4.5 Million Fraudclosed Borrowers May be Eligible for Reviews

“The OCC, along with the Federal Reserve, will oversee the reviews. Whether homeowners were wronged will be decided by independent consultants hired by the servicers but approved by regulators.” ~ 4.5 million foreclosed borrowers may be eligible for reviews Nearly 4.5 million current and former U.S. homeowners will soon get a chance to have their … Read more Related posts:
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Oct
24

Victory | National Campaign Pressures Ocwen Financial to Modify Dixie Mitchell’s Loan

Once again, when you shame the banks in a public arena utilizing social media and the press, you get results… ~ PRESS STATEMENT For Immediate Release: Monday, October 24th Seattle Foster Mom, Cancer Survivor Receives Loan Modification National campaign pressures Ocwen Financial to Modify Dixie Mitchell’s Loan, Continues Fight to Hold Big Banks Accountable Seattle, … Read more Related posts:
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  3. Bloomberg | Goldman Sachs Will Sell Litton Loan Servicing to Ocwen for $264 Million
Oct
24

Mass Refi’s | Government Announces New Program “We Can’t Wait” to Help ‘Underwater’ Homeowners Save $26 Per Month

Don’t spend that $26 dollars all in one place! ~ Government announces new program to help ‘underwater’ homeowners The federal government on Monday announced new rules that would allow many more struggling borrowers to refinance their mortgages at today’s ultra-low rates, reducing monthly payments for some homeowners and potentially providing a modest boost to the … Read more Related posts:
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  2. Hamp “Improvements” – Making Home Affordable Program Enhancements to Offer More Help for Homeowners
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Oct
24

Sucker Alert | Senators Draft Bill to Give Visas to Foreigners Buying Pricey Homes, Fraudclosures

“Backers believe the initiative would help soak up an excess supply of inventory when many would-be American home buyers are holding back because they’re concerned about their jobs or because they would have to take a big loss to sell their current house.” ~ Foreigners’ Sweetener: Buy House, Get a Visa The reeling housing market … Read more Related posts:
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Oct
20

From Bevilacqua to Fontenot, It’s Coast-to-Coast Confusion


Well, I’d have to say that the foreclosure crisis jumped the shark today, for me anyway.  This unconscionable, tragic and devastating situation has gone from inexplicable to appalling.  I mean, my God… look what the bankers in this country have done to us all.

And not one single aspect of this expanding nightmare, whether addressed by a state or federal government program, has even showed us a modicum of competence.  You’d think by this point, someone would do something that outperforms ‘spectacular failure’ by accident, if not by design.  Like, by now couldn’t we have one program that merely failed, as opposed to spectacularly failed?

If you’re one of those who has been running around trying to spread the blame the borrowers for some part of this nightmare… just shut up, would you… you sound like an idiot at this point.  And I don’t care whether you’re at risk of foreclosure or not… this affects you every bit as much as someone who hasn’t made a payment in three years, so let’s see who you want to blame now.

Let’s start on the East Coast and work our way out west, shall we?

Yesterday, the Massachusetts Supreme Judicial Court issued its opinion today in Bevilacqua v. Rodriguez, a case examining the rights of property owners when buying foreclosed homes with toxic titles.  In short, they have none.

As shocking as it may be to some, apparently if you start with MERS, mix in some robo-signing, have total disregard for the PSA, and entirely ignore each and every law along the way, well… you end up destroying the foundation of a society.  On the positive side of the coin, however, you also end up with more money than Canada.

This ‘Spirit of America’ saga began last January with the landmark Ibanez decision, in which the Massachusetts Supreme Judicial Court invalidated two foreclosures conducted by US Bancorp and Wells Fargo Bank.

The court ruled that the foreclosure sales were invalid because notices of the sales named U.S. Bank and Wells Fargo as the mortgage holders but neither had yet been assigned the mortgages, and “thus had no interest in the mortgages being foreclosed at the time of the publication of the notices of sale or at the time of the foreclosure sales.”

Glenn Russell is a foreclosure defense attorney practicing in Massachusetts who I’ve become friends with over the last couple of years.  He represented the La Race family, the other family that was involved in the Ibanez decision, so I called him to get his take on Bevilacqua… and to see if he knew how to pronounce that name, Bev-il-aq-ua… which thankfully he did.

Glenn told me that he views the decision as being the natural extension of the Ibanez decision.

According to Glenn…

“In Massachusetts if the lender or mortgagee doesn’t have the assignment of the mortgage at the time of the first publication of the foreclosure auction, then they’re not a holder of the mortgage and no sale can take place.  In this case, US Bank didn’t receive the assignment until after the foreclosure sale, so they didn’t have anything to sell… when they sold it to Mr. Bevilacqua.”

The “try title” statute is the Massachusetts version of “quiet title” and it basically says I’ve got better title than anyone else, but in this case, the buyer never owned it in the first place, so there was nothing to discuss.

The Massachusetts Supreme Judicial Court agreed with, Land Court Judge Keith Long, the same judge who originally heard the Ibanez case, basically saying that since Mr. Bevilacqua never owned the property, he lacked standing to pursue a “try title” action in the state’s Land Court.

Judge Long provided his “Brooklyn Bridge” analogy, which says that if someone records a deed to the Brooklyn Bridge, and then brings a lawsuit to ask the court to uphold his ownership claim… but then the actual owner of the bridge doesn’t show up in court, the title to the bridge doesn’t just magically convey to its new owner.

The court also held that Bevilacqua lacked standing as a “bona fide good faith purchaser for value,” based on much the same rationale.

Judge Long was sympathetic to Mr. Bevilacqua’s situation.  Apparently, Bevilacqua put several hundred thousand dollars into the property to convert it into condominiums.  Judge Long wrote…

“I have great sympathy for Mr. Bevilacqua’s situation — he was not the one who conducted the invalid foreclosure, and presumably purchased from the foreclosing entity in reliance on receiving good title — but if that was the case his proper grievance and proper remedy is against that wrongfully foreclosing entity on which he relied.”

Well, that wasn’t too subtle… he’s saying Bevilacqua can go sue US Bank who botched the sale.

Now, the court did say that there were a couple of potential ways to fix the problem, one of which being that the owners could attempt to put their chains of title back together and hold new foreclosure sales in their names to clear their titles.  Basically, Bevilacqua would be allowed to foreclose by virtue of having “an equitable assignment” of the mortgage foreclosed on by US Bank.

This approach is said to be quite expensive, but potentially doable, however, a decision in the Eaton v. FNMA case is imminent, and if the court in that case rules that foreclosing parties need to hold both the mortgage and the promissory note when they foreclose, well… that would be the end of the re-foreclosure fix mentioned above.

Another way to fix this problem would be to have US Bank re-do its foreclosure sale, but this approach does allow for the possibility of a competing bid entering the picture, among other things.

The third way to handle this situation would be to find the old owner, in this case Mr. Rodriguez, and get him to sign a quit claim deed and, I’d imagine, a whole pile of waivers of his rights.

Attorney Jeff Loeb, of the prestigious Boston law firm Rich May, appears to be representing Mr. Bevilacqua, but more than likely he was actually retained by Chicago Title, or if not, then another title insurance company.

Smart money says the Jeff will be looking high and low for Mr. Rodriguez to see if he can get him to sign a waiver of his rights… you know for $500… or in this case maybe they’d throw a grand at him, which is I’m told, the standard operating procedure in cases such as this.  Nice guys, right?

Chicago Title is part of Fidelity who is the parent of LPS…. so there’s a rich history of doing business the old fashioned way.

So… Attention Massachusetts Homeowners:

If you have lost your home to foreclosure, and it has been sold since then…

Go to the Registry of Deeds and look up the property records to determine when your mortgage was properly assigned, and if it hadn’t yet been assigned at the time of the first publication of the sale, then they bought nothing… so, go get your house back.

In fact, call Glenn Russell and talk to him about it.  I happen to know that he’d like to handle such a case.

NOW LET’S GO WEST…

So, while the Massachusetts Supreme Judicial Court was busy agreeing with Judge Long of the Land Court that the laws governing the transfer of real property actually do apply even to a foreclosure sale and even after the buyer had put a couple hundred grand into the property, the California Court of Appeals was busy ruling that the only law that matters as far as they’re concerned is the law requiring borrowers to make their payments.

In Fontenot v. Wells Fargo, the court ruled that, “MERS‘s status was not reasonably subject to dispute.”  And even worse, the court ruled that, there is “overriding basis for rejecting a claim based solely on the alleged invalidity of the MERS assignment.”

And further… “if MERS indeed lacked authority to make the assignment, the true victim was not plaintiff but the original lender, which would have suffered the unauthorized loss of a $1 million promissory note.”

Here’s a brief overview of the story, taken from the court’s decision, which, as if it weren’t bad enough, is certified for publication.  (Both this decision and the Massachusetts decision are found at the bottom of this article.)

Plaintiff Arlene Fontenot sued Wells Fargo Bank, Mortgage Electronic Registration Systems, and three other entities after she defaulted on a secured real estate loan and lost the property to foreclosure.

She alleged the foreclosure was unlawful because Wells Fargo had breached an agreement to forbear from foreclosure, and MERS made an invalid assignment of an interest in the promissory note relating to the property.

Wells Fargo and MERS filed demurrers based in part on recorded documents they contended demonstrated plaintiff‘s claims to be without factual foundation.  The trial court took judicial notice of the requested documents and sustained the demurrers without leave to amend.  We affirm.

In December 2007, MERS assigned the deed of trust to defendant HSBC Bank.  Several months later, Wells Fargo was alleged to have foreclosed on the property and sold it, although the complaint otherwise contained no explanation of Wells Fargo‘s relationship to the secured transaction.

The complaint asserted a single cause of action against all defendants for―Wrongful Foreclosure.  Within that cause of action, plaintiff alleged several different imperfections in the foreclosure process, including improper or ineffective transfers of the promissory note and security.  Plaintiff sought an award of damages, as well as an order voiding the foreclosure sale and her debt.

The court granted MERS‘s request for judicial notice and sustained its demurrer without leave to amend, noting, ―The only apparent grounds for suing MERS are the allegations that the deed of trust improperly named MERS as nominee and beneficiary, and that there was no physical delivery of the note to HSBC. . . . Those claims do not state a cause of action against MERS as a matter of law.

Plaintiff raises four primary grounds for reversing the trial court‘s rulings sustaining the two demurrers.

  1. With respect to MERS, she argues the trial court erred in taking judicial notice of the various recorded documents.
  2. The purported assignment of the note by MERS to HSBC in the assignment of deed of trust was invalid because MERS did not possess an interest in the note.
  3. Because the assignment of the note to HSBC was invalid, plaintiff argues, Wells Fargo had no authority to foreclosure.
  4. With respect to Wells Fargo, she argues the trial court erred because she stated a claim either for breach of the forbearance agreement, as amended by the March letter, or promissory estoppel.

On review from an order sustaining a demurrer, the court examined the complaint de novo, which has got to mean something like “anew,” to determine whether it alleges facts sufficient to state a cause of action under any legal theory.

Rather, MERS was the beneficiary under the deed of trust because, as a legally operative document, the deed of trust designated MERS as the beneficiary.  Given this designation, MERS‘s status was not reasonably subject to dispute.  The other matters noticed by the trial court similarly could be inferred from the text or legal effect of the documents themselves, needing no outside confirmation.  We find no abuse of discretion.

Plaintiff‘s claim against MERS challenges an aspect of the ―MERS System, a method devised by the mortgage banking industry to facilitate the securitization of real property debt instruments.  Members of the MERS System assign limited interests in the real property to MERS, which is listed as a grantee in the official records of local governments, but the members retain the promissory notes and mortgage servicing rights.  The notes may thereafter be transferred among members without requiring recordation in the public records.

Ordinarily, the owner of a promissory note secured by a deed of trust is designated as the beneficiary of the deed of trust.  Under the MERS System, however, MERS is designated as the beneficiary in deeds of trust, acting as ―nomine for the lender, and granted the authority to exercise legal rights of the lender.

This aspect of the system has come under attack in a number of state and federal decisions across the country, under a variety of legal theories.  The decisions have generally, although by no means universally, found that the use of MERS does not invalidate a foreclosure sale that is otherwise substantively and procedurally proper.

Our Courts of Appeal in California have only recently addressed MERS‘s role, but both published decisions have come down on the side of MERS.

As the court reasoned, Civil Code section 2924, subdivision (a)(1), which states that a trustee, mortgagee, or beneficiary, or an agent of any of them, may initiate foreclosure, does not include a requirement that an agent demonstrate authorization by its principal.

The court also found no substantive basis for the challenge, noting, as here, the plaintiff had agreed in the deed of trust that MERS could proceed with foreclosure and non-judicial sale in the event of a default.  Because the deed of trust did not require MERS to provide further assurances of its authorization prior to proceeding with foreclosure, the plaintiff was not entitled to demand such assurances.

Plaintiff contends the trial court erred in sustaining Wells Fargo‘s demurrer because she adequately alleged either a claim for wrongful foreclosure, based on Wells Fargo‘s refusal to accept performance under the forbearance agreement as amended by the March letter, or a claim for promissory estoppel.  The trial court declined to consider the allegations regarding the March letter because plaintiff did not attach a copy of the letter to the complaint.

Finally, plaintiff contends the deed of trust was ambiguous because it designated MERS as both the ― nominee for the beneficiary‘ and as the ―beneficiary. An entity cannot be, plaintiff argues, both an agent and a principal.

The record does not support the claimed ambiguity.  Contrary to plaintiff‘s assertion, the deed of trust did not designate MERS as both beneficiary of the deed of trust and nominee for the beneficiary; rather, it states that MERS is the beneficiary, acting as a nominee for the lender.

There is nothing inconsistent in MERS‘s being designated both as the beneficiary and as a nominee, i.e., agent, for the lender.  The legal implication of the designation is that MERS may exercise the rights and obligations of a beneficiary of the deed of trust, a role ordinarily afforded the lender, but it will exercise those rights and obligations only as an agent for the lender, not for its own interests.

Other statements in the deed of trust regarding the role of MERS are consistent with this interpretation, and there is nothing ambiguous or unusual about the legal arrangement.  Plaintiff‘s argument appears to be premised on the unstated assumption that only the owner of the promissory note can be designated as the beneficiary of a deed of trust, but she cites no legal authority to support that premise.

There is a further, overriding basis for rejecting a claim based solely on the alleged invalidity of the MERS assignment.

Plaintiff‘s cause of action ultimately seeks to demonstrate that the non-judicial foreclosure sale was invalid because HSBC lacked authority to foreclose, never having received a proper assignment of the debt.

In order to allege such a claim, it was not enough for plaintiff to allege that MERS‘s purported assignment of the note in the assignment of deed of trust was ineffective.  Instead, plaintiff was required to allege that HSBC did not receive a valid assignment of the debt in any manner.

Plaintiff rests her argument on the documents in the public record, but assignments of debt, as opposed to assignments of the security interest incident to the debt, are commonly not recorded.  The lender could readily have assigned the promissory note to HSBC in an unrecorded document that was not disclosed to plaintiff.

To state a claim, plaintiff was required to allege not only that the purported MERS assignment was invalid, but also that HSBC did not receive an assignment of the debt in any other manner.  There is no such allegation.

Prejudice is not presumed from ―mere irregularities in the process.  Even if MERS lacked authority to transfer the note, it is difficult to conceive how plaintiff was prejudiced by MERS‘s purported assignment, and there is no allegation to this effect.

Because a promissory note is a negotiable instrument, a borrower must anticipate it can and might be transferred to another creditor.  The assignment merely substituted one creditor for another, without changing her obligations under the note.

Plaintiff effectively concedes she was in default… and she does not allege that the transfer to HSBC interfered in any manner with her payment of the note… nor that the original lender would have refrained from foreclosure under the circumstances presented.

If MERS indeed lacked authority to make the assignment, the true victim was not plaintiff but the original lender, which would have suffered the unauthorized loss of a $1 million promissory note.

And there you have it.  Ladies and gentlemen… I give you the California Court of Appeals… and that, as they say is that.  As I understand it, from an attorney friend of mine, this decision is now essentially the law throughout the State of California.

California courts do not care whether the note was assigned correctly, they do not care about MERS being involved as a beneficiary… all they care about is whether borrowers made their payments or not.

If you’re planning on making either of these arguments in a California court, it better be bankruptcy court because if not… it does not look good.  And if someone tells you that you can litigate in California based on an improper assignment or the role played by MERS, just tell them “FonteNOT.”

So… I have a solution for California’s homeowners… move to Massachusetts?

Mandelman out.


CA Fontenot v. Wells Fargo

Bevilacqua-V-Rodriguez Massachusetts SJC Oct 18, 2011

Oct
19

$725,000 Judgment Against Wells Fargo for Misapplying $2,212 Mortgage Payment

725,000 judgment against Wells Fargo for Misapplying $2,212 Mortgage Payment Below is a story of an attorney that has been battling the banks on behalf of many Northern Nevada homeowners for several years.  His first experience with the banksters’ egregious conduct towards borrowers began in September 2004 and resulted in a $725K judgment against Wells … Read more Related posts:
  1. Judge Schack Does it Again! Wells Fargo Motion for Judgment of Foreclosure and Sale for the Premises is DENIED WITH PREJUDICE Complaint is Dismissed
  2. Judge Slaps Wells Fargo in Foreclosure | KENG HEE PAIK, Plaintiff, v. WELLS FARGO BANK, N.A.
  3. Cease and Desist Order In the Matter of: WELLS FARGO & COMPANY and WELLS FARGO FINANCIAL, INC.
Oct
04

Attitudes on Wall Street: Dear God, Give Me Strength

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As I sat down to watch Bethany McLean, the financial reporter that broke the ENRON story, appearing on PBS’ NOW with David Brancaccio, talk about the $18 billion in bonuses that Wall Street’s New York executives paid themselves in 2008 while we watched the U.S. and global financial markets literally melt down, I wasn’t expecting to enjoy myself. I was hoping, I suppose, to be educated in some way as to how these financial geniuses think.

Obama called the $18 billion in bonuses… “shameful”.

Brancaccio opened the interview by saying something about how Wall Street must now realize that they’ve “lost the great war and it’s time to do things completely differently”. Bethany laughed, and it was not a staged, pre-planned laugh… she laughed without meaning to, involuntarily. Then she said something that I’m not going to laugh about.

“I don’t think so. I don’t think there’s been a real come to Jesus moment on the Street yet.” She was just shy of chuckling as she spoke.

Brancaccio replied: “Even with all we’ve been through? Even with the great collapse of 2008 and 209?” And Bethany replied, but quite seriously now:

“I think there is still the attitude that it is the fault of American borrowers for borrowing beyond their means, for homeowners for moving into homes they couldn’t afford, and all Wall Street did was package this stuff up and sell it to investors around the world… that they are the least of the villains, rather than the greatest of the villains.”

Further, she said that the feeling on Wall Street is: “that we’re smarter than you so we’re entitled to make a lot more money than the rest of you.” She said that the people at Merrill Lynch, who were paid untold zillions in at the end of 2008, as they were being taken over by Bank of America, believe that it was just a few people at Merrill that created the problems and that you still have to pay people what they were promised.

By this point I was feeling lightheaded.

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Bethany then pointed out that there’s a “real gap” between how Wall Street sees it and the rest of the country sees it. That the American people wonder how they can be taking taxpayer dollars and paying out exorbitant bonuses, while Wall Street says that they promised people this compensation and that they must be paid as a result… or they’ll leave.

Is that right? They’ll leave if we don’t pay them? Well, Holy Mother of God… DON’T PAY THEM!

Now… dizzy… when will this end. Maybe watching this wasn’t a good idea…

Bethany said that the argument that people will leave might not hold the same weight it once did, because the number of jobs on Wall Street has been cut by more than half. She said that maybe the upper echelon would leave and if they couldn’t find another job, they’ve been paid enough to just go to the beach for a couple of years…

My mid was now reeling… the light in the room seemed to be fading in and out… which beach? Which beach? WHICH GOD DAMN BEACH?

Brancaccio asked about whether these Wall Street types recognized that bonuses are usually paid on profits, but that profits are “radically down,” and Bethany replied that they don’t. She said that there’s a widespread belief that “it wasn’t my fault, so I’m still owed mine.”

Then she pointed out that the justification Wall Street firms have provided in past years when defending the large bonuses being paid out each year is to look at the profits being made. But, she explained, when you look at the write-downs on assets these firms have taken over the past year or two having completely decimated the profits of the last so many years, the reality is that the profits were illusory… they were never there to begin with… just over valued assets sitting on the books. So, as she put it, “people have already collected millions of dollars that in a strictly economic sense, they weren’t entitled to.”

Damn, is it hot in here? Mind if I open a window?

Brancaccio had a stupid half grin on his face as he segued into his next question about how one news story was reported in two different ways… blah, blah, blah… Apparently, Reuters reported that Wall Street bonuses had dropped the most they’d dropped in 30 years. While the New York Times, looking at the same data, reported “The 6th Largest Bonuses in History in 2008 for Wall Street,” or something very close to that.

Brancaccio then astutely pointed out that 2008 did not produce the sixth largest profits in history, which cleared up a lot of confusion for me, how about you?

Bethany commented that she thought the two different ways of reporting the same data on the bonuses was a good analogy to how Wall Street feels versus how we on Main Street America feel… and then she said, “And to answer your initial question, no… I don’t think Wall Street understands how much Main Street holds them to blame.”

Alright look… the next person that refers to me as “Main Street,” I’m knocking out. You’re the one that’s Main Street, betch. I’m Upper Westside. Or maybe Soho… the Villaige… Central Park East. Take that Main Street rap down the road, you backpacker ho.

Oh dear, I’m sorry about that. I can’t believe I said that out loud?

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Citing the stock back-dating scandals that went on just after ENRON, Bethany continued, saying that the same mindset that existed before ENRON still existed today: “That we’re executives and are therefore entitled to money that really belongs to the shareholders.”

Brancaccio, his countenance now looking its most concerned, then asked the all-important question as far as he was concerned: “Will we be able to stop it from happening again?” He went on to say something about how wonderfully transparent Treasury Secretary Tim Geithner has promised to be and how that would help.

I held my laptop out of the way as I threw up on my shoes.

Bethany said she doesn’t have a lot of faith in regulations as far as having the ability to stop future problems, and she points out that Sarbanes-Oxley was supposed to stop the problems in 2003, but that today’s problems had nothing to do with Sarbanes, calling Sarbanes, “completely irrelevant”. She said that regulations are akin to the Maginot Line, which in case you don’t remember your WWII history, did a fine job keeping Germany from invading France.

Then Bethany said that she thought the central problem was “incentives”. I started to pass out… she said that as long as incentives are provided for short-term performance, people will do whatever it takes to achieve that short-term performance and that there’s no “claw-back,” even when that performance is shown just a year or two later to be illusory.

She thinks that’s the biggest problem. Those damn short-term incentives.

Bethany then said that Americans wouldn’t have stood for the government coming out during the boom and saying okay it’s overheated, we’re going to cool things down a bit. So, she thinks “there’s a little hypocrisy there on the part of Main Street, as well.”

I slapped myself across the face as hard as I could.

When I came back, she was explaining that if banks wanted to find out the price of their toxic assets, since nobody knows, they could sell them right now to private investors, but then the losses would be real. And she said the real question is: “Who should bear the brunt of this risk, should it be taxpayers, should it be equity holders, should it be bond holders?

My stomach started to ache… I don’t think I can go on much longer…

Then the two of them went into a discussion about the advantages of nationalizing banks. Brancaccio was saying that the critics of nationalization, which coincidently are the CEOs of the banks themselves, argue that the if the government owned the banks they’d be under political pressure not to do things like put people out of their homes when they didn’t pay their mortgage. Brancaccio asked: “So, is that such a bad thing?”

And she replied that it was a tricky question.

I inadvertently pulled out a good size clump of my own hair.

When Bethany was asked about the banks and the idea of selling the toxic assets to “the bad bank,” she had this to say:

“It doesn’t change the need to determine the actual price of the toxic assets, because the banks will have to sell them to the bad bank. If the government buys the toxic assets at a price where the taxpayers would actually make money on them in the long run, then you’re going to cause a severe hole in the balance sheets of financial institutions… that’s going to mean that the banks will need more capital to fill that gaping hole. If the government buys the toxic assets at a price that keeps the financial institutions whole, keeps the balance sheets intact… then taxpayers are going to have to bear the losses on the toxic assets.”

Be careful… if you read that last paragraph again, your eyes could start to bleed, and you’d land yourself in the hospital for a week. Just say no… no good cam come of it.

Bethany went on to talk about how so many people are guilty in creating this crisis that no one is going to go to jail, as in Jeff Skilling and Andy Fastow of ENRON fame. She thinks the Wall Street executives were wrong, the borrowers were wrong… the sub-prime lenders were wrong. And that it’s hard to pull one person out of that crowd and punish them, because it was tricky question as to whether they did something unethical, as opposed to illegal.

Many experts say that the banks will likely need $2-$4 trillion more from the taxpayers, before this is over. And to top it all off, Bethany said she thought the idea of loan modifications was yet another… tricky question.

At that, I dropped my laptop on the tile floor and went for a walk.

Just don’t, okay? I don’t want to talk about it.

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Sep
28

BAM! | Lawsuits Challenging Fraudclosures Up Nationwide

Lawsuits Challenging Foreclosures Up Nationwide “Foreclosure litigation is on the rise as borrowers are increasingly challenging foreclosures because mortgagees continue to struggle proving mortgage ownership,” said Pat McManemin, a trial attorney with Washington, D.C.-based Patton Boggs, a law firm that deals with public policy and regulatory litigation. “Repurchase and secondary market litigation is also increasing … Read more
Sep
22

Latest 50 State Attorney General Settlement w/ Banks is Worth Less than 2 Months Rent to Harmed Homeowners

The remainder, about $4bn-$4.4bn in cash, could be designated for the states, which then would divide the proceeds to fund a variety of programmes, including assistance to borrowers. About half that amount could be used to pay up to $2,000 to an estimated 1.1m aggrieved borrowers who allege they were harmed by improper practices. ~ … Read more
Sep
18

The FTC File Suit To Crack Down on Abuses by Internet Payday Lenders

I recently presented a paper at the University of San Francisco School of Law, after which Professor Jesse Markham sent me a link about the FTC’s power to regulate payday loans.  I have been a bit fixated on what the CFPB what might be able to do to regulate these products, particularly the entirely unregulated wolrd of internet payday loans (see my brief musings on that topic in the Harvard Business Law Journal), but I had no idea this had also caught the attention of the FTC.

A recent post on the FTC’s web page describes a District Court case brought by the FTC against Payday Financial, LLC, doing business as Lakota Cash and Big Sky Cash, who allegedly send documents to their borrowers’ employers that mimic a garnishment by the Federal government,

 same forms, same exact look.  Federal agencies can garnish without a court order, so the idea is to look like one of those.  The FTC alleges that these lenders illegally revealed consumers’ unproven debts to their employers and deprived consumers of their right to dispute the debts or make payment arrangements.  The complaint further alleges that lenders:
•  misrepresented to employers that the defendants are legally authorized to garnish an employee’s wages, without first obtaining a court order;
• falsely represented to employers that the defendants have notified consumers about the pending garnishment and have given them an opportunity to dispute the debt; 
• unfairly disclosed the existence and the amounts of consumers’ supposed debts to employers and co-workers without the consumers’ knowledge or consent;
• violated the FTC’s Credit Practices Rule by requiring consumers taking out payday loans to consent to have wages taken directly out of their paychecks in the event of a default; and
• violated the Electronic Funds Transfer Act and Regulation E by requiring authorization for electronic payments from their bank account as a condition of obtaining payday loans.
 The FTC files a complaint when it has “reason to believe” that the law has been or is being violated, and it when it appears to the FTC that a proceeding is in the public interest. Consumers who would like to get the FTC’s attention can file a complaint with the FTC at the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).  The FTC’s website provides free information on a variety of consumer topics.   Lately, the FTC has been showing a lot of interest in payday loans, in addition to its primary predatory lending focus, predatory mortgages. 
Sep
15

Irresponsible Borrowers Documentary Trailer 2 – We Need Your Support

Here’s the second version of the trailer for “Irresponsible Borrowers,” the documentary that will show the country and the world the truth about the foreclosure crisis… that it is not the fault of borrowers, but rather it was and is being caused by the bankers of Wall Street who have placed the blame on those that have no voice… until now.

After writing over 500 in-depth articles on the political, social, economic and legal aspects of the crisis, Mandelman Matters is producing this documentary to lay out for the nation the facts of the crisis, interviewing homeowners, attorneys, and other experts to give a voice to those whose lives have unnecessarily been torn apart as our government looked the other way.

Watch it.  Link to it.  Post it.  Support it.  Everyone who contributes will be listed in the credits and we plan to take the film all the way to the Academy Awards.  If “Inside Job” can do it… so can we.  But only with your help… your stories and your financial support.

The final documentary will be delivered on DVD to every member of congress… to the White House… to every major media outlet… to the governors’ desks in all 50 states… help us make your voice heard.  I’ve traveled to several states to speak with members of their legislatures and found that many still don’t understand the crisis… many barely acknowledge its existence.  Me telling them about it… well, it’s not going to cut it… and we’re not going to win this war in the courts alone.

And I promise you this… the foreclosure crisis will only worsen… it will not end by itself… foreclosures only breed foreclosures… and we will see no economic recovery until it is addressed. And it will not be addressed until it’s understood.

Well… that’s all I have to say for the moment… click play and I’ll let the video speak for itself. Then please consider making a contribution below…

Sep
14

We’re Simply Not Going to Win this Battle in Courts Alone…

We’re Simply Not Going to Win this Battle in Courts Alone…

As I sit here today, I’ve written and posted over 500 articles covering the financial and foreclosure crises… posted a few podcasts as well… and traveled around the country meeting with many of those involved in the fight against the servicers on behalf of homeowners.  And I’ve come to the conclusion that we will not win this very important fight in the courts alone… at least not in my lifetime.

I realize that we continue to see encouraging decisions come from various courts around the country… a helpful bankruptcy decision shows up in Arizona or California… courts in Massachusetts, New Jersey or New York deliver another positive outcome… the courts in Nevada or Vermont have made other positive changes related to foreclosures… and the State of Hawaii passes a new law that offers the promise of mandatory mediation… all positive news in various pockets of the country… but no substantive improvements for homeowners in broader terms.

But it’s not enough.  The truth is that I simply do not see the reality of this crisis changing as a result of continuing the status quo.  After all, the definition of insanity is doing the same thing and expecting a different result, right?

So, here are the facts…

  1. At least half of the people in this country still don’t know anything about the foreclosure crisis… many don’t even recognize it as a “crisis” at all.  To them it’s just irresponsible borrowers who bought homes they can’t afford.
  2. This is true about American homeowners and about many in state legislatures and in the media.
  3. Writing articles is one thing… seeing the crisis as told through the real people who face it every day is another thing altogether.  We need to tell the story in documentary style film.
  4. “Inside Job” told the story of what the bankers have done, but it’s only a part of the story… a part of the tragedy.
  5. The banksters get away with what they do every day because not enough people know about their behavior.  We need to show the country what’s really going on.
  6. I want to bring to the big screen the real story of the foreclosure crisis… the story no one has told before… but I need your help… your willingness to be filmed… and your financial support.

During my professional career I’ve produced and won numerous awards for documentary style video productions made on behalf of large corporations.  I’ve also told the story in written form at least as much, if not more, than anyone in the country.

Help me bring the story to the big screen by donating to the production.  It cannot be done without your help.  It’s that simple.

We plan to release the final film by the end of this calendar year.  This is an election year.  We can’t afford to wait.  Please help me change how this country views the tragedy that is the foreclosure crisis.  And by the way… Mandelman Matters is a California Nonprofit Corporation.

Mandelman out.

Aug
25

Mandelman on Arizona’s Channel 12 NBC News… And other news.

So, I just got back from a couple weeks in Arizona filming the foreclosure crisis documentary I’ve been working on over the last year… it’s titled “Irresponsible Borrowers,” and I’ll be releasing the first trailer in the next two weeks. Meanwhile, while I was in Phoenix, I got a call from NBC Channel 12 reporter Melissa Blasius who said she had heard I was in town and wanted to feature what I was doing in one of her stories on the housing crisis.

Melissa deserves a lot of credit for being one of the only mainstream media reporters who has consistently covered the foreclosure crisis and she’s also helped a number of people by bringing media attention to their plight dealing with their servicers. If you’re in Arizona and struggling with your servicer to get your loan modified, I would recommend telling your story to Melissa. It certainly couldn’t hurt and it very well might help.

While in Arizona I met with and filmed numerous homeowners and other experts on the crisis for inclusion in the documentary and it was both very moving and very educational. I also had the opportunity to meet with Neil Garfield of the blog, Living Lies, which I have to say, I enjoyed very much. We spent hours talking and he was very gracious in taking me out to a lovely dinner so I have a much better grasp on who Neil is and what he’s been doing around the country.

Also, BIG NEWS is coming soon… Abigail Field and I have officially teamed up with Marc Dann, Ohio’s former Attorney General and have formed a PAC. We’ve decided that reporting on the crisis is not enough and we’re going to get out in front with real solutions.

So… I’m back at my desk and there’ll be lots more coming… meanwhile… here’s me… Mandelman on Channel 12 NBC News in Phoenix.

Aug
25

Refinancing Malarkey

It looks like the Obama Administration is about to endorse some version of the Hubbard-Mayer plan of letting everyone (or at least everyone with an agency mortgage) refinance at today's low rates, regardless of whether they are delinquent or underwater.  (Gotta love how the administration picks up a 3-year old Republican plan with obvious deficiencies and acts like it's fresh meat.) I fail to see how such a plan will accomplish much.  

The ability to refinance depends heavily on whether a homeowner is current and has equity. Consider, then, the impact on the 4 categories of homeowners under this rubric:   

(1) Borrowers who are current and have equity.  Refinancing is always possibly for anyone who is current and has sufficient equity in their home. That's a lot of existing borrowers for whom a new refi program does nothing. 

(2) Borrowers who are current but lack equity.  There is also a large pool of borrowers who are current, but have insufficient equity or negative equity for a refinancing. A new refi program probably doesn't do much for them either. It doesn't take very much equity to do a FHA refinancing, but putting that aside, the Home Affordable Refinancing Program (HARP) allows for negative equity refinancings. There haven't been a lot of them, however, and I think that bodes poorly for any new program. The closing costs for refinancings can be a major obstacle for households without a lot of extra cash sitting around and with uncertainty as to whether they'll stay in an underwater house long enough for the lower rates to make the refinancing worthwhile.  

(3) Borrowers who are delinquent, but have equity.  These borrowers can already get out of the house via a sale.  In any case, most of these borrowers are seriously delinquent, not just 1 or 2 months delinquent.  Lower monthly mortgage payments aren't going to do a thing to change their delinquency or the pending foreclosure. 

(4) Borrowers who are delinquent and lack equity.  As with delinquent borrowers who have equity, most of these borrowers are seriously delinquent, not just 1 or 2 months delinquent.  Lower monthly mortgage payments aren't going to do a thing to change their delinquency or the pending foreclosure. 

So in the end, it's really not clear who this would help.  It ignores that there's already been lots of refinancing at low rates since 2008--it's not clear how much more refinancing some new initiative will possibly produce, much less how many foreclosures it will prevent.  The refi idea seems to do nothing on either negative equity or unemployment. Any program that fails to address those just isn't serious.  I get that the administration has a MacGyver problem given that it can't move anything in Congress, but that necessitates much more creativity, financially and legally, not rewarming old ideas.  My prediction:  this ends up accomplishing about as much as FHAShortRefi or Hope4Homeowners.  

We need a TARP for Main Street.  This isn't it.  

Aug
15

Gestapo Tactics | Wells Fargo Sends Pre-Foreclosure Notices to Current Homeowners

Unfortunately the reporters are naive to the fact that the banks will work with the borrowers… These people are so screwed. We have seen this before, once you get into the fraudclosure process, you can not get out… ~ 4closureFraud.org Tweet
Aug
12

FBI 2010 Mortgage Fraud Report Year in Review

What a shame… There are a few mentions of  “robo-signing” and “servicing defects” but no mention on the massive pernicious fraud perpetrated by Wall Street and the Institutions that took down the entire global economy… No representation for the “borrowers” in this report. In fact, the “borrowers” are demonized… How they perceive the “borrower” from … Read more