Feb
24
NPR | Banklords – With Banks As Landlords, Some Tenants Neglected
With Banks As Landlords, Some Tenants Neglected LISTEN NOW Jimenez doesn’t know that Deutsche Bank actually isn’t his landlord. It’s the trustee representing a pool of investor-owners. JPMorgan Chase, the loan servicer, handles maintenance and tenants. Jimenez has never spoken with bank employees. He and JPMorgan Chase disagree about why repairs haven’t happened, and why … Read more
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Jan
02
Manufactured Foreclosures | Escrow Fees – Feds Probe Million$ in ‘Double-Billing’ by Banks
Sloppy seconds: Feds probe million$ in ‘double-billing’ by banks Federal investigators are looking into allegations that banks have wrongly pocketed tens of millions of dollars from troubled homeowners by double-billing for mortgage escrow fees, The Post has learned. Exactly how much in phony profits the banks may have pocketed from this alleged practice is not … Read more
Related posts:
- Matt Weidner | BOMBSHELL! – Banks Not Authorized To Collect Fees in Cases!
- Foreclosure Fraud – BAC / Countrywide Must Pay $108 Million for Illegally Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers
- Hurry Up! Monthly Foreclosures Need to Double from April’s Record Pace to Clear the Distressed Pipeline – Lets Get Those Deadbeats OUT!
Dec
12
FL Homeowners Hit a Bump in Suit Over ‘Reprehensible’ Fraudclosure Court Filing Fees but Case Can Go Forward
Homeowners Hit a Bump in Suit Over Court Access FORT MYERS, Fla. (CN) – Florida officials do not have to create a special reimbursement account on the chance that they lose a lawsuit over new filing fees homeowners must pay to challenge foreclosure proceedings, a federal judge ruled. A new Florida law requires that parties … Read more
Related posts:
- Florida Court System Facing $72.3 Million Deficit Due to Shortfall in Foreclosure Filing Fees
- Fraudclosure | Hillsborough County Chief Judge Menendez Responds to Accusations of Restricted Court Access
- Foreclosure Fraud – BAC / Countrywide Must Pay $108 Million for Illegally Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers
Nov
30
"The Wikipedia of Land Registration Systems"
Pretty amazing opinion in Culhane v Aurora Loan Services of Nebraska byJudge Young of the US District Court for the District of Massachusetts. Judge Young breaks out a fresh can of whoop-ass on MERS, which wasn't even a litigant. How are these choice lines: "MERS is the Wikipedia of Land Registration Systems." Now I like Wikipedia, but property title isn't do-it-yourself. Or this gem: "a MERS certifying officer is more akin to an Admiral in the Georgia navy or a Kentucky Colonel with benefits than he is to any genuine financial officer." Well, at least he didn't call them an "Admiral in the Great Navy of the State of Nebraska". You gotta love a landlocked navy.
That said, for all of his misgivings about MERS supplying "the thinnest possible veneer of formality and legality to the wholesale marketing of home mortgages to large institutional investors," Judge Young still says that it's kosher, if unseemly.
The issue here was whether there could be a foreclosure by a naked mortgagee--that is a mortgagee who is not the noteholder. (That's the issue before the Supreme Judicial Court of Massachusetts currently in Eaton v. Fannie Mae.) Judge Young say no: the note and mortgage need to be reunited before foreclosure; a naked mortgagee can't foreclose. In this case, however, Judge Young found that the mortgage and note were reunited before the foreclosure was brought.
I think Judge Young is right on the law, and wrong on the facts here. I don't know how this case was lawyered, but it seems to me that there are two factual problems that indicate that the mortgage and note were not in fact reunited prior to foreclosure. Here's Judge Young's explanation of how the reunification happened:
Aurora, as Deutsche's loan servicer, has an interest in the underlying debt; Aurora also physically possesses the collateral file, including the note. With the assignment of legal title to the mortgage from MERS, Aurora became the mortgagee of record as well, thusperfecting its standing to bring a foreclosure action against Culhane.
Culhane makes much of the fact that the endorsement to Deutsche on the note and attached allonge is undated. While this Court agrees as matter of law that the mortgagee must hold the note or be the servicing agent of the note holder before initiating foreclosure proceedings, here Aurora did. Regardless of the date that Deutsche became the note holder,whether it was before or after the cut-off date for loans to be transferred into the RALI Series 2006–QO5 Trust, as of April 1, 2008, Aurora was servicing Culhane's loan for Deutsche. Aurora caused legal title to the mortgage to be assigned to it over a year after becoming the servicing agent, and it did not send the notice of sale to be published until September 21, 2009.
First, Judge Young seems to assume the note is negotiable. Otherwise it doesn't matter who holds the note. If it's not negotiable, then it's just a plain old contract, and physical possession is irrelevant. Just because I hold the original loan contract between Karl and Soia doesn't mean that I have any right to enforce it if it isn't a negotiable instrument. But it doesn't look like negotiablity was raised by the parties; I would think it is in the purview of judicial notice as it is obvious from the face of the instrument, but if the issue isn't flagged for a judge, it is often missed.
Second, it isn't clear whether the trust law argument was ever put firmly before the court. If the note was transferred to the trust after the trust's closing date, that transfer is void under New York trust law. That means that the trust doesn't own the note, which means Aurora doesn't have an interest in it, which means that the note and mortgage have not been reunited prior to the foreclosure, so under Judge Young's analysis, then, the foreclosure should not be permitted. The reason the closing date matters is because if the transfer is after the closing date, it cannot happen as a matter of law. The fact that Aurora was servicing the loan for Deutsche as trustee isn't enough if Deutsche as trustee doesn't have an interest in the note. I don't know how this issue was lawyered, but this is a critical point.
So it seems to me that this is a good opinion, but that it needed to go further into the factual question of whether Deutsche as trustee had any interest in the note. That might be a function of lawyering rather than anything else. I don't think this case presents a clear victory for the mortgage industry--it just focuses the issue on the question of who can enforce the note, and I'm not sure that's where the industry really wants things to go.
Sep
14
Servicer Assignment of Mortgage to Trust but Servicer Takes Title Regardless (FHFA v BoA mort. loan)
Servicer assignment of mortgage to trust but servicer takes title regardless (FHFA v BoA mort. loan) Posted by L FHFA v Boa lawsuit includes a tranche/class of the REMIC Bank of America Funding STALT 2005-1F. The payment stream from loans in group 4 were in the tranche that is part of this lawsuit. The … Read more
Mar
23
TWO PUBLISHED ORDERS ON VERIFICATIONS!
It’s been more than a year now since the Florida Supreme Court passed a very simple rule. The Rule requires Plaintiffs to verify their complaint. All that means is they must be willing to say the allegations are TRUE AND CORRECT. That’s it folks. Nothing more. This isn’t the moonshot. And the effective date is February 11, 2010!!! Nothing mindblowing about that.
What is mind-blowing is the fact that the foreclosure mills continue to file complaints that are not even verified at all and if they are they are often not verified correctly. I think courts should be independently verifying that the complaints are verified correctly and dismissing them if they are not. Here are the synopsis of the orders, which are in Florida Law Weekly Supplement:
AURORA LOAN SERVICES, Plaintiff, v. TODD A. FLEETWOOD AND KRISTI FLEETWOOD, Defendant. Circuit Court, 19th Judicial Circuit in and for Indian River County. Case No. 31-2010-CA-073506. January 26, 2011. Cynthia L. Cox, Judge.
FINAL ORDER OF DISMISSAL
The verification must be included in the complaint itself for the Court to be certain that the affiant has read the actual allegations and to make it clear what is being verified. The purpose of the verification is to create accuracy and accountability. There is no provision in the rule for the filing of a separate verification in a separate document. Common sense dictates that without verification in the complaint itself, it would never be clear what the affiant reviewed and what allegations they verified. The rule does not permit qualifying or limiting language. The complaint needs to be verified by an employee or officer of the plaintiff, by an employee or officer of its loan servicer, or by the attorney who files the case. Designations such as”authorized agent”, “authorized signatory”, “authorized officer”, “representative of the plaintiff’s servicer”, “representative of the plaintiff” and the like are meaningless, insufficient and tell the reader nothing. The rule requires a clean, plain statement of accuracy by a person who actually verifies the truth of the claims made, and who is identified as being in a position to actually do so. This case seeks to foreclose a residential mortgage and was filed after the effective date of the rule amendment.
IT IS THEREFORE ORDERED AND ADJUDGED as follows:
1. This case is DISMISSED without prejudice. No other pleadings by the plaintiff will be permitted in this case, other than a request for rehearing if appropriate. If the plaintiff elects to file a new action to foreclose on the same property, it must be filed under a new case number and a new filing fee will be required.
2. The plaintiff may move for reconsideration within ten days, on the sole ground that the subject property is not residential property. A copy of the motion and any supporting memorandum must be provided to the undersigned. The Court may rule on the motion without a hearing. No hearing will be set unless determined by the Court to be necessary.
3. It is confiscatory of the Court’s time to have to address this matter. Repeat violations by the same firm, or by the same attorney, may result in imposition of personal sanctions, and issuance of an order directed to the attorney or firm to show cause why that attorney or firm should not be prohibited from filing further foreclosure cases in this Court.
Online Reference: FLWSUPP 1804NATI
Mortgages — Foreclosure — Complaint — Verification — Unverified foreclosure complaint filed after February 11, 2010, effective date of rule 1.110(b) is dismissed with leave to amend
NATIONSTAR MORTGAGE LLC, PLAINTIFF, v. CRAIG K. LUNT AND DOROTHEA C. LUNT, Defendant. Circuit Court, 6th Judicial Circuit in and for Pinellas County, Civil Division. Case No. 10-6330-CI-20. February 7, 2011. Honorable George Jirotka, Judge. Counsel: Karen Thompson, for Plaintiff. Matthew D. Weidner, for Defendant.
ORDER
THIS CAUSE came to be considered upon the Defendant’s Motion to Dismiss, this court having reviewed the Defendant’s motion and accepted the argument of counsel for Defendant who appeared in person and counsel for Plaintiff who appeared via telephone, it is hereby:
ORDERED AND ADJUDGED as follows:
1. The Defendant’s Motion To Dismiss/Motion For More Definite Statement asserted that the Florida Supreme Court, pursuant to Rule 1.110(b), mandated that residential foreclosure complaints shall be verified and that the effective date of the requirement was February 11, 2010.
2. Plaintiff argued that the change to Florida Rule of Civil Procedure was not effective until June 2, 2010 and that because the instant complaint was filed prior to June 2, 2010, the instant complaint was not required to be verified.
3. This court finds that the effective date of Florida Rule of Civil Procedure Rule 1.110(b) is February 11, 2010 and that all residential complaints defined by the Rule must be verified beginning February 11, 2010.
4. Because the instant complaint is not verified in any manner, by any party, the Defendant’s Motion to Dismiss/Motion For More Definite Statement is GRANTED and the case is dismissed except that the Plaintiff shall have thirty (30) days to amend their complaint.
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Nov
03
Federal Judge Finds The Modification Morass a Basis to Halt Foreclosure
Calling the conduct of a loan servicer, “immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers” a federal judge refused to allow the lender to proceed with foreclosure…surely a case to watch.
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Sep
18
Ohio Attorney General/Texas Attorney General Sue Mortgage Servicers
Some states have powerful, proactive Attorney Generals who aren’t afraid to stand up for consumers and common people. The links below will take to you sites that detail actions the Attorney Generals from Ohio and Texas are taking. These lawsuits could and should be filed by Attorneys General in every state. Our Attorney General is nibbling around the edges, one can only hope that the investigations of the mills will ultimately lead to real charges…..
http://www.oag.state.tx.us/oagnews/release.php?id=3458
http://www.myfloridalegal.com/newsrel.nsf/newsreleases/2BAC1AF2A61BBA398525777B0051BB30
http://myfloridalegal.com/mortgagefraud
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Jul
12
15 Texas Homeowners Sue Bank of America for Abusive Practices – Don’t Mess With Texas
I’ll tell you what… there are times in life when you’ve just got to love Texas. People in Texas just don’t like getting misled, lied to, pushed around, and generally abused, so it’s not a great place for banks to do what banks do. But apparently, Bank of America is just as abusive to the homeowners in Texas as they are to the homeowners in the other 49 states, and they’re being treated to a little Texas hospitality as a result.
The Texas Housing Justice League and 15 Texas homeowners have filed suit against Bank of America N.A. and its subsidiary, BAC Home Loans Servicing, alleging abusive servicing practices. I’m not saying that homeowners in other states aren’t just as upset about being abused by the banks, but it’s the homeowners in Texas that aren’t just complaining, they’ve banded together to file the suit, and I’m guessing that not only is this going to be interesting, but it’s probably only the beginning of these types of actions.
I’ve said it before, I’ve even told bankers before… the banks may have taken an early lead against homeowners in this crisis, and they may think they’re winning, but in this country, if you push people far enough, they’re going to fight back. And in the long run, Americans have a long history of coming out on top, as in… would you like a torch or a pitchfork?
The lawsuit, filed in US District Court, Southern District of Texas, Victoria Division, describes:
“… a systematic home loan servicing scheme that includes hours of telephone runaround, misleading and inconsistent information, lost correspondence, verbal abuse, and extensive delay, all of which have documented costs not only in terms of money, but in health. The facts in this case reveal the harsh reality that underlies the loan servicer’s press statements about loan modifications and forbearance agreements following collapse of the U.S. housing market.”
Yeah, that sounds about right. I’d recognize Bank of America anywhere.
I’m no lawyer, but is Bank of America going to dispute these allegations, or just stipulate to them and go from there? Because I would think even the judge would have to suppress the urge to snicker if the Bank of America lawyer started out by saying the bank didn’t do what the homeowners are alleging.
As in: “It’s not true, your honor.” HAHAHAHAHAHAHAHA… “Order in the court, this court will come to order.” Isn’t that about how that would go?
Here are some of the highlights from the complaint:
“Many of the Plaintiffs were told that they were eligible for loan modifications or other workout assistance, only to spend months being shuffled through Defendant BAC’s “Home Retention,” “HOPE”, “Foreclosure,” “Bankruptcy” and “Collections” departments with no resolution.”
Okay, so that’s standard operating procedure at Bank of America, right? I mean, they probably have a manual that describes that runaround, wouldn’t you think?
“Others simply wanted to know that they had been reviewed accurately for eligibility in any available programs, that a denial of assistance was final, and that their arrearage had been correctly calculated. Instead of providing Plaintiffs with basic information about the servicing of their loans and providing timely screenings for workout assistance, however, Defendant BAC misrepresented material information to the Plaintiffs about their loans, and forced them into a scheme of operation so dysfunctional that the constant barrage of misinformation, misdirection, and deliberate inactivity amounted to abuse and harassment.”
“Plaintiffs describe feeling “harassed,” “like a yo-yo,” and “blocked at every turn.”
Are you loving this as much as I am? A yo-yo, huh? I like it… I might have used a different metaphor, but I suppose in court you can’t just say what you’d want to say.
“When Plaintiffs called Defendant BAC the information they received over the telephone often conflicted with written statements or prior telephone conversations. In many of the telephone calls Defendant BAC spun Plaintiffs in a labyrinth of transfers from one department to another and back again. Plaintiffs spent hundreds of hours on the telephone, explaining their stories to a different person each time they called; often they were transferred between departments, knowing they would never speak to the same person again, and wondering if the information being provided would be contradicted by the next person they spoke with. Often, it was.”
Oh my God, I wish I made money at this, because I’d love to be able to go to Texas and watch this case proceed in person. It’s going to be one for the books, that’s for sure. I’m thinking there would have to be some stand up and cheer moments. And I wonder how much trouble I’d get in for throwing rotten tomatoes at Bank of America’s lawyer in the parking lot. I know, so immature, but guess what? I know you are, but what am I?
What’s interesting about this case is that they’re using RESPA, the Real Estate Settlement and Procedures Act, as the basis for the complaint. As in…
RESPA Count: Part A
Plaintiffs each sent Defendant BAC written applications for a loan modification, including a hardship affidavit, and written submissions of financial information that were “qualified written requests” within the meaning of RESPA, in that Plaintiffs sought information about their eligibility for a loan modification or other methods to minimize their losses.
The complaint also describes how special it is to call Bank of America on the phone.
“Requests to speak with supervisors or managers were met with resistance. During the course of telephone calls to Defendant BAC, Plaintiffs often found themselves disconnected after waiting on hold to speak to a supervisor, or were told that no supervisors were available. Some Plaintiffs sought out face-to-face interviews by contacting Bank of America branch offices, but simply found themselves on speakerphones with the same unaccountable departments that had previously been providing them with misinformation by telephone.”
Well, wait a minute… maybe they should have tried communicating with Bank of America in writing, instead of just by phone. Could be… right? Maybe they just don’t have good phone skills.
“Written communications did not fare better. Plaintiffs’ written submissions were often lost or misplaced. Plaintiffs were asked to sign the same documents three, four or even five times, and were asked to provide the same information repeatedly. Many of the Plaintiffs were assigned multiple “negotiators” who would not return telephone calls, or provide timely information to Plaintiffs.”
Oh well, I guess not. So, maybe Bank of America is hoping that the judge will think that it’s all just an isolated incident, and that it’s not something that happens to everyone.
“Plaintiffs’ experiences are not isolated incidents, but instead reveal a pattern and practice by Defendant BAC of deliberately misinforming borrowers in default or at risk of default, and refusing to respond to Plaintiffs’ legitimate, written and oral requests for information.”
Whoops… I guess that’s not going to be an easy case to make either. So, what about the damages?
Damages
Plaintiffs suffered damages including, but not limited to loss of credit, foreclosure, emotional harm, embarrassment and humiliation. Plaintiffs’ damages were proximately caused by Defendant BAC’s noncompliance with the requirements of the mortgage servicer provisions of RESPA.
Defendant BAC has engaged in a pattern and practice of non-compliance with the requirements of the mortgage servicer provisions of RESPA, and Plaintiffs seek $1,000 in statutory damages per violation.
Plaintiffs seek attorney fees under 12 U.S.C. § 2605(f)(3).
So, anyway… there’s of course a lot more involved and I’m not going to include it all in this article, or it will be longer than my usual articles, and that would make it REALLY LONG, I realize. Here are the other Counts listed in the complaint, but I’ll provide a link at the bottom to the actual complaint, so the attorneys reading this can dive right in to the details. But here’s the overview:
Count Two: Breach of Contract – Loan Modification Agreement
Count Three: Breach of Contract – Forbearance Agreement
Count Four: Breach of Contract-Promissory Note and Deed of Trust
Count Five: Violation of the Texas Property Code
Count Six: Breach of Oral Contract-HAMP Trial Modification
Count Seven: Unreasonable Collection Efforts
Count Eight: Intentional Misrepresentation
Count Nine: Texas Debt Collection Act
Here’s how the complaint wraps up, with that wonderful Request for Relief section that always asks for the order, as they say in the sales biz. And this one’s a good read.
REQUEST FOR RELIEF
A home is uniquely valuable. It is the largest investment many low income Texans will make in their lifetimes, and provides one of the few opportunities for low income Texans to build wealth. But a home is also where many of the Plaintiffs and other low income Texans raise their children and accumulate their memories. Misrepresentations that jeopardize a borrower’s home are unconscionable and the damage is irreparable. Defendant BAC’s misrepresentations to borrowers are systemic in nature and widespread in practice. Plaintiffs therefore ask that this court:
(1) Enter a temporary and permanent injunction that Defendant BAC, including its agents employees and contractors, refrain from practices, policies, and plans that result in or increase Defendants’ misrepresentations, errors, falsehoods, barriers to timely, accurate communication with Plaintiffs which are identified by the Court through the course of this litigation;
(2) Award each individual Plaintiff their actual, statutory, and exemplary damages;
(3) Award Plaintiffs their costs and attorney fees; and
(4) Grant such other relief as Court finds necessary and just.
Here’s a link to the actual complaint: 15 Texas Homeowners v. Bank of America.
Although for lawyers, I’m sure I’m stating the obvious, but for others… RESPA is a federal statute so I would think that this sort of thing could be happening all over the place… like in all 50 states. And it’s also worth mentioning that what Bank of America is accused of here, is every bit as true for Chase, Wells, One West, US Bank, Aurora, Saxon… are you feeling me here? Come on, multiply the number of banks and servicers times fifty states, and before you know it we could be having a national block party… I’ll bring the beer.
So, let’s all keep an eye on this, okay? And not throw in the towel just yet. There’s a lot going on around this country related to the foreclosure crisis. We’re in a river, not a lake… the water we’re standing in today, won’t be the same water we’ll stand in tomorrow.
We have to win this eventually, we just have to. We cannot just let this country deteriorate into a depressed land of inequality, lacking in opportunity, rife with corruption, besieged by poverty and dominated by a small oligarchy of immensely wealthy bankers and corporate executives who drive our elected officials like slaves. Think that’s too dramatic? Do you? Which part, specifically?
We cannot lose this. I have a daughter.
Jun
09
AFTER THE SALE: PART I
Submitted by Charles Koppa. 6/9/2010
Editor’s Note: We are starting to look at events AFTER the sale has taken place and we are discovering a number of things:
- CREDIT BID: Only the Creditor can submit a credit bid. All others must pay actual money. If a non-creditor submitted a credit bid (essentially bidding the “amount due” which as we have seen from the FTC action against BOA is incorrectly stated) then the procedure has been violated, the sale has not legally occurred. At least that is my interpretation.
- Also the submission of a credit bid locks in the position of the parties. So if you are suing for wrongful or fraudulent foreclosure, they no longer have the option of fabricating documents as you raise one objection after another.
- The obligation to return money rightfully owed to the homeowner continues but it is ignored. Thus even if the property is not sold to a bonafied purchaser for value without notice of defects, the net accounting due is the same. So the receipt of third party insurance, credit default swaps, or other credit enhancement payments is still required to be allocated to this loan. Hence there is a damage claim against the participants in the foreclosure and sale.
- More later. For now read Charles’ comments below
REO’s and OREO’s have NO MERS Identification Numbers.
1. Loan Servicer (as a MERS member) initiates the NOD and NOTS.
2. When the auctioneer pronounces “Back To Beneficiary”, the securitized bond trust receives the MinBid at averages of 46% below the NOTS amount posted the day before. Bondholder “paper certificate losses” are unconscionably assigned against the Real Estate asset. “The Paper Trust” gains an untitled transfer of the Real Estate Asset which it NEVER Wanted!
3. The Auction extinguishes the Toxic Security on Wall Street. Counterparties collect on their bets. Investor lose their investments” and the monthly cash interest streams are terminated.
4. Simultaneously, the Servicer (and MERS) are extinguished from all public records. Servicer collects on MGIC or other mortgage insurance to cover ALL their contrived losses and costs.
5. When the re-sale is completed, “The Bookkeeping Trust” ALSO disappears from County Property RECORDS!!!
6. Until re-sold, the real property travels at ZERO book value into an off balance sheet private entity (mostly controlled by the BHC) which was the SIV “depositor” (as an off balance entity) in setting up the REMIC and/or the Investment Trust in the first place.
Filed under: CASES, CDO, CORRUPTION, Eviction, expert witness, Fannie MAe, foreclosure, foreclosure mill, Forensic Analysis Workshop, GTC | Honor, HERS, investment banking, Investor, marketing, MODIFICATION, Mortgage, Motion Practice and Discovery, securities fraud, Securitization Survey, Servicer, STATUTES, trustee, workshop Tagged: Auction, bookkeeping trust, credit bid, fabricating documents, foreclosure, foreclosure sale, fraudulent foreclosure, Identification Numbers, Lehman Brothers, MERS, MIN, NOD, NOTS, OREO, property records, REO, sale, servicer
Apr
05
Maiden Lane Disclosures — DISCOVERY CLUES
Analyzed and Presented by Charles Koppa, MORTGAGE AUTOPSIES
There are 131 pages within links at the bottom for Maiden Lane Disclosures (a year later). They give ONLY NAMES of nearly 800 underlying Securities Trusts with NO NAMES/LINKS to the original Grantors in the Deed of Trust for underlying “toxic mortgages” which attach real estate collateral that allowed securitization for each CUSIP. That information remains in the hands of third party loan servicers and third party bond servicers.
BEST THEORY: The Borrowers Loan Default triggers but one element within the Creditor/Depositor’s Security Trust Account. NOD and NOTS are filed in the loan servicer’s behalf, concealing the final Beneficial Trust. With help of MERS, they Assign these “rights” to a new “holder” without borrower approval or knowledge, as part of a process of Substitution of Trustee (to their “friends”?). The three collude against the Homeowner and mutually determine which “sub-trust” should receive the untitled transfer via an unlawful Trustees Deed Upon Sale (TDOS). Unlawful because the Back to Beneficiary process in a Trustees Auction does not meet the requirements of a Bona Fide Purchaser (BFP), especially when IT predatorily devalues the property by an unconscionable 20-25% below realty comps on the DATE OF AUCTION! Worse, such “sub-trust” cannot deliver a “real person” to a Jury Trial for recovery, because IT is simply a bookkeeping task managed by a DIFFERENT Trustee on in the chain of heritage of a top Wall Street Bank Holding Company!
Every property needs a scorecard to track dozens of middlemen between the loan debtor and the true creditor. We are witnessing massive Foreclosure TYRANNY and a generational transfer of wealth without an audit trail…
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, expert witness, foreclosure, GTC | Honor, HERS, Investor, Mortgage, securities fraud, Servicer Tagged: Assign, audit trail, Back to Beneficiary process, Bona Fide Purchaser (BFP, Borrowers Loan Default, Creditor/Depositor's Security Trust Account, DATE OF AUCTION, discovery, final Beneficial Trust, Grantors in the Deed of Trust, HERS, HOLDER, Maiden Lane Disclosures, MERS, NOD, NOTS, Securities Trusts, sub-trust, Substitution of Trustee, TDOS, third party bond servicer, third party loan servicer, transfer of wealth, triggers, Trustees Auction, Trustees Deed Upon Sale (TDOS), unlawful Trustees, unlawful Trustees Deed Upon Sale (TDOS), untitled transfer
Mar
22
FLA BK COURT STOPS US BANK N.A. NO STANDING FEB 2010
The Affidavit executed by Movant’s loan servicer makes no mention of the location of the original Note or who has possession of it. Movant proffered no business records or testimony tracing ownership of the Note and establishing Movant is the present holder of the Note.
The Affidavit executed by Movant’s loan servicer makes no mention of the location of the original Note or who has possession of it. Movant proffered no business records or testimony tracing ownership of the Note and establishing Movant is the present holder of
the Note.The veracity of the Allonge and Assignment is questionable. The dates contained in the Allonge are chronologically impossible. The Allonge is dated August 1, 2006, but references a trust that came into existence on October 31, 2006. The signature of Jennifer Henninger is undated and not notarized. The Allonge was not referenced in or filed with Movant’s Motion in October 2009, but was presented three months later as an attachment to its post-hearing brief.The Assignment was executed and recorded post-petition approximately two weeks prior to Movant’s filing of the Motion for Relief. It was prepared by Jennifer Henninger, who executed the Allonge, and was recorded by the law firm that is representing Movant in this proceeding. Jack Jacob’s execution of the Assignment was notarized by Jennifer Henninger and witnessed by Louis Zaffino, the affiant of Movant’s Affidavit. It appears the Allonge and the Assignment were created post-petition for the purpose of the relief from stay proceeding. Movant did not establish Jennifer Henninger and Jack Jacob had authority to execute the Allonge and Assignment.
FLA BK COURT STOPS US BANK N.A. NO STANDING FEB 2010
UNITED STATES BANKRUPTCY COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
In re:
JORGE CANELLAS, Case No. 6:09-bk-12240-ABB
Chapter 7
Debtor.
_____________________________/
ORDER
This matter came before the Court on the Motion for Relief from Stay (Doc. No.
22) (“Motion”) filed by U.S. Bank National Association, as Trustee of the Lehman
Brothers Small Balance Commercial Mortgage Pass-Through Certificates, 2006-3
(“Movant”), and the Objection thereto (Doc. No. 25) filed by the Chapter 7 Trustee Carla P. Musselman (“Trustee”). Hearings were held on November 23, 2009, December 7, 2009, December 21, 2009, and January 4, 2010 at which the Trustee, her counsel, counsel for Movant, and counsel for the Debtor Jorge Canellas (“Debtor”) appeared.
The parties, pursuant to the Court’s directive, filed post-hearing briefs (Doc. Nos. 43, 45, 46, and 47). The Movant’s Motion is due to be denied for the reasons set forth herein. The Court makes the following findings of fact and conclusions of law after
reviewing the pleadings and evidence, hearing live proffers and argument, and being
otherwise fully advised in the premises.
Hoffner Avenue Property
The Debtor filed this case on August 21, 2009 (“Petition Date”). He owns commercial property located at 830 Hoffner Avenue, Orlando, Florida 32809
(“Property”) and more particularly described as:
Lot 7, SUNDAY BLOCK, according to the plat thereof, recorded in Plat Book O, Page 27, of the Public Records of Orange County, Florida.
He values the Property at $250,000.00 and listed “Aurora” in Schedule D as holding a
security interest in the Property valued at $0.00 (Doc. No. 1). The security interest is not designated as contingent, unliquidated, or disputed. He did not claim the Property as exempt in Schedule C. The Property constitutes non-exempt property of the estate
pursuant to 11 U.S.C. Section 541(a).
The Debtor filed an Affidavit (Doc. No. 47) asserting the Property is important to his appraisal business, Appraisers of America, because he operates his business at the Property. The Debtor’s statements regarding his business location and intentions as to
the Property are inconsistent. He set forth in this Statement of Financial Affairs (Doc. No. 1) he operates the business at his home at 2033 Bearing Lane, Kissimmee, Florida 34741. He set forth in his Statement of Intention (Doc. No. 1) he intends to surrender the Property. His Schedule J does not include a monthly expense for the Property.
The Trustee filed a memorandum on October 21, 2009 stating the initial meeting of creditors pursuant to 11 U.S.C. Section 541 was held and concluded on October 14, 2009, but she has not designated this case as an asset or no asset case. No bar date has
been established for the filing of proofs of claim. No proofs of claim have been filed.
The Debtor received a discharge on December 22, 2009 (Doc. No. 39).
Movant filed the Motion for Relief from Stay on October 19, 2009 seeking relief from the automatic stay of 11 U.S.C. Section 362(a) pursuant to 11 U.S.C. Sections
362(d)(1) and (d)(2) to continue a foreclosure proceeding against the Property which was
pending on the Petition Date. Movant asserts in its Motion:
(i) It is the “owner and holder” of a promissory note and first-priority mortgage on the Property pursuant to an Assignment of Mortgage and Loan Documents.
(ii) The Debtor has failed to pay the monthly mortgage payment of $2,282.90 since May 1, 2009 and the loan balance is approximately $300,662.84, which contains interest charges of $18,232.08, late charges of $570.70, and forced placed insurance
costs of $11,314.24.
(iii) The Property has a value of $178,273.00 based upon the Orange County Property Appraiser’s 2009 assessment.
(iv) Legal title to the Property is vested in the Debtor.
Accompanying Movant’s Motion are:
A. An Affidavit in Support of Motion for Relief from Stay executed in the State of California on October 9, 2009 by Louis Zaffino as a special assets officer at
Aurora Bank FSB, which is Movant’s authorized servicer and services the Debtor’s loan.
The Affidavit sets forth the loan balance and a break-down of the arrearages.
B. A copy of the Promissory Note (“Note”) executed by the Debtor as Borrower on August 1, 2006 for the principal amount of $274,500.00 payable to Lehman
Brothers Bank, FSB as Lender. The Note requires the Debtor to make monthly loan payments of principal and interest of $2,282.90 to Lender from October 1, 2006 for sixty months and thereafter at varying monthly amounts. The interest rate is variable. The
Note designates the loan as Loan Number 00207199.
The Note provides it is secured by the Property described in the Mortgage dated August 1, 2006. It sets forth at page 2: “The terms of this Note . . . shall inure to the benefit of Lender and its successors and assigns. . . .” and it is “governed by federal law
applicable to Lender and, to the extent not preempted by federal law, the laws of the State
of California without regard to its conflicts of law provisions.”
C. A copy of the Mortgage dated August 1, 2006 and executed by the Debtor as Grantor, and his wife Amanda Crim as the joining spouse, in favor Lehman Brothers Bank, FSB as Lender pursuant to which the Debtor granted Lender a first-priority
mortgage in the Property, its rents, and personal property to secure his performance of the
Note obligations. The Mortgage references Loan Number 00207199, the Note, and contains an identical legal description for the Property as contained in the Note.
The Mortgage provides regarding governing law:
With respect to procedural matters related to the perfection and enforcement of Lender’s rights against the Property, this Mortgage will be governed by federal law applicable to Lender and to the extent not
preempted by federal law, the laws of the State of Florida. In all other respects, this Mortgage will be governed by federal law applicable to Lender and, to the extent preempted by federal law, the laws of the State of California without regard to its conflicts of law provisions.
Mortgage at p. 7. It provides regarding successors and assigns: Subject to any limitations stated in this Mortgage on transfer of Grantor’s interest, this Mortgage shall be binding upon and inure to the benefit of the parties, their successors and assigns.
Id. “Lender” is defined as “Lehman Brothers Bank, FSB, its successors and assigns.” Id.
The recordation stamp on page one of the Mortgage reflects it was recorded in the Official Records Book for Orange County, Florida on August 15, 2006 as Instrument 20060534342 at Book 08805, Page 4292.
D. A copy of an Assignment of Mortgage and Loan Documents (“Assignment”) executed on September 28, 2009 by Jack Jacob as the Vice President of
“Aurora Bank FSB f/k/a Lehman Brothers Bank, FSB,” and notarized on September 30, 2009, purporting to assign the Mortgage and underlying loan documents from Aurora Bank FSB, formerly known as Lehman Brothers Bank, FSB, as Assignor, to and in favor
of Movant, as Assignee, “effective as of the 30th day of November, 2006.”
The Assignment references the Mortgage’s Book and Page Numbers and the Property’s common and legal descriptions. The recordation stamp on its first page
reflects it was recorded in the Official Records Book for Orange County, Florida on October 5, 2009 at Book 9944, Page 1038.
Trustee’s Objection
The Trustee opposes Movant’s Motion on the grounds Movant lacks standing to obtain stay relief and it failed to perfect its security interest prior to the Petition Date.
Her opposition is grounded on the contention the Assignment is invalid. She has
presented various legal theories in support of her position:
1.Aurora Bank FSB f/k/a Lehman Brothers Bank did not own the Mortgage and Promissory Note on the date of execution of the Assignment and had no authority to assign them to Movant.
2. By the terms of the two securitized trusts for Lehman Brothers designated 2006-3 registered with the U.S. Securities and Exchange
Commission, no assignment occurred.
3. The Assignment was executed and recorded post-petition and may constitute a violation of the automatic stay pursuant to 11 U.S.C. Section 362(a)(4).
4. Movant has not established that on the Petition Date it had physical possession of the original Promissory Note properly endorsed in its favor.
5. Lehman Brothers’ ability to enforce the Promissory Note or Mortgage was extinguished in 2006 when it was paid by the Trust for the pool of mortgages which form the Trust’s corpus.
6. Title between the Promissory Note and Mortgage were bifurcated, thereby rendering the Mortgage unenforceable.
The Trustee asserts Movant is an unsecured creditor and she has authority to sell the Property free and clear of encumbrances for the benefit of the estate.
Movant asserts the Note and Mortgage are owned by the Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates, 2006-3, a private securitized trust, and Movant, as the asserted owner and holder of the Note and Mortgage, has
authority to enforce the security interest. Movant presented with its post-hearing brief an Allonge to Promissory Note (“Allonge”) purportedly dated August 1, 2006 and executed by Jennifer Henninger as the Special Assets Administrative Assistant of Aurora Bank FSB directing: Pay to the Order of U.S. Bank National Association, as Trustee (the
‘Trustee’) under the Trust Agreement dated as of October 31, 2006, among Structured Asset Securities Corporation, as Depositor, Lehman
Brothers Bank, FSB, as Servicer, and the Trustee relating to Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates,
Series 2006-3, without recourse.
Doc. No. 46 (emphasis added).
The Debtor filed an Affidavit (Doc. No. 47) stating he had no prepetition communications with Movant, was not aware Movant had a security interest in the
Property, and, if the Assignment is deemed invalid, desires to purchase the Property from the Trustee.
Analysis
The evidence presented establishes the Property is encumbered by the Mortgage, which secures the Debtor’s performance of the Note. The Mortgage was properly perfected pre-petition through its recordation in the Official Records Book for Orange
County, Florida. The Mortgage and Note have not been bifurcated. The Mortgage has not been satisfied. The Debtor had actual knowledge of the unsatisfied Mortgage and the Trustee, through the recordation of the original Mortgage, had constructive, if not actual,
knowledge of the unsatisfied Mortgage. Kapila v. Atlantic Mortgage and Inv. Corp. (In re Halabi), 184 F.3d 1335, 1339 (11th Cir. 1999).
The purported assignment of the Note and Mortgage to Movant does not affect perfection or constitute a transfer of property of the estate or the Debtor. Id. at 1337.
“[A] subsequent assignment of the mortgagee’s interest – whether recorded or not – does not change the nature of the interest of the mortgagor or someone claiming under him.”
Id. at 1338. Recordation of an assignment post-petition does not constitute a violation of the automatic stay. Id. at 1337; Rogan v. Bank One, N.A. (In re Cook), 457 F.3d 561, 568 (6th Cir. 2006) (affirming the analysis of In re Halabi).
It is uncontroverted the Note has been in default since approximately May 2009 and a balance of approximately $300,662.84 is due and owing. The Debtor, who is a property appraiser, values the Property at $250,000.00 and Movant values the Property at $178,000.00. The Debtor is not making adequate protection payments to Movant. There
is no equity in the Property and it is not necessary to an effective reorganization given this is a Chapter 7 proceeding and the disclosures made by the Debtor regarding the Property in his bankruptcy papers. Grounds exist for relief from the automatic stay
pursuant to 11 U.S.C. Sections 362(d)(1) and (d)(2).
Movant’s Motion, however, is due to be denied because Movant has failed to establish it has standing to seek stay relief. A motion for relief from the automatic stay must be prosecuted in the name of the real party in interest. 11 U.S.C. § 362(d); FED. R. 7
CIV. P. 17(a)(1); FED. R. BANKR. P. 7017. “The real party in interest in relief from stay is whoever is entitled to enforce the obligation sought to be enforced.” In re Jacobson, 402 B.R. 359, 366 (Bankr. W.D. Wash. 2009). Only the holder of the Note and Mortgage, or
its authorized agent, has standing to bring the Motion. Id. at 367.
Movant asserts in its Motion it is the “owner and holder” of the Note and Mortgage, but has presented no evidence substantiating that assertion. The copies of the Note presented do not contain an endorsement evidencing an assignment of the Note.
The Affidavit executed by Movant’s loan servicer makes no mention of the location of the original Note or who has possession of it. Movant proffered no business records or testimony tracing ownership of the Note and establishing Movant is the present holder of
the Note.
The veracity of the Allonge and Assignment is questionable. The dates contained in the Allonge are chronologically impossible. The Allonge is dated August 1, 2006, but references a trust that came into existence on October 31, 2006. The signature of Jennifer Henninger is undated and not notarized. The Allonge was not referenced in or filed with Movant’s Motion in October 2009, but was presented three months later as an attachment to its post-hearing brief.
The Assignment was executed and recorded post-petition approximately two weeks prior to Movant’s filing of the Motion for Relief. It was prepared by Jennifer Henninger, who executed the Allonge, and was recorded by the law firm that is representing Movant in this proceeding. Jack Jacob’s execution of the Assignment was notarized by Jennifer Henninger and witnessed by Louis Zaffino, the affiant of Movant’s Affidavit. It appears the Allonge and the Assignment were created post-petition for the purpose of the relief from stay proceeding. Movant did not establish Jennifer Henninger and Jack Jacob had authority to execute the Allonge and Assignment.
Movant’s submissions are insufficient to establish it is the owner and holder of the Note and Mortgage or is authorized to act for whoever holds these documents. In re Relka, No. 09-20806, 2009 WL 5149262, at *5 (Bankr. D. Wyo. Dec. 22, 2009) (granting
stay relief where movant established possession of note through testimony of witness
who personally retrieved note from movant’s vault); In re Jacobson, 402 B.R. at 370 (denying movant’s stay relief motion due to movant’s failure to establish it was holder of note); In re Hayes, 393 B.R. 259, 270 (Bankr. D. Mass. 2008) (denying movant’s stay relief motion and sustaining debtor’s claim objection due to movant’s failure to establish it was holder of note). Movant has not established it has standing to bring the Motion and the Motion is due to be denied.
Accordingly, it is
ORDERED, ADJUDGED AND DECREED that the Property located at 830 Hoffner Avenue, Orlando, Florida 32809 and more particularly described as:
Lot 7, SUNDAY BLOCK, according to the plat thereof, recorded in Plat Book O, Page 27, of the Public Records of Orange County, Florida is encumbered by the Mortgage executed by the Debtor on August 1, 2006 and recorded in the Official Records Book for Orange County, Florida on August 15, 2006 as
Instrument 20060534342 at Book 08805, Page 4292, which Mortgage constitutes a valid properly perfected lien, and which secures the Promissory Note executed by the Debtor on August 1, 2006 in the principal amount of $274,500.00 and designated as Loan
Number 00207199; and it is further ORDERED, ADJUDGED AND DECREED that the amount of the Mortgage lien encumbering the Property exceeds the Property’s value and there is no equity in the
Property; and it is further ORDERED, ADJUDGED AND DECREED that the Movant’s Motion for
Relief from Stay (Doc. No. 22) is hereby DENIED due to Movant’s failure to establish it
has standing to bring the Motion; and it is further
ORDERED, ADJUDGED AND DECREED that the Trustee, within twenty-one days of the entry of this Order, is hereby directed, pursuant to 11 U.S.C. Section 704(a) and Federal Rule of Civil Procedure 5009, to file with the Court a Report of No Distribution or to designate this case as an asset case.
Dated this 9th day of February, 2010.
/s/ Arthur B. Briskman
ARTHUR B. BRISKMAN
United States Bankruptcy Judge
Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud Tagged: 2006-3, Allonge to Promissory Note, Assignment of Mortgage and Loan Documents, Aurora Bank FSB f/k/a Lehman Brothers Bank, bankruptcy court, Case No. 6:09-bk-12240-ABB, Chapter 7, Florida, FSB, Jack Jacob, Jennifer Henninger, JORGE CANELLAS, Judge ARTHUR B. BRISKMAN, Lehman Brothers Bank, Lehman Brothers Small Balance Commercial Mortgage Pass-Through Certificates, MIDDLE DISTRICT OF FLORIDA, Motion for Relief from Stay, Note and Mortgage, Orange County, ORLANDO DIVISION, owner and holder, private securitized trust, Special Assets Administrative Assistant, trustee, Trustee Carla P. Musselman, U.S. Bank National Association
Aug
08
Loan Servicer Tactics… Foreclose don’t modify; lie, deceive, whatever it takes
As a citizen, please start asking tougher questions and demanding truthful answers of your elected officials. We MUST hold these men and women accountable to representing ‘we the people’ instead of their lobby pals.
Whatever you hear from the Administration or any of the large institutions via the drive-by media you can assume that it’s a lie or many shades of gray with dash or two of spin. Why? Well, of course, the truth is not going to get votes for politicians or more investors and account holders for any of these characters who operate in the shadows of financial institution corporate offices across America.
Let me give you a dose of truth serum in case you’re tempted to believe the drive by media reports on the foreclosures and the Making Home Affordable plan we’ve been told is going to rescue our economy and the housing market and the millions of families jobless and now facing foreclosure. You ready?
Here it is: the loan servicers don’t care about anything but money and the modus operandi is clear… foreclose as fast as possible on everyone in a mortgage hardship. Just modify enough loans to make everyone think we’re really on board with this. Make excuses for everything else. Lie to media about what’s really going on because mostly everyone believes what they hear anyway.
A deeper look into the numbers and statistics will leave you scratching your head though – and asking yourself the question, “but why?”
According to an article by Gretchen Morgenson from the New York Times, “Alan M. White, an assistant professor at the Valparaiso University law school in Indiana, analyzed data on 3.5 million subprime and alt-A mortgages in securitization pools overseen by Wells Fargo. The loans were written in 2005 through 2007; data on their performance is provided to the trusts’ investors. Mortgages handled by five of the nation’s largest loan servicing companies — Bank of America, Chase Home Finance and Litton Loan Servicing among them — are contained in the Wells Fargo data.
Mr. White found that mortgage modifications peaked in February and have declined in all but one month since. While servicers modified 23,749 loans in these trusts in February, they changed only 19,041 in May and 18,179 in June. This is exactly when servicers were supposed to be responding to the government’s loan modification urgings.
Foreclosures, meanwhile, keep rising. In June, 281,560 were in process, slightly above the 277,847 in May. Last January, there were about 242,000 foreclosures in the pipeline among the Wells Fargo trusts.”
Well, isn’t that interesting. You see, the numbers simply don’t lie. They tell the truth and expose the raw data of what is really happening. The report continues, “the most fascinating, and frightening, figures in the data detail how much money is lost when foreclosed homes are sold. In June, the data show almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.”
Did you catch that? The AVERAGE loss on a house that a servicers takes to foreclosure sale is a whopping 64.7% of the original loan balance!!!! The average loan amount was $223,000. But in the liquidation sale, the property sold for $144,000 less, or a $79,000 sales price on average.
So any logical person goes, “why? Why would a servicer foreclose on the home instead of providing a loan modification for a homeowner who wants to pay but just needs a reduction in that payment?” I know I can’t be the only one who’s wondered that…
If you want to find the answer you just gotta follow the money… it’s that simple. And the answer does not shed any more favorable light on these servicers – who, by the way, are just subsidiaries of the main financial institutions. Example: Citimortgage is the servicer. They are owned by Citigroup. America’s Servicing Company is the servicer. They are owned by Wells Fargo.
So back to following the money. First, the pooling and servicing agreements governing these trusts, servicers and trustees usually contain “default servicing provisions” which provide the servicer which much higher fees when the loan goes into default. Then the servicer also gets all sorts of other fees reimbursed to them upon a liquidation sale such as BPO fees, inspection fees, legal fees, etc. These fees may get paid to the servicer right away but may not be reimbursed until the sale goes through. But, here’s the BIG reason…
Very often, if not most of the times, these servicers were paid in full for all these loans when they acted as the sponsor and sold the Notes (assets) to these trusts. The trust investors put up a lump sum amount to the servicer and the servicer agreed to collect the monies, manage the escrow accounts and in turn, made a guarantee of cash flow payments to the trust each month. The trust investors are most worried about one thing… their monthly payment on the cash flow. If they keep getting their monthly cash payment, do you think they’re going to be screaming bloody murder? Probably not. As long as the check keeps coming, I got no qualms. Stop the checks and I’m going to be gettin’ all in your business. Think about it… haven’t you noticed a peculiar lack of lawsuits being filed by MBS trust investors or the trusts themselves? One would think the federal courts would be littered with lawsuits by these trusts against all the institutions in the securitization chain for all sorts of allegations regarding the massive losses you’d think they’re realizing due to the defaults.
So, to keep the investors out of their “business” the servicer has to figure out a way to keep those cash flow payments going. Well, let’s say I’m servicing a pool of 1000 loans and the monthly cash flow on that pool is $1 million (or $1000 per loan average). But my default rate starts rising and now 10% of these loans are not paying. Well, that’s $100,000 per month less that I’m getting as the servicer. Shoot, how do I keep making the payment of $1 million per month if I’m only receiving $900,000?
Oh, I got it! If I can foreclose on a couple homes in default, take a 64.7% loss on it but I still get $79,000 in one lump sum from each home I liquidate, I can keep making that cash payment to the trust. All I need to do is liquidate about 1.2 homes per month on average, and, even though I take a huge loss on these homes, I can keep making that cash flow payment to the trust, keep my investors happy and better yet, keep them out of my business and away from asking all sorts of questions I really don’t want to answer. Note: this game can only carry on for so long. At some point the pied piper is going to pipe…
This my best stab at a simplified answer to “why” these servicers are ignoring the Making Home Affordable program and foreclosing as fast as they possibly can. Nothing else makes sense to me. If you have any other input, I’d love to hear about in the forum on this topic.
The kicker here is that these servicers don’t have legal standing to foreclose. They don’t own the Note in 80%+ of the cases – and that number is probably higher than 90% of the time. So they unlawfully seize a family’s home, sell it even though they don’t own it and in the process they also violate the servicing agreements they are governed by. These agreements mandate that the servicer act in a fiduciary manner with respect to the interests of the investors. I can tell you unequivocally that taking an average 64.7% loss on a trust asset is worse for the trust versus modifying the loan at a higher amount (still with principal reduction for the borrower) and recapturing the interest. There is NO WAY the current servicer model of foreclose and liquidate passes the NPV test for these trust assets – at least as far as I can see.
For reference and further context, here is the article written by Gretchen Morgenson at the New York Times.
So Many Foreclosures, So Little Logic
By GRETCHEN MORGENSON
LAST week, the stock market tumbled on news that housing foreclosures and delinquencies rose again in the first quarter. The Office of the Comptroller of the Currency said that among the 34 million loans it tracks, foreclosures in progress rose 22 percent, to 844,389. That figure was 73 percent higher than in the same period last year.
But the comptroller’s office also said that amid the gloom, there was promising data about loan modifications: they rose 55 percent in the quarter. That growth came on a very low base, of course, but the move encouraged John C. Dugan, head of the comptroller’s office.
“As the administration’s ‘Making Home Affordable’ program gains traction and helps offset the impact of this very difficult economic cycle,” he said in a statement, “we should continue to see progress in future reports.”
A glimpse of second-quarter mortgage data, however, indicates that the progress Mr. Dugan and his colleagues in Washington are hoping for may take longer to emerge — raising questions about whether policymakers and banks are moving quickly or intelligently enough on the foreclosure problem.
Foreclosures remain one of the great financial ills for the economy. The Bush administration largely overlooked foreclosures affecting average homeowners, focusing instead on propping up elite, troubled financial institutions with taxpayer funds. The Obama administration has said it wants to wrestle the foreclosure issue to the ground by encouraging mortgage loan modifications, but its efforts have gotten little traction.
Loan modifications occur when a lender agrees to change terms of a troubled borrower’s mortgage; the most common approach is to reduce the loan’s interest rate. Cutting the amount of principal owed — an option that could be of more help to a borrower — is rare because it means homeowners pay less money back to the bank over time.
Lenders and their representatives, however, don’t like to modify loans through interest rate cuts or principal reductions because, of course, it reduces the income they receive from borrowers. No surprise, then, that loan modifications have been a trickle amid the recent foreclosure flood.
Enter the government, with the program it announced in March to encourage modifications. It offers incentives to loan servicers to change mortgage terms, providing $1,000 for each loan they modify. The program focuses on making payments more affordable through lower interest rates, but delinquent amounts and late fees are typically tacked onto the mortgage balance. “Making Home Affordable” does not compel lenders to reduce mortgage balances.
Servicers signed on to the program in April. The program’s early months were not covered by the O.C.C.’s first-quarter report. But other figures on modifications conducted in April, May and June are available. And they show a decline in modifications, not an increase as the government hoped.
Alan M. White, an assistant professor at the Valparaiso University law school in Indiana, analyzed data on 3.5 million subprime and alt-A mortgages in securitization pools overseen by Wells Fargo. The loans were written in 2005 through 2007; data on their performance is provided to the trusts’ investors. Mortgages handled by five of the nation’s largest loan servicing companies — Bank of America, Chase Home Finance and Litton Loan Servicing among them — are contained in the Wells Fargo data.
Mr. White found that mortgage modifications peaked in February and have declined in all but one month since. While servicers modified 23,749 loans in these trusts in February, they changed only 19,041 in May and 18,179 in June. This is exactly when servicers were supposed to be responding to the government’s loan modification urgings.
Foreclosures, meanwhile, keep rising. In June, 281,560 were in process, slightly above the 277,847 in May. Last January, there were about 242,000 foreclosures in the pipeline among the Wells Fargo trusts.
“I was hoping we would see some impact in June of the government’s program,” Mr. White said. “Is ‘Home Affordable’ working? My short answer is no.”
To be sure, the government’s data differs from that which Mr. White analyzed, and its loan modification figures for the second quarter may look better as a result. The O.C.C. includes prime loans as well as subprime, for example, while the Wells Fargo data contains no prime loans.
Nevertheless, Mr. White has collected the figures since November 2008, and he said that in the months since, the performance of the 3.5 million mortgages that he analyzes tracked the O.C.C. data pretty closely.
THE Wells Fargo data is illuminating. It shows that in June, 58 percent of modifications cut the payments that the borrower has to pay, a slightly smaller percentage than in April or May. The average reduction in June was $173 a month.
But the most fascinating, and frightening, figures in the data detail how much money is lost when foreclosed homes are sold. In June, the data show almost 32,000 liquidation sales; the average loss on those was 64.7 percent of the original loan balance.
Here are the numbers: the average loan balance began at almost $223,000. But in the liquidation sale, the property sold for $144,000 less, on average. Perhaps no other single figure shows how wildly the mortgage mania pumped up home prices. It also bodes poorly for the quality of the mortgage-related assets lurking in banks’ books.
Loss severities, like foreclosures, are rising. In November, losses averaged 56.1 percent of the original loan balance; in February, 63.3 percent.
Given losses like these, Mr. White said he was perplexed that lenders and their representatives were resisting reducing principal when they modify loans. His data shows how rare it is for lenders to reduce principal. In June, for example, 3,135 loans — just 17.2 percent of the total modified — involved write-downs of principal, interest or fees. The total loss from these write-downs was just $45 million in June.
And yet, the losses incurred in foreclosure sales involving loans in the securitization trusts were a staggering $4.59 billion in June. “There is 100 times as much money lost in foreclosure sales as there was in writing down balances in modifications,” Mr. White said. “That is not rational economic behavior.”
If banks have written down the value of these loans to the 40 cents on the dollar that they are fetching on foreclosures — the only true value for these homes right now — then why don’t they bite the bullet and reduce the loan amount outstanding for the troubled borrowers? That type of modification would be far more likely to succeed than larding a borrower who is hopelessly underwater with yet more arrears.
“You can reduce payments with a lot of gimmicks similar to those built into subprime loans — temporary rate reductions that defer a lot of principal, balloon payments,” Mr. White said. “To me that leads to a situation where American homeowners are paying 50 to 60 percent of their incomes for mortgages which reset in 2011 and 2012. That is not solving the problem.”
Certainly not for borrowers, that is. And because many of these losses will ultimately be passed on to taxpayers, it’s not solving our problem, either.
