Dec
28
Independent Foreclosure Review Fail | NY Times – Foreclosure Relief? Don’t Hold Your Breath
Foreclosure Relief? Don’t Hold Your Breath BUT Michael Olenick, a specialist in mortgage research, said he spotted a conflicted consultant after one hour of digging. Allonhill, a smallish firm appointed by Aurora Bank, a mortgage servicer, is headed by Sue Allon, whose previous small firm acted as credit risk manager in a 2003 mortgage pool … Read more
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Nov
23
Cummings Calls for Unredacted Copies of “Engagement Letters” Between Mortgage Servicing Companies and Private Consultants
Cummings Calls for Unredacted Copies of “Engagement Letters” Between Mortgage Servicing Companies and Private Consultants Washington, DC (Nov. 22, 2011)—Ranking Member Elijah E. Cummings released the following statement today regarding the public release of highly redacted “engagement letters” between mortgage servicing companies and independent consultants they hired to review past foreclosure abuses: “Although I am … Read more
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Nov
15
Whoa! | Morgan Stanley, Saxon and American Home Mortgage Servicing Agree to End Robo-Signing
Superintendent Lawsky Announces Agreements With Morgan Stanley, Saxon, AHMSI & Vericrest On Groundbreaking New Mortgage Practices Benjamin M. Lawsky, Superintendent of Financial Services, today announced that New York’s Department of Financial Services has entered into agreements with Morgan Stanley and its mortgage servicer Saxon, American Home Mortgage Servicing, and Vericrest Financial to adhere to the … Read more
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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
24
Assembly Bill No. 284 | Potential Felony Charges Make Servicers (aka Illegal Debt Collectors) Pause Nevada Fraudclosures
Potential felony charges make servicers pause Nevada foreclosures Many mortgage servicers stopped initiating foreclosures in Nevada because of a new law, which carried threats of criminal penalties for faulty filings. Assembly Bill 284 took effect Oct. 1, making it a felony if a mortgage servicer or trustee made false representations concerning a title. There also … Read more
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- KABOOM | A Lawsuit That Dirty Debt Collectors Should Be Worried About
- A New Foreclosure Tactic – Lenders / Debt Collectors Holding Second Mortgages Freeze Bank Accounts
Sep
20
Jeffrey Stephan | GMAC Takes Steps to Fix Its Problems in Mortgages
A review of roughly 25,000 loan files has “not found one instance where a borrower was foreclosed on without being in significant default” ~ GMAC Takes Steps to Fix Its Problems in Mortgages GMAC Mortgage LLC, the mortgage servicer that vaulted “robo-signing” into the headlines, says it has overhauled its foreclosure procedures. The unit of … Read more
Sep
16
BofA, JPMorgan Fail to Make Fannie Mae Grade for Loan Servicing
BofA, JPMorgan Fail to Make Fannie Mae Grade for Loan Servicing Bank of America Corp. (BAC), the largest U.S. mortgage servicer, failed to make a list of companies doing a satisfactory job of assisting homeowners struggling to pay their mortgage, according to Fannie Mae. Of the 11 biggest servicers of Fannie Mae mortgages, Wells Fargo … Read more
Sep
08
American Banker | ‘Procedures Matter’ in Foreclosure; Do Outcomes Matter More?
‘Procedures Matter’ in Foreclosure; Do Outcomes Matter More? Is it “just” a technicality if a mortgage servicer, foreclosing on a borrower who in all likelihood has defaulted, creates documents to prove the servicer’s client acquired the loan years ago? Consider this (admittedly imperfect) analogy: is it just a technicality if a criminal wasn’t read his … Read more
May
16
Over There… Over There… Send The Word, We’ll Foreclose, While You’re There
Wells Fargo Bank, with their all-American stagecoach logo, has just been accused of violating the Servicemember Civil Relief Act, a federal law that requires members of the armed forces on active duty to be told about civil actions like foreclosure, and allows them to delay the process until they return home to defend themselves against the action… assuming they make it home, of course.
That doesn’t seem too difficult a law to follow, does it? I mean, there couldn’t be that many active duty military personnel in any one state… that are over seas at any one time… that all have the same mortgage servicer… and are all in foreclosure at the same time, right? How many could there be in a single state? A few thousand would seem like a lot, right?
Hard to believe there could even be that many, maybe more like a couple hundred would be at the high end of your guess, wouldn’t you think? The kind of number that by my way of thinking you could keep track of with an index card system, to say nothing of some souped-up-servicer supercomputer.
So, what exactly is the problem here, banker-people? Don’t you have enough homeowners under consideration for a loan modification that you can foreclose on without notice that aren’t active duty military? No one, save a handful of foreclosure defense attorneys and bloggers, would even care if you did it to regular folk… you can deceive and defraud them all you want… just leave our men and women on active duty military alone, okay?
You’re welcome to do it to veterans, for example… they’re not active duty anymore, so what have they done for us lately? Nothing. You can do it to police officers, teachers, firefighters, nurses, single moms who work three jobs and have three kids… you can do it to senior citizens with disabilities, for heaven’s sake… we do not care. But active duty Army, Navy, Air Force, Marines and Coast Guard… they’re all off-limits, what’s so hard to remember about that?
After all, it was only a few weeks ago… actually, according to Bloomberg it was May 6, 2011… that JPMorgan Chase, admitting it mishandled mortgages of U.S. service members, paid $56 million to settle the claims.
Isn’t a $56 million settlement paid a couple of weeks ago by one of your brethren enough to get you guys at Wells Fargo to at least make a note not to repeat the same mistake? I only ask because my wife got a parking ticket last week for parking on the wrong side of the street on Wednesdays and the fine was $45 and that was enough to get me to remember not to park there next time. Is $56 million to you guys not even the equivalent of $45 to me… is that the problem?
The settlement provides $27 million in cash which will be split among to 6,000 military personnel involved, and JPMorgan Chase has agreed to return the houses they stole, even if they have to pay fair market value to buy them back from purchasers in cases where the homes were already sold at auction. The bank will also forgive any remaining mortgage debt of the military borrowers who were supposed to be protected under the law… but weren’t… and the bank will reduce the interest rate on all mortgages held by deployed troops to 4 percent for one year.
Regardless, according to ABC Action News, Coast Guardsman Keith Johnson, who had been overseas fighting one of our wars, had just returned home and was greeted by his wife… oh, and also the news that Wells Fargo Bank had foreclosed on, and sold, his home while he was away.
His wife had no idea the bank was working hard behind the scenes to sell their home because they were in the middle of applying for a loan modification. And he had no idea what the bank was planning because… well, because he had been overseas fighting for his country.
Since Keith and his wife had no knowledge of what was happening, no defenses to the foreclosure were filed on their behalf, and Wells Fargo obtained a summary judgment and then auctioned off the Johnson’s home. Must be because Tampa needed another foreclosed home to go back to the bank and then sit vacant for many months or even years.
According to the ABC Action News story…
“Attorney John Odom is a nationally known expert on the act, and says it also protects soldiers against default judgments because, ” Active duty personnel are not free to come and go as they might need to defend themselves,” Odom tells us.
Well, now you see I hadn’t really thought about it until now, but I suppose that’s true. The folks on active duty military are not free to come and go as they might need to defend themselves. Do you see the thinking behind the Servicemember Civil Relief Act now Wells Fargo Bank people? I’ll bet you can find out even more about the law on Wikipedia, if you think that might help you to remember to stop breaking it.
Also from the ABC Action News story, here’s Wells Fargo entire response:
Wells Fargo takes our responsibility to comply with the Servicemembers Civil Relief Act (SCRA) very seriously. We work hard to make banking easier for our servicemen and servicewomen — around the world. For example, we have 11 military base locations across the country, allowing our military customers to have convenient access to banking services, including dedicated a website and phone lines.
We did everything we could in this case but there were obligations the homeowner was unable to meet. We followed the service member act by requesting an attorney ad litem, and we were acting on the validity of the court document filed by his court-appointed attorney.
Wells Fargo exhausted all efforts to resolve this matter. We made numerous attempts to resolve the case and facilitate a modification, short sale, refinance or payoff. We do our best to avoid foreclosure whenever possible, however, in some case we are unable to reach a mutually agreeable resolution.
Vickee J. Adams
Vice President, Mortgage Communications
Vickee, Vickee, Vickee… my darling Vickee… I just don’t get the sense that you are embracing the spirit of the law here, because if you were you would know that the entire country knows that Wells Fargo Bank screwed up bad… you violated federal law… you stole someone’s home, and not just anyone’s home, but the home of someone who has been overseas fighting for his country. And when that sort of thing happens, you don’t start blathering on about how you make banking easier with 11 branches on military bases from coast-coast that allow customers to essentially have convenient access to “Almost Free Checking,” and a dedicated Website.
Can you see why yours is an inappropriate response under the circumstances, Vickee dearest? And by the way, you most certainly didn’t do everything you could have to avoid foreclosure in this case, because if you had done EVERYTHING you could have done, you wouldn’t have ended up being in violation of federal law and you wouldn’t have ended up lying to the Johnsons and then stealing their home, can you see the logic there, Vickee?
Because you see, Vickee, my darling, when one does in fact do EVERYTHING one can do… by definition… one doesn’t end up breaking federal laws. If one does discover that one is breaking federal laws, then I think it’s safe to say… and I hate to speak in absolutes here, but… I do think it’s safe to say that you’ve come up short as far as having done EVERYTHING you could do.
And, Vickee… you guys at Well Fargo… or any of your too-big-to-jail compadres, for that matter… this case really has proven that you don’t “do you best to avoid foreclosure whenever possible,” now do you? Because this was not a case of you doing your best and not being able to reach a mutually agreeable resolution, as you claim in your boiler plate statement.
This was a case of you simply not communicating with the homeowner, except to tell them they were under consideration for a loan modification… until you turned around and sold their house without telling them of your plans. And you’re Vice President of Mortgage Communications, Vickee, so it’s ironic that I should have to be tell you this.
According to attorney Odom:
“He (Johnson) is never contacted by anyone about the foreclosure procedures being filed. And he comes home and he has no home. Now that’s wrong. Somebody didn’t do their job, because the law says that shouldn’t not have happened.”
Florida foreclosure defense attorney Matt Weidner is representing the Johnsons, and so I called Matt this afternoon to ask him what was happening. Incredibly, Matt told me that Wells Fargo is pushing back hard.
Wells Fargo is saying that they followed the law by requesting an “attorney ad litem.” The Latin phrase “ad litem” means “for the suit,” and an attorney ad litem is a lawyer generally appointed for an incapacitated person. Matt’s view… and mine too, by the way… is that Wells Fargo could and should have notified the Johnsons.
Me being the “Lay-person Ad Litem,” I asked Matt if the Johnsons have a telephone, and he assured me that they do. So, there’s one way Wells could have gotten in touch with them if they were really interested in preventing foreclosures or in not selling the home of one our soldiers out from under him.
“They (Wells Fargo) say they couldn’t locate Keith Johnson to notify him, but one thing that our military does exceptionally well is locate their soldiers… they know where their soldiers are at all times. For Wells to claim that they were unable to locate Mr. Johnson is just not a credible statement,” Matt said.
Matt also says has filed pleadings with the court including a motion to vacate, saying: “Foreclosure sales without notice are wrong and I expect the judge to agree with that.”
Matt Weidner said that he and his fellow foreclosure defense attorneys in Florida are committed to making sure that no service member faces foreclosure without an experienced foreclosure defense attorney to represent them. Florida has a well developed network of highly skilled attorneys who work together and are dedicated to protecting the rights of all homeowners, but he says that protecting those that are overseas serving in our military today must remain a top priority.
Let me guess banker-people… if Wells Fargo is found to be in violation of the federal law that protects our servicemen and servicewomen, you’re going to claim it to be yet another “isolated incident?” You know like the robo-signing that was an isolated incident, or the inability to produce documentation that shows you as the trustee actually won the note on which you are trying to foreclose in the Ibanez decision… was an isolated incident?
Or, is complying with this federal law going to raise the cost of borrowing for all Americans, not that there is borrowing for most Americans.
I don’t know about everyone else, but it strikes me as funny that the biggest difference between The Great Depression and today’s depression, is that during the 1930s, people robbed banks. Today, banks rob people.
Mandelman out.
May
08
GAO Study Published May 5th Discovers Illegal Foreclosures
On May 5, 2011, the Government Accountability Office (“GAO”) released its study of mortgage servicers and foreclosures… I guess now that everyone and their brother-in-law have conducted such a study into the mortgages servicers’ maladroit, dishonest and criminal best practices, the GAO figured they couldn’t get in any trouble for piling on with more of the same. Personally, I’m holding out for the U.S. Post Office’s study of mortgage servicer performance, which I hear is going to be followed up by a scathing report being issued by the Bureau of Land Management in conjunction with the Department of Transportation.
And I’m sorry if this sounds at all bitter, but do you think it has it occurred to any of the GS-geniuses inside the beltway that I’ve been writing about the… shall we say, inadequacies of mortgage servicers for two and a half years, and they’re just now getting around to issuing a series of studies at a cost I don’t even want to know about, that say the same things I and others could have told them about over coffee in 2008. I don’t know about you, but it scares the heck out of me.
Well, anyway… the GAO’s study showed the same things that all the other studies have shown, causing several legislators including Sen. Al Franken, who presumably were not able to jump onto the last study’s release, to write a letter to several of the banking regulators (and I use that term very loosely) and Federal Reserve Chairman, Ben If-You-Don’t-Have-It-Print-It Bernanke. According to a story by Jim Spencer, writing for the Twin Cities’ Star Tribune, the letter said:
“We have seen countless examples of servicers giving borrowers the run-around and continuing the foreclosure process when a loan modification has already been obtained. Perhaps the most egregious cases of servicer wrongdoing have been violations of the Service Members Civil Relief Act by wrongly foreclosing on active-duty service members. Correcting these problems and ensuring they do not reoccur should be a priority for all of your agencies.”
Before I say anything about their statement above, let me make it clear that I served in the U.S. Air Force following graduation from high school, so I’m perfectly capable of being biased about our troops, and hyper-sensitive about them being inadequately treated by our government, which they are in so many ways. However, that being said… I’m not sure I can distinguish between someone on active duty losing their house as a result of an illegal foreclosure and… oh, I don’t know… anyone else.
I wrote about a family in which the father was diagnosed a few years ago with advanced diabetes. His kidneys have failed, he’s on dialysis, has developed heart disease, was on a respirator the last time he was hospitalized. He worked for the City of Placentia in Southern California for some 27 years. His wife has her own small business. They have an adorable eight year-old daughter who goes to school near by and loves her home.
Medical bills combined with the economy sliding off a cliff caused them to ask JPMorgan Chase to modify their loan, and they made their payments every month on time until the day that they got a notice on their door saying their home would be sold out from under them… in an hour, they learned after calling Chase in a panic. They now have a lawyer, and the sale has been stopped, for the moment anyway… Chase won’t accept any more trial payments, which is another word for “payments”. It must be nice to live in your home after paying what the bank told you to pay every month, knowing that at any hour you could be told you are out on the street.
Of course, no one in the family is in the U.S Armed Forces at the moment… perhaps the 8 year-old could sign up now, but be permitted to defer her enlistment for a decade when she’ll turn eighteen. Would that make this family any more deserving of relief in the eyes of our legislators? I’m not sure I can think of anyone that deserves to be illegally foreclosed upon, can you?
Just two weeks ago, I was introduced to a couple who had just been approved for a loan modification by Bank of America… the only problem was that Fannie Mae was going to sell their home in 24 hours… and BofA wouldn’t be able to “issue” the modification for 48 hours. Should be an easy one right?
Wrong. Fannie refused to postpone the sale date, even though BofA informed them that the loan modification was a day away. Now, is that an illegal foreclosure? If it’s not, then I have nothing to say to the leaders of this country except that you should all be ashamed. The couple filed bankruptcy to stop the sale… they didn’t want to… but Fannie Mae, our bankrupt mortgage mess, forced them to do it. Of course, neither of them is active duty military either.
Want some more… give me a couple of hours and I could provide you with a few hundred… just off the top of my head. Let me check my notes and call around and I’ll come up with a thousand within 24 hours.
Sen. Franken, however, only referred to the revelation of mishandled foreclosures for those in the military a scandal, saying in an interview last Thursday:
“If people broke the law and foreclosed on service members, they should be indicted.”
I don’t want to put words into Al’s mouth here, but what if people broke the law and foreclosed on just regular old U.S. citizens? What should happen to them as a result? Community service? A stern talking to? When did it become relatively more acceptable to steal homes from ordinary U.S. citizens than anyone else? What about stealing homes from veterans? Does that fall somewhere between active duty and never served? What if someone served in the Peace Corps?
The senator’s letter went on to say that the GAO’s report described mortgage servicers hiring employees to sign tens of thousands of affidavits without ever looking at the documents to determine if the loan was in default. And isn’t it nice to see the GAO reporting robo-signing seven months after new of the practice first made headlines.
The study also pointed out the same things the OCC, OTS, and Federal Reserve’s study pointed out about three weeks ago, such as:
“Documents used to force people from their homes were not properly prepared or legally notarized. Foreclosure work contracted by loan servicing companies to third parties received little or no oversight.”
Sen. Franken, perhaps coming out of a coma that lasted two years said…
“Loan servicers make it difficult for delinquent borrowers to even talk about solutions. I’ve talked to so many people who try to go to their servicers and can’t get in touch with anyone. When they can reach the mortgage company, they never speak to the same person twice to try to work on ways to save their homes. A single point of contact is the most important thing in any of this.”
You know what, Sen. Franken… I like you. I think you’re a very smart guy who is also very caring and I even think that you ran for public office for the right reasons. I even read your last book, and enjoyed it very much. But let me assure you of something, Sir… you are in no way qualified to ascertain what “the most important thing in any of this” is or is not.
Like all of your peers in our legislature, you are incomprehensibly late to this tragic party, your contribution to anything having to do with the foreclosure crisis has been woefully inadequate, assuming you’ve done anything at all… and from your statements it is clear that what you know about the what’s gone on or continues to go on as related to foreclosures in this country we could fit in a thimble.
Look, don’t get me wrong, Sen. Franken… I’m glad you’re finally here taking a look, and I’m happy that the little you’ve seen offends you and a few of your legislative pals. And by all means, get out there and make some strong statements in support of our troops, after all being a Democrat you pretty much have to do that or risk Rush Limbaugh calling you a pansy or whatever, right?
But this is a crisis that has been going on at least three full years now, and it’s gotten no better during that time, which you guys have been playing around with the pretend priorities of partisan politics in Washington D.C. We all see that… you’re not fooling anyone.
Why do you think it was that the Dems got “shellacked,” as the president put it, in the midterms? That’s right, it was the foreclosure crisis and your party’s dramatic and unconscionable mishandling of everything related to it.
So, go ahead… help stop our men and women in our Armed Forces from losing their homes as a result of what is plainly criminal behavior on the part of mortgage servicers… behavior that you and yours have essentially condoned for the last TWO YEARS.
It’s you and your peers that have allowed these egregious acts by servicers to strip people of their most valuable and treasured assets illegally. You’ve stood by and done nothing… and now you’re reading what is just another in a continuing series of reports that all say what you have either known or should have know for the last two years.
So, fine. Better late than never, but don’t add insult to political expediency by standing up at the microphone claiming that there is some meaningful distinction between stealing someone’s home through illegal foreclosure when they are active duty military because if that’s true… what about if it happens to a police officer… or a public school teacher… or a firefighter… or an emergency room nurse… or just a hard working American citizen caught up in the same financial crisis as everyone else… a crisis not of their making, but one that was created by the very same bankers now behind the illegal foreclosures.
Do something Sen. Franken. The letter talked about in this article was signed not only by Sen. Franken but also fellow Democrats: Sen. Robert Menendez of New Jersey, Rep. John Conyers of Michigan, Rep. Luis Gutierrez of Illinois and Rep. Mike Capuano of Massachusetts.
But, you are going to be held to a higher standard because that’s why you came to Washington D.C., right Al? Because as we used to say, if you’re not part of the solution, you’re part of the problem. And not to put to fine a point on it, Sen. Franken, but at this point in time, that would make you what, as far as the foreclosure crisis goes?
Mandelman out.
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Apr
19
FEDS Announce Enforcement Actions Against 14 Servicers, LPS and MERS… Hot Towels in Washrooms Threatened Once Again
I have to tell you right up front that I’m damn tired of vacillating regulatory initiatives that produce feeble or even flaccid responses to issues that are unnecessarily destroying the lives of millions of Americans and preventing our national economy from any sort of meaningful recovery… all while the administration blathers on about the budget and Libya while playing golf, and our legislature continues to engage in petty politics while shining the shoes of Wall Street’s elite.
Think that was too harsh? Really? How so? That’s precisely what continues to go on… am I missing something? Is there some aspect of our government where an outbreak of competence is being overlooked?
Still, I’m committed to covering this subject even when doing so means that I have to start drinking at 9:30 in the morning… kidding, I’m just kidding… so, here’s the news on the FEDS and their “enforcement actions,” and I use that term very loosely, because I’m pretty sure that at the end of the proverbial day, comparatively I will have gotten in more trouble back in high school for having a party while my parents were out of town. Maybe not… there’s more to come and I suppose I could be wrong… but don’t bet on it.
The Office of the Comptroller of the Currency (“OCC”), the Office of Thrift Supervision (“OTS”), and the Federal Reserve have apparently concluded their investigations into the mortgage servicer and supporting firm practices… including allegations of “robo-signing”, and have announced formal enforcement actions against fourteen servicers and two related servicer providers, Lender Processing Services (“LPS”), and the Mortgage Electronic Registration Systems… or MERS, for short.
The list of servicers, in alphabetical order, includes: Ally Financial/GMAC, Aurora Bank, Bank of America, Citigroup, EverBank, HSBC, JPMorgan Chase, MetLife, OneWest Bank, PNC Financial, Sovereign Bank, SunTrust, U.S. Bancorp, and Wells Fargo.
According to a report titled: Interagency Review of Foreclosure Policies and Practices, which lists the Federal Reserve System, OCC and OTS as its sponsors:
“The reviews found critical weaknesses in servicers’ foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third-party vendors, including foreclosure attorneys. While it is important to note that findings varied across institutions, the weaknesses at each servicer, individually or collectively, resulted in unsafe and unsound practices and violations of applicable federal and state law and requirements. The results elevated the agencies’ concern that widespread risks may be presented—to consumers, communities, various market participants, and the overall mortgage market. The servicers included in this review represent more than two-thirds of the servicing market. Thus, the agencies consider problems cited within this report to have widespread consequences for the national housing market and borrowers.”
Now, that all sounds pretty toothy, right? Yeah, I thought so too when I first read it, but as has consistently been the case when looking at our government’s actions where bankers are concerned, a stern talking to is about as far as it goes. After that, it’s pretty much threats on par with eliminating hot towels in bank executive washrooms, and when all is said and done, they don’t even do that.
The federal agencies involved in the investigation used what they refer to as “standardized work programs” to guide their assessment and document their findings. Here they are verbatim, as presented in their final report, followed by my brief commentary in blue type:
1. Policies and procedures - Examiners reviewed the servicers’ policies and procedures to see if they provided adequate controls over the foreclosure process and whether those policies and procedures were sufficient for compliance with applicable laws and regulations.
Well, obviously servicer controls over the foreclosure process have been something less than “adequate” to ensure compliance with applicable laws and regulations… right? I mean, that is why we’re even talking about this… right?
2. Organizational structure and staffing - Examiners reviewed the functional unit(s) responsible for foreclosure processes, including their staffing levels, their staff ’s qualifications, and their training programs.
Even the bankers/servicers have been bemoaning how they are inadequately staffed and prepared to handle the unprecedented volume of foreclosures and applications for loan modifications, so obviously there are problems in this area… right?
Of course, they’ve been lamenting this lack of preparedness for the last three years, so it would seem that this rather pedestrian issue could have easily been solved by now… right? I mean to say… they could have built the damn space shuttle several times over by now, if they wanted to… right?
3. Management of third-party service providers - Examiners reviewed the servicers’ oversight of key third parties used throughout the foreclosure process, with a focus on foreclosure attorneys, MERS, and default-service providers such as LPS.
Obviously this is another problematic area… right? I mean, I couldn’t even count the number of court decisions that have highlighted the problems with LPS and MERS, so I’d have to think that all of those judges can’t just be flapping their gums, as it were.
4. Quality control and internal audits - Examiners assessed quality-control processes in foreclosures. Examiners also reviewed internal and external audit reports, including government-sponsored enterprise (GSE) and investor audits and reviews of foreclosure activities as well as servicers’ self-assessments.
Personally, I’d be shocked out of my shoes to find out that there even are any meaningful “quality control processes” in place at the major servicers, and I say that because none of them have gotten any better at this over the last three years and that’s no easy feat. I mean, what if I forced you to play golf every day for two or three years. Do you think you could be no better at golf after two years of playing every day even if you tried your hardest not to be any better? I doubt it.
I’m not even gong to comment on the colossal messes that are Fannie and Freddie, what would be the point? And I happen to know for a fact that investor audits are near meaningless in terms of impacting servicer behavior or performance. As to servicer “self-assessments,” all I can say is: Bwahahahahahahahaha! Sell that somewhere else, would you please.
5. Compliance with applicable laws - Examiners checked the adequacy of the governance, audits, and controls that servicers had in place to ensure compliance with applicable laws.
Oh shut up! If any of the federal regulators involved in this investigation were doing their job in the first place, they wouldn’t need to be conducting this “special” investigation now… right? I mean, shouldn’t the OCC, OTS and the Fed already KNOW the answers to these questions?
6. Loss mitigation - Examiners determined if servicers were in direct communication with borrowers and whether loss-mitigation actions, including loan modifications, were considered as alternatives to foreclosure.
This one is a no brainer… right? I mean, it’s only a question of degree… and the hellish torture borrowers must endure to receive such “consideration”… right?
7. Critical documents - Examiners evaluated servicers’ control over critical documents in the foreclosure process, including the safeguarding of original loan documentation. Examiners also determined whether critical foreclosure documents were in the foreclosure files that they reviewed, and whether notes were endorsed and mortgages assigned.
Obviously, this is a problem area, considering court decisions such as the Massachusetts Supreme Court’s “Ibanez” case in which neither Wells Fargo nor US Bank were able to come up with a single piece of paper showing that they were in fact the holders of the mortgages in question.
One bank brought in a blank Pooling and Servicing Agreement that was downloaded from the SEC’s Website, and the other showed up with a blank Private Placement Memorandum… neither could produce a schedule of loans allegedly assigned to the applicable trusts. And this, after more than two years to prepare.
Look, if the serivcers had the paperwork they needed to foreclose, they wouldn’t have needed “robo-signers” to sign their names to lost note affidavits ten thousand times a month… right?
8. Risk management - Examiners assessed whether servicers appropriately identified financial, reputational, and legal risks and whether these risks were communicated to the board of directors and senior management of the servicer.
Oh, they have to be kidding about this one. Tell you what… if anyone can find a single bank Board Member or servicer senior manager who will admit that they knew anything about anything in this regard, I’ll carry you piggyback from LA to Wall Street… hopping on one foot… naked… with a smiley face painted on my butt… while whistling a happy tune the whole way… how’s that?
~~~
Okay, so I’m sure you’re all wondering how the investigations came out, as was I after reaching this point in the report. I mean, obviously something triggered the “enforcement actions,” so what was it? How did the servicers rate as related to the “standardized work programs,” as described above? Well, I’m going to tell you… verbatim… again directly from the Fed’s report.
The interagency reviews identified significant weaknesses in several areas.
Well, thank the good Lord for that, wouldn’t you say?
A. Foreclosure process governance - Foreclosure governance processes of the servicers were underdeveloped and insufficient to manage and control operational, compliance, legal, and reputational risk associated with an increasing volume of foreclosures. Weaknesses included:
- Inadequate policies, procedures, and independent control infrastructure covering all aspects of the foreclosure process.
- Inadequate monitoring and controls to oversee foreclosure activities conducted on behalf of servicers by external law firms or other third-party vendors.
- Lack of sufficient audit trails to show how information set out in the affidavits (amount of indebtedness, fees, penalties, etc.) was linked to the servicers’ internal records at the time the affidavits were executed.
- Inadequate quality control and audit reviews to ensure compliance with legal requirements, policies and procedures, as well as the maintenance of sound operating environments.
- Inadequate identification of financial, reputational, and legal risks, and absence of internal communication about those risks among boards of directors and senior management.
Okay, so correct me if I’m wrong, but isn’t the essence of what was said there that NON ONE IS WATCHING THE STORE? Inadequate policies, procedures and controls covering ALL ASPECTS of the foreclosure process? I mean… pardon me, but isn’t the foreclosure process what servicers are in business… and entrusted to handle?
Inadequate monitoring of external law firms and third-party vendors? A lack of sufficient audit trails, AND inadequate quality control and audit reviews to ensure compliance with legal requirements AND inadequate identification of risks combined with the ABSENCE of communication about those risks to Boards and senior managers? (See, I told you no one at the top would know anything. Guess I’m pretty safe on that whole piggyback from LA to Wall Street bet.)
So… basically… the servicers are doing nothing right where foreclosures are concerned… right?
B. Organizational structure and availability of staffing - Examiners found inadequate organization and staffing of foreclosure units to address the increased volumes of foreclosures.
And, no surprises there. As I said, the servicers have been whining about this point for years now… I suppose where they live there’s full employment so they have a dickens of a time hiring and training anyone. Must be tough…
C. Affidavit and notarization practices - Individuals who signed foreclosure affidavits often did not personally check the documents for accuracy or possess the level of knowledge of the information that they attested to in those affidavits. In addition, some foreclosure documents indicated they were executed under oath, when no oath was administered. Examiners also found that the majority of the servicers had improper notary practices, which failed to conform to state legal requirements.
These determinations were based primarily on servicers’ self-assessments of their foreclosure processes and examiners’ interviews of servicer staff involved in the preparation of foreclosure documents.
Okay, so that says that bank employees did in fact lie on affidavits… fraudulently signing them for use in court, and failing to comply with state laws governing notarization of documents. Want to know what would happen to any of us if we got caught doing any of that? We’d very likely find ourselves in jail… or in a lot of trouble, at the very least.
If we got caught doing it tens of thousands of times a month for a couple of years… in order to foreclose on people’s homes… we’d be sharing a cell with Bernie Madoff, sure as shootin’.
And the Feds determined this through servicer self-assessments and interviews with servicer staffers? That’s a hoot! Shows you just how willing those employed by servicers are to cover for their employers. Just imagine what the Feds might find if they actually INVESTIGATED the affidavits for themselves instead of accepting the servicers’ self-assessments.
So, basically… the Feds asked: What up with the robo-signers?
And the servicers replied: Yep, we did it… you caught us… no need to do any further checking.
D. Documentation practices - Examiners found some—but not widespread—errors between actual fees charged and what the servicers’ internal records indicated, with servicers undercharging fees as frequently as overcharging them. The dollar amount of overcharged fees as compared with the servicers’ internal records was generally small.
Oh, who cares? I have no trouble believing that servicers are entirely incompetent as opposed to being evil… evil organizations are never as obtuse as servicers have proven themselves to be.
E. Third-party vendor management - Examiners generally found adequate evidence of physical control and possession of original notes and mortgages. Examiners also found, with limited exceptions, that notes appeared to be properly endorsed and mortgages and deeds of trust appeared properly assigned.
The review did find that, in some cases, the third-party law firms hired by the servicers were nonetheless filing mortgage foreclosure complaints or lost-note affidavits even though proper documentation existed.
What a total crock of crap that is… adequate evidence of properly endorsed and assigned, physically possessed original notes and mortgages? Attorneys including Max Gardner have told me that they’ve never seen a properly assigned or endorsed note or mortgage possessed by a servicer… and they’ve reviewed hundreds or even thousands of case files… but I’ll tell you what…
Fine… since the Feds say servicers have everything in order in this regard… then they shouldn’t object to having to show it to the judge when in court, or providing a signed declaration stating that they have the proper assignments and/or endorsements prior to foreclosing… right?
If they’ve got it… then show it. Shouldn’t be an issue… okay, so major problem solved right there.
I wonder why it is, however, that the servicers throw such a fit whenever legislation shows up at the state level that would require servicers to either produce such documentation prior to foreclosing… or even just requires them to submit a declaration that they have such documentation… does the banking lobby go into panic mode, making all sorts of thinly veiled threats about how such a law will increase borrowing costs for homeowners and basically destroy our collective economic future?
What I’m describing was recently the case in Arizona where the State Senate passed a bill 28-2 that would have required servicers to produce a declaration that they were in possession of the proper chain of title documentation prior to foreclosure.
I’m going to be writing an article about what happened in the Arizona case later today, but suffice it to say that the bill… while on its way to the Arizona House of Representatives… over a weekend… managed to completely DISSAPPEAR… replaced by a bill using the same alpha-numeric identifier, but now having to do with the funding of firefighters. And that should scare the hell out of anyone who cares about our democracy in the least… any of the Founding Fathers would turn over in their graves… where are we anyway… Iran? Hugo Chavez’s Venezuela?
F. Quality control (QC) and audit - Examiners found weaknesses in quality control and internal auditing procedures at all servicers included in the review.
Yeah, yeah, yeah… like I said earlier… I’d be shocked to learn that any quality control or internal auditing procedures existed at any of the servicers. In light of the rest of the investigation’s findings, for what in the world would it even be used?
~~~
Alrighty then… so what’s the next step, federal regulator people? What’s involved in the “enforcement actions” you have so proudly announced are being taken against 14 servicers, LPS and MERS? Whatcha’ gonna do, betches? Are you going to take away hot towels from their executive washrooms?
Here’s what the report says… VERBATIM, once again.
Based on the deficiencies identified in these reviews and the risks of additional issues as a result of weak controls and processes, the agencies at this time are taking formal enforcement actions against each of the 14 servicers subject to this review to address those weaknesses and risks. The enforcement actions require each servicer, among other things, to conduct a more complete review of certain aspects of foreclosure actions that occurred between January 1, 2009… and December 31, 2010.
OH DEAR GOD… NOOOOOOOOO… you’re not going to make the servicers conduct a more complete review of certain aspects of foreclosure actions… that’s going way too far. And what about the hot towels… they need hot towels… I’m overcome here… the tears won’t stop… just give me a minute…
I have a quick, if perhaps slightly unrelated question before I wrap this up and provide a few links so you can find the various related documents and press releases for yourself. I don’t want to offend anyone here, but why do we even need the word “F#@K” if you can’t use it here? Okay, it’s rhetorical, but I’m serious here… what’s that word for if not for situations such as this one?
Okay, I’m back. So… there you have it. Before I sign off, here are a few links you might want to check out… assuming you’re a glutton for punishment that is. Here’s the press release from the Federal Reserve describing the investigation’s conclusion: For Immediate Release from the Federal Reserve Board of Governors
And here’s the press release from the OCC, which has links to the actual enforcement actions against the eight servicers called out by that agency’s investigation: OCC Takes Enforcement Action Against Eight Servicers for Unsafe and Unsound Foreclosure Practices
In closing…
I should mention that this farce of an investigation by our federal banking regulators is not precluding the state attorneys general from continuing to pursue their own independent… and God willing… more stringent settlement with the mortgage servicers… and reports are that they will continue to do just that. Not that I have much faith that the 50 AGs are going to do all that much more… but I don’t see how they could accomplish any less.
And those critical of the Fed’s investigation and “enforcement action,” if it can even be called that, are making their voices heard with literally dozens of consumer advocacy organizations speaking out against the wholly insipid outcome, arguing that the consent decrees do not hold servicers accountable for illegal practices or stop avoidable foreclosures.
Numerous agencies signed onto a letter sent to Ben Bernanke, Sheila Bair, John Walsh (OCC) and John Bowman (OTS) asking that the Feds work with the state AGs on a tougher settlement. Among other things, the letter states:
“Millions of homeowners have been victimized by the fraudulent and abusive practices of mortgage servicers whose staff are trained for collection activities rather than loss mitigation, whose infrastructure cannot handle the volume and intensity of demand, and whose business records are a mess. Servicers falsify court documents in large part because they have not kept the accurate records of ownership, payments and escrow accounts that would enable them to proceed legally. The robo-signing allegations are the most obvious evidence that servicers are routinely failing to comply with the requirements of the laws and contractual provisions to which they are subject and the tip of the iceberg of servicer noncompliance.
These proposed consent orders also appear to do nothing to ensure that homeowners will be protected from past and existing abuses in the mortgage servicing process. The standards and methodology for the third-party review are vague. The proposed orders also provide no guidelines on loss mitigation or on evaluations for core servicing abuses, including application of payments, assessment of fees, or force placed insurance. Finally, the servicers may seek to inappropriately use these self-fashioned reviews as shields against other actions against them by homeowners or government enforcement agencies.
The proposed consent orders do not provide the accountability and rigor required to right this foreclosure crisis. They are clearly not intended to do so. We request that you withdraw the proposed orders and work with the state Attorneys General and United States Department of Justice on a joint settlement.”
~~~
So… what will happen next? I honestly have no idea. On one hand, I’d like to believe that my fellow citizens could not possibly abide this kind of flagrant corruption, dereliction of duty and at the utmost best… absolute ineptitude.
On the other hand, are you following American Idol this season? I just love the guy that plays the stand-up bass, don’t you? He won’t win, but he has great taste in music, I think. And what about Obama’s birth certificate… Trump in ‘12?
Mandelman out.
Mar
07
The Psychology and Politics of Foreclosure
This article originally ran in December 0f 2009, but I’m reposting it because maybe it will be read by someone who will find it even the least bit interesting.
Training personnel to properly interact with those losing homes to foreclosure is not only the right thing to do… it’s also likely to improve a mortgage servicer’s bottom-line.
Losing a home to foreclosure is something most people never forget. It’s an event likely to stay with you for the rest of your life. It’s certainly not something most people think will happen to them… until it does. And it can happen to anyone at any stage of life, young, old, rich, poor… all can find themselves at risk. As the off-color colloquialism says about life… stuff happens. Although many people might not readily agree, foreclosures are statistically a “there-but-for-the-grace-of-God-go-I” type of situation.
Of course, there are times when more stuff happens to more people, and today is obviously an example of such times. The economic conditions that we’re experiencing today are causing more foreclosures than at any time since the 1930s. When housing prices began to collapse a couple of years back, no one could have seen just how far things would go, and how difficult it would be to bring our economy back to life, as we’ve known it.
One of the causalities of our accelerating economic downturn has been a shared understanding of its cause. Some blame our politicians, some blame Wall Street’s bankers, some blame the Federal Reserve, and we’ve all heard that it was the sub-prime borrowers themselves that are the root cause of our recession.
Belief in a Just World
As human beings, we need to understand the causes behind events that negatively impact our world in order to feel safe. When we don’t understand how or why something happened, when something appears
to have been a truly random occurrence, it frightens us terribly because we can’t plan to protect ourselves from such an event.
Melvin Lerner is a prominent social psychologist. In his 1980 book, “The Belief in a Just World: A Fundamental Delusion,” he argued that people want to believe in the inherent justice of the economic system in which they live, and want to believe that people who are suffering are responsible for their own situations. He conducted a series of experiments and provided empirical evidence showing that after an initial feeling of sympathy, people tend to develop negative views toward others who are suffering. And that’s the type of negative tendency that seems to be in play today.
So, perhaps it shouldn’t be surprising that instead of having sympathy for homeowners that are losing their homes to foreclosure, many people are blaming the homeowners themselves for their predicaments. It’s just an example of the general tendency that was documented by Melvin Lerner and other social psychologists many years ago.
The Sanctity of Contracts
The other factor that comes into play involves the phrase: “sanctity of contracts.” We live in a nation with a capitalist economy that depends on the sanctity of contracts. Our founding fathers put the contract clause into the U.S. Constitution to make clear that people need to live up to the documents they sign. Article I, Section 10 of the U.S. Constitution states: “No state shall pass any law impairing the obligation of contracts.”
So, people have the tendency to view those losing homes to foreclosure as not living up to the contracts they’ve signed. They bit off more than they could chew, is a phrase often heard by those who lack sympathy for borrowers in foreclosure.
How do these factors manifest themselves in human terms? To understand, picture a line of moving trucks extending for hundreds of miles, taking the furniture of countless families to storage lockers. Picture the schoolchildren saying goodbye to their classmates, leaving the comfort and security of their own bedrooms. Picture the parents sitting up late at night looking through bills trying to figure out how they can save their home, or resigning themselves to the fact that they can’t make it. Picture the arguments, the crying, feelings of loss, of failure… picture the moment when all hope is lost.
Picture the day they must leave their home, getting in the car, pulling away from their home, the ones that turn to look back, the ones that force themselves not to look. The radios that aren’t turned on because no one wants to hear music at a time like that. These people you’re picturing aren’t going on vacation, they are being abruptly moved to the other side of town. They won’t have their own yard to play in. They won’t have their patio to relax on as they watch their children run and play. They’re losing their most prized possession… their home.
Yet, it’s also easy to take a stern view of this spectacle. The arguments go something like this: Foreclosure is not the end of the world. There are valuable lessons to be learned from such a life experience. They got themselves into this mess, now they have to pay the price for their own irresponsible actions.
The Price Paid by Children
Some of the hardest-hit victims of foreclosures are children. According to the Center for Responsible Lending, over the last two years: “Over 1.95 million youth have been affected by foreclosure.”
Brenda Jones Harden, Ph.D., wrote that “children exposed to violent, dangerous, and/or highly unstable environments are more likely to experience developmental difficulties.” Children hear more than most parents think they do, so parents’ stress is transferred to their children more than anyone might think.
Oftentimes, the kids come to feel that they are both a financial and emotional burden. They can begin making sacrifices for their families, wanting less, eating less. Some children are forced to quit teams they’re on, or stop taking music lessons simply because their parents cannot afford them. Even young children start taking on weekend jobs to help pay the family’s bills. Vacations are cancelled, and other normal childhood comforts are left by the wayside.
There are other enduring side effects as well. Being uprooted creates instability in a child’s life. They lose friends, teachers, teammates, social circles, perhaps most importantly, confidence. Being forced to change one’s lifestyle is both difficult and stressful for adults. For children, it can be a nightmare.
Children that are displaced by foreclosures often start bringing home lower grades. They exhibit behavior caused by lowered self-esteem. Behavioral issues often become common problems among kids because they feel that they don’t belong in their new setting. Frequently, families that lose their homes can’t afford to move into a neighborhood of equal socio-economic standing. The children can find themselves in new surroundings that may have more crime, inferior school systems, and fewer activities available for youth.
The Great Depression of the 1930s changed a generation. Those that lived through those difficult times altered the way they lived the rest of their lives. What will our nation experience a decade from now as a result of the millions of foreclosures our country continues to experience in these difficult times? No one can know the answer to that question, but it seems clear that there will be some discernable impact on segments of our population, and today’s children are certain to pay a price.
Exhibiting Anger
The crisis we’re experiencing is morphing as it continues, and we can expect continued changes that lead to further problems in our society as the recession lengthens and broadens in scope. One of the factors that’s changing is that the level of anger among foreclosed homeowners certainly appears to be rising, and lenders and mortgage servicers, faced with managing and marketing the volume of foreclosed properties, are increasingly seeing that anger in very tangible terms.
According to the National Association of Realtors, foreclosed properties already make up 45% of home sales, and the number is climbing. Home prices have continued to decline at record pace in 2009, and there are no signs of them stabilizing. Further price declines will undoubtedly result in even more foreclosures. Homeowners remain unable to refinance out of unaffordable adjustable rate mortgages (“ARMs”), and as the market continues its decline, more homeowners, realizing that they have little hope of building equity, will choose to walk away from their properties.
Homeowners losing homes to foreclosure have started advertising their home’s fixtures on Websites like craigslist.com. Some are stripping their home down to its wiring, destroying its plumbing, tearing out entire kitchens, and even removing roofing tiles. Garage doors are disappearing. Built-in cabinets are gone. Even furnaces and air conditioning units are up for sale by homeowners losing their homes to foreclosure.
Recently, the media reported that one homeowner in Monsey, NY, actually leveled his home with a bulldozer just a few days before the property was scheduled to be sold at auction.
Of course, not all homeowners experience that level of anger, or if they do, choose not to exhibit their anger in such extreme ways. But the trends are disturbing. More and more often homeowners are damaging their homes before being forced out as a result of foreclosure.
Communities Suffering
The large number of foreclosed homes on the market today means hundreds of thousands of homes sitting vacant. And vacant homes are magnets for partying teenagers, drug users, vandalism and crime. Broken windows, smashed plaster, huge holes punched in walls, graffiti on walls throughout the homes, debris, and much worse are becoming more commonplace, as more neighborhoods are seeing more foreclosed homes remain on the market for longer periods of time.
Abandoned homes from the foreclosure crisis have a direct impact on the rise in crime in numerous communities. Even when not the result of homeowners or local teenagers, thieves start breaking into these vacant houses, stripping them of valuables, and the destruction of property and vandalism is making the homes even more difficult to sell. Often, as a result, it requires more money to repair these homes than the homes would sell for in today’s market.
According to a recent study by Dan Immergluck of the Georgia Institute of Technology in Atlanta, and Geoff Smith of the Woodstock Institute in Chicago, “when the foreclosure rate increases one percentage point, neighborhood violent crime rises nearly 2.5 percent.” A study conducted in Austin, Texas last year, found that “blocks with unsecured buildings had 3.2 times as many drug calls to police, 1.8 times as many calls reporting theft, and twice the number of calls reporting violence as blocks without vacant buildings.”
According to a paper on the impact of foreclosures, published by NeighborWorks America:
“When homes are abandoned because of foreclosure, entire communities begin to deteriorate. Garbage, un-mowed lawns, pests and dilapidated roofs and porches are eyesores. The lack of care can change the entire atmosphere in a community. The people who remain may have feelings of loneliness, fear and frustration. To make matters worse, potential buyers find conditions like these unattractive, turning them away and cause the empty homes to remain on the market for months and even years.”
Neighbors Pay Too
According to the Center for Responsible Lending, “Foreclosures cost neighbors $223 billion.” The Center also cites that “Over 44 million homes in the United States will experience property devaluation as a result of foreclosures in their neighborhoods. Forty-two counties in the United States can expect to see their property tax base erode by more than $1 billion. And households located in proximity to lost properties could see the value of their property decrease by $5,000, on average.”
According to a story in USA Today, Vallejo, California, once a vibrant and flourishing place to live, recently had to declare bankruptcy when the collapsing housing market caused their local economy to go over the edge. “Vallejo cut 87 jobs and slashed funding for parks, a library, a senior citizens’ center and other public services, but it wasn’t enough to hold off the bankruptcy filing.”
Unfortunately, social programs and public services are often the first things to be cut from municipal budgets, and seeing the irony in this vicious cycle is unavoidable. The programs that are cut first are often the programs that exist to help those suffering from the crisis that caused the cuts in the first place.
Gimme’ Shelter
Of course, the question we should all be asking, with so many people losing homes, is where is everyone moving to? According to the National Coalition for the Homeless:
- 76% of displaced homeowners and renters are moving in with relatives and friends.
- 54% move to emergency shelters at some point.
- 40% are already ending up on the streets.
- 61% of state and local homeless coalitions say they’ve seen a rise in homelessness since the foreclosure crisis began in 2007.
Of course, many homeowners that lose their homes to foreclosure ultimately become renters, and the increasing demand for rentals has, quite predictably, led to rising prices. So, not only do foreclosure victims have a tough time qualifying for rental housing due to their damaged credit scores, but many are being priced out of the market as well.
And that’s not the end of the rental story. Foreclosures are affecting renters too. Many of the foreclosed properties nationwide are apartment unit buildings. According to the Furman Center: “60% of the 15,000 foreclosure filings in New York City last year were on multi-unit buildings.” And the result is families forced out of their apartments often with very little notice. According to the National Low Income Housing Coalition, “In the State of Nevada alone, 5,000 families have been evicted from their rental homes in the last 18 months.”
The coalition also reports that in suburban Los Angeles, a tent city of more than 200 displaced residents has emerged. Notoriously high rent payments in the LA basin are leaving many with no other option than to pitch a tent or live out of their car in settlements like this. At this settlement there is no electricity, no plumbing and no drainage. There is nowhere to properly store food. Clearly, the lack of plumbing and refrigeration poses serious health risks to the residents of this makeshift community.
Homeowners Attitudes About Banks Worsening
Lenders, mortgage servicers, hedge funds, and various real estate investors are all more than aware of the crisis and its ramifications. Yet, distressed homeowners continue to report their frustration and anger over the way they are treated by their bank. And for banks and mortgage servicers wondering about the outcome of this increasing homeowner dissatisfaction… well, the writing is on the wall.
In a November 2008 story, published by the Oakland Tribune (Oakland, California), customers of Countrywide, Wachovia, and Wells Fargo, among others, describe the banks as uncooperative, ineffective and rude.
“Countrywide says it wants to help people restructure? That’s baloney,” said Dawn Aguiar, who bought her Fremont home for $587,000 in 2005. “They have not been helpful at all.” She financed the purchase with a $586,000 mortgage from Countrywide, but homes in her neighborhood now sell for $450,000 to $500,000, so her house is “under water” – worth less than the loan. Her adjustable rate loan balance increases monthly, and she’s behind in her payments.
“One lady I spoke to was so rude, she had a real attitude,” Aguiar said. “She talked down to me like I was a deadbeat.”
The complaints from homeowners at risk of foreclosure about rude treatment by bank personnel are mounting in number and visibility. A quick check online yielded the following:
Mark Gagliardi about Countrywide: “They’re not proactive. No calls, no follow-ups. And when I call them, I get put on ignore.”
Sue Chai Spaulding about Bank of America: “They don’t want to help you. But they shouldn’t take this so lightly. These are people’s lives. They have been rude to me.”
Rachelle Gonzales about American Home Mortgage: “It’s so frustrating. They say they’ll help. Then they say no. They have called me names. They have called me a slime. This has been awful. Just awful.”
On one Website discussion about homeowners losing homes to foreclosure, the following discussion thread was easily found:
The first comment said: “The best way to ruin a house beyond repair is this… Get yourself a couple of bags of cement and mix a lot of water to make it a bit light… Drop it down every open pipe in your house (sink, toilet, bathtub, sewer pipes, main water pipe) then let it set. The repair will cost the bank more than the house… replacing every pipe in the house means they have to redo the house. They might be able to charge you tho… ha, ha.”
To which another replied: “Awww… the poor banks. Whatever will they do? Ain’t karma a bitch?”
And then another added: Yes they could, but, what can they get out of you when you have nothing to lose? Remember kids, fire cleanses everything.
And then another: “Great point. I hate banksters.”
And another: “Payback’s a bitch.”
And then another: “I think this is funny as hell. Everyone getting evicted should take all they want, then burn the place down.”
And another: “The bank may own the house but not the appliances! Of course they should take them – they are theirs. I can find NO sympathy in my heart for bankers or real estate agents – they’re right up there with tax collectors.”
And then another: “If the lender makes things hard, they get to live with the consequences. That house will be torn to shreds.”
And lastly: “If you ask for peace, prepare for war.”
The Cost of Foreclosing
The costs involved in foreclosing on a home are high and getting higher. Lost principal and interest payments, tax and insurance payments, maintaining the property, lost servicing fee income, costs of collection efforts/servicing, legal costs for handling the foreclosure, administrative fees, costs of restoring the property to saleable condition, real estate commissions… all play a role in negatively impacting a lender’s bottom-line.
According to estimates from Standard & Poor’s, published in 2008, the average cost to a lender, expressed as a percentage of the loan balance is 26%. The costs breakdown as follows:
Amount lost in interest payments: 13.6%
Property taxes paid by lender: 3%
Legal fees paid by lender: 1%
Real estate agent commissions: 6%
Home maintenance: 3%
With the housing crisis still in full swing, home prices still not at bottom, and many forecasting millions of foreclosures still to come, it’s clear that lenders will endure more pain over the next few years. What banks and servicers need to consider is how homeowner attitudes are likely to change for the worse as the crisis continues.
Our politicians have recently started to see how populist anger can make governing much more difficult. The outrage over the AIG bonuses provided an example of how close many of our nation’s citizens are to marching in the streets. One can only imagine how homeowners will feel a year or two from now, when many of those who thought they could make it through our economic downturn, find that they have not. No one can know for sure, but one thing seems certain: If they’re getting angry today, they’ll be that much angrier a year from now.
Loan Modifications
As the economy has deteriorated, the number of foreclosures has continued to increase, which places further downward pressure on home values, which in turn causes more foreclosures and does further harm to our economy. Today, we all realize that foreclosures benefit no one, although to-date, we have not united behind a solution to this very serious ongoing problem.
As a result of this dangerous, downward spiral, the cost of foreclosure in some parts of the country is reaching the level at which no one, including the investors that own the property, wants to foreclose.
One alternative is loan modification. If, by modifying the terms of an existing mortgage, the borrower can afford the mortgage payments and therefore remain in the home and avoid foreclosure, it’s often true that everyone, even the investors that hold the mortgage on the property, comes out ahead. For investors, it’s really a question of which alternative, foreclosure or modification, offers the greater financial return. There are several methods for determining the cost differential between the two alternatives, for example one could compare a present value calculation with the expected cost of foreclosure, factoring in variables like repairs and reconditioning, expected time on the market, and assumptions about trends in home prices.
It’s worth considering, however, that lenders and servicers continue to struggle with loan modifications, which are transactions that are particularly time and labor intensive and often produce unsustainable results. As an example, studies published last year indicate that when banks attempt to handle loan modification negotiations directly with a borrower, the end result is that 60% are back in default in six months.
The reasons for this are many, but the overriding fact is that negotiations between a bank and an individual homeowner at risk of foreclosure, are obviously not negotiations between equals, and that manifests itself
in high re-default rates in the first year.
By contracting with qualified and quality loan modification firms, banks may be able to increase the diameter of the pipeline and therefore modify more loans, keeping people in their homes where they’re supposed to be.
Cash for Keys
A number of lenders have adopted the practice of offering to pay a homeowner about to lose a home to foreclosure a cash payment for leaving the home undamaged. Lenders report offering payments of $1500-$3,000. But with the incidence of borrowers damaging their homes before they leave rising, offering three grand may only be keeping the already honest… honest.
For those angry enough to strip wiring out of a home, remove a garage door, or even sell the air conditioning unit, three thousand dollars is not likely to accomplish much.
The Best Way to Catch Flies
Lenders seeking to reduce their costs of foreclosures should consider the old axiom: You catch more flies with honey than you do with vinegar.
As it relates to a lender’s loss mitigation and collection personnel, it means that training them to better understand the psychology of foreclosures, to feel more empathy for those losing homes, to identify with a parent with children in financial distress… and more… banks can expect to be repaid hundreds of times over.
People in foreclosure, and those at risk of going into foreclosure, are often scared, lonely, tired, insecure, and sometimes confused. They’re not thinking clearly and they’re on the edge. A little kindness at a time like that can go a long, long way. A little rudeness, on the other hand, can push someone into a rage. It’s not easy to work with distressed homeowners day after day. And even though some might feel like they’re not letting their true feelings come through, at times like these, that can be difficult, if not impossible to do.
Here are some ideas that I think bank management could consider to change the way their personnel behave toward distressed borrowers.
- Explain what distressed borrowers are thinking and how they are feeling. Give them the details. Ask them to imagine what they would do and how they would feel. By bringing them into this kind of discussion, you’ll force people to realize that others worry about the same things they do, and once they share their thoughts and feelings with co-workers, they’ll stop seeing those in trouble as getting what they deserve.
- Share the facts about the costs that neighborhoods, communities and society as a whole pay as a result of foreclosures. You can use some of the statistics presented earlier. People sometimes fail to see how something that hasn’t happened to them personally, affects everyone personally.
- Play the Foreclosure Game – Ask people to calculate what would have to happen to place them at risk of losing their homes to foreclosure. You can even create cards that describe various catastrophes that happen to people in life. For example: You are injured in a car accident that leaves you unable to work for three months; the driver that hit you is uninsured. A month later your spouse is laid off from work, and you have a tuition payment of $18,000 due in 90 days. You can’t take out an equity line on your home, nor can you borrow from the bank. And your retirement plan account has been reduced by 40% as a result of the latest market correction.
- Consider asking a borrower who already lost his or her home to foreclosure to come in as a guest speaker. Often times, it’s harder to harbor ill feelings about someone you’ve met face-to-face, and the personnel stories from people who have come through it, can have a lot of impact.
- Conduct role-playing exercises in which one person is the borrower and the other the bank manager. The borrower starts by explaining to the bank manager how they got in so much trouble. The rest of the group votes on the level of empathy and compassion the bank manager has communicated during the call.
- Review your personnel training manuals to ensure that they are not placing counterproductive restrictions or using guidelines that make it more difficult for your people to spend the time needed. For example, do your people try to spend less than a certain amount of time per call? If the answer is yes, you may want to consider either lifting that requirement, or lengthening it.
- Changing culture has to start at the top. Have all of your organization’s top managers speak at your training sessions. When your loss mitigation personnel hear the CEO talk about foreclosure victims with sympathy and caring… they’ll stop and listen.
- Clip and distribute articles that highlight the heartbreaking stories of people losing homes due to no fault of their own. Many people today, still have the impression that those that got in trouble did it to themselves. Show data on the number of prime loans that are now defaulting. Examples that destroy that perception help to open minds.
- Encourage your people to share stories with each other at regular meetings. This is not something you want to do just once and leave it alone after that. This is an ongoing program intended to make sure that the people you have on the phone aren’t causing someone to punch holes in their walls when they hang up from the call.
- Consider increasing the number of breaks your people take during the day. And consider providing some items “just for fun” in areas where breaks are taken. An Etch-a-Sketch, Slinky, or even Play-Doh, can all bring back happy memories and help to relieve stress, or on the more serious side, provide an exercise ball, weights, or even a treadmill or two… exercise kills stress.
Conclusion
Human beings have a need to see bad things that happen to someone as not being their problem. And because of how this crisis has unfolded, many people have come to believe that everyone losing a home is an “irresponsible sub-prime borrower”. This belief can color how someone interacts with a distressed homeowner.
Those losing homes today are going through very stressful times. Many have lost jobs, and are struggling to make ends meet. Many have young children. And many have lost all hope. It’s easy for someone under that kind of stress to become angry, and an angry homeowner losing a home to foreclosure is likely to damage the home before leaving.
Banks and servicers need to take a look at how loss mitigation personnel are trained to deal with homeowners at risk of foreclosure, because as the months and even years go by, the situation will only get worse. By helping personnel to better understand what’s happening and how these customers are feeling, they can spend a little extra time, or offer a kind word that can make the difference between a home left in decent condition, and one in need of thousands of dollars in repairs.
Most importantly, communicate with the people that interact with troubled borrowers on the phone every day. It’s a hard job and constant exposure to tragic situations and frustrated or angry customers can wear one down, even if the person doesn’t realize it.
Today, just like my mother used to say… It pays to be nice.
Mandelman out.
Feb
17
Federal Regulators to Bring Enforcement Actions Against Banks… May Get Rid of Hot Towels in Washroom
After lawyers deposing bank personnel uncovered “robo-signers” fraudulently signing thousands of lost note affidavits and other documents the serivcers were required to have in order to foreclose on a home, but apparently didn’t, a regulatory review of mortgage servicer practices was initiated by the federal banking agencies.
Well, the magazine, American Banker (“AB”) is now reporting that formal enforcement actions against most, if not all, of the 14 mortgage servicers reviewed are expected soon.
AB says that Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and Ally Financial Inc. — are likely to face the toughest requirements, due to the sheer number of issues being addressed. Expectations are that the enforcement actions will include civil monetary penalties.
The regulators are still in discussions over the specific terms and state attorneys general, the Justice Department, the Department of Housing and Urban Development, the Treasury Department and the Consumer Financial Protection Bureau are all involved. According to prepared testimony of Acting Comptroller of the Currency John Walsh, which was obtained by American Banker and scheduled for Thursday in front of the Senate Banking Committee:
“The OCC and the other federal banking agencies with relevant jurisdiction are in the process of finalizing actions that will incorporate appropriate remedial requirements and sanctions with respect to the servicers within their respective jurisdictions. We expect that our actions will comprehensively address servicers’ identified deficiencies and will hold servicers to standards that require effective and proactive risk management of servicing operations, and appropriate remediation for customers who have been financially harmed by defects in servicers’ standards and procedures. We also intend to leverage our findings and lessons learned in this examination of enforcement process to contribute to the development of national servicing standards.”
The federal regulators have said that they hope the enforcement orders have the effect of sending a message to the rest of the servicing industry. I love it when federal banking regulators “hope” stuff will happen.
The details are still being finalized, but are likely to require servicers to increase staffing levels, establish a single point of contact for borrowers, and “conduct a comprehensive look back at their servicing portfolio to detect and correct problems,” whatever the hell that means.
AB says that the FDIC and other government officials are pushing for “servicers to offer enhanced, streamlined modifications to troubled borrowers in exchange for a clearer path to foreclosure if re-default occurs after the workout.”
But the AB story says: “It remains unclear, however, if regulators will take such a step.”
Okay, just wait a damn minute here.
When I started writing this article I thought I was going to be telling people that finally… finally… after being allowed to abuse literally millions of American homeowners in the worst ways and at the worst time imaginable, finally the federal banking regulators were going take steps to punish servicers for their crimes against homeowners, investors, and our society as a whole.
But, that’s not what’s happening here at all is it. What did that last paragraph say?
“… servicers to offer enhanced, streamlined modifications to troubled borrowers in exchange for a clearer path to foreclosure if re-default occurs after the workout.”
You know what… go to hell. How about the servicers offer “enhanced, streamlined modifications to troubled borrowers” just because it’s the right thing to do? How about the servicers do it because although they can never come close to making amends for what they’ve done, under your watchful eye, federal regulators, I might add… they start doing the right thing now because they owe it to the American citizenry? How about they do it because it’s their job… because it’s in the best interests of the nation… how about any of those reasons, you disingenuous pack of regulating clowns?
How about the servicers… and you guys that call yourselves banking regulators, although I would like to point out that clearly you have regulated nothing in the banking industry for perhaps 30 and certainly 20 years… how about if you all start to realize that it’s your bankers that have caused our economy to fall off a cliff and caused the pain that will no doubt be with us for decade or decades, and that if people re-default it’s your fault for not properly modifying the loan, or because of yet another economically induced hardship, and that you don’t get to foreclose quicker next time because you did such a lousy job the first time around?
How about if the servicers are never permitted to punish anyone else for anything because they lost that privilege when they proved themselves capable of being nothing short of sadistic, unfeeling monsters, unfit to socialize with the rest of humanity? How about something like that?
And the story goes on to say that although several banks were expecting the enforcement actions to come out this week, but that “the timeline appears to be slipping.”
Yeah, I’ll be the timeline is slipping. Something in Washington’s slipping, that’s for damn sure.
Now, sources are apparently saying that they hope to issue whatever milquetoast enforcement action orders the traveling sycophants finally agree on sometime in March, and that there’s going to be something called a “global settlement” that comes as part of the package.
“After the orders are released, regulators will follow up with a report on the findings of their review and further recommendations,” the AB story says.
Oh and guess what? “There appear to be differences among the agencies in how tough to make the enforcement orders and how high the monetary penalty should be.”
No kidding? Now that’s hard to believe, don’t you think? Reports say that Elizabeth Warren’s Consumer Financial Protection Bureau, or CFPB, is “pushing for steep fines to be assessed on servicers, coupled with stringent remedial actions.” Go Liz… you are the bomb.
The FDIC is also supposed to be in favor of tough enforcement measures. (Like what, do you suppose… a stern talking to?) The OCC… or, Office of the Comptroller of the Currency, however, is “concerned about taking overly harsh actions.”
Let me guess, the OCC wants to get tough on servicers that have violated whatever it is they’ve violated by offering back rubs, blow jobs and a buck ninety-five as a fine. I can’t take this much longer… why the hell did I start writing about this in the first place?
It seems that this past Monday, the regulators… and I use that term extremely loosely… met with Tim “Transparency” Geithner, along with representatives from the Federal Housing Finance Agency (“FHFA”), HUD and CFPB in order to consider the pending actions.
The AB story then says the following:
“Although the orders will effectively establish standards for the largest servicers, they are not expected to supplant efforts already underway for regulators to issue their own formal set of rules.”
What in the world does that mean? Why can’t these people talk like… I don’t know… people? I’ll tell you what… I wasn’t in favor of it before, but I’m starting to be pro-torture over here. Let’s waterboard these inconceivable wastes-of-space and then see how bright eyed and bushy tailed they are at work the next day.
Want more? Try this sentence on for size:
“Regulators are still divided on where and how to set such standards, with the FDIC pushing to include them as part of a risk-retention rule while the OCC wants to craft a stand-alone measure.”
Gee, which side of that pressing issue are you on, pray tell? Are you a risk-retention kind of person, or do you favor a stand-alone measure? Don’t answer that, damn it, I’ll have to hurt you.
There’s more and then I’m done with this topic forever… you want to read about crap like this, read someone else’s blog because I’d rather chop off all eight of my fingers than have to write about this kind of drool again. Here goes…
“Regulators have been hinting for weeks that they may take enforcement actions against servicers, and Walsh sought to reassure Congress everyone’s on top of the issue.”
“We are directing banks to take corrective action where we find errors or deficiencies, and we have an array of informal and formal enforcement actions and penalties that we will impose if warranted These range from informal memoranda of understanding to civil money penalties, removals from banking, and criminal referrals.”
Sheila Bair over at FDIC says that any solution “must result in industry-wide standards.” In her January 19th speech to the Mortgage Bankers Association. Bair said:
“In order to remedy failures endemic to the largest mortgage servicers, I hope to see enforceable requirements that will significantly improve opportunities for homeowners to avoid foreclosure.”
Wait a minute… what damn year is this? 2011? Yeah, fine… I was just checking. I’ll bet you anything that if I go back two years, I can find Sheila saying that same sentence.
Then the AB story says that it would have been better if the servicers had taken remedial steps on their own before regulators were forced to take action. Oh for crying out loud… yeah, I suppose it would have been better for Pablo Escobar to check himself into a drug rehabilitation center too, but that wasn’t very likely, now was it?
Then from the AB story:
“It’s unfortunate it had to get this point,” said William Longbrake, an executive-in-residence at the University of Maryland. “It would have been better if the industry had done these things without the federal government.”
What in the Sam Hill is an “executive in residence”? And what kind of distorted perspective looks at what the servicers have done her… these last three years… and says… gee, it would have been better if they wouldn’t have done those things. Mr. Longbrake, are you aware that people have committed suicide because of that these servicers have done to them? Marriages have ended. Entire communities destroyed. Damage to children that is inestimable. How about asking… where the hell has the federal government been for the last three years?
The AB story wraps up with talk about the “global settlement” claptrap, and I don’t know what the hell it means, but I sure don’t like the sound of it. Here’s what the AB story says:
“While the settlement is likely to be bad public relations for the servicers involved, Jaret Seiberg, a policy analyst at MF Global Inc.’s Washington Research Group, said a global settlement may still be positive news for the industry.”
“A global settlement should be extremely positive for banks by putting this issue to rest and letting the industry move past the paperwork snafus,” Seiberg said.
“Bad public relations?” “Paperwork snafus?” Jaret, Jaret, Jaret… my boy… you are such an asshat. And you’re a policy analyst at MF Global Inc.’s Washington Research Group? If there’s a God, someday you or someone you love will lose your home to foreclosure.
Jaret was also quite intrigued by “the potential for streamlined modifications.” It’s true… Jaret says that requiring streamlined modifications could have an impact. Maybe… he’s not sure, but they could… according to Jaret… it’s a possibility… according to Jaret… they might… have an impact… of some kind… who knows, but it’s a distinct possibility… says Jaret.
Here’s Jaret’s big finishing quote… pay attention, he’s a policy analyst remember… at MF Global Inc.’s Washington Research Group. Go Jaret… it’s your birthday… Go Jaret…
“The easier you make the modification the more likely you are to get a modification, so the concept makes a lot of sense. For the industry, where there is an automatic modification and then foreclosure if the borrower goes delinquent a second time, you could end up benefiting the banks because it’s going to eliminate a lot of uncertainty now about the ability of financial firms to foreclose on borrowers behind on payments. Right now there are so many programs out there, it difficult to know when banks can foreclose. This would set up a streamlined model.”
What? Yeah right… like I’m the only one thinking about how much fun it would be to kick the shite out of Jaret in a parking lot after a couple of beers and maybe a shot of Patron. Don’t punish yourself… It’s okay to dream.
And I’m going to have to watch this stupid story develop, you want to know why?
Well, believe it or not, a producer from KNX/KFWB, which are CBS Radio stations out here in Los Angeles, just called me a few minutes ago, as I was writing this unbelievably annoying story, and asked me if I would be on Bob McCormick’s Money Radio Show again this coming Monday morning starting at 9:00 AM.
It seems that they just saw this story come across the wire and want me to come on the show and discuss it. At 9:00 AM Monday morning. And I’m going to be in Las Vegas at the Paris Hotel and Casino attending Max Gardner’s Operation Strike Back attorney training event, so it’s really quite a problem.
I mean, I can do the show from the phone in my room, but how in the world am I going to have time to get drunk enough by 9:00 AM so that after I talk about this insipid drivel I don’t hurl myself from the top of the Vegas version of the Eifel Tower?
Mandelman out.
Jan
29
California Appeals Court Rules Homeowners Can Sue Banks for Fraud Over Broken Loan Modification Promises
Well, first let me just say… it’s about damn time.
The Second District Court of Appeals in Los Angeles has ruled that banks are “legally bound by their loan modification promises,” and can be sued for fraud when homeowners rely on such promises and are damaged as a result.
Did I already say that it’s about damn time? Well, it totally is.
Claudia Aceves received a foreclosure notice from U.S. Bank, so she filed for bankruptcy protection and the foreclosure was halted. Her plan was to file Chapter 13, which would mean that she could very likely keep her home and under a court approved repayment plan.
Then she got a call from the nice folks at U.S. Bank… and the bank’s representative said… I’m paraphrasing here…
“Oh, Claudia, Claudia, Claudia… this is all just one big misunderstanding. You don’t need to trouble yourself with the whole bankruptcy thing. We’d be happy to help you get your loan reinstated and modified… assuming, of course, you wouldn’t mind just withdrawing your bankruptcy filing.”
So, she did.
And just five days later… without so much as a courtesy call or even a “F#@k you” card… U.S. Bank scheduled her home to be auctioned off a month later.
See… this is an excellent example of why I’m starting to think we’ve become too civilized a society. I was born back in Brooklyn, New York, I mostly grew up in Pittsburgh, and my wife’s from the City of Chicago… and I’m here to tell you that if someone tried to pull something like that on someone else in any of those places back when we were kids, the offending party would pray for the dispute to be settled in a courtroom, you know what I’m saying here?
Claudia told Bob Egelko of the San Francisco Chronicle that the bank was nice enough to contact her attorney the day before the sale to offer her the chance to save her home by agreeing to a higher monthly payment.
The auction went on as scheduled and would you like to venture a guess as to who purchased Claudia’s home? Come on, you can do it… why, U.S. Bank, of course! And just two months later, the bank pinned an eviction notice to her door.
What would they say over in England… oh, that’s right… Jolly good show! In fact, I’d have to add… crackerjack work… that is one fine piece of banking right there, wouldn’t you say?
So, instead of, let’s say… causing someone great bodily harm or significant property damage… Claudia filed a lawsuit against her bank… only to have a lower court judge dismiss it!
Hey look… I can understand that… I mean, she was the one who was having trouble making the mortgage payment on her $845,000 loan, which almost undoubtedly secures a property worth something under $500k. And she had a chance to keep her home through a court approved repayment plan had she gone ahead with her Chapter 13 filing.
But, noooo… she withdrew her filing, now didn’t she? And whose fault was that? She knew she was dealing with a bank, and she went ahead and relied on what they said… I mean… come on… who would do something like that in this day and age?
I could see it if she had gotten a call from say… the mob… you know, good old organized crime. Sure, then she could have reasonably assumed that the caller would keep his word and help her modify her loan, but a bank representative? There’s no way I’d believe anything a bank representative told me over the phone.
So, the lower court dismissed her frivolous claim, but what do you know… it must be a brand new day in the California courts because the Second District Appeals Court picked it right back up and, even though they declined to reverse the foreclosure, this past Thursday the court ruled 3-0 that…
“… a lender who falsely promises to help a homeowner prevent foreclosure can be sued for fraud.”
The court, according to Friday’s Chronicle, said:
“… (she) could have reasonably relied on the bank’s promise to work out a loan reinstatement and modification if she did not seek relief under the bankruptcy law…”
During the proceedings held in Los Angeles, U.S. Bank argued that Claudia had acted in “bad faith,” by attempting to avail herself of our nation’s bankruptcy laws in order to avoid foreclosure.
A spokes-jackass from U.S. Bank supposedly said:
“The betch was trying to avoid getting foreclosed on by hiding behind that bankruptcy shiz, so why should we have to deal fairly, tell the truth, and keep our promises? She’s the one who set the rules here… and come on… we all know that ho can’t afford no $835,000 loan, and if we don’t take her pad back and dump it now, it could be worth a hundred grand less by the end of this year.
If Americans want this country’s banks to get healthy again, they’re going to have to stop getting in our way, and set aside all those ridiculous rights and laws that deadbeats are always yammering on about. I’m telling you, if people keep resisting like this, we’ll just have to spend more of your tax dollars lobbying and probably even have to order another trill from Uncle Timmy and Aunt Ben.”
Okay, so I made that last part up, about the spokes-jackass, but can you blame me?
And anyway, the court said that Chapter 13 is a legitimate way for a homeowner to reinstate a mortgage and that they didn’t see how Claudia filing for bankruptcy protection would have violated the bank’s rights. Not only that, but since a federal bankruptcy judge still cannot modify a mortgage by lowering payments or extending the term, Claudia had darn fine reason to rely on the bank’s promise to help her reinstate her loan, and provide her with more favorable terms.
Claudia’s attorney, Nick Alden, told the Chronicle that the decision should also help other homeowners throughout California who have been told by their bank that they would get a modification, and are making trial payments as a result, but could easily find their homes on the auction block at any moment.
Why? Because they’re banks, that’s why… and these days, banks and fraud are like bees and honey, don’t you know.
So… hey, banker-people-that-read-me… I know you’re there… Google analytics, remember… are you starting to notice anything changing for you guys of late? Starting to feel a little bit warmer under your heavily starched collars? Why you guys are starting to be about as popular as Sarah Palin at an Arizona Liberals convention wearing an NRA tee-shirt with a target on each breast.
Do you remember what I started warning you about over a year ago? Anyone, anyone? Remember my article, My Grandmother, Standard Oil and the Banks? Well if you didn’t read it… it’s sure should pack a powerful message about your collective future.
And homeowners… start your lawyers… Here’s a link to the ACEVES DECISION, but in case it doesn’t work because I had some trouble with it, the decision in its entirety follows below.
In case you want to reach Nick Alden or Dennis Moore, the two lawyers in this case, here’s their contact information:
Nick Alden, Attorney at Law
1380 Davies Dr.
Beverly Hills, CA, US 90210
Telephone: +1 (310) 275-6664
Fax: +1 (310) 550-1856
aldenlaw@yahoo.com
Dennis Moore, Attorney at Law
5041 La Mart Dr., Ste 230
Riverside, CA 92507
(951) 660-5289
Fax: (951) 340-3276
Mandelman out.
~~~
Filed 1/27/11
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
| CLAUDIA JACQUELINE ACEVES,
Plaintiff and Appellant, v. U.S. BANK, N.A., as Trustee, etc., Defendant and Respondent. |
B220922
(Los Angeles County Super. Ct. No. BC410890) |
APPEAL from an order and a judgment of the Superior Court of Los Angeles County, Michael L. Stern, Judge. Affirmed in part and reversed in part.
Dennis Moore; Nick A. Alden for Plaintiff and Appellant.
Brooks Bauer, Michael R. Brooks and Bruce T. Bauer for Defendant and Respondent.
___________________________________________
As alleged in this case, plaintiff, a married woman, obtained an adjustable rate loan from a bank to purchase real property secured by a deed of trust on her residence. About two years into the loan, she could not afford the monthly payments and filed for bankruptcy under chapter 7 of the Bankruptcy Code (11 U.S.C. §§ 701–784). She intended to convert the chapter 7 proceeding to a chapter 13 proceeding (11 U.S.C. §§ 1301–1330) and to enlist the financial assistance of her husband to reinstate the loan, pay the arrearages, and resume the regular loan payments.
Plaintiff contacted the bank, which promised to work with her on a loan reinstatement and modification if she would forgo further bankruptcy proceedings. In reliance on that promise, plaintiff did not convert her bankruptcy case to a chapter 13 proceeding or oppose the bank’s motion to lift the bankruptcy stay. While the bank was promising to work with plaintiff, it was simultaneously complying with the notice requirements to conduct a sale under the power of sale in the deed of trust, commonly referred to as a nonjudicial foreclosure or foreclosure. (See Civ. Code, §§ 2924, 2924a–2924k.)
The bankruptcy court lifted the stay. But the bank did not work with plaintiff in an attempt to reinstate and modify the loan. Rather, it completed the foreclosure.
Plaintiff filed this action against the bank, alleging a cause of action for promissory estoppel, among others. She argued the bank’s promise to work with her in reinstating and modifying the loan was enforceable, she had relied on the promise by forgoing bankruptcy protection under chapter 13, and the bank subsequently breached its promise by foreclosing. The trial court dismissed the case on demurrer.
We conclude (1) plaintiff could have reasonably relied on the bank’s promise to work on a loan reinstatement and modification if she did not seek relief under chapter 13, (2) the promise was sufficiently concrete to be enforceable, and (3) plaintiff’s decision to forgo chapter 13 relief was detrimental because it allowed the bank to foreclose on the property. Contrary to the bank’s contention that plaintiff’s use of the Bankruptcy Code was ipso facto bad faith, chapter 13 is “‘uniquely tailored to protect homeowners’ primary residences [from foreclosure].’” (In re Willette (Bankr. D.Vt. 2008) 395 B.R. 308, 322.)
I
BACKGROUND
The facts of this case are taken from the allegations of the operative complaint, which we accept as true. (See Hensler v. City of Glendale (1994) 8 Cal.4th 1, 8, fn. 3.)
A. Complaint
This action was filed on April 1, 2009. Two months later, a first amended complaint was filed. On August 17, 2009, after the sustaining of a demurrer, a second amended complaint (complaint) was filed. The complaint alleged as follows.
Plaintiff Claudia Aceves, an unmarried woman, obtained a loan from Option One Mortgage Corporation (Option One) on April 20, 2006. The loan was evidenced by a note secured by a deed of trust on Aceves’s residence. Aceves borrowed $845,000 at an initial rate of 6.35 percent. After two years, the rate became adjustable. The term of the loan was 30 years. Aceves’s initial monthly payments were $4,857.09.
On March 25, 2008, Option One transferred its entire interest under the deed of trust to defendant U.S. Bank, National Association, as the “Trustee for the Certificateholders of Asset Backed Securities Corporation Home Equity Loan Trust, Series OOMC 2006-HE5” (U.S. Bank). The transfer was effected through an “Assignment of Deed of Trust.” U.S. Bank therefore became Option One’s assignee and the beneficiary of the deed of trust. Also on March 25, 2008, U.S. Bank, by way of a “Substitution of Trustee,” designated Quality Loan Service Corporation (Quality Loan Service) as the trustee under the deed of trust. The Substitution of Trustee was signed by the bank’s attorney-in-fact.
In January 2008, Aceves could no longer afford the monthly payments on the loan. On March 26, 2008, Quality Loan Service recorded a “Notice of Default and Election to Sell Under Deed of Trust.” (See Civ. Code, § 2924.) Shortly thereafter, Aceves filed for bankruptcy protection under chapter 7 of the Bankruptcy Code (11 U.S.C. §§ 701–784), imposing an automatic stay on the foreclosure proceedings (see 11 U.S.C. § 362(a)). Aceves contacted U.S. Bank and was told that, once her loan was out of bankruptcy, the bank “would work with her on a mortgage reinstatement and loan modification.” She was asked to submit documents to U.S. Bank for its consideration.
Aceves intended to convert her chapter 7 bankruptcy case to a chapter 13 case (see 11 U.S.C. §§ 1301–1330) and to rely on the financial resources of her husband “to save her home” under chapter 13. In general, chapter 7, entitled “Liquidation,” permits a debtor to discharge unpaid debts, but a debtor who discharges an unpaid home loan cannot keep the home; chapter 13, entitled “Adjustment of Debts of an Individual with Regular Income,” allows a homeowner in default to reinstate the original loan payments, pay the arrearages over time, avoid foreclosure, and retain the home. (See 1 Collier on Bankruptcy (16th ed. 2010) ¶¶ 1.07[1][a] to 1.07[1][g], 1.07[5][a] to 1.07[5][e], pp. 1‑25 to 1‑30, 1‑43 to 1‑45.)
U.S. Bank filed a motion in the bankruptcy court to lift the stay so it could proceed with a nonjudicial foreclosure.
On or about November 12, 2008, Aceves’s bankruptcy attorney received a letter from counsel for the company servicing the loan, American Home Mortgage Servicing, Inc. (American Home). The letter requested that Aceves’s attorney agree in writing to allow American Home to contact Aceves directly to “explore Loss Mitigation possibilities.” Thereafter, Aceves contacted American Home’s counsel and was told they could not speak to her before the motion to lift the bankruptcy stay had been granted.
In reliance on U.S. Bank’s promise to work with her to reinstate and modify the loan, Aceves did not oppose the motion to lift the bankruptcy stay and decided not to seek bankruptcy relief under chapter 13. On December 4, 2008, the bankruptcy court lifted the stay. On December 9, 2008, although neither U.S. Bank nor American Home had contacted Aceves to discuss the reinstatement and modification of the loan, U.S. Bank scheduled Aceves’s home for public auction on January 9, 2009.
On December 10, 2008, Aceves sent documents to American Home related to reinstating and modifying the loan. On December 23, 2008, American Home informed Aceves that a “negotiator” would contact her on or before January 13, 2009 — four days after the auction of her residence. On December 29, 2008, Aceves received a telephone call from “Samantha,” a negotiator from American Home. Samantha said to forget about any assistance in avoiding foreclosure because the “file” had been “discharged” in bankruptcy. On January 2, 2009, Samantha contacted Aceves again, saying that American Home had mistakenly decided not to offer her any assistance: American Home incorrectly thought Aceves’s loan had been discharged in bankruptcy; instead, Aceves had merely filed for bankruptcy. Samantha said that, as a result of American Home’s mistake, it would reconsider a loss mitigation proposal. On January 8, 2009, the day before the auction, Samantha called Aceves’s bankruptcy attorney and stated that the new balance on the loan was $965,926.22; the new monthly payment would be more than $7,200; and a $6,500 deposit was due immediately via Western Union. Samantha refused to put any of those terms in writing. Aceves did not accept the offer.
On January 9, 2009, Aceves’s home was sold at a trustee’s sale to U.S. Bank. On February 11, 2009, U.S. Bank served Aceves with a three-day notice to vacate the premises and, a month later, filed an unlawful detainer action against her and her husband (U.S. Bank, N.A. v. Aceves (Super. Ct. L.A. County, 2009, No. 09H00857)). Apparently, Aceves and her husband vacated the premises during the eviction proceedings.
U.S. Bank never intended to work with Aceves to reinstate and modify the loan. The bank so promised only to convince Aceves to forgo further bankruptcy proceedings, thereby permitting the bank to lift the automatic stay and foreclose on the property.
The complaint alleged causes of action against U.S. Bank for quiet title, slander of title, fraud, promissory estoppel, and declaratory relief. It also sought to set aside the trustee’s sale and to void the trustee’s deed upon the sale of the home.
B. Demurrer
U.S. Bank filed a demurrer separately attacking each cause of action and the requested remedies. Aceves filed opposition.
At the hearing on the demurrer, Aceves’s attorney argued that Aceves and her husband “could have saved their house through bankruptcy,” but “due to the promises of the bank, they didn’t go those routes to save their house. [¶] . . . [¶] . . . [T]hat’s the whole essence of promissory estoppel. [¶] . . . [¶] Prior to [American Home’s November 12, 2008] letter, there’s numerous phone contacts and conversations with [American Home], which was the agent for U.S. Bank, regarding, ‘Yes, once we get leave, we will work with you, . . . and they did not work with her at all.’” The trial court replied: “The foreclosure took place. There’s no promissory fraud or anything that deluded [Aceves] under the circumstances.”
On October 29, 2009, the trial court entered an order sustaining the demurrer without leave to amend and a judgment in favor of U.S. Bank. Aceves filed this appeal.
II
DISCUSSION
Aceves focuses primarily on her claim for promissory estoppel, arguing it is adequately pleaded. She also contends her other claims should have survived the demurrer. U.S. Bank counters that the trial court properly dismissed the case.
We conclude Aceves stated a claim for promissory estoppel. As alleged, in reliance on a promise by U.S. Bank to work with her in reinstating and modifying the loan, Aceves did not attempt to save her home under chapter 13. Yet U.S. Bank then went forward with the foreclosure and did not commence negotiations toward a possible loan solution. As demonstrated in its brief on appeal, U.S. Bank fails to appreciate that chapter 13 may be used legitimately to assist a borrower in reinstating a home loan and avoiding foreclosure after a default.
All but one of Aceves’s remaining claims were properly dismissed. She adequately pleaded a claim for fraud. But the record does not support her other claims or requests for relief: The complaint does not allege any irregularities in the foreclosure process that would permit the trial court to void the deed of sale or otherwise invalidate the foreclosure.
A. Promissory Estoppel
“‘The elements of a promissory estoppel claim are “(1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) [the] reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance.” . . .’” (Advanced Choices, Inc. v. State Dept. of Health Services (2010) 182 Cal.App.4th 1661, 1672.)
1. Clear and Unambiguous Promise
“‘[A] promise is an indispensable element of the doctrine of promissory estoppel. The cases are uniform in holding that this doctrine cannot be invoked and must be held inapplicable in the absence of a showing that a promise had been made upon which the complaining party relied to his prejudice . . . .’ . . . The promise must, in addition, be ‘clear and unambiguous in its terms.’” (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1044, citation omitted.) “To be enforceable, a promise need only be ‘“definite enough that a court can determine the scope of the duty[,] and the limits of performance must be sufficiently defined to provide a rational basis for the assessment of damages.”’ . . . It is only where ‘“a supposed ‘contract’ does not provide a basis for determining what obligations the parties have agreed to, and hence does not make possible a determination of whether those agreed obligations have been breached, [that] there is no contract.”’” (Id. at p. 1045, citation omitted.) “[T]hat a promise is conditional does not render it unenforceable or ambiguous.” (Ibid.)
U.S. Bank agreed to “work with [Aceves] on a mortgage reinstatement and loan modification” if she no longer pursued relief in the bankruptcy court. This is a clear and unambiguous promise. It indicates that U.S. Bank would not foreclose on Aceves’s home without first engaging in negotiations with her to reinstate and modify the loan on mutually agreeable terms.
U.S. Bank’s discussion of Laks v. Coast Fed. Sav. & Loan Assn. (1976) 60 Cal.App.3d 885 misses the mark. There, the plaintiffs applied for a loan and relied on promissory estoppel in arguing that the lender was bound to make the loan. The Court of Appeal affirmed the dismissal of the case on demurrer, explaining that the alleged promise to make a loan was unclear and ambiguous because it did not include all of the essential terms of a loan, including the identity of the borrower and the security for the loan. In contrast, Aceves contends U.S. Bank promised but failed to engage in negotiations toward a solution of her loan problems. Thus, the question here is simply whether U.S. Bank made and kept a promise to negotiate with Aceves, not whether, as in Laks, the bank promised to make a loan or, more precisely, to modify a loan. Aceves does not, and could not, assert she relied on the terms of a modified loan agreement in forgoing bankruptcy relief. She acknowledges that the parties never got that far because U.S. Bank broke its promise to negotiate with her in an attempt to reach a mutually agreeable modification. While Laks turned on the sufficiency of the terms of a loan, Aceves’s claim rests on whether U.S. Bank engaged in the promised negotiations. The bank either did or did not negotiate.
Further, U.S. Bank asserts that it offered Aceves a loan modification, referring to the offer it made the day before the auction. That assertion, however, is of no avail. Aceves’s promissory estoppel claim is not based on a promise to make a unilateral offer but on a promise to negotiate in an attempt to reach a mutually agreeable loan modification. And, even assuming this case involved a mere promise to make a unilateral offer, we cannot say the bank’s offer satisfied such a promise in light of the offer’s terms and the circumstances under which it was made.
2. Reliance on the Promise
Aceves relied on U.S. Bank’s promise by declining to convert her chapter 7 bankruptcy proceeding to a chapter 13 proceeding, by not relying on her husband’s financial assistance in developing a chapter 13 plan, and by not opposing U.S. Bank’s motion to lift the bankruptcy stay.
3. Reasonable and Foreseeable Reliance
“‘Promissory estoppel applies whenever a “promise which the promissor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance” would result in an “injustice” if the promise were not enforced. . . .’” (Advanced Choices, Inc. v. State Dept. of Health Services, supra, 182 Cal.App.4th at pp. 1671–1672, citation omitted, italics added.)
“[A] party plaintiff’s misguided belief or guileless action in relying on a statement on which no reasonable person would rely is not justifiable reliance. . . . ‘If the conduct of the plaintiff in the light of his own intelligence and information was manifestly unreasonable, . . . he will be denied a recovery.’” (Kruse v. Bank of America (1988) 202 Cal.App.3d 38, 54, citation omitted.) A mere “hopeful expectation[] cannot be equated with the necessary justifiable reliance.” (Id. at p. 55.)
We conclude Aceves reasonably relied on U.S. Bank’s promise; U.S. Bank reasonably expected her to so rely; and it was foreseeable she would do so. U.S. Bank promised to work with Aceves to reinstate and modify the loan. That would have been more beneficial to Aceves than the relief she could have obtained under chapter 13. The bankruptcy court could have reinstated the loan — permitted Aceves to cure the default, pay the arrearages, and resume regular loan payments — but it could not have modified the terms of the loan, for example, by reducing the amount of the regular monthly payments or extending the life of the loan. (See 11 U.S.C. § 1322(b)(2), (3), (5), (c)(1); 8 Collier on Bankruptcy, supra, ¶¶ 1322.06[1], 1322.07[2], 1322.09[1]–[6], 1322.16 & fn. 5, pp. 23–24, 31–32, 34–42, 55–56.) By promising to work with Aceves to modify the loan in addition to reinstating it, U.S. Bank presented Aceves with a compelling reason to opt for negotiations with the bank instead of seeking bankruptcy relief. (See Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at pp. 1041–1042 [discussing justifiable reliance].)
We emphasize that this case involves a long-term loan secured by a deed of trust, one in which the last payment under the loan schedule would be due after the final payment under a bankruptcy plan. (See 11 U.S.C. § 1322(b)(5).) Aceves had more than 28 years left on the loan, and a bankruptcy plan could not have exceeded five years. In contrast, if a case involves a short-term loan, where the last payment under the original loan schedule is due before the final payment under the bankruptcy plan, the bankruptcy court has the authority to modify the terms of the loan. (See 11 U.S.C. § 1322(c)(2); In re Paschen (11th Cir. 2002) 296 F.3d 1203, 1205–1209; 8 Collier on Bankruptcy, supra, ¶ 1322.17, pp. 57–58; March et al., Cal. Practice Guide: Bankruptcy (The Rutter Group 2010) ¶ 13:396, p. 13‑45; compare id. ¶¶ 13:385 to 13:419, pp. 13‑42 to 13‑48 [discussing short-term debts] with id. ¶¶ 13:440 to 13:484, pp. 13‑49 to 13‑54 [discussing long-term debts].) The modification of a short-term loan may include “lienstripping,” that is, the bifurcation of the loan into secured and unsecured components based on the value of the home, with the unsecured component subject to a “cramdown.” (See In re Paschen, supra, 296 F.3d at pp. 1205–1209; 8 Collier on Bankruptcy, supra, ¶ 1322.17, pp. 57–58; see also March et al., Cal. Practice Guide: Bankruptcy, supra, ¶¶ 13:370 to 13:371.1, p. 13‑41 [discussing lienstripping].) If a lien is “stripped down,” the lender is “only assured of receiving full [payment] for the secured portion of the [bankruptcy] claim.” (In re Paschen, supra, 296 F.3d at p. 1206.)
4. Detriment
U.S. Bank makes no attempt to hide its disdain for the protections offered homeowners by chapter 13, referring disparagingly to Aceves’s bankruptcy case as “bad faith.” But “Chapter 13’s greatest significance for debtors is its use as a weapon to avoid foreclosure on their homes. Restricting initial . . . access to Chapter 13 protection will increase foreclosure rates for financially distressed homeowners. Loss of homes hurts not only the individual homeowner but also the family, the neighborhood and the community at large. Preserving access to Chapter 13 will reduce this harm.
“Chapter 13 bankruptcies do not result in destruction of the interests of traditional mortgage lenders. Under Chapter 13, a debtor cannot discharge a mortgage debt and keep her home. Rather, a Chapter 13 bankruptcy offers the debtor an opportunity to cure a mortgage delinquency over time — in essence it is a statutorily mandated payment plan — but one that requires the debtor to pay precisely the amount she would have to pay to the lender outside of bankruptcy. Under Chapter 13, the plan must provide the amount necessary to cure the mortgage default, which includes the fees and costs allowed by the mortgage agreement and by state law. Mortgage lenders who are secured only by an interest in the debtor’s residence enjoy even greater protection under 11 U.S.C. § 1322(b)(2) . . . . Known as the ‘anti-modification provision,’ [section] 1322(b)(2) bars a debtor from modifying any rights of such a lender — including the payment schedule provided for under the loan contract. . . . [Cf. 11 U.S.C. § 1322(c)(2) [bankruptcy court has authority to modify rights of lender, including payment schedule, in cases involving short-term mortgages]; see pt. II.A.3, ante.]
“Even though a debtor must, through reinstatement of her delinquent mortgage by a Chapter 13 repayment plan . . . , pay her full obligation to the lender, Chapter 13 remains the only viable way for most mortgage debtors to cure defaults and save their homes. Mortgage lenders are extraordinarily unwilling to accept repayment schedules outside of bankruptcy. . . . There is no history to support any claim that lenders will accommodate the need for extended workouts without the pressure of bankruptcy as an option for consumer debtors. Reducing the availability of [C]hapter 13 protection to mortgage debtors is most likely to result in higher foreclosure rates, not in greater flexibility by lenders.” (DeJarnatt, Once Is Not Enough: Preserving Consumers’ Rights To Bankruptcy Protection (Spring 1999) Ind. L.J. 455, 495–496, fn. omitted.)
“It is unrealistic to think mortgage companies will do workouts without the threat of the debtor’s access to Chapter 13 protection. The bankruptcy process is still very protective of the mortgage industry. To the extent that the existence of Chapter 13 protections increases the costs of mortgage financing to all consumers, it can and should be viewed as an essential form of consumer insurance . . . .” (DeJarnatt, Once Is Not Enough: Preserving Consumers’ Rights To Bankruptcy Protection, supra, Ind. L.J. at p. 499, fn. omitted.)
We mention just a few of the rights Aceves sacrificed by deciding to forgo a chapter 13 proceeding. First, although Aceves initially filed a chapter 7 proceeding, “a chapter 7 debtor may convert to a case[] under chapter []13 at any time without court approval, so long as the debtor is eligible for relief under the new chapter.” (1 Collier on Bankruptcy, supra, ¶ 1.06, p. 24, italics added; accord, March et al., Cal. Practice Guide: Bankruptcy, supra, ¶¶ 5:1700 to 5:1701, 5:1715 to 5:1731, pp. 5(II)‑1, 5(II)‑3 to 5(II)‑5; see 11 U.S.C. § 706(a).) In addition, Aceves could have “cured” the default, reinstating the loan to predefault conditions. (See In re Frazer (Bankr. 9th Cir. 2007) 377 B.R. 621, 628; In re Taddeo (2d Cir. 1982) 685 F.2d 24, 26–28; 11 U.S.C. § 1322(b)(5); March et al., Cal. Practice Guide: Bankruptcy, supra, ¶ 13:450, p. 13‑50.) She also would have had a “reasonable time” — a maximum of five years — to make up the arrearages. (See 11 U.S.C. § 1322(b)(5), (d); 8 Collier on Bankruptcy, supra, ¶ 1322.09[5], pp. 39–40; March et al., Cal. Practice Guide: Bankruptcy, supra, ¶ 13:443, p. 13‑49.) And, by complying with a bankruptcy plan, Aceves could have prevented U.S. Bank from foreclosing on the property. (See 8 Collier on Bankruptcy, supra, ¶¶ 1322.09[1] to 1322.09[3], 1322.16, pp. 34–37, 55–56.) “‘“Indeed, the bottom line of most Chapter 13 cases is to preserve and avoid foreclosure of the family house.”’” (In re King (Bankr. N.D.Fla. 1991) 131 B.R. 207, 211; see also March et al., Cal. Practice Guide: Bankruptcy, supra, ¶¶ 8:1050, 8:1375 to 8:1411, pp. 8(II)‑1, 8(II)‑42 to 8(II)‑47 [discussing automatic stay]; In re Hoggle (11th Cir. 1994) 12 F.3d 1008, 1008–1012 [affirming district court order denying lender’s motion for relief from automatic stay]; Lamarche v. Miles (E.D.N.Y. 2009) 416 B.R. 53, 55–62 [affirming bankruptcy court order denying landlord’s motion to set aside automatic stay]; In re Gatlin (Bankr. W.D.Ark. 2006) 357 B.R. 519, 520–523 [denying lender’s motion for relief from automatic stay].)
U.S. Bank maintains that even if Aceves had pursued relief under chapter 13, she could not have afforded the payments under a bankruptcy plan. But the complaint alleged that, with the financial assistance of her husband, Aceves could have saved her home under chapter 13. We accept the truth of Aceves’s allegations over U.S. Bank’s speculation. (See Hensler v. City of Glendale, supra, 8 Cal.4th at p. 8, fn. 3.)
5. Absence of Consideration
U.S. Bank argues that an oral promise to postpone either a loan payment or a foreclosure is unenforceable. We have previously addressed that argument, stating: “‘[I]n the absence of consideration, a gratuitous oral promise to postpone a sale of property pursuant to the terms of a trust deed ordinarily would be unenforceable under [Civil Code] section 1698.’ (Raedeke v. Gibraltar Sav. & Loan Assn. (1974) 10 Cal.3d 665, 673, italics added.) The same holds true for an oral promise to allow the postponement of mortgage payments. (California Securities Co. v. Grosse (1935) 3 Cal.2d 732, 733 [applying Civil Code section 1698].) However, ‘. . . the doctrine of promissory estoppel is used to provide a substitute for the consideration which ordinarily is required to create an enforceable promise. . . . “The purpose of this doctrine is to make a promise binding, under certain circumstances, without consideration in the usual sense of something bargained for and given in exchange. . . .”’ (Raedeke, supra, 10 Cal.3d at p. 672.) ‘“Under this doctrine a promisor is bound when he should reasonably expect a substantial change of position, either by act or forbearance, in reliance on his promise, if injustice can be avoided only by its enforcement. . . .”’” (Sutherland v. Barclays American/Mortgage Corp. (1997) 53 Cal.App.4th 299, 312; accord, Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at pp. 1039–1041.) We further commented: “When Raedeke and California Securities Co. were decided, Civil Code section 1698 provided in its entirety: ‘A contract in writing may be altered by a contract in writing, or by an executed oral agreement, and not otherwise.’ . . . In 1976, a new section 1698 was enacted which states in part: ‘A contract in writing may be modified by a contract in writing . . . [or] by an oral agreement to the extent that the oral agreement is executed by the parties. . . . Nothing in this section precludes in an appropriate case the application of rules of law concerning estoppel . . . .’” (Sutherland v. Barclays American/Mortgage Corp., supra, 53 Cal.App.4th at p. 312, fn. 8, citations omitted.) Our earlier analysis in Sutherland applies here.
Finally, a promissory estoppel claim generally entitles a plaintiff to the damages available on a breach of contract claim. (See Toscano v. Greene Music (2004) 124 Cal.App.4th 685, 692–693.) Because this is not a case where the homeowner paid the funds needed to reinstate the loan before the foreclosure, promissory estoppel does not provide a basis for voiding the deed of sale or otherwise invalidating the foreclosure. (See Garcia v. World Savings, FSB, supra, 183 Cal.App.4th at p. 1047, distinguishing Bank of America v. La Jolla Group II (2005) 129 Cal.App.4th 706, 711–714.)
B. Remaining Claims
The elements of fraud are similar to the elements of promissory estoppel, with the additional requirements that a false promise be made and that the promisor know of the falsity when making the promise. (See McClain v. Octagon Plaza, LLC (2008) 159 Cal.App.4th 784, 792–794 [discussing elements of fraud].) Aceves has adequately alleged those facts.
Aceves’s other claims and requests for relief lack merit as a matter of law. All of them are based on alleged irregularities in the foreclosure process. We see no irregularities that would justify relief. For example, Aceves contends U.S. Bank’s designation of Quality Loan Service as the trustee under the deed of trust was defective because the “Substitution of Trustee” was signed by the bank’s attorney-in-fact. But Aceves cites no pertinent authority for her contention. (See Schoendorf v. U.D. Registry, Inc. (2002) 97 Cal.App.4th 227, 237–238 [party forfeits contention absent citation of authority].) Neither Civil Code section 2934a, which governs the substitution of trustees, nor the trust deed itself precludes an attorney-in-fact from signing a Substitution of Trustee. And case law strongly suggests Aceves is wrong. (See Tran v. Farmers Group, Inc. (2002) 104 Cal.App.4th 1202, 1213 [“an attorney-in-fact is an agent owing a fiduciary duty to the principal”]; Burgess v. Security-First Nat. Bank (1941) 44 Cal.App.2d 808, 818–819 [person can perform any legal act through attorney-in-fact that he or she could perform in person, including entering into contracts].)
Aceves also takes issue with the notice of default, pointing out that it mistakenly identified Option One as the beneficiary under the deed of trust when U.S. Bank was actually the beneficiary. Although this contention is factually correct, it is of no legal consequence. Aceves did not suffer any prejudice as a result of the error. Nor could she. The notice instructed Aceves to contact Quality Loan Service, the trustee, not Option One, if she wanted “[t]o find out the amount you must pay, or arrange for payment to stop the foreclosure, or if your property is in foreclosure for any other reason.” The notice also included the address and telephone number for Quality Loan Service, not Option One. Absent prejudice, the error does not warrant relief. (See Knapp v. Doherty (2004) 123 Cal.App.4th 76, 93–94 & fn. 9.)
Last, after the filing of the reply brief and before oral argument, we requested additional briefing on the protections accorded by chapter 13. In her letter brief, Aceves went beyond the scope of the request and presented arguments not previously made about the order in which various documents were recorded. The new arguments were unsolicited; Aceves did not explain why the arguments were not raised earlier; and U.S. Bank had no opportunity to respond. Accordingly, we do not reach them. (See City of Costa Mesa v. Connell (1999) 74 Cal.App.4th 188, 197; Campos v. Anderson (1997) 57 Cal.App.4th 784, 794, fn. 3.)
It follows that the trial court properly sustained the demurrer without leave to amend with respect to all claims and requests for relief other than the claims for promissory estoppel and fraud. Aceves should be allowed to pursue those two claims.
III
DISPOSITION
The order and the judgment are reversed to the extent they dismissed the claims for promissory estoppel and fraud. In all other respects, the order and judgment are affirmed. Appellant is entitled to costs on appeal.
CERTIFIED FOR PUBLICATION.
MALLANO, P. J.
We concur:
ROTHSCHILD, J.
JOHNSON, J.
Dec
20
Wanna Know Why Your Loan Mod Was Denied? Call the Bank…They’ll Tell You.
You’re a real dope if you wasted all your time submitting loan modification paperwork to your lender. You’re an even bigger dope if you called the “independent” phone number to find out why it was denied. (almost all were denied after all)….
Of all the possible reasons why the government’s loan modification program has been a dud, at least one has received scant attention: When borrowers are denied a loan mod and call a hotline to have their case reviewed, they are handed off to a nonprofit group created by a large mortgage servicer and largely funded by the industry.
Well ain’t that just great…turns out the biggest dopes in this whole thing are all the American taxpayers…not only did we shovel billions of dollars to the lenders and the servicers and their law firms…we also shoveled millions of dollars off in every different direction…..why has not a single solitary person been placed in handcuffs?
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Nov
04
The REST Report Matters at REST Report Matters
By now, I would think, most of my readers know that when homeowners ask me questions about today’s loan modification process, I tell them that, if it were me… and it certainly could be one day… I’d run a REST Report. In fact, I wouldn’t even consider applying for loan modification, without running my own REST Report, and assuming it was NPV positive, sending it to my mortgage servicer, along with the other documents required, to my mortgage servicer.
I say this without hesitation, because the REST Report has now been used by more than 1,000 homeowners facing foreclosure, and it is the only way, outside of a HAMP servicer, that you can know with certainty whether you qualify for a loan modification under the president’s HAMP program. And should the REST Report show that you do not qualify under HAMP, the report shows whether the NPV of other loan modification scenarios would cause the investor who holds your note to come out ahead financially as compared with foreclosure.
In point of fact, it’s the only tool or practice I’ve ever seen that’s made a consistent, measurable, and highly positive difference for homeowners, attempting to get their loans modified. Last year at this time, if someone asked for my advice on how to increase the odds that a servicer would ultimately modify a loan, I would have said “get a lawyer.” Now I respond to those inquiries, by saying, “get a REST Report.” You can always hire a lawyer later, should you feel the need.
There are law firms and individual attorneys stretching from coast-to-coast that offer the REST Report along side loan modification services, and in fact several have told me that they are no longer accept a new client until he or she has run the report, and that report shows a positive NPV as compared with the costs of foreclosure.’
Enter REST Report Matters…
Founded a few months ago, with offices in San Diego, California, REST Report Matters is the brainchild of partners, Michael Nazarinia and Charlie Rose. But even though it’s their vision and leadership that drives their organization forward each day, the pair has also made a special commitment to supporting the readers of Mandelman Matters.
For example, they invited me to their offices to provide three days of training to their staff, in addition to the extensive training they themselves offer, and that training not only covered the technical aspects of the REST platform, but also created a professional atmosphere designed to be more consultative than sales driven, according to Charlie. He wanted me to tell my readers that they should feel free to call REST Report Matters with questions anytime, without worrying that the person they speak with will be singularly focused on selling them something.
I’ve known Michael for about a year now. In his last position, his firm helped support my efforts to protect the rights of a homeowner to hire an attorney when at risk of foreclosure. He and I got along from the very first time we spoke on the phone, as I recall… you’ll find him to be smart, knowledgeable and caring. Like me, Michael is a lifetime learner, which I believe is a euphemism
for what we used to call a nerd, in my day.
The team at REST Report Matters also stands out in my mind, as many have worked with Charlie and Michael in past positions so there is a sense of shared purpose beyond what one would expect in a young company. Oh, and that’s the company that’s young, the staff… not so much, which I also like a great deal. Call me crazy, but I’m not sure I’d care much for talking about my mortgage with someone whose experience with mortgages consists of hearing about them from Mom & Dad, so no worries about that here. Charlie is actually pretty young… 30 years-old, I believe, and I although I usually don’t find myself in conversations with too many thirty year-olds, entirely by design actually, but Charlie’s certainly the exception. He’s quick to grasp the significance of new things, and I can’t imagine any homeowners not liking him and appreciating his candor right away.
But, I am perhaps most excited about a new password protected section of the firm’s site, that although still under construction as I write this, REST Report Matters is in the process of incorporating several unique features into their “clients only” Website that, soon will be capable of delivering a unique, technology-driven ongoing educational support and community component that I think homeowners will find both valuable and even enjoyable… to the extent that anything having to do with this topic can be considered enjoyable… perhaps stimulating is a better word in this instance.
I wouldn’t want to spoil anything that’s in development and only a few weeks away from the public launch, so suffice it to say that the suite of services the firm is developing are designed to fit together and complete the picture of what optimal support for working with the REST Report to get a loan modified should look like.
REST Report Matters is not a law firm, and as such they do not represent homeowners with their lenders and servicers, nor do they provide advice to homeowners, or in any sense offer comprehensive loan modification services. It’s just the REST Report, packaged with other important support tools and educational programs… delivered by the highly trained, compassionate professionals at REST Report Matters.
You can visit REST Report Matters here.
Or, call them at: 877-737-8440
And, as always, you can reach me for further discussions at mandelman@mac.com.
Mandelman Matters is a California Nonprofit Corpooration and does receive a small percentage of the revenue generated by sales of the REST Report.
However, you may be assured that it a very small percentage and nowhere near enough to get me to recommend something I wouldn’t be recommending regardless. If you want any additional details, including, email me and I’ll be happy to disclose anything and everything.
Because if I can’t disclose it, I don’t do it.
Aug
23
Max Gardner’s Top Reasons for Wanting a Pooling Servicing Agreement
EDITOR’S NOTE: Lest people think I invented this whole field of law just because I’m loudest about it, here is a post from Max Gardner, who only a few days after I started this blog had already figured out everything I had figured out and was already doing something about it.
Max Gardner’s Top Reasons for Wanting a Pooling Servicing Agreement
Monday, November 5th, 2007
Every time I file a civil action against a mortgage servicer the very first document I want is a copy of the “Pooling and Servicing Agreement.” This is the legal document that creates the securitized trust of mortgage loans and also strictly provides for the duties of all entities who are assigned the responsiblity of servicing loans for the Trust.
For all “public placements” or “public offerings,” the Pooling and Servicing Agreement is always filed on Form 8-K with the Securities and Exchange Commission. All such documents can be found by conducting a search of the SEC’s website through an internal search engine known as “Edgar.” But, what is a PSA? Why do I want to see it? What can be found in the PSA? Kevin Byers, a forensic accountant, who works with me on these cases, has assisted me in developing the following list of reasons why any consumer must have the PSA. The reasons are as follows:
Pooling and Servicing Agreements (PSA)Top Twenty Reasons to Request ProductionKevin Byers and O. Max Gardner III
In no particular order, these are some of reasons you need to request through formal discovery in any mortgage-related case the PSA Agreement and why it is relevant:
1. It is a contractual document naming the parties to any given securitization, important for standing issues. The document will list the Sponsor, the Trustee for the Securitized Trust, the Master Servicer, and all primary and secondary servicers.
2. It provides address for all necessary parties including “notice” addresses for the service of legal process. 3. It outlines the specific duties of the Servicer and/or the Master Servicer as well as the Trustee on behalf of a respective trust. 4. It contains the representations and warranties of all parties to the agreement, including the Servicer and/or Master Servicer.
5. It includes all representations provided by the Depositor of the loans into the trust as the same relate to important consumer protection issues related to the underwriting and origination of the loan, such as conformity with anti-predatory lending laws, full-file credit reporting, title insurance coverage, and validity and content of individual loan files.
6. It gives the conditions under which a prepayment penalty may be waived or modified by the Servicer and/or Master Servicer. 7. It oftentimes will outline specific loss mitigation and foreclosure avoidance measures available to the Servicer, including, for example, forbearance and loan modification, principal reductions, interest reductions and interest changes.
8. It defines a “defective mortgage loan” and describes the circumstances and process by which the lender must repurchase a loan.
9. It establishes the rights of the Trustee under the Trust to force the Depositor/Originator of any loan to repurchase a loan under the recourse provisions. 10. It describes the specific process by which a delinquent loan can be charged off and the subsequent servicing party and procedures that apply to such charged-off loan. 11. It provides guidelines on loan-level advances that must be paid by the servicer. 12. It provides details regarding the mechanics of how the Servicer must go about foreclosing on property, what documents need to be requested and/or recorded and what authorizations need to be granted to foreclose, and in whose name the foreclosure must be filed. 13. It provides guidance on the fees a Servicer may retain as compensation in the administration of the loans, for example, NSF fees, late fees, loan modification or assumption fees.
14. It will contain the Mortgage Loan Schedule, important to verify the ownership of the loan on behalf of the Trust.
15. It details the requirements for mortgage assignments and when these will or will not be recorded and the implications of the failure to record such assignments. 16. It details the specific loan documents contained in each loan file that will be delivered to the Trustee or Document Custodian on behalf of the trust, establishing who holds the original Note and where it may be found.
17. It describes the credit enhancements that have been deployed to enhance the rating of the most secure certificates of investment in the Trust.
18. It provides rules and procedures for the rights of the Master Servicer or the Primary Servicer to accept a deed-in-lieu of foreclosure or a short sale of the property so as to avoid a foreclosure.
19. It describes the rights the Originator/Depositor may retain the Residual Value of the Trust and the extent to which the residuals may be used as credit enhancements.
20. It will name a default servicer and describe when a loan is considered to be in default and outline the process for the transfer of servicing rights.
O. Max Gardner IIIHistoric Webbley House
Filed under: bubble, CDO, CORRUPTION, Eviction, evidence, expert witness, foreclosure, foreclosure mill, GTC | Honor, HERS, investment banking, MODIFICATION, Mortgage, Pleading, securities fraud, Servicer, STATUTES, trustee Tagged: discovery, Master Servicer, MAX GARDNER, Pooling and Servicing Agreement, PSA, trust
Jun
17
Mandelman’s Uncommon Advice for Getting Through the Loan Modification Process Without Losing It
How to hold up under the stress and strain of getting a loan modification…
Every single day of the last 18 months I’ve talked to homeowners who are somewhere in, around, or near the process of attempting to get a loan modification. Some who call or email me have yet to apply, some have only just applied, many have been living through the hellish experience for over a year.
There are those with a sale date only days away, and then there are those who have already lost their home to foreclosure. I’ve spoken or emailed with literally thousands of homeowners, some for hours on end and on more than one occasion.
I’ve seen the emotions people go through as the process incomprehensibly drags on, month after unbearably stressful month. I’ve seen the happy days, when something inexplicably seemed to go right, and the absolutely terrible days, when nothing the bank said made sense or came true. It’s one of the fundamental paradigm shifts that everyone goes through at some point during the loan modification prices: they come to the realization that banks lie often and whenever it suits them, and there’s nothing anyone can do about it.
We weren’t raised to think of banks as liars or con artists, so it’s a difficult thing for most people to accept, but after a few first hand experiences, everybody ends up in the same place: stunned at the realization that the bank doesn’t care about us as customers at all.
There’s no point in sugarcoating this… getting a bank or mortgage servicer to agree to modify a mortgage is never a pleasant experience. In fact, it’s pretty much horrible, even when it’s good. You may finish the process with a permanent loan modification, but it’s unlikely that you’ll feel much like celebrating.
There are a few things you should know about the loan modification process, from the bank’s perspective, that may make it a little easier to get through the process. Because in my experience, when it comes to loan modifications, it’s the uncertainty that will drive you to distraction.
First of all, it’s important to understand that banks know that some people who become delinquent and apply for a loan modification will end up bringing their account current again on their own. The banks refer to this as “self-curing” and it should be obvious that to a bank, modifying a loan that would end up self-curing would be like throwing money out the window.
The problem is that the only way a bank can tell if a borrower is going to self-cure is to basically torture that borrower. The bank will do just about anything to make a borrower who becomes delinquent feel uncomfortable. Banks call at all hours of the day and into the evening, and, of course, send collection letters that are designed to make borrowers feel guilty, irresponsible, ashamed and afraid. No one who falls behind on mortgage payments gets through it unscathed. Most people stop answering their home phone, some even turn it off, and the days of happily walking to the mailbox to get the mail are over.
Homeowners who are delinquent on their mortgage are not only being tortured by their banks in the hopes that they will breakdown and bring the loan current on their own, but at the same time they’re tortured by others around them as well. From television programs that talk about “irresponsible homeowners” who borrowed too much, to friends or relatives who don’t understand why anyone would “get in over their head,” it’s no picnic to feel like the only one in the room who is at risk of losing your home.
Bound by Shame…
You see, when people are ashamed of something they don’t talk to others about their problem. They keep in inside… hidden… a dark secret that no one can ever know. And that makes it worse… and worse… and worse. It’s something like being in solitary confinement. Over time, and loan modifications can take plenty of time, it can become unbearable… and lead to lashing out… sometimes at loved ones, or at others who are trying to help.
I can tell you that I’m contacted at least once each week by a homeowner who tells me that his or her spouse either has already left, or may soon leave the marriage because one blames the other for the predicament in which they find themselves. Many others have told me that without some of the articles I’ve written, they would not have made it through the storm as they did, and frankly it’s these emails that have kept me going every time I wanted to stop writing on Mandelman Matters.
I’ve also received more than a dozen calls from people that have lost someone to suicide as a result of the pressure and shame that can come along with losing a home. It makes me sick, and I’ve been reduced to tears more than a few times as I’ve come to understand what’s really happening in millions of American homes today. I know… if the foreclosure crisis has not yet affected you personally, then you can’t see it or feel it… but it’s there and its growing every day.
There is still a portion of our society that feels little if any empathy for homeowners at risk of foreclosure, and they justify their intolerant views by telling themselves that foreclosures only happen to irresponsible homeowners… certainly never to them, they rationalize. They, after all, are responsible.
Well, let’s dispense with these viewpoints right away. It’s not the fault of borrowers, what we’re going through was caused by the banks, Wall Street, commercial, and miscellaneous others. Period. Is that to say that some homeowners didn’t borrowers more than they should have… of course not. But, three years into this crisis, it has affected tens of millions and unless something changes, it will affect tens of millions more. If you’re not losing your home today, you’re lucky. And unless you sold bonds to Iceland… then our global economic meltdown and financial crisis is not your fault.
I’ve said it before and I’ll say it again now… foreclosures breed foreclosures… they lead to reduced consumer spending, which cuts corporate profits and leads to increasing unemployment, which leads to more foreclosures, which destroys even more equity and contributes to more foreclosures still. And in addition to that disastrous downward spiral, foreclosures continue to make the toxic assets residing on the balance sheets of many of our nation’s banks, that much more toxic, thus deepening our problems.
So, if you’re a homeowner at risk of foreclosure, start by letting yourself off the hook because it’s not your fault, and you didn’t do anything wrong, except in hindsight, of course. And if you’re still unsure, or have someone in your life that simply won’t listen to reason, send that person one of the links below, and if they still want to argue, tell them to come argue with me.
Senate Investigation Says Banks Caused Crisis Not Borrowers
Phoenix Couple Says Wells Fargo Is the Loan Modification Scammer
Mandelman U Presents Securitization of Mortgage Backed Securities
Physical & Fiscal Health: About Alcohol, Sugar, Exercise… and Sleep.
The stress involved in the loan modification process is debilitating, but there’s plenty you can do to make it even worse, and people do these things all the time. Consider the following information on four things that you can do that will make the process that much easier.
A. Alcohol is a bad idea when you’re under a great deal of stress. The problem is, it can also feel like the right thing to do, when you’re under a great deal of stress. While there’s no way for you to stop someone who’s determined to drink through stressful times, you may be able to stop, or at least slow, those who just need to hear someone tell them to be aware of this issue.
I always tell homeowners entering the loan modification process that they should consider being aware of the tendency to drink more alcohol when feeling stressed… you want them to remember that drinking doesn’t make it easier… it makes it harder… much harder
B. Sugar is another drug that people turn to when stressed out. It’s also a substance with few true positive benefits. Too much sugar makes one sleepy and the ability to calculate and remember is lost.
Here’s a link to an article about sugar titled: Refined Sugar… The Sweetest Poison of All.
C. Exercise is the best stress reliever of all for several reasons. In fact, the best way to deal with stress is to increase the amount of exercise you get. Any exercise will do. Even walking three times a week can mean the difference between restful sleep and nights spent tossing and turning.
- Exercise decreases ‘stress hormones’ like cortisol, and increases endorphins, which are your body’s ‘feel-good’ chemicals. The result gives your mood a natural boost.
- Physical activity can take your mind off of your problems. Exercise usually involves a change of scenery as well, either taking you to a gym, a park, a dojo, a biking trail, or a neighborhood sidewalk, all of which can be pleasant, low-stress places.
- Exercise helps you lose weight, and many people feel a boost as clothes look more flattering on, and as a result they project increased confidence and strength.
- Stress can cause illness, and illness can cause stress. So, improving overall health with exercise can also save a great deal of stress in the short run, by strengthening your immunity to colds, the flu and other minor illnesses, and in the long run, by helping you stay healthier longer.
- Research shows that physical activity may be linked to lower physiological reactivity toward stress. Simply put, those who get more exercise become less affected by the stress they face.
The 180-Day Savings Challenge
Maybe your loan will loan be modified, maybe it won’t. Maybe it’s bankruptcy that’s the best path, or maybe it’s not. There are many potential outcomes for homeowner at risk of foreclosure. But all of them involve one thing: money.
The answer is money. What was your question?
Start saving on day one of your loan modification process, and it may be advantageous to think of this saving as part of a challenge. Here’s what I’ve often said to homeowners when they’ve called me to tell me they just started the loan modification process.
1. I start by reminding them that the process is lengthy, stressful and no fun.
2. I explain bluntly that six months from now, they may or may not have been successful getting their mortgage modified, but regardless of where that situation stands six months down the road, they’re going to want to have as much money as they can sock away. And there’s no better time than right away to start saving even small amounts.
3. I recommend everyone applying for a loan modification start their own 180-Day Savings Challenge.
4. Here’s all you need: A calendar to mark off the days as they pass, and chart progress along the way. A large jar in which to throw change and small bills. A commitment to answering the question: How much can we possibly save in 180-days if we try our absolute hardest to save every nickel.
Why is this important? Because if your lender or servicer fails to modify your loan as you hope they will, the only thing that may save your home is money, so you’ll need all you can get. Also, along the way… your lender or servicer may do something illegal or unfair under the law, and an attorney may be able to file a suit on your behalf. Check out how homeowners are slowly regaining some of their power:
Court Rules Private Right-of-Action Exists for Violations of CA Civil-Code-2923-5
But suing a bank isn’t cheap, much less free, so you’ll need money on hand for that. And lastly, maybe everything will work out exactly as planned, meaning that your loan will be modified to fit your financial situation, so you won’t need the money you’ve saved over the past six months, but who cares?
Won’t it be cool to know how much you can save in a six month period of you tried your hardest to do so? You bet it would, so there’s no reason not to get started immediately. Hold a garage sale? Sure. Babysitting on weekends, why not. Bake sale… sure but make it sugar-free.
In Conclusion…
I have to tell you that after spending all of my waking hours shoulder deep in the foreclosure crisis, watching our government bungle everything it touches, and talking with homeowners in almost all 50 states, I’ve wanted to quit a thousand times, and yet I’d never did. Because I’ve also met some of the world’s greatest people who I am proud to call friends today.
We’re in this together, whether you’re losing your house today… or possibly tomorrow. The link below will take you to my last bit of advice… and it’s perhaps the single most important thing you can do. It’s called the REST Report and you send it into your lender or servicer. It shows how the investor who owns your loan will come out by modifying instead of foreclosing. I wouldn’t even consider starting down the loan modification path without it.
How and why to use the rest report when applying for a loan modification
And I’m here: mandelman@mac.com
Aug
04
Mortgage Hardship: Solutions to Avoid Foreclosure
Here’s a link to my similar article at EZinesArticles.com: http://ezinearticles.com/?Mortgage-Hardship—Solutions-to-Avoid-Foreclosure&id=2710389
If you are facing a hardship with making your mortgage payments, you’re not alone. The national foreclosure rate is now at one in every 555 households. If you live in the Ft. Myers/Cape Coral area, that statistic jumps to 1 in every 18 households now in foreclosure.
A mortgage hardship is very common with unemployment numbers rising daily and US homeowners losing the values in their homes on a monthly basis as well
When someone loses their income they go through all sorts of emotions when they cease to have the ability to pay their bills. Fear can easily be all-consuming when facing a mortgage hardship and foreclosure.
The first thing I tell my clients is to not be afraid. Fear can take a root in our lives and cripple us from taking action and acting wisely.
Don’t cave in to the fear tactics of your mortgage servicer or lender – or any other creditor for that matter. You’re still in control even though you may not feel like it.
There are precise steps you can take to protect yourself and your interests. There are legal rights that you possess and can use to help yourself in difficult times. The biggest challenge is that most American consumers and homeowners don’t know they have legal rights. You have foreclosure rights…when you’re facing a mortgage hardship, all hope is not lost.
We have helped families stay in their home for an extra 6 months, 8 months and over a year. We never provide a precise time frame or outcome. There are so many variables… if you have a company giving you a bunch of promises and charging a lot of money upfront for now finite service, be extremely wary and cautious.
Another very likely issue is that the financial institution attempting to collect and/or foreclose doesn’t even own your loan or have the legal right to collect. Over 80% of all foreclosures filed in Florida right now contain a “Lost Note” count alleging that they (the plaintiff) have lost the most important document as evidence of the debt they claim you owe – the Note
There are several affirmative defenses that a qualified and competent foreclosure attorney will know how to bring in your case.
A TILA mortgage rescission may be something that you can assert if there are material disclosure violations found in a forensic loan audit of your loan documents. Obtaining a true forensic loan audit is probably the best first step you as a homeowner in mortgage hardship can take.
A forensic loan auditor will truly break down the entire package of loan documents and examine them for state and federal loan violations along with a forensic examination for fraud and failure to disclose, appraisal fraud and loan application and underwriting fraud.
Be certain that you are truly dealing with a reputable and knowledgeable auditor. I find that a very select few of us really know what to look for and truly know the laws. So many people will tell you what you want to hear without preserving integrity and honesty.
There is a litany of scams out there so be careful. Take your time, ask questions, find a professional who will help and educate you. Knowledge is truly power. The more you know and understand your foreclosure rights, the better off you’ll be.
Quantified violations of the Truth in Lending Act (TILA) and other federal violations can be used a Claims in Defense by Recoupment in any foreclosure action brought against you. A forensic loan audit (done right) is highly valuable for you.
You’ll land on your feet. You’ll make it through this tough time. Be a sponge for information, read it with common sense in mind and find a person or two who can be your mentor or advisor through this time. You’ll make it… I promise.
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By 4closureFraud | Bankruptcy, Foreclosure Fraud, News for the Patriot
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