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| Foreclosure Fraud And Robo-signing Investigation |
| Robosigning Settlement On The Horizon The fight is still on, but both sides on the 50 state mortgage fraud investigation, are looking for a victory "by decision" rather than a "knockout". Attorney General for Iowa, Tom Miller and his team representing the 50 states, go before the Senate Banking Committee on November 17th to explain their case. They will be joined by Bank of America and by JP Morgan Chase. Everyone is hoping to come away with a workable solution to the foreclosure mess. There are a few options on the table. The first is a sort of slush fund. In simple terms, the banks will pay into this fund. All borrowers that have a claim will be paid from this fund. Borrowers will have to prove that they suffered damages. This could be difficult if they are several months behind on their mortgage payments. If you haven't made a mortgage payment in 12 months, what damages do you have? Seriously. Someone has to decide if the claim is valid. And if so, write a check. So far it looks like the "50 states team" will be responsible for all the administration. Another option tabled, is the practice of foreclosing on a homeowner while the homeowner is in the middle of a loan modification. Banks will have to cease and desist immediately. They can't have it both ways. Either they modify or they foreclose. Third party mediation is possible if both sides can not reach a settlement. This is the thorn in the side. Who do you get to mediate? You could have someone from the banking industry, from a government agency, or from a non-profit. Would it be one person, or a committee of several people selected from different camps? As you can see there are several issues to be addressed and resolved. However, progress is being made and homeowners with legitimate claims can expect some cash in the near future. Some would just like to get their home back. Maybe they can get the cash and then repurchase their foreclosed home. prev: next: Home: |
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| Regulators Warn Banks: Foreclosure Mess Will Cost You We are still in the midst of the foreclosure fiasco. It could be 2013 until the mess is cleaned up. Meanwhile, the costs are mounting for the banks. And there are additional potential costs that could be around $150 billion. Banking regulators are asking the banks to increase their capital in order to meet this tsunami of costs. There are several areas of costs to consider. In all situations the original amount can be negotiated to a lower cost. Mortgage put-backs The Congressional Oversight Panel estimates that mortgage put backs could reach $52 billion. Put backs occur when an investor asks the bank to buy back a loan because the loan was materially misrepresented to the investor. Analysts at JP Morgan Chase have a much higher estimated for the industry. This figure is $55 billion to $120 billion. In recent months, Freddie Mac and Fannie Mae has been pressuring the banks to buy back about 1 out of every 4 loans that defaulted. Civil money penalties One of the many enforcement tools of bank regulators is Civil Money Penalty (CMP). A CMP is a punitive fine imposed by a civil court on an institution that has profited from illegal or unethical activity. A false affidavit filed in court by a bank is a serious offense and could result in a fine of $25,000. When we consider the number of false filings, the total fines could amount to over $6 billion. According to CreditSights, a leading analyst, JP Morgan Chase, Bank of America and Wells Fargo could face losses of $2 billion each. Real estate losses The foreclosure mess has delayed bringing thousands of foreclosure properties to the market. In the short term house values will remain about the same as "pre-robosigning". However, as the banks and regulators work through the back log of foreclosure case files, there will be a glut of houses hitting the market resulting in lower values. Goodwill What is the price of trust? We can't put a figure on the damage done by the actions of the banks. It will take a considerable amount of time for consumers to trust their bank again. Meanwhile, credit unions, community banks and smaller lenders are aggressively marketing to consumers. They are offering no fees checking and high interest rates on savings accounts. The financial penalties are crucial and they act as a strong deterrent to further "robo-signing". However, removal of key employees from a financial institution will help cure the disease. Regulators need to ban officers and directors of the banks from the banking industry. The duration of the ban could be 10 years or more depending on the severity of the offense. And finally, we need to hold those in a fiduciary position accountable. Lawyers, accountants and other professionals should be prosecuted if they knew that their client, the bank, was breaking the law. prev: next: Home: |
| Court Rules Foreclosure Was Improper On 2 Houses January 10, 2011 Wells Fargo and US Bancorp have to give up two house that they seized by foreclosure back in 2007. The Supreme Judicial Court of Massachusetts voided the seizure of the two houses. The court stated that the banks lacked authority to foreclose. The banks failed to show that the title to the houses had been legally transferred in the process. In other words, the mortgage backed securities trust never took legal possession of the mortgages. This decision will swamp the courts with challenges to foreclosures that were completed, and also for foreclosures still in the works. The bigger picture is the limbo that many homebuyers find themselves in. If they in the process of buying will the deal close? And for prospective buyers, why put money down on a house when the chances of closing are unknown. prev: next: Home: |
| Lawyers Get Slammed In Foreclosure Mess Lawyers across the nation are being accused of processing fraudulent and shoddy paperwork in order to fast track foreclosures on behalf of banks. New York is leading the charge in making lawyers responsible for their actions. In November 2010, a judge ordered the law firm of Steven J. Baum to pay almost $20,000 in fines related to papers that had numerous errors. New York is also taking a hard look at over 80,000 foreclosure cases that are pending. Lawyers are obviously not happy with how the tide has changed against them. They feel as if they are being blamed for the banks' mistakes in foreclosures. Lawyers say that the rely on their clients and their clients' employees to provide accurate information. The role of lawyers is being examined in 23 states where foreclosure is reviewed by the courts. The Florida attorney general's office is conducting a civil investigation into the foreclosure practices of the law firm of David J. Stern. Mr. Stern's firm handled about 20 percent of the foreclosures in Florida. In New York the court devised a 2 page affirmation to be signed by lawyers in foreclosure cases. It basically is asking the lawyers to say that reviewed the information in the documents that are being presented to the court and that the information is accurate. This seem to be an easy way to deal with questionable documents. But we can expect lawyers to push back and try to get something that is less damning. If they sign it would be difficult to come back and say "well, I didn't know. I took the word of my client, the bank". prev: next: Home: |
| Trustees Ask Court Permission To Destroy Mortgage Documents January 23, 2011 There are thousands of boxes of original mortgage documents in storage. The documents are the property of two mortgage lenders that went out of business. Now the bankruptcy trustees would like to destroy the documents. Bankruptcy judges will meet on Monday, January 24th in Wilmington, Delaware to decide whether the documents will be destroyed. The two companies involved are Mortgage Lenders Network USA and American Home Mortgage. Mortgage Lenders Network USA was closed in February 2007 and there are 18,000 boxes in storage. The cost for storage is about $16,000 a month. The other company, American Home Mortgage has 4,100 boxes in storage and the fire marshal consider the boxes a fire hazard. Most of the mortgages were issued 8 years ago or longer. Lawyers for American Home Mortgage claimed that employees had removed all the important document, and that the documents had been electronically copied and stored in a database. Opponents of destroying the documents countered that the boxes of documents were not audited. This request is at a time when homeowners and state attorney generals are challenging the banks in court over 'robo-signing'. At the root of the foreclosure mess is the lack or absence of the original mortgage document. Lawyers for homeowners fear that without the original documents their foreclosure cases will not be successful. I would be surprised if the judges allow these documents to be destroyed. While it is expensive to store the 18,000 boxes belonging to Mortgage Lenders Network USA and the 4,100 boxes from American Home Mortgage, other options have to be explored so that this evidence can be preserved. The two cases are separate and are not related in any way, shape or form. This is the story from both sides representing the bankrupt mortgage lenders. It's a coincidence that the two cases end up in the same court, on the same day. |
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