AG Madigan Calls on Mortgage Companies to Suspend Illinois Foreclosures, Will Introduce Foreclosure Legislation and Support BK Cramdowns

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AG Madigan Calls on Mortgage Companies to Suspend Illinois Foreclosures, Will Introduce Foreclosure Legislation and Support BK Cramdowns

AG Madigan Calls on Mortgage Companies to Suspend Illinois Foreclosures

by Moe Bedard on October 8, 2010

in Attorney General

Lisa Madigan, Illinois state attorney general,...
Image via Wikipedia

Madigan Launches Probe into Major Lenders, Announces Legislation to Prevent Rubberstamped Foreclosures

Chicago (LoanSafe.org) — Attorney General Lisa Madigan today demanded 23 additional loan servicers provide her office with information concerning the fairness and accuracy of their foreclosure procedures in courts across the state.

The Attorney General recently issued a similar demand to GMAC/Ally, Bank of America and JP Morgan Chase to halt all pending foreclosures in Illinois, including post-foreclosure sales and evictions, after they admitted they were filing false documents in foreclosure proceedings.

In today’s 23 demand letters, Madigan called on mortgage companies to evaluate their internal foreclosure review procedures and, unless they can provide assurances that the affidavits and foreclosure documents are trustworthy, immediately suspend pending foreclosure actions in Illinois.

In recent weeks, some of the nation’s largest loan servicers have admitted publicly that their employees have literally rubberstamped thousands of false foreclosure affidavits without having personal knowledge of or verifying the underlying loan file information. Madigan will review those servicers’ procedures for possible violations of the Illinois Consumer Fraud Act.

“The same mortgage giants and big banks that fraudulently put people into unfair loans are now fraudulently throwing people out of their homes. They should not be above the law,” Madigan said. “Illinois homeowners are legally entitled to a foreclosure process that is transparent, accurate and fair.”

Madigan also announced she is helping to convene a multistate task force of state attorneys general and bank regulators to coordinate states’ reviews of servicers’ foreclosure processes. Madigan’s office has contacted federal regulators and investigators, including the U.S. Justice Department, to assist with a coordinated response.

Madigan will introduce legislation in Springfield to ensure the integrity of documents filed in foreclosure actions. Madigan’s bill ensures homeowners know the amount they owe, who owns their loan, the terms of their original loan and who they can contact. Specifically, the proposed legislation will require servicers to:

  • Provide borrowers with a verified and accurate amount owed and a payment history to ensure borrowers are given proper credit for all payments.
  • Detail the steps taken to verify the accuracy of the information contained in the affidavit to prevent the filing of false affidavits not based on personal knowledge;
  • File a copy of the original note with the foreclosure complaint so that borrowers clearly know the terms of their contract with their lender; and
  • Ensure that the named plaintiff is the legal owner of the loan and has the right to foreclose on the homeowner.
U.S. Senator Richard Durbin, of Illinois.Image via Wikipedia

Madigan also called on lawmakers in Washington to support the re-introduction of legislation drafted by U.S. Sen. Richard Durbin, D-Ill., permitting judges in bankruptcy courts to reduce the principal amounts on mortgages and thereby save homes.

The push by Attorney General Madigan to shine a light on the foreclosure filing process continues her aggressive battle against mortgage giants on behalf of homeowners in crisis. In 2008, Madigan led a nationwide $8.7 billion settlement with Countrywide over its predatory lending practices. The Attorney General has also filed suit against both Wells Fargo and Countrywide alleging widespread discrimination against African American and Latino borrowers who paid disproportionately more for their mortgages than other borrowers.

Madigan urged homeowners to visit her Web site, www.IllinoisAttorneyGeneral.gov, for resources available to assist homeowners in crisis. Included on the site is her Illinois Mortgage Lending Guide, a resource manual containing step-by-step instructions for those struggling to make their loan payments and a list of HUD-certified counseling agencies that offer default counseling services. Homeowners who do not have easy access to the Internet should call the Attorney General’s Helpline at 1-866-544-7151 to quickly receive the guide or the brochure by mail.

7 Responses

  1. It funny but about month ago i did write to the white house and to many sen with the suggestion that all foreclosures should stop that banks should take a step back and not for close, that banks should cramdown loans and this way people could start paying for their homes again and everything would start moving!!!!it not fair that they dare to do this to the american people! I am so proud of senator richard Durbin is doing allowing judges to cramdown on these loans making it possible for homeowners to keep their homes. who is fighting for us in n.y.? everyone continue to write and demand for judges to cramdown loans that you

  2. Neil – our AG is speaking out too… Arizona Terry Goddard.
    http://zingervotes.blogspot.com/2010/10/arizona-ag-goddard-warns-mortgage.html

    I am so thrilled that he sent letter to 60 institutions.. now he needs to halt the foreclosures… I hope our leaders in AZ step up to the plate because we have 2nd largest foreclosure rate in nation and peoples civil rights are being tramped on. We are non judicial so its too late after sale without huge cost to homeowner to fight it.

  3. NEIL people should not be posting full articles in comments that is stealing from authors and also copyright violation…. hate to see that kind of thing regardless of motive it is WRONG and can get websites in trouble….. plagiarism is a big deal.

    I am glad she is stepping up to the plate. Illinois and other states are starting to really build up some steam for addressing the issues. I hope they dont’ just make a way for the banks to redo all the fraud… the ones that have already been defrauded of homes with FORGED paperwork, should not be allowed a redo … we are talking PERJURY not a mistake or technical difficulties or as one ignorant report pout it DUBIOUS paperwork (that one sticks in my craw).

    l

  4. http://mattweidnerlaw.com/blog/

    The Truth About What’s Happening in Florida Foreclosure Courtrooms
    October 9th, 2010 · Foreclosure,

    The following letter was sent by my colleague Greg Clark, a well-respected title attorney who has this to say about the conflict between what is happening in foreclosure courtrooms and how incorrect or improper legal decisions will plague our economy for decades to come.

    Erroneous court decisions, and their failure to properly apply the law litter the vast landscape of our legal history. Reversals of our U.S. Supreme Court, by itself, years or decades later, is proof.

    We in the world of transactional/title law and insurance follow a different tune than the drumbeat of the latest questionable appellate decision. We know that the vast majority of the judges sitting on benches never closed a real estate transaction nor searched and put together a title chain, nor could they spot a cloud or defect. We deal in a delicate and extremely conservative area of the law developed over nearly a 1,000 years of practice, process and tradition; We carry the history and weight of that developed law and its solid logic into the most important aspect of any transaction – the fundamental bedrock assumption underpinning its successful completion: clear and marketable title. Every buyer presumes it.

    So we do not accept bad or illogical decisions of courts if it conflicts with our learned perception of the law and acceptance of a risk assessment. We cannot be forced to write title.

    But if we don’t write title most of the modern real estate world and our economic system will grind down to a halt.

    Taking Taylor further up the chain of appeal would cause no harm but it’s presence now as bad precedent gives no shelter or safe harbor for any title underwriting decisions foolishly based on it. Instead it stands out like a sore thumb, a poster boy for a decision based on expediency not law or logic.

    Greg Clark

    Clearwater, Florida

  5. Obama is clarifying the issue of the pocket veto
    in this link

    http://www.huffingtonpost.com/2010/10/09/obama-clarifies-pocket-ve_n_756873.html

    NEVER AGAIN

  6. MERS: Myths, Misconceptions, and Realities – A REBUTTAL

    Joe Murin, one of the current managing directors of The Collingwood Group, a financial advisory company with offices inside the DC borders as well as in New York whose business is to advise companies who want to get on the Federal teat is a former CEO of GinnieMae, one of the founding companies of MERS. Two and a half weeks ago, on July 22nd, 2010, he wrote a lengthy article for “The Voice of Housing”, a blog on Mortgage Daily News entitled “MERS: Myths, Misconceptions, and Realities”. In it he goes into a great deal of detail attempting to rebut the slings and arrows which are hurled at MERS. It is much more detailed than the weak attempt MERS themselves made directly to this blog several weeks ago which had seven sentences and eleven false and misleading statements. Joe’s essay isn’t nearly as gross as MERS as he states quite a few truths in an attempt to obfuscate the REAL truth.

    I reprint it here in its entirety to point out the accuracies as well as the inaccuracies to try and dispel some of the smoke which he fans so well. I tried to respond directly to Joe, but I couldn’t find any way to do so through the article or any of the links given in the site page.

    I ask all of my readers to try and get this rebuttal to Mr. Murin and I offer Mr. Murin the opportunity to engage in a healthy debate over this rebuttal. Perhaps if we engage in some honest intellectual discussion, we can arrive at the truth of the matter. Should he write, I will reprint in its entirety any reply he may have and will not respond inside his text as is about to happen below.

    Comments are broken out and italicized.

    MERS: Myths, Misconceptions, and Realities

    by Joe Murin

    (http://www.mortgagenewsdaily.com/channels/voiceofhousing/164078.aspx?CommentPosted=true#commentmessage)

    The housing crisis has revealed many things about our finance system. It lacked proper oversight, auditability, transparency, and incentives to do the right thing by borrowers and investors. My partners and I often refer to these calamitous times simply as the battle between – “victims and villains” – those who took advantage of the system and those who were taken advantage of by it.

    I have some problems with this. Read one way, I have to agree, yes to all. Read another, I have to object to a lot because the nuances of his language obfuscate the truth. Yes, without a doubt, there was no oversight, no auditability (let’s do a forensic audit of MERS~!), but what annoys the most is this sense of incentives to game the system by borrowers & investors which the language portrays. The incentive to game the system was on the part of the Financial Intermediaries (FI’s) who sang the siren’s song to both borrower’s and investors to participate in the game. Were it not for those incentives, put in place and operated by the FI’s, none of this wouldhave happened.

    MERS is emerging as a convenient and misunderstood target for pundits and politicos that appear to view this organization as fitting the profile of a “villain”. Joe, couldn’t disagree with you enough.

    First, let me answer the question: What is MERS?

    The mortgage industry (the MBA, GSEs, and largest originators and loan servicers) created MERSCORP, Inc. to more easily identify and track individual mortgage loans and the information related to those loans, including the servicer and investor. Yes, but without bothering to see if it complied with any of the 50 different recording statutes of the 50 different states and it did so by corporate decree, not by the messy process of working it through 50 state legislatures. A classic sign of oligarchial control. They proposed it, and after making changes suggested by Moody’s rating service, crammed this system down our collective throats while very few were looking. Moody’s essentially said ‘looks good to us, let’s do it’ and so they did – by corporate decree.

    The MERS® System is a national electronic registry that tracks the changes in servicing rights and beneficial ownership interests in mortgage loans. The MERS® System tracks mortgage loan information by use of a unique 18-digit Mortgage Identification Number—or “MIN” as it is called—which is registered on the MERS® System. MERSCORP, Inc. is the parent company of Mortgage Electronic Registration Systems, Inc., a corporation whose sole purpose is to be the mortgagee of record and nominee for the beneficial owner of the mortgage loan. This is straight out of MERS’s marketing information. Yes, it is true, it is an electronic registry, and yes, they do keep track of changes in servicing rights. But if they actually keep track of changes in beneficial ownership, why can no one get them to discovery where they demonstrate this tracking ability? Hmmmm?

    Because the MERS® System was developed using open, non-propriety standards and technology, it has been incorporated into virtually all of the mortgage industry’s loan origination, servicing, and loan delivery software. Nearly every major originator, servicer and investor in residential mortgage finance is a member of MERS and is electronically connected to this unique system. Since 1997, more than 63 million home loans have been assigned a MIN and have been registered on MERS®. Today, more than 60 percent of all newly originated mortgage loans, including those from Fannie Mae, Freddie Mac, Ginnie Mae, all major conduits and state housing authorities, have a MIN. All of this is true and it should terrify every homeowner who has MERS on their Mortgage.

    In summary, MERS is a nearly universally adopted industry utility that keeps track of who owns and services your mortgage. By making MERS the “mortgagee of record” loans can be bought and sold more easily which creates a more liquid and tradeable market for mortgage assets, which should reduce costs to borrowers. Lenders pay a one time “registration fee” to MERS for this service…

    Okay. Let’s take a look at this. It is indeed nearly universally adopted, they do keep track of changes of servicing rights to individual mortgages, but they seemingly forgot that part about keeping track of who actually OWNS your mortgage. The evidence of this charge is that they will not disclose that tracking even though many homeowners have attempted to find out. MERS avoids discovery like the plague. While it may reduce costs to borrowers (debatable, but we’ll give it to them) the entity whom it really reduces costs for is the mortgage bankers association. It also needs to be heavily emphasized that MERS does indeed create a situation where loans can be bought and sold more easily creating a more liquid and tradeable market for mortgage assets. This FACT makes MERS the very CRUX of the entire mortgage scandal

    Why does “MERS” appear on many mortgages?

    Residential mortgage loans typically consist of two elements: 1) a note between the lender and the borrower that sets forth the terms of the loan and establishes the obligation to repay the loan to purchase a property; and 2) a security instrument which depending on the state may be called a “mortgage” or “deed of trust.” Absolute truth

    The security instrument is recorded in the county land records telling the world that there is a lien on the borrower’s property. This lien allows the property to be foreclosed upon and sold if the borrower defaults on their obligation to repay the promissory note. Again, absolute truth.

    The homebuyer at the closing table signs the security instrument (“mortgage” or “deed of trust”). By signing this document, the lender and the borrower agree to appoint Mortgage Electronic Registration Systems, Inc. (MERS) as nominee for the lender and the lender’s successors. By doing so, the borrower grants the mortgage lien on the property to MERS, and the security instrument is recorded in the county land records. As long as the sale of Note involves a member of MERS, MERS remains the mortgagee of record, and continues to act as a nominee for the new Note-holder.

    Functionally, this is correct. Don’t believe them? Go check your copy of your closing documents. If you have MERS on your Mortgage, you will find this document, usually one page, perhaps a page and a quarter in amongst your copies. However, I submit, this is fraud in the inducement. Try to get your loan paperwork processed without signing this document. It is a condition of sale. It is a piece of paper put in front of you to sign. Don’t sign it, you don’t get your house. But it is a fraudulent piece of paper because it causes you to sign off on becoming a victim of the larger frauds perpetrated by Wall Street on the entire American public.

    This from Dictionary.com:

    * fraud in the inducement – noun – fraud which intentionally causes a person to execute an instrument or make an agreement or render a judgment; e.g., misleading someone about the true facts

    Did you know what the true facts were when you signed off on that doc? I doubt it. You just signed off on the docs presented to you as they were because to do otherwise would have torpedoed the whole deal and you wouldn’t get your house/refi/HELOC whatever.

    Myth#1: MERS is paid by servicers to foreclose on homeowners that can’t make their payments.

    Reality: Anything that MERS does beyond its core business of registering and tracking mortgage loans is a net cost to them. As the mortgagee of record, they have traditionally been responsible (though not financially incented) to carry out foreclosure actions on behalf of the lender when the music stopped playing or paying.

    Okay, just have to put this in here in case I don’t get to put it in somewhere else. In MERS v NB Department of Banking and Finance MERS insisted they have absolutely NO actionable interest in title and the court agreed. That means MERS cannot foreclose, they cannot assign beneficial interest (they just keep the records, remember?) and worst of all, THEY CAN’T DELIVER CLEAR TITLE and that is why having MERS on your Mortgage should terrify you.

    Myth#2: MERS is defrauding and virtually bankrupting municipalities by enabling servicers and investors to avoid paying county filing fees. Because MERS is the mortgagee of record, loans can be bought and sold without the traditional paperwork and fees required before MERS was created.

    Reality: Borrowers generally pay recording and transfer fees, and, yes, when those services no longer need to be performed, a fee is no longer required.

    MERS reduces the filing and transfer fees paid by the borrower (at closing) to the government when a loan is recorded and/or assigned from one lender to another, and many lenders pass on this savings to the borrower. As for “defrauding” and “virtually bankrupting” municipalities by reducing the fees they collect, avoiding these fees in no way constitutes any type of tax avoidance or fraud. Fees are paid in exchange for a service. If the service is not needed—i.e., registering subsequent assignments are not necessary and therefore paying a fee is unneeded—then there is no “lost” revenue. So while banks are avoiding the county recording fee through the use of the MERS System, it is not tax avoidance.

    Lots of stuff here. MERS doesn’t reduce the fee you pay to record your paperwork at all. Check your closing docs. There is a fee in there ranging from $21-$42 for recordation. That’s where your obligation to the county stops. Any other changes in beneficial ownership (which are not recorded) are not your responsibility but the responsibility of the person buying beneficial ownership so this is total BS, a red herring. They aren’t saving you JACK. They are, however, saving the banks and investors a boatload of money by not paying recording fees to the county. You will notice he speaks out of both sides of his mouth here. On the one hand, he admits the banks are “…avoiding the county recording fee through the use of the MERS system …” but deny it avoids taxes. Typical of what MERS does. If it means they have to pay money, they are merely a nominee with absolutely no actionable interest in title. If they are collecting money, they have unlimited rights. As far as whether or not they are avoiding taxes and fees, that is for the courts to decide and at least two courts, TN and CA have Qui Tam, False Claims acts pending which if successful, will command a forensic audit of MERS in those two states and will claw hundreds of billions of dollars back to the counties which were defrauded.

    Misconception: If I stop making my payments MERS doesn’t have any right to foreclose since they don’t actually own my mortgages.

    Reality: When a borrower signs the mortgage security instrument at closing, they grant and convey the legal title to the mortgage to Mortgage Electronic Registration Systems, Inc. (MERS) and MERS is the mortgagee. As the agent for the promissory note owner, upon instructions from the owner, MERS will commence a foreclosure. The mortgage instrument states that MERS has the right to foreclose and sell the property. Courts around the country have repeatedly upheld and recognized this right.

    Remember, MERS is the mortgagee of record and acts as the note holder’s agent. If the noteholder wants to foreclose, MERS needs to carry out their responsibilities to their client. MERS, like any mortgagee, needs to produce documentation (often signed original note/deed) as indisputable evidence of ownership in a mortgage. In some cases where MERS did not or cannot produce the documentation, the foreclosure actions have been cancelled. However, the right for a lender or a lender’s agent to foreclose because of a lost Deed or assignment does not, generally speaking, expunge a borrower’s obligation to pay a debt – it just might not be a collateralized loan anymore.

    They guy is totally talking out of both sides of his mouth here. On the one hand, while it is true you signed a document (I submit, fraud in the inducement) permitting yourself to become part of the MERS fraud, what he neglects to point out in this answer is that by their own description of themselves, MERS is only the nominee for the beneficial owner. He describes MERS earlier in this document merely as a record keeper. How can a record keeper have any rights to do anything? The answer is, they don’t and it seems courts around the country are pointing this out much to the Mortgage Banker Association’s and MERS’s chagrin.

    I have to give credit here because credit is due. He states: “the right for a lender or a lender’s agent to foreclose because of a lost Deed or assignment does not, generally speaking, expunge a borrower’s obligation to pay a debt – it just might not be a collateralized loan anymore.” He is absolutely correct. You still owe the money. The difficulty lies in determining just exactly who that person is.

    The problem MERS creates is one of duality of database. On the one hand, there is the database at the county courthouse publicly available to interested third parties which has been the standard for 400 years in this country and is the only one that matters. On the other, we have MERS’s VERY private database which only they control and which gives false and misleading answers (I have screen shots to prove it) demanding parity, if not supremacy over the public records at the county courthouse. Again, I submit, if they do indeed keep track of beneficial ownership of an individual mortgage, given the enormous amount of money at stake in the movement to challenge MERS’s very right to do anything, why don’t they produce this information in discovery? You would think they would be Johnny on the Spot but no, they avoid discovery like the plague. I want to know why? What are they hiding?

    How does MERS fit into today’s market?

    The housing crisis revealed the need for greater transparency in the mortgage loan process. Policymakers are demanding new regulations that require tracking and analysis of loan level data throughout the life of every mortgage loan – the type of data already captured or accessible through the MERS® System and the MIN. The MERS process creates accountability and transparency, helps keep costs low, reduces the risk of errors in recordkeeping and makes it easier to keep track of the lien if a loan is sold to other banks and investors. The only problem here is, they don’t do that. The concept may have been good, but the execution is beyond flawed; it is a total failure. They are not forthcoming with any information other than servicing rights. Try to find the chain of title for your mortgage from the time you signed your documents to today and you will not be able to do so. Let me say that again. You will not be able to do so.

    The Mortgage Identification number, or “MIN”, and the MERS® System are existing loan level data systems that are fully integrated into the mortgage industry. True. And therein lies the danger. Together they are the single most important existing tools for tracking loan level data in the home loan process. MERSCORP, Inc. (MERS) provides a central registry of mortgage information. It identifies and tracks individual mortgage loans and the information related to those loans, as well as facilitates more efficient transfer of loans from originators to investors. Again true. And because access to their database is so tightly controlled and not publicly available, it makes MERS the heart of the entire Wall Street, Mortgage Scandal.

    At a time of crisis in the nation’s financial system, the MIN provides greater accountability and transparency for consumers, lenders, investors and regulators. Excuse me, I have something caught in my throat – BULLSHIT – ah, better. So sorry, pardon me. Through the MIN, MERS helps:

    * Identify for homeowners the servicer of their mortgage loans as if you didn’t know who you write your monthly check to?
    * Investors and credit rating agencies analyze the credit quality of mortgage back assets If they had done that, none of this would have happened.
    * Regulators in monitoring compliance with the law Asleep at the wheel
    * Public agencies track housing and economic trends Perhaps, shall we give them this one?
    * Track and confirm great volumes of loan-level data for professionals who originate, service and securitize mortgages Tying MERS directly to the overall fraud
    * Identify the parties responsible for maintaining vacant properties, thereby helping local governments succeed in their neighborhood preservation efforts Really? Then why do I constantly read reports saying municipalities don’t know who to hold responsible. Is it MERS? Oh wait, that would mean they have to spend money. Sorry, I don’t know what I was thinking.
    * Keep distressed borrowers in their homes by speeding up the loan modification process By occluding ownership MERS is the REASON you can’t get a loan mod or short sale done.
    * Law enforcement officials fight fraud by tracking down criminals who attempt to obtain multiple loans on the same property Perhaps. Let’s give them this one too, shall we?

    So I would concur that there may be some confusion related to the MERS business model and value-add to the mortgage process. Ya think???? However, accusing them of malfeasance, fraud, or putting municipal employees out of a job is as far-fetched as saying Tiger Woods will receive the husband of the year award.

    Let’s face it, the only thing MERS has done wrong is be at the wrong place at the wrong time during a crisis. And as we all know every crisis needs a victim and a villain. It just so happens that MERS was convenient to fill that role.

    Face it, Joe. MERS is the heart of the scandal. I challenge you to post this rebuttal on your website and refute my charges. Heck, I challenge you to write me directly and refute my rebuttals. I promise, if you do, I will publish your response in its entirety without my comments interspersed in the text as I did in the above. I won’t promise you I won’t write and publish a critique, because I most likely will. So please, I beg of you, write me, engage me in conversation.

    I have to tell you though, Joe, I’m not holding my breath.

  7. http://www.suffolk.edu/sjc/archive/2010/SJC_10694.html

    Here are the Oral arguments on Oct 7 2010 from the Supreme Judicial Court of Massachusetts in the Ibanez Case. I believe US bank is finished. Enjoy the Vid

    BM

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