When Lenders Won’t Listen

COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

EDITOR’S COMMENT: Of course the main problem is that you are not ever talking to the lender. You are talking to the pretender lender. And any attorney who “helps” a client accept an offer of settlement or modification without getting written acknowledgment that title may be clouded, or who doesn’t extract an agreement that a Judge will enter an agreed Order quieting title to conform to the settlement is a walking target for malpractice and discipline.

When Lenders Won’t Listen



FixesFixes looks at solutions to social problems and why they work.

At the end of this week’s Fixes column on ESOP, an organization in Ohio that helps prevent foreclosures, I promised to share some stories of homeowners’ experiences. I also asked readers to write in with their own mortgage tales. Many did. The stories illustrate why trusted, nonprofit, third-party intermediaries like ESOP, which know how to communicate productively with both homeowners and lenders — and are committed to finding solutions — are needed to ease the housing crisis. Even better, a few readers offered suggestions about how to avoid this problem in the future.

Readers encountering difficulties with their mortgages described many frustrations they faced trying to work with banks or loan servicers. “I lost my job and was unemployed for 6 months before I got another position which paid me less then I was making when I got my mortgage,” wrote Ms. Fofana (26.) of New York, NY. “I told my mortgage company my situation and was offered a loan modification where the monthly payments were higher than the original monthly payment. Only after I filed for bankruptcy did the bank take my request for a modification seriously.”

A homeowner who self-identified as Overwhelmed, (29.), wrote that Ocwen, a national loan servicer that works successfully with ESOP in Ohio, had been less helpful in Kentucky. “We have gotten an attorney, sent in paperwork registered, faxed and e-mailed nine times,” the reader explained. “They keep telling us we did not send in the paperwork. I have sent copies of the registered receipt, faxes receipt — to no avail. The one person we were working with said they had gotten the paperwork and all looked in order. I have never been able to talk to her again.”

ESOP representatives told me a number of stories about homeowners who had been treated poorly by lenders. But one story captured the wastefulness and ineptitude of some of today’s foreclosure proceedings. A couple named Deborah and Gregory Matthews from Bellefontaine, in west central Ohio, had fallen into default after Gregory lost his job and Deborah had to accept a position at half her former pay. They called their lender, US Bank, for help and were informed that they could make reduced payments as part of a partial modification. Then the Matthews were shocked to receive foreclosure papers. A few days before Thanksgiving last year, a bank representative called and said the house was going to a sheriff’s sale the following January and they needed to move out. (In fact, homeowners are not required to vacate until they receive an eviction notice.)

They didn’t know any better, so they packed up and moved to an apartment 10 miles away. In January, they discovered the house was still vacant. They looked into it and found that it had never been scheduled for a sheriff’s sale. The bank said it would reopen their modification file, so the Matthews broke their lease, forfeited their security deposit, and moved back home. In the meantime, the pipes had burst, and they had to pay $2,000 to fix them and clean up water damage. Now that the Matthews are clients of ESOP, the bank has indicated that it will do a workout with the couple and reimburse them for the costs they incurred when they moved out.

Many readers seemed less interested in arranging solutions for distressed homeowners like the Matthews than in expressing their frustration and anger about a situation that they see as inherently unfair. S.L.H., from Seattle, (38.) wrote: “I’m really sick of hearing about the need for compassion when it comes to people who owe money on real estate. Funny, none of these home ‘owners’ had compassion for those who were priced out of the market and forced to rent during the great bubble.” There is no justice, some argued, in their neighbors getting adjustments to their loans because they cannot afford it.

The moral argument against letting homeowners off the hook was put forward by K, from the Midwest, (6.) who penned: “[T]here are those of us who were raised with the idea that if you make a bargain you keep it. If you say you will return something you have borrowed, whether it is a lawnmower from next door or a bank loan, then you do what you have said … But, then, I was raised in a different America.”

Not all bargains are made in good faith, however. Borrowers and lenders, it turns out, did not share equal information in many cases. ESOP started assisting homeowners in the late 1990s when mortgage brokers appeared in poor neighborhoods of Cleveland peddling loans door-to-door to low-income residents, touting shiny cash incentives and “teaser rates” of 1 percent, and burying fees and rate hikes in the back. It was predatory lending that decimated inner city neighborhoods — not anything that resembled fair deals.

However, many homeowners across the nation did understand what they were signing even if they failed to appreciate the real risks. The difference was that the borrowers made their mistakes one house at a time, effectively as amateurs. The lenders made these mistakes as professionals, dealing with hundreds of thousands of borrowers, and they concealed the cumulative problem even as it was metastasizing. So now we have millions of homeowners who wouldn’t be in distress if not for the fact that they lost their jobs as a result of a recession that was precipitated by the very bankers who are now threatening to foreclose on them.

In the face of these events, saying, “You made a deal, you have to stick to it” is self-defeating. Today, roughly one in ten  mortgages is in danger of foreclosure and one in four is underwater.

Which gets to a larger point. When so many people have made the same mistakes, you have to look beyond individual causes. You need to examine the systems, pressures and incentives at the root of the problem. Bankers and brokers had all sorts of incentives to make bad loans, just as homeowners did to accept them.

So what can be done to prevent a similar problem in the future (if banks ever get back to lending)? Readers put forward a few good ideas. Dee from Brooklyn, (22. )suggested that loans be clearly labeled: “Perhaps we need a law providing, among other things, that in any ARM [adjustable rate mortgage] deal, there must be a disclosure on the loan note documents, in large bold type, stating that the loan is an ARM, and may re-set.”

This makes sense to me. We label foods. We put warnings on dangerous products like tobacco. We make sure drug companies include harmful side effects in their advertisements. Why not apply the logic to lending? Clear labeling, with mandatory disclosures — warning: this loan could give you an ulcer! — could help homeowners who are murky about the financials. It could also put a crimp in the predatory practices of payday lenders and check cashing operations.

Pseg, from the USA, (44.), suggested that governments should compel lenders to respond to borrowers in a timely fashion. “[N]o bank should be allowed to add on extra fees if a review for a modification takes more than 45 days … In my experience the norm seems to be servicers dragging things out past the point of most homeowners’ patience … All the while late fees, attorney fees, processing fees, etc., are added on an already unaffordable loan.”

I like this idea. If governments are required by the Constitution to give defendants a “speedy trial” or risk cases being dismissed, perhaps mortgage servicers should be required to give borrowers “speedy reviews” or forfeit their rights to stack up fees and penalties? Right now, the incentives for some loan servicers favor dragging things out as long as possible — which is costly and painful for homeowners and unhealthy for the housing market.

More From Fixes

Read previous contributions to this series.

Changes like these, and others, are unlikely to happen without considerable public pressure. That’s why ESOP’s community organizing tactics — especially its willingness to be confrontational at times — remain an important part of its arsenal, and could be an example to others who want to make similar progress. The financial crisis has demonstrated how squeamish policy makers become when facing banking interests. At the same time, many community-based groups who used to fight for people at the grassroots have formed alliances with private sector developers and banks, who are their major funders. Their boards are also chock full of banking executives. This may be helpful for accelerating community development projects, but it’s unhelpful when it makes local leaders fearful of raising their voices, lest they lose their funding.

ESOP has demonstrated that it often takes pressure on the banks and loan servicers to make them respond to homeowners. A reader, Kim from New Mexico, put it well: “ESOP uses a stick to make the Big Banks eat their carrots, and as so many comments on this story show, you need a stick.”

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David Bornstein

David Bornstein is the author of “How to Change the World,” which has been published in 20 languages, and “The Price of a Dream: The Story of the Grameen Bank,” and is co-author of “Social Entrepreneurship: What Everyone Needs to Know.” He is the founder of dowser.org, a media site that reports on social innovation.

31 Responses

  1. Gary H

    Money went missing. Refinances were likely not paid off as required by the refinance.

    Joyce Louise

    Sounds like you are really committed –really appreciate that. Here is what I want to know — in addition to all else —- where did the payoff monies on a refinance really go???

    Appears insurance fraud is big issue — payoffs may never have been executed — insurance proceeds instead — and “scratch and dent” from set-up “shell” trusts to redirect the scratch and dents elsewhere. Meaning — borrowers were deemed non-compliant before they even defaulted.

    Private trusts set up for GSE falsely categorized non-compliant loans. — non-compliant because exceeded GSE loan limits/mortgage insurance documents not submitted/ false early payment defaults, breach of representation – etc. etc. (subject of “PUTBACKS/REPURCHASES). Documents fraudulently withheld. Thus, set-up trusts had no choice but to reject – and, loans were actually redirected into non-securitized trusts (did not meet law for Regulation AB securities pass-through). Trusts were originally set up to accept GSE non-compliant loans —- but these trusts were just shells. Loans are long gone from those original trusts — but foreclosure attorneys still clinging to mama’s apron strings — when mama long abandoned.

    And, of course, insurance fraud.

    Have to dig deeper.

  2. I am still upset about the 3.92 billion given to Minneapolis so they could buy up the foreclosed homes and rehab and then sell them to others. In the meantime, the non profits, the realtors and the attorneys made a bunch of money and the lender’s came out smelling like a rose . I still have not been able to get an accounting ledger to see what the lender was paid for that home. They could have left all of the people in the homes by simply subsidizing the payment in the right way and moratoriums for those in definite hardship situation The 75 Billion did not go very far to help one homeowner, let’s be clear about that. It was given to small towns and urban areas to purchase f/c from the banks, maintain the bank’s properties, it was a sick choice by the our government over the people.

  3. Neva

    Yes the tarp money was used to also used to pay servicers incentives for doing modifications, rightoff of losses and deficiencies and some differences in the homeowners payment. My understanding the homeowners bascially got nothing. In stead of funding the whole payment to the servicer who in turn passed it on to the trust in most cases, why didn’t they just supplement a portion of the monthly payment so they could stay current. The way they did it I believe was to pay the whole payment, but it still showed up as an advance and did not bring the homeowner current. That is why they tried the forebearance programs as well as modifications. At any rate, the whole thing did not work because the money was not going to the right people nor being posted correctly.

  4. The TARP money supplements the monthly payments of homeowners. HAMP requires resetting the mortgage so that it is at 31% of the monthly income. TARP then kicks in and supplements this payment to the point that it is equal to 39% of the monthly income. But if they do not modify any loans, no TARP money is spent. At the rate that things are going, very little of the TARP money will be spent. This is from the Treasury Rules related to loan modifications. http://www.challengingforeclosure.com Sirak@challenginforeclosure.com

  5. Gary

    This is the reason I am so thankful I do not and have not accepted any funds from the feds, attorneys, realtors or anyone else connected with the mortgage housing demise we now find ourselves in. I really never have to worry about what I say to whom because I am depending on no one but myself.

    If you bought house x from y, then you paid Y for the house with your own personal money or perhaps a loan you got from the bank. Now about Y’s ownership in the the house, depends on how he may have purchased it or however he may have become legal owner. If he purchased the home before selling it to you, then he paid for it, then he paid for it. Doesn’t really matter who he purchased the house from. It could have been at a foreclosure auction or just from another individual.

    The big issue on the board today will be, as I mentioned to a lot of people weeks ago, is what ridiculous program will the administration come up with to try to resolve this issue. We all know that both the Bush 2007 program was a failure 15 out of 400,000 modifications, and now Obama with about 500,000 out of 4 million, both a failure. The feds have only delayed any kind of recovery and I still have to ask the question why? I have my ideas, but hey, not going to blast away again bebause no one really listens.

    I am frightened by the prospect that now that after the tricle down effect of this delay has brought us to the edge of the cliff, just what will the feds come up with now. They will end up at some point paying the lenders for deficiencies, helping them absorb losses and perhaps subsidizing some of the loans by paying the full payment, rather than a partial payment. As I have tried time and time again to get everyone to understand, it was important to come upu with the plan that we knew would work and a strategy to pull it off. All the idiots had to do early on 2007-2009, was subsidize, rather than attempt to modify the loan, the $300 to 800 per month so a full payment of prin and interest and escrow could be paid on behalf of the hardship individual, no investors allowed. By keeping those payments current, in latter part of 2008 and 2009, there never would have been the delay in the recovery. Also, while we were subsidizing the loans, the people who knew something about working on behalf of the people could have formed a union to help them do something about their hardship so that et the end of the 3 or 5 year period, they would have resolved their issue. The way we did it simply took the whole housing market down, together with the corruption that was needed to keep giving false hope to people and that allowed banks to get out from the liability of those securitized markets. Those investors that purchased those bonds were sinking in quicksand the minute they bought the securities and they were set up big time with a phony product. SEC you should have known better. OCC a disgrace to the American people and to the Congress, a 13% approval rating doesn’t come close. Try -150% approvavl rating. Here you will find the group that took this country down as they had oversight of the regulatory and they worked in tandem by doing absolutely “nothing” to prevent this mess. At any rate, if we give one red cent to the banks fo wipe out their deficients at the cost of the taxpayers, this is a win win situation for the lenders and lose lose and unconsionable act upon the American people. There were many plans that would have worked. Looks to me like the investors who purcahsed the securities can still hire attorneys to go after these companies – but what about the individual homeowner. There is no defense and the AG’s unless they surprise the hell out of me, will come up with some side stepping settlement that will not help the very people who need it.

  6. Anonymous and Joyce Louise

    Again thanks for some great info which I perceive ocurred after foreclosure on a property. First let me make this statement…..I am Not a planted mole of the banks and I do have a current evolving court case against BOA ET. AL in CA where I’m now in pro-per. I beleive my point was missed to a degree in the question I asked, so here goes again….

    I ‘bought’ house “X” from seller “Y”, an individual that had ownership according to recorded title.

    After this initial sale from seller “Y” to “X’…..where did the money come from to Pay seller “Y”?



  7. Gary:

    To add to Anonymous statement if I may, once the proceeds are received from the sale, the servicer calculates the mortgage insurance if any and collects on that. After all credits have been gathered, sale proceeds, mi insurance, Va guarantes, whatever, all the bills are paid, attorney fees, etc, and then that money is passed on as Anonymous says. That is exactly why I have always wanted to see what the INDIVIDUAL customer account reflects, rather than seeing all of the loans bungled into one figure and submitted to the company, as Anonymous said. In a securitized loan, this would be the Depositor normally because the loan was transferred or should have been out of the pool when it was first decided to place the loan in foreclosure. In a recent case we had, it appeared that the Trustee held the collection rights so foreclosure could take place, but the money was passed through by the servicer to the party, most likely the depositor, but depending on the contract, the company filing the complaint might have to receive the funds first and then on to the depositor. There is a system that we always used before filing for foreclosure whic was to determine “amount of estimated recovery” and that is how they determine bid information on some occasions. Not all companies follow this line, but it is relatively close. Same thing goes for the TARP properties. It is very unsettling to me as to how much the feds are assisting the banks, if at all, with the loan payoff when investors step in and buy the stuff say for example 30% on the dollar of the remaining balance on the loan. In otherwords, if the loan had a $100,000 balance when placed in the REO asset column, the investor buys for 30%, how is that other amount written off. As a loss, or was there a subsidy to the lender who sold the reo to the investor. Not sure what the TARP funds did. Did they assist in the sale to the new buyer of REO toxic assets? If they would produce those individual ledgers the public would know what part TARP played in the sale of the toxic assets on the bank’s books. They are off balance sheet of the banks as I understand it. Of course we were never allowed to just remove toxic loans from our books to make the financials look better, but they had to in this case.

  8. Know someone who worked in the sale of foreclosed home business — his job was to sell the foreclosed homes. Told me the party that “recoups” the proceeds is never the “bank” named in foreclosure complaint.

    Only “Rights” are transferred — proceeds to that party are distributed by the sale.

  9. Anonymous

    Thank you for opening the doors for us that are pursuing these fraudulent actions in court, very much appreciated.

    When considering the pretender lender side of the picture, how is / was it possible for the ‘sellers’ of the property or home to be paid in full after the closing of the sale…..where did this money come from that was placed into their account?


  10. Here is a twist to the foreclosure problem. Could this really make lenders listen? It’s a five-year lease exchange between neighborhood owners in pending foreclosure.


    I thought Dodd-Frank Act only protected tenants for six months, but maybe I am wrong about that.

  11. Mansaray-Ruffin also contends that by failing to object to the plan after receiving a copy of it in the mail, EMC waived its right to challenge the plan’s invalidation of its lien.
    While there is visceral appeal to this argument, it does not withstand scrutiny. In order for us to credit Mansaray-Ruffin’s position, we would have to find that EMC’s failure to
    object somehow constituted a waiver of Rule 7001 and all of the procedural protections that go with it (i.e., Rules 7002-7087). This, we cannot do. By way of analogy, if a
    plaintiff were to attempt to “commence” a civil litigation by filing a motion with the district court and mailing a copy of it to the defendant, and the defendant were to fail to file a
    pleading in response, we surely would not uphold the entry of a default judgment on behalf of the plaintiff. In that situation, the plaintiff has the affirmative duty to file a
    complaint and to serve a summons with a copy of the complaint on the defendant. See Fed. R. Civ. P. 3-4. This duty is not lessened or negated by the defendant’s inaction.
    Similarly, EMC’s failure to object to the plan did not do away with Mansaray-Ruffin’s duty to file a complaint and serve EMC pursuant to Rules 7001, 7003, and 7004. EMC
    had the legal right to do nothing and insist upon being served with a summons and a complaint in order for its lien to be invalidated.
    The only issue that remains is whether, because Mansaray-Ruffin’s plan treating EMC’s lien as invalid has been confirmed, it should be deemed final and controlling
    notwithstanding her failure to follow the Rules.
    The Bankruptcy Code does provide that the terms of a confirmed plan are binding. 11 U.S.C. § 1327.*fn6 In In re Szostek, we explained that, “[u]nder § 1327, a confirmation
    order is res judicata as to all issues decided or which could have been decided at the hearing on confirmation.” 886 F.2d 1405, 1408 (3d Cir. 1989). In that case, a secured
    creditor sought the revocation of the debtor’s confirmed Chapter 13 plan because the plan failed to provide for the full recovery of the present value of its claim. In finding for
    the debtor, we invoked § 1327 and the “well settled law that a confirmed plan is final.” Id. at 1408-10. Quoting from our opinion in In re Penn Central Transportation Co., 771
    F.2d 762, 767 (3d Cir. 1985), we emphasized our view that:
    the purpose of bankruptcy law and the provisions for reorganization could not be realized if the discharge of debtors were not complete and absolute; that if courts should
    relax provisions of the law and facilitate the assertion of old claims against discharged and reorganized debtors, the policy of the law would be defeated; that creditors would
    not participate in reorganization if they could not feel that the plan was final, and that it would be unjust and unfair to those who had accepted and acted upon a reorganization
    plan if the court were thereafter to reopen the plan and change the conditions which constituted the basis of its earlier acceptance.
    Szostek, 886


  12. Regarding that ‘ordinary’ homeowner’s insurance that is to protect in case of theft or certain types of damages, how many of you have taken notice of WHO the LOSS PAYEE is.

    I was NOT happy to find that the DEBT-COLLECTOR who is after my house, Litton Loan Servicing, has contacted my insurance company and got Litton listed as the loss payee.

    THEY DO NOT own the mortgage. Of course, CountryWide before them should apparently also NOT have been the loss payee.

    Are any of us SURE who SHOULD be listed as THE loss payee on our homeowner’s policy?

  13. http://www.scribd.com/doc/45284598/MORTGAGE-BANKER-COVERAGE-OF-TITLE-AND-INSURANCE-COVERAGE-DISPUTESConferences-2010-RegulatoryCompliance

    insurance? What What is mortgage insurance?
    Effect of mortgage crisis on mortgage insurance.
    The claims process claims 
    Dispute resolution provisions 
    assignments & transfers Loan
    Loan modifications transfers & assignments 
    Representation provisions and exclusions 

  14. in my case the servicer slipped language into my modification naming themselves as the lender. i had no idea my real lender actually went belly up 3 years earlier. during the entire loan mod process my servicer kept saying they were working on behalf of my lender everytime i asked to negotiate any points they had in the mod. then after we signed on the dotted line, our servicer (gmac) who by virtue of the language in the mod is now my lender, assigns it to a trust that closed in 2006 who immediately started foreclosure and also broke its remic status by acquiring my loan after the close date of the trust. i checked my land records and there is nothing before or after my real lenders bankruptcy that indicates they assigned it to anyone, in fact, gmac is claiming an allonge to note they possess is evidence they own it, and when i question them why a trust who claimed they owned it in 06 (when they sold mortgage backed securities to investors with my loan in the mortgage pool) would sell them the loan, and then buy it back when it was non-performing.. they said that info is proprietary and confidential. what a crock. i reported this to my ag and the irs, and neither could care what gmac is doing. fraud, misrepresentation, fraud on the courts,, etc etc and no one cares . i always thought remics had to be passive and couldnt buy and sell assets after their closing date? my guess is the gmac mod was a total ruse to get a fresh set of paperwork on my loan to deposit into the trust because the trust never really had it. the assignment of mortgage even says “MERS does hereby assign said mortgage secured by the loan mod recorded in…” to me that means the mortgage isnt secured by the note anymore, but by the mod.. what a cluster. anyone have any thoughts?

  15. is there anyone who is familiar with this LAWRENCE J. BUCKLEY in Dallas Texas? i read that he was disbarred in Texas. is this the same guy? i tried to contact the texas bar but the only info i have is under LJ Buckley who has a good standing record in texas. unfortunately Lawrence J. Buckley is not listed on their list of attorney, but according to ca bar association he practice outside ca which in dallas, texas, his bar texas licence id 70308. need some input please.

  16. If the Governors won’t do executive order moratoriums to stop this fraud, then don’t trust those governors. They are covering it up along with the Fed and Federal Reserve.

    They all know now. Absence of action = complicity

  17. Anonymous

    You are so right on in your analysis of the situation with servicers taking over the loans. I have one right now, in Court, in Wisconsin, whereby the client, acting pro se, was told what documentation she needed to make them prove up and that included the documentation to show how they acquired it, the works. My client got their stay on the foreclosure and got another 60 days and I believve even has the promise of a job so she may be able to keep her home after all. She said, gosh, I was so nervous, but I think I made the point that they have to prove ownership all the way or they can’t foreclose. Well, I guess the judge believed you. Just goes to show you, that pro se’s don’t always lose.

  18. Here is a story about a client of mine and her mother that is just unforgiveable and it is one of the worst stories that I have had to endure. I worked for one and a half years for a Katrina victim who came to Houston to stay while the area recovered and also so that she could continue her diaylsis 3 times a week. She and her mother came to Houston and asked nothing of Houston citizens, took care of herself, but in the meantime went to three different agencies to get help, including the state of Louisiana because of a potential foreclosure of her home after she had just paid $60,000 toward what she thought was the payoff needed. This client was referred to me by the NAACP as she could get no help from legal aid or other non profit organizations. The servicer claimed she owned $19,000 in escrow deficit. Well, the servicer could not even interpret their own payment history and dogged this poor woman beyond anything imaginable. She called me about 11:00 one night and I told her after listening to her story, to go to bed and don’t worry, she will never hear from these guys again and that we would intervene for her. Well as I said it took me a almost a year and a half, but finally, after we proved to them that the $19,000 charges were really $7800, (2 winterizing treatments for $1600 each on a property that was underwater and the Washington Mutual People just tagged it on her bill), they decided to go ahead an release her lien. Even though she offered to pay it out at a reasonable repayment amount, the servicer said no, I called to tell her that her long period of harrassment by the collectors was over and that I would be sending her the release on her property which they promised to give. She was ready to go back home to New Orleans and we were both thrilled and I would miss her because we had become good friends through the long ordeal. I told her that on a Wednesday evening and then on Saturday afternoon received a phone call from the family member that she had been murdered in her home, along with her mother. I keep thinking about the fact that had she gone home much sooner, that perhaps this may not have happened to her. We will never know. Now what does that have to do with anything. It has to do with our law enforcement allowing white collar crime to take over the lives of innocent and good people. First she is harrassed to high heaven by the mortgage servicer while she is heavily relying on dialysis to survive, and then ends up getting murdered after putting up such a good fight and thus finally going home, but not the way she planned. I have never collected one cent to help defend any of these people nor have I taken any kind of grant or donations from the government, attorneys, realtors, servicers or anyone else connected to this implorable act on this innocent person. I want to remain objective. If the servicer is correct, then I make sure the homeowner understands why something can’t be done, but if they are wrong, we give it 200% and make it right. Been doing that now for some 5 years, 24/7 and using our own personal funds to expense the call center. Taking taxpayer money is not what we do to absorb the cost of the servicers and to do their work even though now, we are at a point and time that this may work for a while, just like it did with the others, ACORN, HOPE, etc.

  19. Bottom line. The banksters have no incentive to renegotiate the home loans once they already got bailed out. And know they are gonna get bailed out in the future.

    bottom line.

  20. One other point — according to Fed Res — servicers are not the creditor either – unless they acquire legal title.

    Believe servicers, in some instances, have purchased loans — making servicers BOTH the owner/creditor and the servicer. If this is the case, servicers should say so – provide all documentation for acquisition – provide Debt Validation — leave out the Trust/Trustee in any contract/foreclosure proceedings – and explain how and when the “debt” was acquired. Of course, this now means that the “debt” is unsecured – as receivables were charged-off and mortgage loan contract is no longer existent. And, that brings in the question of discharge in bankruptcy.

  21. Anonymous

    So true. In fact we have a case right now where signors of a deed of trust have signed their rights away concerning a huge issue here in Texas, but did not know it at the time. Obviously the Deed of Trust says in most of the provisions of the Deed of Trust that they will follow applicable law. Since so many debtors did not know what that encompassed, they simply signed it assuming the lender was going to do as he said, follow applicable law. By signing the Deed of Trust however, they were signing with the one and only so called originating creditor I guess. I may be wrong about this, but aren’t most of the modifications that have been processed are portfolio loans and not securitized loans? Also, doesn’t it have to do with how much the servicer is going to be reimbursed by the 75B the feds allocated. Of course we know there were billions more that were funneled through different sources, for example, taxpayer money used to bail out Bear Stearns for 27B and then the feds let Chase by it for a mere 287 million. Was any of that paid back?

    I hope that the ESOP group continues to do good for the people, but as you said, these modifications must protect the legal rights of the people and ESOP needs to make it clear just exactly whose loans are being accepted and whose aren’t. And what if any, the lender is receiving a benefit, either to the servicer or as a subsidy to any losses the lender might have. Seems to me also, that modifications appear to be done on persons that are delinquent perhaps 2 to 6 months. I believe it was a person by the name concerned who agreed that we should be able to see the general ledgers on those loans that they are modifying.

  22. Ian

    Yes — you are correct. There could be multiple creditors — we are not talking about multiple security investors since they are not the creditor — but, instead, multiple creditors. In the case, of multiple creditors – (say 3) — the one with largest interest must divulge it’s identity.

    Joyce Louise, — agree meaningful modifications can benefit homeowners. But, they have to be cautious about what is signed — which is often a release of future legal rights. Unfortunately, it is a contract – and if party (creditor) is concealed — this makes contract illegal and affects mortgage title. Servicer abuse is massive – including hiding fees that may surface later — signing away legal rights with wrong party is dangerous.

  23. The pretender/lenders are not going to do what is right. They exist only to take the homeowner’s money. They are sleazeball debt collectors. Actually, they do not even own the loan. In fact, it is almost impossible to figure out who the owner of the debt is. It was all a giant scame by Wall Street, and, guess what, they are still getting away with it. There are still loans being put into securitized trust without proper documentation. Notes and mortgages are being sold more than once into securitized trusts. Our AG’s are pretty wimpy, and I have not seen anybody go to jail yet. They have to go to jail. AHMSI used to be American Brokers Conduit. The went down in bankruptcy in August 2007, and some of their executives were charged and one went to jail. AHMSI is just one of the debt collector servicers like BAC, Litton, WFB, etc. They all break the law on a daily basis. http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  24. Modifications did not work, as I tried to explain to the regulatory because they were intended as a ploy, not a resolution and in no way were they ever meant to do anything but buy time. Unfortunately, they carried it too far and permanent damage resulted as a result of their plan. The trickle down effect of the loss of jobs and devaluation of property has made this a different ball game for the realtors. So now we are all telling it to the Judge who had not a clue as to what was going on and simply played right in the hands of the lenders. And guess what, millions of homeowners who could have made a difference – did nothing.

  25. I wish for just once, someone would talk about how a modification COULD HAVE BEEN the answer to probably 40% of the problem loans today. It is not about the creditor on that modification, it is all about the servicer providing a modification that benefits the borrower while he is going through whatever hardship he is experiencing so that he can keep his home and maintain it. The lenders whoever they might be are real estate dealers, buying (through origination) and selling loans (proprties).

  26. All of the points brought out in the above article are not new. In 2002, just about everyone knew what was going on in the mortgage industry and did nothing about it. In fact, as a mortgage broker during that 2000 to 2002 period, I refused to broker the loans because I had enough sense to know what it was going to lead to and so did everyone else. In fact, for the very few loans that I did originate that were based on these dangerous loan programs, I clearly gave each and every one of my clients a “did you know” letter advising them about the dangers of such loans. Needless to say I was not a popular mortgage broker with the wholesalers.

    I would say to you that one of the primary reasons for the down fall of our economy has been the relunctance of those homeowners who are doing well and who have been able to continue to make their payments that they are not standing behind those persons who were entrapped into these loans and which were encouraged by the Congress and whom I believe worked in tandem with the regulatory to “not perform proper oversight” of such business practices by the banks. Instead, during the 2007-2009 period, homeowners initially thought it was the “dead beat” borrower who was at fault for this mess. In fact, it was through the ignorance of homeowners that they actually believed what the feds were saying about people who signed up for loans they could not afford. I want to remind you that no matter what the borrower things as to whether or not he should be buying that home, to a large degree, it is the lenders faught for approving loans for persons that do not qualify. That has been our history for ever people, at least until 2001 and forward. It wasn’t caution to the wind, it was all about theft, all the way down the line and most Americans were blaming those that made the home loans. I don’t remember the last time I went into the bank and told them they had to approve my loan. I want you all to know that as a financial services person, there was not a place that I worked for that did not have a way to control who was lying and who was not. Why do you think some of the loans were designated as “the liar’s loans”. The American people were a joke and made fools of and even those who knew better or should have known better, blamed the approval process on the home buyer rather than the financial institution that approved that loan. They literally lost their stockholders money. NOW, just in recent months, THERE IS SOMEWHAT A BETTER UNDERSTANDING THAT MOST BUYERS OF HOMES DURING THIS PERIOD CLEARLY WERE THE VICTIM OF A TARGETED PLAN BY WALL STREET AND THE BANKS WHO FUNDED THE LOANS. PRODUCING A PRODUCT THAT COULD BE USED AS COLLATERAL FOR WORTHLESS SECURITIES. The stockholders of Fannie and Freddie, together with those holding stock in the banks, should have gotten off of their high horses worrying about their own investments AND SHOULD HAVE BEEN WORRIED ABOUT THE CAUSE AND EFFECT OF SUCH PRACTICES BY THE BANKS WHICH THEY HELD STOCK WAS GOING TO HAVE ON THIS ECONOMY. YES, IT WOULD BE FAR REACHING AND ALL HOMEOWNERS WOULD LOSE IN MANY WAYS, JOB LOSS, PROPERTY VALUE LOSS AND SO ON. YET, THEY DID NOTHING BUT SIT AND BLAME THESE BORROWERS RATHER THAN PLACING THE BLAME WHERE IT REALLY SHOULD HAVE BEEN. AND NOW THE INVESTORS WANT TO SUE TO THE LENDERS FOR THEIR LOSSES. FINALLY. No, it was easier to blame the homeowners who signed up for the loans INITIALLY.. I don’t like the idea of losing value in my stock either, but the truth of the matter is, you made an investment in those stocks and if your leaders are out there preying on your brothers, I don’t think for a minute that you should receive the benefit of those transactions. And you did AT LEAST FOR AWHILE.. Had the American people stood behind those that were targeted and subject to such personal and inhumane treatment and made their voices heard, things would have been a lot different, and sooner rather than later.

    Give a speedy trial. Why in the world are we going to need a speedy trial?. Why did our AG’s sit on their asses and let the homeowners take such a hit. They may be attempting to make their investigations now, but it is damn little late in the day and they are doing nothing but trying to save face because they let the people in their states down in such a way that I get sick just thinking about it. The robo signing and fraudulent actions by the attorneys and their firms are nothing compared to the actions by the banks to put people in these dangerous loan programs. One thing that I do believe has happened is that now the American people can see what some attorneys are capable of doing for the almighty dollar.
    This author of this story may have heard a lot from the homeowners about how they were treated by loan servicers and how they continue to be treated by loan servicers, well, that is nothing new as I said and it is through the negligence of the GSE’s that this has happened and , through the laxness of the Congress to make the regulatory perform proper oversight and most importantly, the lack of the people to step up and weild in these wrongdoers. I have a few stories of my own to tell and have had for years, as to how it appears that the purchasers of these loans in the secondary as well as the big banks purchasing from smaller investment bankers, basically knew what they were buying and did it anyway as I said, to produce a product that would sell, certainly not to fulfil the American Dream. The American people had a dream in early 1980’s and they got screwed then as well and now we probably are looking at the children of those very companies that are screwing us now. Boy what a lesson Daddy taught his children. It was not the fact that deregulation was passed my friend, it was a matter of greed coupled with the unethical and dishonest business practices to entrap the American people while regulatory and the Congress and the AG’s sat back and let it happen. I see no end to this mess until the American people stand up and demand that these matters be cleaned up in a fair and just manner to those that have been harmed as a result of their actions. We have no idea what the AG’s are arranging for us. And that is more frightening than the wrongful acts themselves, because it could end up condoning all that was done to the American people in the first place. Speedy trial. If we are still having to worry about such a thing, that tells me, we are surely setting ourselves up for more of the same. My goodness, where are people of substance that can run this show. It is not the Administration, the Congress, the regulatory, the AG’s, the American Bankers Association, and some of the non profits who have literally raked in millions to run their outfits – or we would not be in this mess today. Yes, if you borrowed the money, you should pay it back, but that is only if you borrowed the money based on good faith and fair dealing and your documents are legal. Obviously a lot of Americans don’t get it yet either. I hope they do and soon. We need their support now. It is not a matter of us crying for compassion, it is a matter of them standing up for the rights of all Americans by educating themselves as to what is really going on behind closed doors. Yes, I’m mad. Can’t you tell? I still believe that deregulation was good for the purpose intended and I believe that Fannie and Freddie also were the best of the best at one time. All those even remotely connected to the origination and funding of these loans together with the servicrs wanted a piece of the pie and left nothing for the people and what do we do, get up and make another pie so the wrong doers can do it all over again. The only difference is, someone might suggest that we add a little more flavoring so they will eat the pie a little faster.

  27. ANONYMOUS- when I read the Fed Reserve interim opinion in 2009, I came away with the understanding that the creditor, or covered person, was he who could account for the loan on their balance sheet. Now it is the largest position interest? Also, the trust can never be the creditor, or lender, or foreclosing entity because a trust by definition has no balance sheet? It is a pass-through structure, whereby tax liabilities flow through to investors on a pro-rata basis. Sort of like a Sub S Corp, pretty simple actually. Can you further illuminate this “largest position interest” situation? And how is the homeowner to know who has the largest position interest? Call the IRS with the trust # and ask for a % breakdown? This would seem to be yet another exhausting, fraudulent exercise in futility. Thanks for all your input.

  28. Gary H

    See the Federal Reserve Opinion on the May 2009 TILA Amendment which expands the definition of a creditor due to securitization. The Fed Res Opinion (now Rule) refers to a “covered person” as the creditor. A “covered person” must identify itself to borrowers and provide all contact information. The Opinion states that security investors are not a “covered person” – and that the creditor responsible to disclose itself is the entity with largest position interest reported on it’s balance sheet. And, due to FASB 166 and 167, off- balance sheet conduits are now back on balance sheet.

    Neil is absolutely correct. Modification “contracts”, if they exist, are not being done in the name of the current creditor — and are, therefore, invalid. A modification is simply a modification of the original contract — and when terms of original contract are changed – there must be a new contract between the right parties.

    As far as the people, in the above article, complaining that homeowners should pay full principal and interest back, these people are fortunate they were not a part of the “lender” fraud. Holding homeowners monetarily accountable to the fraud is simply ridiculous. Contracts are extinguishable due to fraud — and there was much lender fraud in the signing of any of the so-called mortgage loan contracts, in foreclosures, and, now in modification “contracts.”

  29. There is No such thing as a LENDER in any form of a SECURITIZED LOAN! There is Nothing Traditional in State Real Property Law that comes close to supporting this on any scale.

    The magic is in the confusion…..and…..intermingling of the Law on the Books by the likes of Wall Street.

    When was I ever allowed to have more than ONE accounting book?


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