RANDALL WRAY: Anatomy of Mortgage Fraud, Part II: The Mother of All Frauds

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

NOTABLE QUOTES:

Not only does the foreclosing party need to physically hold the note, but the note must be properly endorsed and transferred every time a mortgage is sold. A clear chain of title must be demonstrated to make the note valid. This is to protect borrowers from fraud

But, in fact, the notes were never transferred, there is no clear chain of paperwork, and in many cases the notes have “disappeared” so that when the servicers or MERS tries to foreclose, they must file “lost note affidavits” claiming rightful ownership even though they do not have evidence. They have also been caught using “robo-signers” to forge documents — and sometimes they have foreclosed on the wrong properties and even seized homes on which there was no mortgage. That is precisely why the law requires proper transfers of the note. Without that, the mortgage is a fraud and foreclosure is fraudulent.

But if the servicers were holding them, how could they be in the REMIC trust? The IRS code is very strict — the paperwork must be conveyed to the REMIC and there must be a clear paper chain of title through the securitization and sales. Without the paperwork, the securitizations may not be legal, and could subject investors to back taxes and penalties.

We now know beyond question that the notes were not typically transferred — both MERS’s own document as well as court testimony by top management of servicers make it clear that the “customary” practice was for the servicers to retain the notes. We also know that almost all securitizations were done in NY. And we know that the PSAs required transfer of the notes to the trustees — who were required to certify that this was done. From this we can conclude that a) the trustees either did not perform the certification, or they lied, and b) the securities are no good. Probably most of them; maybe all of them. Fraudulent.

L. Randall Wray

L. Randall Wray

Professor of Economics and Research Director of the Center for Full Employment and Price Stability, University of Missouri–Kansas City

Posted: December 13, 2010 10:58 AM

In part one of this series I showed that MERS recommended that mortgage servicers retain the “wet ink” notes that borrowers signed. These notes are required in 45 states to foreclose on a home. Not only does the foreclosing party need to physically hold the note, but the note must be properly endorsed and transferred every time a mortgage is sold. A clear chain of title must be demonstrated to make the note valid. This is to protect borrowers from fraud — no one can manufacture a note, claim to be a creditor, and then take a homeowner’s property. And this is especially important when mortgages are securitized and bought and sold a dozen times — if there is no clear chain of title, the borrower can never be sure who is really the creditor.

But, in fact, the notes were never transferred, there is no clear chain of paperwork, and in many cases the notes have “disappeared” so that when the servicers or MERS tries to foreclose, they must file “lost note affidavits” claiming rightful ownership even though they do not have evidence. They have also been caught using “robo-signers” to forge documents — and sometimes they have foreclosed on the wrong properties and even seized homes on which there was no mortgage. That is precisely why the law requires proper transfers of the note. Without that, the mortgage is a fraud and foreclosure is fraudulent.

By itself, all of this is a horrific scandal, involving up to 65 million mortgages — the number of mortgages registered at MERS, most of which presumably were subjected to MERS’s guidelines and extremely sloppy record-keeping. But like Shrek’s onion, it is much more complicated than that — with layer after layer of fraud piled on fraud. There are many angles to be explored, most of them too complex and arcane to be pursued in a short column. Here, in part two, I will discuss the implications for the securities that bundled the fraudulent mortgages registered at MERS. Not only did MERS defraud the counties out of their recording fees and the homeowners out of their homes, but it also helped to perpetrate securities fraud and federal tax fraud. Fortunately for the investors in these securities, the securitization process was fatally flawed, meaning that they can return to the issuing banks and demand their money back. But that implies, of course, that the banksters are hopelessly insolvent — on the hook for hundreds of billions of dollars.

Inevitably, they will turn to Uncle Sam for more handouts. Get ready for more backroom deals made by the Fed and Treasury to rescue firms like Bank of America. If you loved the first three rounds of this financial crisis, you will love the next six rounds as markets pummel Wall Street banks, with Uncle Sam as referee applying the smelling salts to revive it for yet another round (whilst its CEOs skim more billions off the top in compensation). Ultimately, it will not work. Wall Street will go down for the count — but probably not until it drags Main Street through a great depression that your great grandkids will study in the history books. And, by the way, they will laugh at the misguided efforts of the thoroughly compromised one-term Obama administration that focused its efforts at budget-balancing in the face of the worst headwinds America had ever seen.

MERS and Securitization

Recall from part one that mortgage lenders and servicers are members of MERS, with one employee of each deputized by MERS. This allowed the fiction that resales of mortgages are merely in-house transfers and hence there is no need to pay a recording fee to the county where the property is situated. MERS claims to be the mortgagee of record, holding the mortgages for its members. At the same time, it recommends that servicers retain the notes, but since these are members of MERS, and since MERS has an employee in each, MERS claims it has the legal standing to foreclose on delinquent borrowers.

Mortgages were typically securitized and pooled in a Real Estate Mortgage Investment Conduit (REMIC) that would hold them in trust. Done properly this allowed them to take advantage of an IRS tax exemption. However, to avoid the county recording fees, MERS claimed to hold the mortgages and notes (technically, the mortgage and the note are separate, and it is the note that is required to foreclose — without the note, the mortgage has been ruled by courts to be a “nullity” — see Floyd Norris) so that they could be traded without paying the fees and filing the paperwork. In fact, the servicers held the notes. But if the servicers were holding them, how could they be in the REMIC trust? The IRS code is very strict — the paperwork must be conveyed to the REMIC and there must be a clear paper chain of title through the securitization and sales. Without the paperwork, the securitizations may not be legal, and could subject investors to back taxes and penalties. (See Adam Levitin)

But, as always with the Wall Street onion, things are worse when we dig deeper. Almost all of the residential mortgage backed securitizations were done under New York state law — which is even stricter than the REMIC requirements. That law wanted to make the securities as safe as possible, “bankruptcy remote” so that if the issuing banks failed, bank creditors could not come after the securitized mortgages — to seize the notes and recover losses. This is why it was essential that the notes and mortgages be physically conveyed to the trustees. Remember that the major banks are also owners of the servicers — so if the servicers retain the notes and the bank fails, the bank’s creditors might be able to claim the notes and mortgages. So according to NY state law it is the “Pooling and Servicing Agreement” that governs the securizations. These require that the notes and mortgages are held by the REMIC trustee. Indeed, they require that the trustee check to make sure all notes are conveyed; if there are any mortgages included in the “pool” without proper paperwork, then they must be replaced by mortgages with notes. All of this is supposed to be certified by the trustee as completed — usually within about six months. (For an excellent explanation of the details, see Yves Smith)

We now know beyond question that the notes were not typically transferred — both MERS’s own document as well as court testimony by top management of servicers make it clear that the “customary” practice was for the servicers to retain the notes. We also know that almost all securitizations were done in NY. And we know that the PSAs required transfer of the notes to the trustees — who were required to certify that this was done. From this we can conclude that a) the trustees either did not perform the certification, or they lied, and b) the securities are no good. Probably most of them; maybe all of them. Fraudulent.

Lo and behold, the mortgages went spectacularly bad. That would mean the securities holders are stuck with losses. But only if the securitizations were legal. They were not. They failed on two accounts: the underlying mortgages did not correspond to the “representations” made to securities holders, and the notes were never endorsed and sent to the trusts. That means the holders of the trillions of dollars of securities can present them to the originating banks, demanding their money back.

The servicers are now “misplacing” all the documents, including the notes, associated with the mortgages on which they are foreclosing. The hope is that MERS and the mortgage servicing banks can get the properties, dispose of them in firesales, and pay pennies on the dollar to securities holders before they discover they’ve been scammed from here to Pluto. Hence it would seem the notes were not really lost, but rather are being destroyed to cover the fraud. And if this is true, MERS and the big banks are conspiring to commit foreclosure fraud as they destroy documents and create new counterfeit paper trails. The reader who pointed me to the MERS document put it this way:

 

When we get into the “work product” of the ‘robo-signers’ as seen in the sheer volume of Lost Note Affidavits, it is evident that these exist not simply because notes were “lost” but as a cover-up because the trustee and/or servicers realized early on that the notes were never properly endorsed and transferred or delivered to the trust so they “disappeared” the physical piece of paper and any allonges thereby eliminating any evidence contrary to the trust’s ownership of the notes. As you wrote ‘Those pesky little documents might come back to haunt them should someone later file a lawsuit.’

Yep, that is why they are shredding them and hiring Burger King kids to manufacture new ones. More fraud to cover previous fraud. Yes, this is go-to-jail fraud, but what the heck — if you are already facing time behind bars you might as well go for broke.

I share this reader’s outrage:

Reading through “MERS Recommended Foreclosure Procedures – State by State“, it becomes obvious that MERS was set up to be one big steamrolling foreclosure machine. I simply cannot get over the fact that this document was created in 1999. How nicely MERS accommodates predatory servicers inflicting servicing fraud on homeowners in order that deal makers, proprietary traders and certain hedge funds could profit many times over with their rigged credit default swap bets shorting subprime. This was a very clever, interlocking scheme of complicity on the part of many involved perpetrators.

You don’t have to be a conspiracy theorist to smell something rotten in Denmark about all of this. Maybe there was never any overarching plan. Maybe MERS was set up merely to defraud counties out of their mortgage registration fees. Perhaps MERS never realized that failure to transfer the notes to the trustees invalidated all the securities, while contributing to tax fraud.

If all that is true, then the destruction of documents and the creation of falsified documents by “Burger King” robo-signers was not planned back in 1999. But it is still go-to-jail fraud. And the big banks are still on the hook for hundreds of billions — maybe trillions — of dollars. In other words, it is still a big problem.

Where Do We Go From Here?

To recap, MERS’s own documents demonstrate beyond question:

  1. The notes were never transferred, as required by Federal and NY state law, to the trustees of the REMICs;
  2. At best, the notes were retained by the mortgage servicers as directed by MERS (many never left the mortgage brokers, many of whom are now bankrupt);
  3. MERS claims to own the notes and therefore the mortgages to speed foreclosure;
  4. Actually, MERS does not hold the notes, which are held by servicers, but MERS instead “deputizes” employees of the servicers so that it can claim notes are transferred “in house” to avoid paying recording fees as well as avoiding maintenance of clear chains of title;
  5. On foreclosure, the documents are “disappeared” because they demonstrate the notes were never endorsed and transferred as required by law, with MERS and the servicers filing “lost note affidavits” to dupe the judges into allowing illegal foreclosures to proceed and to dupe securities holders so that they do not demand restitution;
  6. Servicers ensure homeowners default, as they “lose” mortgage payments, credit them to the wrong accounts, or helpfully recommend to homeowners that they stop making payments–all of this is to speed foreclosure to ensure securities holders do not realize they have been duped as they are paid pennies on the dollar for toxic securities;
  7. This also ensures that the investment banks that originated the toxic securities win their credit default swap bets they placed against the homeowners, with favored hedge fund managers like Paulson also winning CDO bets on failures;
  8. The faster the foreclosures can be processed through manufacture of fraudulent documents by Robo-signers, the lower the chance that MERS and all of its clients will be brought to justice.

There is a community of interests that can bring together the securities holders (including PIMCO and the NYFed) and the defrauded homeowners to stop the illegal foreclosures. The best thing for the investors is to demonstrate that the securities are fraudulent because the underlying mortgages did not meet the representations and because the notes were not legally transferred. The best thing for the homeowners is to demonstrate that because the notes were not legally transferred, no one has standing to foreclose. While they might still owe money on their mortgages, no one can take their homes away from them. That provides the proper incentive to force banks to modify the mortgages.

Further, and somewhat ironically, leaving homeowners in their homes is best for the banksters at the level of the economy as a whole. Since the securities investors will be able to force the banksters to take back the securities, the loss minimizing solution for banks is to stop the foreclosures that are depressing real estate prices. That can then buy time to modify the mortgages to ensure homeowners can stay in the homes and service their debt. Instead, the banks are pushing for Congress to retroactively legalize the frauds they perpetrated against counties, borrowers, and investors. As always, Wall Street wants someone else to pay for its crimes — and is willing to destroy the property rights that are fundamental to a system based on private property in order to protect CEO compensation on Wall Street.

Here is the alternative solution President Obama needs to consider.

  • An immediate moratorium on foreclosures of any mortgages that are, or ever were, registered at MERS;
  • Declare all outstanding fraudulent securities null and void, require securitizing banks to make restitution to investors, and sue the banks for restitution of the back taxes owed by REMICs;
  • If this makes the banks insolvent, begin to resolve them, shutting them down;
  • Prohibit Fannie and Freddie and any chartered bank from dealing with MERS, which is an organization formed to perpetrate fraud;
  • Investigate MERS for fraudulent activity, require restitution of all county recording fees that were evaded, and punish the guilty;
  • Formulate a policy to help homeowners who have been victims of lender fraud, with a goal of reducing mortgage payments to something they can afford; and
  • Let Congress know he will veto any legislation that legalizes the fraud perpetrated by MERS, by mortgage servicers, and by originating and securitizing banks.

These actions will help to restore the rule of law, while punishing the guilty. And stopping (illegal) foreclosures will reduce the pressure on real estate prices. By itself this will not put the US on the road to recovery, but it is certainly a step in the right direction.

In the final part of this series I will conclude with an assessment of the role that self-supervision by Wall Street played — and continues to play — in propagating this crisis, with MERS as the prime example of the folly of the delusion that the interests of banksters coincide in any manner with the public interest.

30 Responses

  1. Elizabeth

    Would really like to help you but I am not an attorney — and you do not live in my state. Appears you live in Texas. Is there anyone here who can help Elizabeth??

  2. I habe proof that law firm attorney’s have filed documents with the county clerk wearing many hats for example one of their lawyer is legal counsel for Wells Fargo, Vice President for MERS and at the same time counsel for the law firm, when they do a assignment of the deed of trust with their trustee service they assigned the deed of trust to themselves wow help me please I ahev everything I just done undertsand it all Neil Please

  3. What I have is the following:

    a copy of the patent for default documents

    a copy of the 8k that details the business services i.e Trustee services and the 25 year contract with another

    this service is provided in Texas,Calf, Ga so in your in these places we need to get a something establish I talked to lawyer of the Stern complaint it was a moment because he said he NEVER takes calls he does not know why he spoke to me but he did this case is worst then stern

  4. ANONYMOUS if your out there help a girl out most of this stuff I obtained from a few 8k filing with the sec which to be honest I dont understand I good at finding whatever but that does not mean I understand it the lastest filing talks about providing credit it needs to be addressed it maybe a way to help those her ein Texas I wish I could express have they just send these papers with no substance however they are used to conduct a real sale on the this is out and robbery someone please help me with what I have

  5. They are debt collectors, Vice Presidents for MERS,Counsel for Banks,sell their services to Fannie Mae but more imortantly they have an invested interest in the outcome of foreclosure how can this be Neil. Their patent company went public a few years back and since has change owership but never address its the same as these lawyers what can I do with all of this ?

    They have another company that provides services as trustees they don’t even brother to file anything with the county clerk they just send these “products’ of thier default document with the Notice of Subsitute Trustee and move for a sale how in the hell can this be.

  6. they have another company that provides services as trustees they don’t even brother to file anything with the county clerk they just send these “products’ of thier default document with the Notice of Subsitute Trustee and move for a sale how in the hell can this be.

  7. Neil

    I don’t have anyone else to trust and a lot of the stuff I have to be honest I don’t understand but one thing is for sure Barrett, Daffin, Frappier, Turner & Engel has another business wherein they provide trustee and title services meaning they file documents for those who have MERS as a subsitute trustee and have the deed of trust assigned to there sub company they have a patent from back in maybe 2003 were they have these documents they perfect for default then

  8. Hi Neil

    I have never writtten to you before although I read everything you print along with b davies I like him I am sitting with information that would make the Stern case in Florida look like child play compared to Barrett, Daffin, Frappier, Turner & Engel the foreclosure mill here in Texas but are they lawyers, debt collectors, trustees, Vice Presidents who are they

  9. b davies

    Not surprised. Quite some time ago suspected foul play when HAMP “counselors” started listing the servicer as the “lender.”

    Thanks.

  10. http://www.scribd.com/doc/45840222/How-the-Mortgage-Industry-Polices-HAMP-Seeking-Alpha

    WHO HELPS HAMP HELP HOMEOWNERS. NOW THIS IS REALLY CRIMINAL.

    American Banker’s Kate Berry uncovers a stunning factoid Monday: the nonprofit Homeownership Preservation Foundation, the official body charged with resolving disputes over HAMP modifications, was founded by ResCap and to this day is run by GMAC and other finance officials from within the mortgage industry.

    No one involved even bothers to dispute the conflict of interest, one of many that have plagued the Treasury Department’s Home Affordable Modification Program, or Hamp.

    “Because we’re supported by the industry, are we really working for the homeowner?” asked Bruce Paradis, the foundation’s chairman, who retired as CEO of ResCap in 2007…

  11. http://www.scribd.com/doc/45840368/How-HAMP-Modifications-Are-Escalated-Seeking-Alpha

    HOW HAMP MODIFICATIONS ARE ESCULATED WHEN THERE IS A COMPLAINT.

    Here’s where things start getting a bit surreal, though. According to a 24-page MHA Supplemental Directive from November, an “Escalated Case” is just given back to the servicer to be decided all over again — essentially, it’s escalated all the way back to the very entity which was being complained about in the first place. The servicer is required, under MHA rules, to have lots of ducks in a row when it makes the decision on the escalated case, and it needs to make its decision within 25 days. But it’s still up to the servicer to make the decision. And once the servicer has made that decision, the escalated case is considered resolve

  12. http://www.scribd.com/doc/45839844/ONEWEST-CLASS-ACTION-HAMP-Complaint-hamp-reyes-Onewest

    ONEWEST HAMP CLASS ACTION WELL PLEAD AND COVERS THE SCAM WITH HAMP AND ONEWEST WHO TOOK $626 MILLION TO SIGN THE AGREEMENT. THEY SHOULD BE JAILED.

  13. HEY FOR THOSE OF YOU THAT COMPLAINED TO HAVE ME CENSORED AND THOSE THAT HAD ME “MODERATED” (YES YOU NEIL), I CAN SEE NOW THAT YOU REALLY DON’T BELIEVE IN CORE AMERICAN VALUES LIKE FREE SPEECH AND OPEN DEBATE SO YOUR LOYALTY TO AMERICANS IS QUESTIONABLE AT THE LEAST.

  14. Obama’s a Zionist Puppet, the only thing he considers is ways to please his masters.

  15. […] This post was mentioned on Twitter by PRO Law. PRO Law said: RANDALL WRAY: Anatomy of Mortgage Fraud, Part II: The Mother of …: Maybe MERS was set up merely to defraud cou… http://bit.ly/f6mWt1 […]

  16. I cried when I listened to Sandra Hines. So many tears that I had to back away from my laptop or I would have ruined my computer. She jspoke for all of us that have lost our homes to foreclosure fraud.

  17. Mers is in the spotlight but there is other foreclosoure fraud in the courts that go back years llike forged deeds that have no latches.
    I think it has come to a point in our nation’s history that Judges who refuse to follow the Law of the Land pursuant jto properety rights under our Constitution should step aside and let those Judges who defend our Constiitution guide our Courts.

  18. Everybody that is trying to participate in Bank of America’s Home Modification Scams needs to get educated on their rules first!! Don’t listen to what they tell you on the phone because that is all LIES!!!

    To Qualify you CAN’T BE BEHIND ON YOUR MORTGAGE!!!!! THEY ALSO RECEIVE 1,000.00 FROM THE GOV. EVERY TIME THEY COLLECT 3 TRIAL PAYMENTS IN A ROW FROM YOU THAT IS NOT LATE!!!!!!!!

    SAVE SOME MONEY & DON’T PAY THEM!!!
    THEY WILL NOT QUALIFY YOU!!!!
    THEY WILL DRAIN YOU FROM ALL OF YOUR MONEY & THEN THEY WILL FORECLOSE ON YOU WHEN THEY THINK YOU ARE OUT OF MONEY.
    THEY DO THIS SO YOU ARE BROKE & CAN’T HIRE AN ATTORNEY!!!

    DO NOT TAKE MY WORD FOR THIS. READ ALL OF THESE POSTS ON THESE FRAUD SITES & YOU WILL GET THE PICTURE!!!!!

  19. http://www.scribd.com/doc/45819473/NOTARY-LAWS-Being-There-the-Importance-of-Physical-Presence-to-the-Notary

    The notary public who wishes never to be sued in civil, criminal or administrative court might adopt as a motto the title of that most celebrated of legal writs: habeas corpus.1

    “You have the body” would be an apt imperative for any cautious and conscientious notary intent both on deterring fraud and staying out of court. The “body,” of course, would be that of the signer of any document presented for notarization, for it is the frequent failure of notaries to ensure the signer’s physical presence before them at the time and place of the notarial act that has been a major cause of their legal problems in
    recent decades.

    Knowing their purpose is to detect and deter fraud, most notaries are well prepared for the
    threat posed by impostors with false identification documents. They are on high alert when a stranger approaches, requests a notarial act and presents a driver’s license or other identification to prove identity.
    However, their guard is down when it is a friend, relative, associate, client or supervisor who requests their notarial services. And when that friend, relative, associate, client or supervisor presents a document apparently signed by an absent third party, assuring the notary that the signature is genuine, that the signer is ill or unavailable, and the urgency such that immediate notarization is essential, the notary will frequently waive normal precautions and procedures as a favor to this trusted person. Too often, that trust is misplaced and the signature a forgery.

  20. We’ve all heard of the fraud and incompetence of the big bank servicers. Join us and sign this petition asking regulators to impose rules of the road on big bank servicers. Your name and comments will be delivered to all the bank regulators. Enough is enough.

    To Secretary Geithner, Chairman Bernanke, Chairman Bair, and Comptroller Walsh:

    Foreclosure fraud, illegal fees, and just plain incompetence have gone on long enough. We believe that it is time that regulators put some rules on big banks and mortgages. As part of the new Wall Street reform bill, you have the authority to impose rules on new mortgages going forward.

    Please stop these big banks from cheating their customers.

    http://www.stopservicerscams.com/

  21. In California, what exactly does “properly endorsed” mean? Does there need to be a date in California?

    Thanks!

  22. Niel, don’t let this one slip away.

  23. Thank You Anonymous. Happy Holidays.

  24. THE A MAN

    Your post is related to mine!!! Obviously, if the Fed Res and OCC are opposing — it is good for us!!!!

    Happy Holidays to all —- except Patrick Pulatie.

  25. We are up against trouble from Fed Res and OCC. There is no reason why the Fed Res opposes regulation of servicers which is supported by US Treasury and the FDIC — appears — they just do not want to!!! OCC has always covered up — they state “they are not aware” — I do not think so. Currently, as article reports — there is no regulation of mortgage servicers — they can just do whatever they want. And, the Fed Res??? They have had more than enough communication of the fraud!!!! What have they done??? Guess they like it that way!!!

    see below

    Zach Carter
    zach.carter@huffingtonpost.com | HuffPost Reporting

    Federal Reserve Blocks New Foreclosure Regulations
    First Posted: 12-21-10 08:42 PM | Updated: 12-22-10 01:53 PM
    Bank Regulation, Fed, Federal Reserve, Foreclosure, Foreclosure Crisis, Foreclosure Rules, Foreclosures,

    WASHINGTON — Top policymakers at the Federal Reserve are fighting efforts to rein in widely reported bank abuses, sparking an inter-agency feud with the FDIC and the Treasury Department. The Fed, along with the more bank-friendly Office of the Comptroller of the Currency, is resisting moves to craft rules cracking down on banks that charge illegal fees and carry out improper foreclosures. The FDIC supports such rules, according to an FDIC official involved in the dispute.
    The new regulations would rein in debt collection, loan modification and foreclosure proceedings at bank divisions called “mortgage servicers.” Servicers have committed widespread fraud in the foreclosure process. While the recent robo-signing of fraudulent documents has received the most attention, consumer advocates have complained about improper fees and servicer mistakes that lead to foreclosure for years.
    “Given that we’ve seen a massive failure in servicing practices and a massive failure to address servicing in an honest way, I think this is important,” says Joshua Rosner, a managing director at Graham Fisher & Co., and longtime critic of the U.S. mortgage system.
    Last week, the National Consumer Law Center and the National Association of Consumer Advocates published a survey of 96 foreclosure attorneys from around the country, attesting that servicers have pushed 2,500 of their clients into the foreclosure process, even as the borrowers were negotiating loan modifications with the same servicers.
    Banks have also been extremely slow to permit and process loan modifications for troubled homeowners. With housing prices down dramatically from their bubble-level peaks, mortgage investors usually limit their losses by reducing a borrower’s debt burden instead of foreclosing. But servicers– who are supposed to operate in the best interests of investors– have been reluctant to grant mortgage modifications, particularly modifications that actually reduce the outstanding balance on the loan.
    Servicers have also failed to live up to the rules proposed by the Treasury Department under President Obama’s Home Affordable Modification Plan. According to a recent report by the Congressional Oversight Panel, a full 29,000 borrowers have been in temporary payment plans for more than a year without being granted permanent relief. The temporary modifications are supposed to last just three months under Treasury Department rules.
    Regulators at all federal banking agencies are aware of the problems. On December 8, community outreach officials from the OCC and the Fed met with dozens of housing counselors from around the country and acknowledged that complaints about mortgage servicing abuses have been coming to their offices for years. Nevertheless, at a recent hearing, Comptroller of the Currency John Walsh said his agency didn’t know about the outright fraud being committed by servicers until press reports emerged this fall.
    Advertisement
    Mortgage servicing sprang into existence with the invention of mortgage securitization markets in the 1970s and became a major part of the banking business as the housing bubble ballooned over the past decade. Servicers do not own the loans they handle. Instead, they make their money by skimming from interest payments they forward to mortgage investors who own the loan and by charging fees to delinquent borrowers. Critics argue that the arrangement encourages servicers to take actions that hurt both borrowers and investors, pushing homeowners into unnecessary foreclosures in order to reap bigger fees.
    On Tuesday, more than fifty economists, banking experts and consumer advocates sent an open letter to banking regulators demanding action on mortgage servicers. Many of the proposed rules are simple standards of banking conduct, like appropriately crediting borrower accounts when they make payments. But most mortgage servicers are effectively unregulated at the moment. The OCC, which oversees the largest servicers, has never taken any formal public regulatory action against a mortgage servicer, allowing abuses to continue without serious consequences.
    “Widely reported servicer fraud, whether in the foreclosure process or in the systematic assessment of illegal fees against homeowners, is . . . a serious problem,” the letter reads, noting that, “problems of this magnitude are a threat not only to the economic recovery, but to the safety and soundness of all insured depository institutions.”
    The Wall Street reform bill signed into law by President Barack Obama this summer requires regulators to craft new rules to ensure the securitization market functions properly. The FDIC wants those rules to include standards for mortgage servicer conduct and hopes to have rules ready by the end of next month.
    Nevertheless, the Fed and the OCC are pushing back, according to a source at the FDIC. Spokespeople from both the Fed and the OCC said their agencies support new mortgage servicing standards but declined to comment on the new rules being advocated by the FDIC. A spokesman for the Treasury Department said the Treasury supports regulating mortgage servicers, but was unable to comment on the FDIC plan by press time.
    Reform advocates say that regulators can take action under so called “skin-in-the-game” or “risk-retention” requirements in the Wall Street reform bill. Banks that package and sell mortgage securities would be required to keep at least five percent of the credit risk from those securities on their own books, in an effort to prevent banks from scoring profits by selling garbage securities. The FDIC is on board.
    “The FDIC believes that the risk retention rules are an appropriate vehicle permitted by the statute that would establish serving standards for the industry as a whole, and we should not miss this opportunity to set quality servicing standards for the future,” FDIC General Counsel Michael Krimminger told The Huffington Post.
    Under the new rules, banks will not have to maintain credit risk for top-quality mortgages, which regulators must define. Reformers hope to include mortgage servicing standards in the definition of a top-quality mortgage. The result, reformers say, would be a new industry standard that banks adopt as a matter of course to limit their own potential losses.

  26. FOR THOSE WHO WANT TO UNDERSTAND THE WAREHOUSE LENDING REQUIREMENTS INCLUDING THE SECURITY INTEREST POSTING OF AND DELIVERY OF COLLATERAL TO THE CREDIT AGENT (ESSENTIALLY THE CUSTODIAN OF THE WAREHOUSE LENDING TRANSACTION), SEE THIS DOCUMENT. IRONICALLY SECTION 2 IS DEALING WITH THE COLLATERAL DOCUMENTS AND REPS & WARRANTIES OF SUCH,. IT IS SIMILAR TO THE PSA.

    THIRD AMENDED AND RESTATED WAREHOUSING
    CREDIT AND SECURITY AGREEMENT BETWEEN

    UNIVERSAL AMERICAN MORTGAGE COMPANY, LLC,
    a Florida limited liability company

    EAGLE HOME MORTGAGE, INC.,
    a Washington corporation,

    EAGLE HOME MORTGAGE OF CALIFORNIA, INC.,
    a California corporation,
    UNIVERSAL AMERICAN MORTGAGE COMPANY OF CALIFORNIA,
    a California corporation,

    UAMC ASSET CORP. II,
    a Nevada corporation,

    UNIVERSAL AMERICAN MORTGAGE COMPANY OF PENNSYLVANIA, INC.,
    a Florida corporation

    EAGLE HOME MORTGAGE, LLC,
    a Delaware limited liability company

    The Lenders Party Hereto

    AND

    RESIDENTIAL FUNDING CORPORATION,
    a Delaware corporation, as Credit Agent

    Dated as of April 30, 2006

    http://www.scribd.com/doc/45808483/Third-Amended-and-Restated-Warehousing-Credit-and-Security-Agreement-Uamcc-Bank-One

  27. New forerclosure law proposed by democrats. is this good for us?

    http://www.huffingtonpost.com/2010/12/22/new-foreclosure-rules_n_800358.html

  28. There is a bill being brought to Congress by a Ohio representative that brings MERS to its knees. Let’s hope it passes in the new year–HR6460. This bill prevents Fannie and Freddie from guaranteeing any mortgages that have MERS in the chain of title.
    http://www.challengingforeclosure.com Sirak@challengingforeclosure.com

  29. “Mortgage service industry makes more money from foreclosures than from restructuring debt.”

    http://dailybail.com/home/foreclosing-on-people-who-never-missed-a-payment.html

  30. 25 Feb Fugitive Lured by Northshore Process Service Gets His Just Dessert
    Fugitive wanted in a New York investment scam captured when an NPS Investigator lures him across the Canadian border with the promise of a free lunch

    New York, NY, Feb. 24, 2007 – Federal prosecutors say Stephen Nagy, 54, defrauded investors of more than $8 million. He had been living in the Toronto area when he was arrested Friday on his way to Kolski’s Seafood Cove in nearby Clinton, NY.

    The private investigator who nabbed him had fallen for the investment scam, Assistant U.S. Attorney Victor Sneedle of Chicago, IL., said Saturday. It wasn’t immediately known how much money the investigator lost.

    A New York grand jury indicted Nagy and four nine men in 2002 on charges of conspiracy to commit wire fraud and securities fraud, as well as conspiracy to launder money. They were accused of cheating victims across the country by promising to invest their money in high-yield banking transactions with little or no risk from 1998 through mid-2000.

    Posted by site admin, filed under Uncategorized. Date: February 25, 2007, 3:38 pm | No Comments »

    Wonder if it is the same Steve nagy of new century?
    Found this if anyone would like to read it.

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