EXPERTS TAKE NOTE: BOND INSURER WINS KEY RULING AGAINST BOA FOR FRAUD

REUTERS: MBIA wins key ruling in Bank of America case

STATISTICAL SAMPLING APPROVED AS EVIDENCE FOR WHOLE CASE

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  • WILMINGTON, Delaware | Thu Dec 23, 2010 5:39pm EST

    WILMINGTON, Delaware (Reuters) – MBIA Inc won a key ruling that will sharply reduce the time and cost of gathering evidence to prove that Bank of America fraudulently induced it to insure billions of dollars of mortgage bonds.

    A New York state judge ruled that MBIA can use statistical sampling to try to prove that underwriting standards on pools of about $20 billion in loans were fraudulently represented.

    MBIA is seeking to recover more than $1.4 billion that it has paid out in insurance claims stemming from the bonds that pooled loans from Countrywide, a mortgage company that was bought by Bank of America.

    The bond insurer had argued inspecting each of 368,000 loan files that were packaged into 15 mortgage bonds would have been extremely costly and time-consuming.

    Bank of America said in a statement that the “ruling is limited and procedural in nature. Nothing has been decided on the merits. As the Court notes, MBIA must prove each element of its claims — this we believe it cannot do. We intend to continue to aggressively defend.”

    The ruling could give momentum to other insurers and investors who have been pressing mortgage companies to repurchase soured loans underlying mortgage bonds but have struggled with the expense of fighting on a loan-by-loan basis.

    9 Responses

    1. BANK OF AMERICA ASSIGNS SAME NOTE TWICE AND GETS PAID TWICE!

      (To prevent further retribution to our family, I post this information under a pseudonym.)

      1) In 2001, I closed on a refinancing loan, with XXXX Mortgage Company “A” (“MCA”).
      2) “MCA” immediately thereafter assigned the loan to Bank of America (“BOA”).
      3) According to the “journey” of the Note as indicated in the endorsement stamps (the Note was just produced last week, yes last week) and a recorded assignment – “BOA” assigned the NOTE to Residential Funding at some point within the immediate 12 week period following the “MCA” assignment to “BOA”.
      4) At the time of the assignment “BOA” was paid by Residential Funding.
      5) Residential Funding then assigned the NOTE to Bankers Trust Company, as Trustee, also at some point within the 12 weeks immediately following the “MCA” assignment to “BOA”.
      6) Residential Funding was paid by Bankers Trust Company, as Trustee
      7) Additionally during the same 12 week time frame, “BOA” also assigned the same aforementioned NOTE to Bankers Trust Company, as Trustee.
      “BOA” at the time of that assignment, was also paid by Bankers Trust Company, as Trustee for the same NOTE.
      9) Four years later, “BOA” returned a payment to me as “Misapplied Funds”.
      10) I then received correspondence from Litton Loan Servicing indicating the servicing of the loan had been transferred from “BOA” to Litton Loan Servicing.
      11) Litton Loan stated they were servicing the loan for “GMAC- RFC”.
      12) I had never heard of either Litton or GMAC-RFC.
      13) Two months after “Litton Loan” becoming involved, I received notice our home was going to be foreclosed by “Deutsche Bank Trust Company Americas”.

      [Confused does not begin to state my concern as to whether our payments were being properly applied.]

      14) I was fortunate to obtain a reinstatement of loan after payment of over $28,000 to the law firm representing “Deutsche”.
      15) The attempts to obtain clarification were not successful, and the foreclosure advertisements continued.
      16) In order to protect our home, I was foreced to file a Chapter 13 “pro se”.
      17) The case came to be converted to a Chapter 7.
      18) Our family came to be evicted (despite our request to pay the first mortgage, which was denied) from our home by a real estate agent reportedly acting with the same power as vested in the Chapter 7 Trustee. The Chapter 7 Trustee sent me an email stating, “A failure to cooperate with her is the equivalent of a failure to cooperate with me.”

      Any party interested in reviewing partially redacted copies of the Note and BOA assignment showing the transfers to confirm this story or any other comments or suggestions can contact the writer at alvinessel@gmail.com.

    2. […] This post was mentioned on Twitter by PRO Law. PRO Law said: EXPERTS TAKE NOTE: BOND INSURER WINS KEY RULING AGAINST BOA FOR …: Here is a complaint in the case of Ocwen Lo… http://bit.ly/fPVfph […]

    3. I believe that we made it well known to the Congress back in the 1990’s that they needed to do something about the escrow setups on first time homeowners who purchased newly constructed homes. These homeowners were targeted and set up from the get go. And yes, by the time the payment was analyzed to recover the servicer’s advances for taxes, shortages and the amount required for future taxes, there was just no way because on top of that so many of these homeowners had adjustable rate mortgages. Did I say negligent loan servicing technique. Everything I think about my client who was paying over $10,000 in a matter of 18 months for MI insurance and then didn’t have enough to pay her taxes for almost two years made me literally sick. WE were all over television with that story and no one even cared or commented except the homeowners who called in. What a mess and it is was man made.

      Think about it, across this nation, especially in Florida and Nevada, just how many new homes were built and sold to first time home buyers and they want to know why we had the meltdown. Hey, builders were making huge profits and Wall Street was getting a product produced for the biggest scam of our lifetime. All on the backs of the American people. Taxpayers go get em.

    4. Admission: In MERS cases, assignments are not obtained until foreclosure begins
      The best “stuff” comes out when the sharks bite each other. Here is a complaint in the case of Ocwen Loan Servicing, LLC v. Mortgage Electronic Registration Systems, Inc., No. 1:08-CV-00824 (E.D. Va 2008). It states, among other things, that the “MERS system is also essential to the foreclosure process, since mortgage servicers seeking to foreclose on defaulted mortgages that are registered on the MERS system must obtain an assignment from MERS in order to commence foreclosure proceedings.”

      You can read more here:
      http://bryllaw.blogspot.com/2010/12/admission-in-mers-cases-assignments-are.html

    5. Joyce Louise, you hit the nail on the head. The amount for taxes paid into escrow that was set up at my closing was less than half of the amount that had been paid the previous year (my house was not new construction, btw).

      This was done even though the pretender lender had access to the correct amount of taxes. Well, guess what, when tax time rolls around–about 4 months after closing–it empties out my escrow account, leaving me with an escrow deficiency that causes the pretender lender to not only demand a lump sum from me to make up for it, but also to raise my monthly payment for the remainder of the life of my loan.

      If this new, higher monthly payment had been disclosed to me at closing, I wouldn’t have gone through with the loan because I would have known I couldn’t have afforded it. This “under-escrowing” was not a “mistake” on the part of the pretender lender–how could it have been? They were experienced originators, they did an aggregate analysis, they KNEW the amount I had paid for taxes the year before. The ONLY reason to have under-escrowed was to make my monthly payment appear lower at closing than they KNEW it would actually end up being.

    6. Is it not possible that if the bond insurors go after the lenders for fraud and misrepresentations and warranties that such action would solidify the support of evidence that proves the borrowers were at risk and should give the borrowers all the evidence they need to place their claim?

    7. How about exposing the motive of Fees Commissions etc… for the banksters-servicers. How much Commision fees did the banksters make?

      How does this information helps us the borrower.

    8. MOTION TO COMPEL IN THE CASE IN JUNE. COVERS ALL THE DETAILS OF THE CASE. THESE LOAN LEVEL FILES CONTAIN THE FRAUD.

      http://www.scribd.com/doc/35714992/MBIA-SUES-BANK-OF-AMERICA-FOR-FAILURE-TO-FOLLOW-THE-REPS-AND-WARRANTIES-THIS-IS-THE-INSURANCE-POLICY-FOR-THE-TRUST-MOTION-TO-COMPEL-THE-LOAN-LEVEL

    9. What I think is most interesting about the bond insurers is that they do not understand really understand why so many loans went sour. For example, It would be my guess that 25% of the loans made by this company were loans that were made to purchase newly constructed homes. So many of those homeowners qualified for the loans, but by the time they set up the first payment incorrectly (for example collected $25.00 a month for unimproved taxes for as long as 18 months) when the taxes were going to be nothing less than $3500 to $4,000, this automatically set the homeowner up to fail. He could never have made the new payment once escrow was done beginning the second year and if he had an adjustable rate mortgage, clearly this loan was going south. Now that happened I am sure with a whole lot of lenders and their servicers so they intentionally set these payments too low so they could get through the first year or two wihtout default.

      Then we had other lenders who qualified the borrower with T & I and MI insurance but unfortunately, they had to forego the proper monthly tax amounts for a very expensive MI monthly payment. For example, one of my borrowers although she had a great interest rate of 6% fixed rate, her first payment was set up for $687.00 per month for mortgage insurance, $28.00 for mo taxes and 87 for insurance. She had paid in over $10,000 for MI insurance in 18 months and just $504.00 for taxes over 18 months. When her annual taxes should have been $4200 per month. This was a FNMA investor loan and the servicer and FNMA did absolutely nothing but make us fight for almost 2 years to keep this home from foreclosure. We ended up refinancing it finally and then FNMA’ s servicer forgot to stop the sale and she was foreclosed on anyway even though they had been paid off. NOW the bond people need to understand that it was truly a “negligent servicing technique” that assisted in bringing the mortgage industry down. What happened to the due diligence of FNMA and why not did the Servicer say, this is not right. We need to modify this borrower’s loan at the time it was set up or asked the seller (Irwin mortgage – before they went under) to buy it back. This borrower as were the others I told you about, were qualified for their loans, but they were backed into a corner just like tens of thousands of others. The bond insurers need to look at all loans that were purchase of a newly contructed home and then look at the new loan set up and first analysis time frame. We tried 15 years ago to stop the lenders from setting up payments too low on newly contructed homes for tax payments, but believe it or not, the borrowers’ attorneys said – hey, you are not going to collect money from me that you are not paying out, so then Respa got into the picture and made the decision that tax payments would be collected either on currrent or future estimated taxes. So if you have a newly contructed home that did not have improved taxes at the time the loan was closed, guess what, your loan was set up on the current unimproved tax amount. Both should have known better of course. The lender should have made it clear that in the first year, the borrower may be paying a lower amount for taxes even though they qualified him for a higher amount just to get by the underwriting criteria. It all could have been avoided. Now the building industry is hurting big time and so is everyone else because values of property have so deteriorated. This never would have happened on my watch, I can tell you that.

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