TIP OF THE ICEBERG: U.S. Inquiry on Military Family Foreclosures

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EDITOR’S NOTE: The number of foreclosures on active military homeowners who were fighting for their country at the time their homes were being stolen by pretender lenders is far in excess of the small numbers referred to in this article. It is abhorrent to treat those who fight on command of our government in this manner. Besides the usual moral issues (fraud, predatory behavior etc.) it is a direct affront to all of us and our laws. These laws have been in place for a long time to completely prevent this from happening and the banks, the pretenders, the “agents” and their lawyers all knew it. They did it anyway.

This behavior highlights the utter disregard for law, procedure, fairness and morality. Before this mortgage mess was created by Wall Street, every bank foreclosing on property did extreme due diligence for one simple reason — to make utterly certain that they were getting clear title in the foreclosure if they prevailed. Now the practice of doing a title search (they pull a credit report instead) and checking on the status of the the loan, the property and the homeowner, all of which were regular industry standard practices, have been simply dropped. And THAT has resulted in clouding and breaking the chain of title on as many as 80 million mortgage transactions, 7 million foreclosures and any pending or future mortgage transactions, resales, or foreclosures.

This isn’t the result of irresponsible borrowers. They don’t write the paperwork, they don’t conduct the closings, and they don’t pretend to know what is in the documents presented tot hem for signature. They trust that the “lender” is properly representing itself, the appraisal, and the viability of the loan. They trust that the title agent, the title company and the closing agent are executing a closing in compliance with established law and procedure. Their trust is misplaced. In the coming years, the number of claims for payment on title policies, the number of lawsuits for quiet title, and the number of lawsuits for damages is going to skyrocket, not because of greedy borrowers who conspired to make a mess out of the marketplace, but because of a fictitious securitization scheme in which the parties simply were indifferent to the consequences of their action, compliance with law, or any regulatory requirements.

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U.S. Inquiry on Military Family Foreclosures

By DIANA B. HENRIQUES

The Justice Department is investigating allegations that a mortgage subsidiary of Morgan Stanley foreclosed on almost two dozen military families from 2006 to 2008 in violation of a longstanding law aimed at preventing such action.

A department spokeswoman confirmed on Friday that the Morgan Stanley unit, Saxon Mortgage Services, is one of several mortgage and lending companies being investigated by its civil rights division. The inquiry is focused on possible violations of a federal law that bars lenders from foreclosing on active-duty service members without a court hearing.

Mark Lake, a Morgan Stanley spokesman, declined on Friday to comment on the investigation. However, in the fine print of a recent regulatory filing, Morgan Stanley disclosed that it was “responding to subpoenas and requests for information” from various government and regulatory agencies concerning, among other issues, its “compliance with the Servicemembers Civil Relief Act,” the law that governs the actions creditors can take against service members on active duty.

The investigation came to light in a document that Saxon’s lawyers filed on Tuesday in federal court in Grand Rapids, Mich., during a trial to assess damages against Saxon and two co-defendants after a federal judge ruled late last year that they had illegally seized and sold the home of Sgt. James B. Hurley, a Michigan National Guard member who lost his home while he was serving in Iraq in 2005. That case was ultimately settled on Thursday.

In the document filed on Tuesday, one of Saxon’s lawyers characterized the investigation as “merely a preliminary investigation based on unproven allegations, for which no liability or wrongdoing has been found.”

The filing also suggested that Saxon was negotiating a settlement, but neither Morgan Stanley nor the Justice Department would comment on any talks.

According to people present in the courtroom, the discussions of the Saxon filing indicated that as many as 23 military foreclosures were under scrutiny in the Justice Department investigation.

Under the civil relief act, a judge must hold a hearing at which the service member is represented before granting a lender the right to foreclose on the service member’s home, even in states where a court order is not required for civilian foreclosures. As early as 2005, advocates for military families were complaining that banks and other lenders were frequently violating the law.

Sergeant Hurley was one of the service members affected by a violation of the act. He returned from duty as a power generator mechanic in Iraq in December 2005 to find that Saxon had foreclosed on his riverside home outside Hartford, Mich., and sold it to someone else. He sued Saxon and two co-defendants, Orlans Associates, the law firm in Troy, Mich., that handled the foreclosure paperwork, and Deutsche Bank Trust Company Americas, the trustee for the mortgage involved in the foreclosure.

The case dragged on until late last year, when Judge Gordon J. Quist of United States District Court ruled that the foreclosure and sale of the Hurley home had violated the civil relief act and ordered a jury trial to determine damages.

On Thursday, the fifth day of that trial, Sergeant Hurley settled with all the defendants in the case for an undisclosed sum, according to Col. John S. Odom, a retired Air Force lawyer who represented the Hurley family. The terms of the settlement are confidential, Colonel Odom said. “But the Hurleys are well pleased,” he added.

Mr. Lake of Morgan Stanley said: “We are very pleased to have settled this matter with Sergeant Hurley. As we have said previously, Saxon is always willing to make reasonable accommodations to amicably resolve a matter, especially for our service men and women.”

John T. Gallagher, a spokesman for Deutsche Bank, declined to comment on the settlement itself. “As Deutsche Bank has repeatedly informed The New York Times, loan servicers, and not trustees, initiate and manage all foreclosures,” Mr. Gallagher said.

He emphasized that Saxon, as the servicer on the Hurley mortgage, “had the sole interaction with Mr. Hurley’s representatives regarding the loan. No employee of Deutsche Bank had any involvement in the underlying facts.”

The settlement came two days after the brief courtroom drama on Tuesday that led to the disclosure of the Justice Department investigation.

It began when Colonel Odom unexpectedly served a subpoena on Saxon’s general counsel, Gregory Smallwood, who was present in the courtroom.

Saxon’s trial lawyers immediately filed a motion arguing that the subpoena should be quashed because “the court has ruled inadmissible any reference to the D.O.J. investigation for which plaintiffs have suggested Mr. Smallwood’s testimony would be probative.”

The motion also argued that “the fact that Saxon may be negotiating a settlement of the investigation is also inadmissible” and that “any reference to the investigation, the negotiation of a consent decree, or the allegations that are the basis for that investigation, would also be unfairly prejudicial to Saxon.”

14 Responses

  1. Sherry,

    Keep your chin high and remember never give up even after you move. I like you have been fighting the fight since Feb 2008 on a loan that was done less than a year earlier. Have been a home owner for over 30 years and never a late payment till March 08! I have been married 27 years and live up to my commitments also. I have owned my own business for 20 and have lost everything all my down payment, savings and retirement but they cannot take my family, my health or spirit away.

    I like you have become a crusader letting everyone I know about the fraud and they seem to think it does not affect them. Our court system is broken and we have judges who have not educated themselves to the fraud all they see are deadbeats. Well I am not a deadbeat and refuse to wear that label.

    Heaven help the day when American’s finally wake up to what is going on it is going to their neighbors I wonder when they will start to realize millions of people did not just decide to stop making their payments. I am confident it is going to get ugly for sure and very soon.

  2. Servicers are debt collectors. They operate outside the law. As long as the laws about debt collecting are not enforced, this nightmare will continue on. Burmese8@yahoo.com

  3. Sherry: Thanks for the clarification on 2 separate properties and sorry to spell your name wrong! You have really been through a lot and the revamp of the BK system by the Geedubyah was designed expressly to benefit the creditors and as a psychological warfare tool on the debtor. Benefit from the BK with a debt jubilee & disregard the attitude/mind games the system tries to pull. Do what you have to do for YOU to survive and forget about the bankster-mantra deadbeat meme. I too have been married 27 years & know something about “committment”. I honor my committments too – but the hell with honoring a fraudulant and corrupt one!!! We debtors with MERS & Wall Street securitized mortgages that were passed around like a whiskey bottle at a frat-party (love that phrase – thanks, Neil) are not the PERPETRATORS OF FRAUD here. THEY ARE. I have little hope there will be justice for us though.

  4. Leapfrog, it is 2 different properties. The AHMSI is our home of 20 years, we took out a refi in 2005 for a remodel, this was just your regular old vanilla fraud. We would be like everyone else who is still paying the Pretender Lender if we hadn’t purchased the 2nd property in 2007. The super fraud was by Saxon Mortgage on a 2nd property we purchased for my business offices and training center in 3-2007. The Saxon Mortgage fraud wiped us out financially and then the economic downturn hit. While researching what happened with Saxon Mortgage I found out that our home had MERS also and started researching that too. First we couldn’t pay AHMSI due to my business loss, then we wouldn’t pay them even if we could because I will not pay the fraudsters. So we are losing our home and now we fit the profile of dead beats.

  5. Leapfrog, one thing I know for sure is I do not understand law, especially because there are those for us and then there are none for the Banksters.

    I was raked across the coals in our chapter 7 bk, because how could we go from being in control of $1.5 million in RE and $100,000+ in IRAs in one year and have them gone the next? Can you spell fraud Mr Trustee, not by me, but by the Saxon Mortgage that destroyed our credit on purpose and I fell for the scam to save our credit by using our retirement assets to save our credit. We had to go back 3 times over 6 weeks with tons of paperwork to prove asset movement to show we did not do the fraud. It was wearing and intimidating, but luckily I am good with paper and could go back multiple years to prove my innocence. At one point the Trustee asked my husband how long we had been married and did my husband think I was defrauding him? We have been married 31 years, and I wasn’t the fraudster.

    So, I just keep fighting for our financial lives and hope to have the softest landing possible. 3 years of my life has gone to this process so far, it started in Jan 2008 when Saxon took over the Servicing of the loan on our property purchased just 10 months earlier. There ought to be a law! Oh yeah, there are laws, the banksters just don’t have to follow any of them and we have to prove our own innocence after being raped and pillaged.

  6. Sherrie: I too had ABC, and made a few pymts to AHMSI, then got transferred to CW, then BOA, then BAC. I know ABC filed for BK, but don’t think they ever had a first creditor meeting. Shouldn’t they have had to get permission from the trustee to transfer the assets? If I had tried to transfer any assets, I’d be sanctioned or in jail!

  7. […] official you can and send them a copy of this with your comments.  This is just plain WRONG! http://livinglies.wordpress.com/2011/03/14/tip-of-the-iceberg-u-s-inquiry-on-military-family-foreclo… […]

  8. Yep, I know AHMSI isn’t a real anything but a fraud. American Broker Conduit went BK in 2007 and some steel tycoon bought the servicing of the mortgages. I spent 6 months sending them letters to prove to me that they have any right whatsoever to even get payments from us let alone take our home from us. But, just form letters and copies of the note and trust deed in return. This blog is filled with people who have fought the good fight until the end, and so have we. I would prefer to move my private possessions myself and not meet some crazy swat team with tazer guns.

    As for the cruise, sounds lovely since tomorrow is my 60th BD, but I will be packing not cruising. Maybe for my big BD surprise we will be officially served with eviction, who knows! I do need to be here defending our private property until we can find a place to move too or AHMSI comes to their senses. Since this has escalated to the President’s Office, which by the way is a big so what.

    My husband is working again, a real blessing, at a very reduced rate, but at least it is work. My business was stopped dead in it’s tracks in 2009 and it takes good credit and no bk or else I am sure to suddenly lose my ethics, just ask the State of CA. Because we sure do know that the people who run the financial institutions have ethics right?

    All our funds go to Attorneys. I never even spoke to an Attorney before the fraud began. Now I have a Team of Attorneys. And I must say, I have been very frustrated with BK Attorneys who say they are “Foreclosure Defense Specialists”, who I have found to be BK Attorneys who only believe in a chapter 20, at much higher rates. Since I have become a specialist in mortgage servicing fraud and securitization, I sadly know much more about this than the Attorneys who say they can help at a hefty price tag. I even was the only civilian at the bk court to get a 14 day stay when my expensive bk Attorney wanted to charge an additional $750 to get a stay for 12 days, blew the Judge in our little hodunk county away. Oh and my Attorney got sanctioned by the Judge for not showing up at least by phone after charging me $3,000 for a bk 7 and wanted still more to fight the lifting of the automatic stay.

    It is only money, I can rebuild, but not from my own office and training center or from my beautiful home of 20 years. Mortgages is just one of the many places the American people are being defrauded, we are not special, this is happening to millions now and will to millions more because “our” govt. is fully allowing this to happen.

    So, maybe I will just go on a cruise, sometime in the future. In the past all our funds have gone into fixing up our homes and saving for retirement, no time or extra funds for vacations because we are just too responsible as a couple. But, _____ that idea in the future, I am done being responsible and having it ripped away from us. it is wearing to do all this, not to mention heart breaking.

    However, I know we will survive this and we shall be the victors because we still have our love, values, family and health. What goes around comes around. We must not let “them” get away with this raping of our nation and it’s citizens. Together we are better!

  9. Sherry H.

    AHMSI isn’t even a real servicer ,, they are a debt collector , no different from any other company that buys lists to collect from … somebody got paid off on that loan, the way these loans were packaged and the way you were manipulated and maneauvered leave little doubt about that ,, probably several times over.

    I’m very surprised that homes such as yours don’t spontaneously combust with great frequency, preferably while you’re on a cruise boat.

  10. It was Saxon Mortgage Services (Morgan Stanley) that started the fraud against us, ruining our credit on purpose to defraud us of our property. Credit Default Swaps had to be a part of the reason they chose to put our payments in a side fund and tell the credit bureaus we hadn’t had the payments. That credit fraud took 9 months and an Attorney to correct, costing us all of our funds including our retirement while we tried to hold our credit together. Even though it was fraud, all the banks leaped in on the debt and doubled, tripled and quadrupled the cost of interest on our accounts.

    Now, I am packing our home of 20 years after being homeowners for 30 years without ever missing a payment prior to the fraud above. On 2-24-11 AHMSI took back our home and they will be here legally(?) any day to kick us, “the deadbeats” out.

    Last week, while I was in the shower, a woman opened our door and shouted back to me for 2 minutes before I figured out she was an intruder in my home. She said she was there to change the locks on our home, that her paper told her the house was vacant. Since she was inside a sliding glass door that she had opened, it was plan to see our home was not vacant and she wanted to know why I was upset to find her there, partially inside our home while I was in the shower?

    My Attorney says this is trespass and I should get a gun or a pit bull to defend myself against such instances in the future. I shouldn’t have too defend myself against such lies, but all seems to be a lie these days and since we have fallen from grace it seems that there are people who feel we have no rights. this woman said she was sorry, it was just her job and this is how she pays for private school for her 3 kids, by trespassing on me!

    We have gone from being a middle-income family with my own business, 2 homes and retirement assets that we have saved over the past 30+ years to being bankrupt and treated as if we have zero rights. Thank goodness our daughter is grown and she is not living this fraud.

    In 2009 I sent out 40 page proof of the fraud to 8 different govt agencies, there was no help there. We have done everything we can to stay in our home and have joined a mass joinder lawsuit, after being in 2 other programs that didn’t work. I don’t know if it will work either, but AHMSI is on notice of the lawsuit. And, soon I will have Saxon Mortgage and Morgan Stanley named for destroying our financial lives and trying to steal the other property.

    I will not pay these “pretender lenders” one more cent and haven’t for a long time. I don’t want them to take our home, but I will not support their crime in any way. I know I am preaching to the choir, if you are on this site, you are already fighting and understand what is happening. As I speak with people around the country, I am appalled that they still have no idea what is happening and that it actually affects them if they have purchased or refinanced over the past 15 years. We are all so programed to pay these debts that unless you are one of the homeowners that has already been thrown under the bus of the too big to fail banks, people actually think that there is nothing wrong or different happening to their property rights and therefore their rights as citizens of the USA.

    When the citizens of America actually figure out what is happening throughout our entire system and economy, I fear that the violence that comes from it will really rock this country.

  11. Why don’t they just have the Fed investigate it instead? That way it will turn out exactly how the banksters want it – no wrongful foreclosures found – no wrongful military foreclosures found. Surprise. Surprise.

    (I hope my sarcasm is coming through loud and clear.)

  12. Well Said Neil !

    This isn’t the result of irresponsible borrowers. They don’t write the paperwork, they don’t conduct the closings, and they don’t pretend to know what is in the documents presented tot hem for signature. They trust that the “lender” is properly representing itself, the appraisal, and the viability of the loan. They trust that the title agent, the title company and the closing agent are executing a closing in compliance with established law and procedure. Their trust is misplaced. In the coming years, the number of claims for payment on title policies, the number of lawsuits for quiet title, and the number of lawsuits for damages is going to skyrocket, not because of greedy borrowers who conspired to make a mess out of the marketplace, but because of a fictitious securitization scheme in which the parties simply were indifferent to the consequences of their action, compliance with law, or any regulatory requirements

  13. neidermeyer

    Not me — ha ha — I wish!!

  14. Unrelated ,, Sorry
    Anonymous , you NAUGHTY boy …
    From MSNBC via Drudge:
    Anonymous, a hacker group sympathetic to WikiLeaks, plans to release e-mails obtained from Bank of America early Monday morning, according to posts on the group’s Twitter feed. http://www.msnbc.msn.com/id/42062121/ns/business-consumer_news/

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