U.S. Trustee Exec: Toxic Practices Are Typical and Harmful

COMBO Title and Securitization Search, Report, Documents, Analysis

Bank PlayBook: Whatever it Takes to Foreclose

EDITOR’S NOTE: Despite the recent obvious NY Fed attempt to thwart disclosure of the truth about the obligations,, notes, mortgages and mortgage bonds, the lie we have been living on Wall Street is unravelling. It is becoming exquisitely obvious that the investment banks and all the parties in the securitization scheme want foreclosures. They don’t want settlements, they don’t want modifications, they don’t want short-sales, and they don’t want any laws or  application of existing laws to prevent them from declaring a default and go through the foreclosure process to a sale where they can make a false credit bid.
The reason is simple. Just as the signature of the borrower at any cost was necessary to complete the illusion of a valid securitized loan, the removal of the borrower is necessary to complete the illusion of an investor loss that is bloated in reports and claims to cover up the fees and profits made by Wall Street in the continuing mortgage meltdown that gave rise to the name of this blog: LIVING LIES.
May 14, 2011

A Low Bid for Fixing a Big Mess


SO the feds finally got one: Raj Rajaratnam, the hedge fund tycoon, is going down for insider trading.

Just don’t think for a moment that this victory for prosecutors will be keeping the high and mighty of finance up at night. No, some giant financial institutions have a bigger worry — namely, how to make the foreclosure fiasco go away.

As the Rajaratnam verdict captivated many on Wall Street last week, the institutions that service about two-thirds of the mortgages in this country offered to pay $5 billion to settle allegations about robo-signing and other shady practices that quick-step troubled borrowers out of their homes.

That figure is a fraction of the $20 billion that state attorneys general had apparently floated. If regulators accept the lowball offer, perhaps that would be because they haven’t dug deep enough.

Because evidence of extensive and abusive servicing practices does in fact exist. It is piling up at the offices of the United States Trustee Program, the arm of the Justice Department that monitors the bankruptcy system. Over the past six months, the trustee has drawn material from 95 field offices covering 88 judicial districts. The findings should dispel any notion that toxic servicing practices were atypical or have done no harm.

Clifford J. White III, director of the executive office of the United States Trustee, discussed some of the findings in an interview last week. But before we recount the ugly details, it’s worth noting the immense pushback the banks have mounted against the trustee office.

Banks have repeatedly tried to thwart the program’s actions, filing lawsuits and court motions to prevent officials from compiling evidence. Never mind that part of a trustee’s job is to investigate possible improprieties in foreclosures to determine if they are poisoning the bankruptcy system.

“We have faced consistent opposition by all of the major servicers,” Mr. White said. “We are currently facing 200 motions to quash our discovery requests. We also are facing upwards of 20 appeals either in district courts or in circuit courts.”

Those pushing back include Bank of America, Citigroup, G.M.A.C., JPMorgan Chase and Wells Fargo, he said.

The banks typically make two arguments. First, they say the trustee program has no legal standing to delve into individual cases between lenders and borrowers because it is not a “party” to these disputes. Every court has rejected this claim. Nonetheless, the tactic has allowed servicers to stall trustees’ discovery requests.

In other cases, the banks agree to turn over information in specific matters of interest to the trustee program but refuse to provide details on their overall policies and procedures, which could show deep and systemic flaws.

Why are these institutions so afraid of a little sunlight?

To be sure, the nationwide investigation by the United States Trustee’s office represents an aggressive tack that big financial institutions are unaccustomed to. “The bankruptcy system provided an early warning sign of problems in mortgage servicing,” Mr. White said. “We began looking a few years ago at some of the violations of mortgage servicers, on a case-by-case basis. What’s different from the past is, if we find a facial discrepancy” — something that’s a problem on its face — “we are off the bat seeking discovery.”

When the banks have provided information, lawyers for the trustee program have often found extensive errors in amounts owed and charges levied. Needless to say, these mistakes do not typically favor the borrowers.

Mr. White declined to get specific. But the mistakes that his office has found fall into two broad categories. One involves inaccurate amounts that the banks say borrowers owe. The accuracy of these documents, which are filed with the courts, is crucial. Borrowers and bankruptcy judges overseeing their cases use them to determine payment schedules to cure defaults, for example.

Inaccuracies often arise because loan servicers fail to reflect that borrowers are in trial loan modifications, like those offered by the government, Mr. White said. As a result, though borrowers are paying the proper amounts, the servicer shows them falling behind. Then the bank moves to restart foreclosure.

IN other cases, proofs of claim filed by servicers are just wildly off base. In one matter, a bank claimed to the court that a borrower owed $52,043. After the borrower objected and a trustee asked for documentation, the amount owed dropped to $3,156.

Imagine what would have happened if the amount hadn’t been questioned?

The other problematic area showing up in the trustees’ inquiries relates to what Mr. White calls improper default servicing fees. These include charges for legal work, property inspections, insurance and appraisals.

Often, the fees charged to troubled borrowers are not even specified. Trustee program officials found a defaulted borrower who was charged $10,260.50 in “prior service fees” with zero documentation. In another case, a borrower fell behind after the lender doubled his escrow payments with no explanation or justification. Then the bank filed a motion to lift the bankruptcy stay so that it could foreclose.

“In fewer than 20 judicial districts,” Mr. White said, “we have identified hundreds of facial deficiencies, including cases in which we seek to investigate inflated or improper escrow charges and cases in which the mortgage servicer sought relief from stay so it could foreclose on a debtor’s home.”

Mistakes happen, of course. And loan servicers like to contend that if errors occur, they are rare and honestly made. But after sifting through the data produced by this investigation, Mr. White disagreed that problems are rare. “In Senate testimony, an executive from Countrywide said its error rate was 1 percent,” Mr. White recalled. “The mortgage servicer industry error rate might be 10 times higher, based on the number of cases we are looking at.”

“There are continued flaws in the process, and they are not merely technical,” Mr. White continued. “Those flaws undermine the integrity of the bankruptcy system. Many homeowners have been harmed, including where the lender has come in and said ‘we want to lift the stay and go back into foreclosure proceedings,’ even though they lacked a sufficient basis to do it.”

He went on: “There are enough examples of this to know that we are not dealing with small numbers.”

So an authoritative source with access to a lot of data has identified industry practices as not only pernicious but also pervasive. Which makes it all the more mystifying that regulators seem eager to strike a cheap and easy settlement with the banks.

31 Responses

  1. ANON

    Forgive my persistent density. Is this premise true: if the mortgage follows the note as in Virginia, you’re never unsecured as the mortgage is just following the note in the ether?

  2. ANON

    Where exactly can i read this report?

  3. ANON

  4. carie

    If they cannot show conveyance — then they cannot show possession — then they cannot show a mortgage – as “mortgage follows note” – and vice-versa. Thus, unsecured debt —

    As the Congressional Oversight Panel (TARP) wrote in November Report — Footnote 35 — “Without the note, a mortgage is unenforceable, while without the mortgage, a note is simply an unsecured debt obligation, no different from credit
    card debt.”

    Still owe it as unsecured debt — but, dischargeable in BK. Oh — how they fought BK reform before Congress — twice voted down. Thing is — we did not need reform — already right in front of us.

  5. …or, unsecured “default debt”, or whatever the heck debt—not really debt—?!?

  6. So, ANONYMOUS, am I right in saying that since they definitely cannot show conveyance, that makes it unsecured debt?

  7. uprootedone,

    Ocwen being investigated by FTC. That will take a very long time.

  8. Thanks everyone for your input—it is greatly appreciated!!

  9. This will continue until the White House stops these shared loss agreements through the FDI”C, funded by Treasury borrowing.
    The U.S. is actually encouraging, incentivising foreclosures, not modifications.

  10. This story should be forwarded to 60 Minutes, so they can do a follow-up to their robosigners episode. Make sure they intereview Tim Gheitner and the other Fed crooks.

  11. Carie

    Check http://www.whatsignature.com and see if your notaries information is there. Also go to the Secy of State website where the notary is located. You may be able to find the notaries application with signature in the public records as well as their bond to file a claim against.

  12. Anyone dealing with Ocwen please email me


  13. Hi Bob G

    12 CFR Part 226
    [Regulation Z; Docket No. R–1378]

    – focus on “Section by Section Anaylsis

    TiLA Amendment is 15 U.S.C. § 1641(g)(1)

  14. carie

    Checked out your trust — find no Mortgage Schedule and no Mortgage Loan Purchase Agreement. So, how are they going to be able to prove possession by conveyance to the trust — to you???

    This particular series states:

    “The Depositor is the owner of the Trust Fund that is hereby conveyed to the Trustee in return for the Certificates. ” Interesting.

    This is one of those trusts in which there could have been no “true sale” — (not that any trusts were a true sale). Because the originator sold the loans to itself (Depositor) and resulting certificates to itself — and they continued to “control” as servicer.

    Indymac – a mess.

    As to current creditor — no one will give to you — court have to enforce — but courts are not doing. But, seems to me that you have an easy case as to non-conveyance — nothing to show your “loan” went there.


    What was that Fed Reserve cite you posted previously regarding demand for the true creditor in a mort loan transaction. I seem to have misplaced it, but need it now. Thanx.

  16. Carrie

    Depose the notary or subpoena his/her driver’s license. Compare the sigs on the license with the notarizations.

  17. B of A’s Top Bankster on the Hot seat!

    NEW YORK -(Dow Jones)- Bank of America Corp.

    (BAC) Chief Executive Brian Moynihan faced contentious questions from several shareholders Wednesday at the annual meeting for the nation’s largest bank by assets, particularly regarding its mortgage problems.

    Michael Garland, a representative from the New York City Comptroller’s Office, which oversees the public pension funds of New York,

    told shareholders the management team’s assurances that it was fixing the problems in mortgages were insufficient.

    The Office had put forth a vote requesting the bank initiate a fully independent review to ensure its mortgage and foreclosure practices are compliant with laws and regulations.

    Moynihan appeared to grow impatient with shareholder questions. While one man demanded Moynihan himself call him on the phone to discuss what the holder said was a wrongful foreclosure, Moynihan began checking his watch. He also tried to speed along proposals.

    Outside the meeting there was a small protest from activists asking the bank for principal reductions and for improvements in its modifications. One protestor held a large placard that looked like an envelope that read:

    “To: Brian Moynihan, From: the millions of households who have lost their homes. Return address not available.”

    Moynihan, in his introductory remarks, tried to get investors to separate the mortgage morass from what he said were the bank’s strong prospects. After the bank split its home-lending operations in two earlier this year, the bank said it would be working down the troubled mortgage portfolio.

    On Wednesday Moynihan said the bank clearly has work to do, calling it “the last problem from the financial crisis,” but added, “Our heart and soul is out there every day on this issue.”

    Chairman Charles O. Holliday Jr. admitted the bank was “behind on some of the things we wanted to accomplish” but “we will fix it.”

    The bank paid $1.4 billion in legal fees last year, General Counsel Ed O’Keefe said in response to a shareholder question Wednesday.

    Still the entire meeting wasn’t negative. Several shareholders applauded management for various accomplishments including a series of homeowners who had mortgages modified by the bank.

    And investors voted in line with management recommendations on all the proposals, including confirming the executive compensation in the so-called say-on-pay vote. The holders also elected every board member while rejecting all proposals brought by shareholders.

    Separately Moynihan said the bank is going to pay a dividend “as soon as we get approval.”
    Moynihan said there remains work to be done at the bank to get regulatory approval for the dividend.

    He said the work was always expected to take until the summer and that the bank expects the work to be done this year.

    “When we are sure that work is done … we’ll ask our regulators,” Moynihan said.
    Earlier this year the Federal Reserve told the bank it objected to its capital plan. The top 19 bank holding companies had to submit such plans in order to raise dividends.

    Bank of America had always said it would seek a modest increase in the dividend in the second half of 2011.

    Read more: http://www.foxbusiness.com/industries/2011/05/11/bank-america-faces-mortgage-questions-annual-meeting/#ixzz1MUmCNPiV

  18. Well, there is no assignment recorded in my county, no SOT recorded in my county, (just sent to me in an email)…The notaries signature is a “squiggle”, and I am currently trying to figure out how to find her actual real signature, because this looks fraudulent to me…

    I found my pooling and servicing agreement online—does anyone know the best things to look for in that to use in court?

  19. carie
    recorded oder is usually but not always.
    1st- is the NOD
    2 -next usually an assignment
    3 -SOT
    4 -notice of TS

    the notary CAN be from anywhere.

  20. So, ANONYMOUS—that is the question, if and when we are in court against them: How do we PROVE to the judge that they CANNOT identify a current creditor?

  21. I forgot to mention that the SOT “document” substitutes Aztec Foreclosure corporation for Deutsche Bank National Trust Company…….as Trustee of the IndyMac INDX Mortgage Loan Trust 2006-AR19, Mortgage Pass-Through Certificates, Series 2006-AR19 under the Pooling and Servicing Agreement dated June 1, 2006……which probably doesn’t even exist?!?!?

  22. Thank you—you can contact me at cariemac9@gmail.com


    The servicer is IndyMac Mortgage Services—the notary is in the county of Travis, in Texas, a Monique McQueen. It is not recorded in my county of Los Angeles, CA, where the property is. It is dated Nov. 30, 2010. Signed by Autumn Barrow, assistant secretary, as attorney in fact for OneWest Bank,FSB.

    Also, isn’t it supposed to be in MY county and state? AND, the notice of default was recorded on 10/28/2010…BEFORE the substitution of trustee date—whats up with that????

  23. Neil is right — they want foreclosures — not modifications – not settlements — not short sales. They want foreclosures. The biggest reason they want foreclosures is because they would have to identify the current creditor under the scenarios – and, this would, of course, prove the foreclosure attempt fraudulent. .

    Do not forget – these “investment banks” — also had debt buying divisions/subsidiaries — Refinance subprime — refinance default debt — that is what they did. What they did with that debt is now the question.

  24. I know lots about bogus charges. That’s how I was pushed into foreclosure. The servicer would never explain or remove bogus fees and would persist in charging my “account” late fees for short payments (made short by bogus late fees) thus provoking their version of a default You cannot win with them if you work for a living there isn’t enough time to deal with their shenanigans

    Carie. The notary, chris Ivey, on my bogus assignment lost his license after a litigant filed a complaint in another foreclosure. He didn’t respond to the inquiry by the court (georgia) and the court yanked his license. I can give you a few insights if you give me a way to contact you

  25. Carie,

    What is the name of the notary? North Carolina published a large number of signatures when they halted foreclosures there ,, typically a squiggle is robosigned ,, after 4000 signatures in a day you get REAL sloppy. It would help also if we had the name of the lawfirm and the servicer along with the date when it was supposedly executed.

  26. I apologize if this has already been answered, but does anyone know how I can verify a notaries’ signature? My substitution of trustee (bogus) document has a “squiggle” for the notaries’ signature…looks very fraudulent to me…

  27. The whole world is looking at us and this is diminishing our influence in the world. Our Soldiers are in harms way.



  28. The economic collapse causing homeowners loss of jobs, business, businesses, and job hours cut in half, loosing the income to pay the mortgage debt, they otherwise would have and did pay, causing them to default and to need help the banks have denied them, is being side stepped. There is more here than a discount on your mortgage, and paying a few months rent. How dare they make such a unthinkable offer. As you all know now, the banks purposely drug homeowners into default. These flat out unconscionable criminals must go to jail. The homeowners and all Americans that have been harmed by them need to be compensated and helped. It is not just the homeowner.. There are starving families that have lost jobs, some of them if they are lucky are living with family members and friends. No where to go and no jobs, or a job at half the pay, or hours cut in half. This goes beyond the mortgage fraud compensation.

  29. they are “not errors” if this is the profit plan.
    much like the insurance fraud claiming no hazard insurance- the borrowers own valid insurance of no consequence or irrelevant to the sevicer charges, in as much as it is not part of the servicers profit plan.

  30. Foreclosure should not be able to be initiated, facilitated, perpetuated or sustained by ANY entity who PROFITS from it. Period.

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