Menendez and Booker Take on Zombie Foreclosures

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It seems ridiculous. Why would a lender reject a workout, reject modification, reject a short sale and insist on a foreclosure — and then walk away from the property? Why has this not been a center of attention as hundreds of communities, cities and states have been decimated by this phenomenon?

The answer turns on the themes of this blog and several other media outlets but nobody in a position to change the conversation wants to face up to the single true statement about this: somehow the banks are making more money going to foreclosure (and walking away from the property) than doing a workout to save the loan as a valuable asset. The foreclosure sale is worth more to them than the property.

The banks are not stupid. They know that destroying neighborhoods and cities results in a precipitous drop in home values (going to zero in many places). They know that this results in a disastrous deterioration of the value of the security for the alleged loans.

So we are faced with a second undeniable truth: the banks are not losing money on foreclosures, they are making money.

So when Senators like Menendez and Booker from New Jersey write a letter to federal regulators asking them to look into the wild phenomenon of Zombie foreclosures, we can only hope that such Senators and the federal regulators will ask themselves some very simple questions. That is the only way this crisis will be averted and it is a vehicle for bringing down the largest banks who are performing illegal acts every day in foreclosures across the country.

If we go beyond the basic questions, then we start to drill down to the real facts — not the ones that practically everyone assumes to be true.

How could the banks not be losing money on Zombie foreclosures? The loss of the loan and the loss of the property securing the loan obviously reduces the value of the alleged loan to zero. In fact, it creates a liability to the bank for walking away after they kicked out the people who own the house. The City can go after them for taxes and the prospect of liability for attractive nuisance and other torts requires them to pay for insurance or brace for impact when the lawsuit happens. Any normal banker will tell you that this is not an acceptable scenario nor is it industry practice amongst banks who make loans.

Hence the conclusion that the parties who invoking the foreclosure procedures did not make loans — nor did anyone else in their alleged chain. The part of the deal where the lender hands over the cash to the closing agent never happened in those loans. If it had happened then the loan and the property would have value to these banks and other entities. Since it was “other people’s money” involved in that “loan” transaction, the banks simply don’t care what happens to the loan or the property except that THEY want the foreclosures to the detriment of the owners of the property, the detriment to the Pension funds whose money was somehow used to make the alleged loans, the detriment of our communities, and the detriment of government which ramped up to handle all the new housing only to find that their tax base vanished.

So if the banks are not losing money on the alleged default of the borrower, it opens the door to understanding that practically anything else they do would result in profits to the banks who are illegally and fraudulently controlling the foreclosure process. When they bring a foreclosure action they use self proclaimed authority that is presumed to be true even though truth is not involved. They have credibility even though they lack the truth.

It’s a perfect world to Wall Street. They use nonexistent entities as claimants in the foreclosure process thus insulating themselves from liability for wrongful foreclosure when those few cases actually get decided on the merits. The money from the pension funds goes into the pocket of the Wall Street banks instead of those empty Trusts.

The pension funds gets a certificate of ownership and debt from the empty trust and they are contractually bound not to ask questions about any specific loan. Ever wonder why that provision is in every Pooling and Service Agreement. So while intermediary parties have a party with pension money, the pension money was used to fund loans that were underwritten for the purpose of loss instead of the usual profit motive. And by knowing that the loans would fail the banks were able to get even more money by betting on loans that they knew would fail. And then they got even more money by betting on the loss of value of the certificates. And they got even more money when they engaged in the Re-REMIC practice of closing out the old trust and starting a new one. And to add insult to injury, the pension fund keeps getting paid by the wrongdoers from a “reserve fund” consisting entirely of pension money. Pouring salt on that wound is the bank’s hubris in claiming the right to recover “servicer advances” made from the reserve pool — only upon foreclosure sale. And the cherry on top is that the “servicers” who are not servicers sell the right to recover servicer advances in additional securitization schemes.

Homeowners take it personally when the servicer tells them  they were rejected by the investor for a modification (false claim). They think it must be personal because no other explanation makes sense to them. But that is because they don’t have the information on “securitization fail.”

The BIG LIE is that lenders are foreclosing. They are not. In fact, there are no lenders in the legal and conventional use of the word. There are only victims of fraud.

11 Responses

  1. most mortgages are foreign contracts
    discuss it tonite on Talkshoe

    Call in at (724) 444-7444 (then use Call ID: 139335) then “0” for guest
    and/or use your computer to blog/type at
    6:45 PM Eastern Thursdays (for 60 min)

  2. Melissa, on November 5, 2015 at 10:23 am said:
    I am a little confused, what is the GSE Business Model? If you can explain it and how it may help it would be greatly appreciated. Also to do a search does one just type in GSE Business Model?

    Yes, read all you can about it. It is the model that hijacked the American mortgage industry in the late 1960s.

    Every creditable scholar on the subject agrees that the GSE BM is a “fatally flawed” business model.

    Congress bet your purse on the model via granting a government guarantee of the “lenders” mbss in exchange for the promise that lenders would “buy back” all loans that did not comply with reps and warrants.

    Your congress representatives should be held accountable for the failure to hold the banks accountable for the initial promise to hold players/partners in the GSE BM accountable.

    If you read the GSE “guides” all predatory activities are prohibited. It is time congress enforce the promises of the GSEs that gave them the guarantee of the US treasury on their mbss (they bet your purse and my wallet) on a business model that simply does not work.

  3. Wells Fargo fined $81.6 million for violating federal bankruptcy rules
    DOJ: Wells Fargo failed to notify bankrupt homeowners of mortgage payment increases
    Ben Lane
    November 5, 2015

    Wells Fargo (WFC) will return $81.6 million to homeowners after reaching a settlement with the Department of Justice’s U.S. Trustee Program over the bank’s “repeated failures” to provide bankrupt homeowners with legally required notices of mortgage payment increases.

    According to the DOJ, Wells Fargo’s failure to provide the proper legal notices denied homeowners the opportunity to challenge the accuracy of mortgage payment increases.

    By failing to properly notify homeowners, Wells Fargo violated federal bankruptcy rules that took effect in December 2011 that imposed more detailed disclosure requirements to ensure proper accounting of fees and charges on homeowners in bankruptcy, the DOJ said.

    According to the DOJ, Bankruptcy Rule 3002.1 requires mortgage creditors to file and serve a notice 21 days before adjusting a Chapter 13 debtor’s monthly mortgage payment.

    “Wells Fargo acknowledges that it failed to timely file more than 100,000 payment change notices and failed to timely perform more than 18,000 escrow analyses in cases involving nearly 68,000 accounts of homeowners in bankruptcy between Dec. 1, 2011, and March 31, 2015,” the DOJ said.

    As part of the settlement, Wells Fargo will change its internal operations and submit to oversight by an independent compliance reviewer.

    Wells Fargo will pay a total of $81.6 million to homeowners who were in bankruptcy between Dec. 1, 2011, and March 31, 2015, and who were affected by Wells Fargo’s failure to timely file PCNs and escrow statements, the DOJ said.

    The $81.6 million repayment will be made to several different groups of borrowers, including:

    $53.6 million will be paid to more than 42,000 homeowners whose payments increased as to which Wells Fargo failed to timely file a PCN with the court. The payment will be in the form of a credit to the homeowner’s mortgage account in a lump sum amount, which averages $1,254 per homeowner and varies depending on the homeowner’s mortgage balance. More than 70% of the total payments will go to homeowners who have mortgage balances under $300,000. These payments will be made regardless of whether homeowners actually paid the increased amount.

    An estimated $10 million will be paid by crediting homeowners’ accounts at the end of their bankruptcy cases if, upon a detailed review of the accounts, it is determined the homeowners were not fully compensated through the initial crediting process described above. Wells Fargo estimates that 15 to 20% of homeowners who receive the initial payments will be due additional amounts at case closing.

    $1.5 million will be refunded in cash to about 3,000 homeowners where notices of decreases in monthly payments were not timely provided and the homeowners paid more than the actual amount due.

    $1 million will be refunded in cash to about 2,400 homeowners who satisfied escrow shortages by making a lump sum payment, but whose monthly payments did not decrease to account for the lump sum payment.

    $4.5 million will be paid by crediting the mortgage escrow accounts of about 6,000 homeowners who did not receive timely escrow statements. Wells Fargo will credit the amount of any increase in escrow shortage that was incurred between the time Wells Fargo should have performed the analysis and the time it actually did perform the analysis. As a result, homeowners will not be responsible for any increase in the escrow shortage stemming from Wells Fargo’s failure to timely perform the escrow analysis.

    $4 million will be paid to about 12,000 homeowners by crediting mortgage accounts in the amount of $333, where Wells Fargo failed to timely perform an escrow analysis that would have resulted in a PCN being filed and the homeowner is not already receiving remediation for a missed or untimely PCN.

    $4 million will be refunded in cash to about 6,000 homeowners who did not receive timely escrow statements and whose escrow accounts contained surpluses that Wells Fargo had not refunded or credited toward the next year’s escrow payment.

    $3 million in remediation to about 8,000 homeowners has already been completed by Wells Fargo for certain violations.

    “I am pleased that Wells Fargo has acted responsibly by accepting accountability for its deficient bankruptcy practices, agreed to compensate affected homeowners for those deficiencies and committed to making necessary improvements in its bankruptcy operations,” said Director Cliff White of the U.S. Trustee Program.

    “When creditors fail to comply with the bankruptcy laws and rules, they compromise the integrity of the bankruptcy system and must be held accountable. Transparency in the process is of paramount importance,” White said.

    “Homeowners in bankruptcy have the right to proper and timely notices, particularly when they are being asked to pay more,” White continued. “The U.S. Trustee Program remains diligent in its effort to hold financial institutions that disregard the law accountable for their actions.”

    In addition to the monetary remediation, Wells Fargo will make changes to internal procedures to prevent recurrence of the violations, the DOJ said. These changes include improvements to its computer platform, improvements to employee training and oversight and implementation of quality control processes to ensure the accuracy and timeliness of PCNs and escrow statements.

    Michael DeVito, executive vice president for Wells Fargo Home Mortgage, said that the company has already made changes to its systems to ensure it won’t violate bankruptcy rules moving forward.

    “We believe we have made the necessary investments and improvements in our systems and processes to ensure that payment change notices for the bankruptcy court and escrow analyses for customers in bankruptcy are properly prepared and delivered in a timely fashion,” DeVito said. “We will work with the U.S. Trustee’s office and an independent reviewer to demonstrate the effectiveness of our improvements and to provide payments to customers, as required.”

  4. a gentle reminder that there is a follow up call to Neil tonite…

    Garfield’s Goose & Friends with your host, greg

    (every Thursday night starting 15 minutes right after Neil’s show)

    Call in at (724) 444-7444 (then use Call ID: 139335) then “0” for guest
    and/or use your computer to blog/type at
    6:45 PM Eastern Thursdays (for 60 min)

    please use the phone line to speak and ask questions
    computer access will only allow you to hear and type into the blog…

  5. Spokeo v Robins – will be a very interesting case –

    . . . the violation of a statutory right is usually sufficient injury in to confer standing.

    . . . The Court explained that when a cause of action does not require proof of actual damages, a plaintiff can suffer a violation of the statutory right without suffering actual damages.”

    thanks for tip,34

  6. Keep an eye on Spokeo, Inc. v. Robins- -Lexology

  7. Richard,
    I am a little confused, what is the GSE Business Model? If you can explain it and how it may help it would be greatly appreciated. Also to do a search does one just type in GSE Business Model?

  8. It is all spelled out step by step in the GSE Business Model.

    Our congress bet the us treasury on its success via the guarantee.

    The frustration is palpable here. Take the time to study the Model for a remedy or look forward to more of the same.

  9. If you visit Senator Menendez’ web page he declares his intention to get to the bottom of the derivatives to provide for transparency.

    The actual verbiage from his web site escapes me and I have to run out the door. I do recall that he names derivatives “the riskiest of financial products”, or words to that effect.

    NJ is a stone’s throw away from the international, criminal disgrace that is Wall Street …

    After all, 98% of the phony “Trusts” claim to be acting under NY law.

    Is there any confusion as to why NJ leads the nation in “zombie Foreclosures”?

    Real simple boys and girls: We The People have refuge within the LAW.

    If the LAW provides for certain rules, those rules have consequences when those rules are broken.

    Senator Menendez and Senator Booker are Democrats.

    Democrats like taxes.

    Bankers cooked up this whole scam to enrich themselves at the expense of taxpayers (MERS denied Billions to the 1300 or so municipalities that used county recording fees as a type of tax)…

    Bankers denied TRILLIONS to the IRS through phony “securitizations” that never garnered legitimacy as true “REMIC TRUSTS” because those bankers fraudulently collected tax deferments (pass-through certificates) on their scam (hidden “bucket trusts”).

    Bankers robbed the pension systems to pay their phony “loans” after they manipulated the interest rates on those phony “loans” so those phony interest rates would favor the banks (LIBOR).

    The banks are NOT the government.

    The US Dollar is under assault because the rest of the world has clearly seen a lack of will on the part of our elected representatives to hold the CRIMINAL BANKERS ACCOUNTABLE.


    Every pension plan in this country oughtta’ be banging down the doors of representatives like Senators Menendez and Booker…


  10. neil , let me tell you what is going on in my little area of Deerfield beach, florida. Blackstone has bought several properties in the area and are renting out on long term leases (> I yr lease) JP morgan chase holds the mortgage and they rent to anyone. I know they thought my home was going to become one of blackstone’s rental properties. the neighborhood is crap now(at least on my street). it was nice prior to foreclosure crisis. the city does not care, they want the extra revenue they get in a non homestead property. the taxes nearly double. city does not care, they only want the money. way I see it, its one big government conspiracy. why do all these foreclosures in broward county, florida get a poa over to fannie mae or the assignment of right to bid and then they hide the bidder but you know the bidder is these investors like blackstone and if your foreclosed property serves their purpose to produce income, they just take it. there is no fair bidding in the court system, much like the rest of the court. what ever happen to arms length transactions, they do not exist in south florida

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