Modification Minefields as Foreclosures Resume Upward Volume

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New Jersey now has an upsurge of Foreclosure activity. It is on track to become first in the nation in the number of foreclosures. What is clear is that the level of foreclosure activity is being carefully managed to avoid attention in the media. Right now, foreclosure articles and the infamous acts of the banks in pursuing foreclosures is staying off Page 1 and usually not  anywhere in newspapers and other media outlets online and and in distributed media. The pattern is obvious. After one area becomes saturated with foreclosures, the banks switch off the flow and then move to another geographical area. This effectively manages the news. And it keeps foreclosures from becoming a hot political issue despite the fact that millions of Americans are being displaced by illegal foreclosures based upon invalid mortgage documents and the complete absence of any real creditor in the mix.

As foreclosures rise, the number of attempts at modification also rise. This is a game used by “servicers” to assure what appears to be an inescapable default because their marching orders are to get the foreclosure sales, not to resolve the issue. The investment banks need foreclosures; they don’t need the money and they don’t need the house —- as the hundreds of thousands of zombie foreclosures attest where the bank forecloses and abandons property where the borrower could and would have continued paying.

The problem with modifications is the same as the problem with foreclosures. It constitutes another layer of mortgage fraud perpetrated by the Wall Street banks, who are now facing increasingly successful challenges to their attempts to complete the cycle of fraud with a foreclosure.

The “servicer” whom nearly everyone takes for granted as having some authority to move forward is in actuality just as much a stranger to the transaction as the alleged Trust or “Holder”. The so-called servicer alleged authority depends upon powers conferred on it by the Pooling and Servicing Agreement of an unfunded Trust that never completed its mission to originate or acquire loans. If the REMIC trust doesn’t own the loans, the servicer claiming authority from the PSA is claiming vapor. If the Trust doesn’t own the loan then the PSA is irrelevant and the powers conferred in the PSA are pure vapor.

This brings us full circle to where we were in 2007-2008 when it was the banks themselves that claimed that there were no trusts and that there was no securitization. They were, as it turns out, telling the truth. The Trusts were drafted but never funded, never used as conduits and never engaged in ANY transaction in which the Trust had funded the origination or acquisition of loans. So anyone claiming authority from the trust was claiming authority from a fictional character — like Donald Duck.

Complicating matters further is the issue of who owns the loan when there is a claim by Freddie or Fannie. Both of them say they “have” the mortgage online when they neither “have it” nor “own it.” Fannie and Freddie were one of two things in this mess: (1) guarantors, which means they have no interest until after a creditor liquidates the property and claims an actual money loss and Fannie and Freddie actually pays off the loss or (2) Master trustee (and probably guarantor as well) for a REMIC Trust that probably has no greater value than the unfunded REMIC Trusts that are unused conduits.

Further complicating the issue with the former Government Sponsored Entities (Fannie and Freddie) is the fact that many banks have been forced to buy back or pay damages for violating underwriting standards and other types of fraud.

So how do you get or sign a modification with a servicer that has no authority and represents a Trust that has no interest in the loan? The answer is that there is no legal way to do it — BUT there is a way that would allow a legal fiction to be created if a Court issued an order approving the modification and declaring the rights of the parties. The order would say that XYZ is the servicer and ABC is the creditor or owner of the loan and that the homeowner is the borrower and that the modification agreement is approved. If proper notice (including publication) is given it would have the same effect as a foreclosure and would eliminate all questions of title. Without that, you will have continuing title problems. You should also request that the “Servicer” or “Trustee” arrange for a “Guarantee of Title” from a title company.

For the tricks and craziness of what is happening in modifications and the issues presented in New Jersey and other states click the link above.

Fraudulent Appraisals: The Centerpiece of Securitization PONZI Scheme

Editor’s comment: There are two “good” reasons why Wall Street wanted the appraisals inflated. The first was that the higher the appraisals (the real values be damned) the more money they could show that was moving, and the more sure they  could be that even good loans would be defaulted strategically by people unwilling to pay. The second was to create the frenetic bubble where consumers were led to believe that the rising prices represented rising values and that they better get on the train before it leaves the station.

Without investors and borrowers feeling like they were on a speeding train under the masterful control of Wall Street banks with 100+ year histories, there would have been no mortgage mess. Investors would not have been looking at the mortgage bonds as something not only safe, but with growth potential. Borrowers would have stayed away from homes or financing packages they could not afford.

Now, as the facts seep out of leaking seals, the investor side and the borrower side are realizing that real estate prices DO go down, especially when the prices are so far over any reasonable valuation. With investors, there is no deal. Without borrowers, there is no deal. It is that simple.

So now we have a new term: FRAFing — Field Review Appraisal Fraud in which Quality Mortgage Service and others are being hired to show that the appraisals were faked. This shouldn’t be hard.

Collect up a hundred random appraisers who were working during that period, and they will tell you that they were shown the contract, and directed to use the broadest possible range of comparables to come up with the highest possible appraisal, even though by industry standards, the appraisal should have been much lower.

The facts bear out these allegations. As soon as the money stopped, the home prices collapsed. Why is that? If they were really worth the price paid or financed, then homes should have been a safe place to keep your money while their were wild currency gyrations and the banks were teetering on collapse and actually still are on the edge of ending their long reign of terror over the US economy and political landscape.

The short answer is unavoidable: the homes were not worth what the sham lenders were certifying in their loan packages. remember that the appraisal is from the lender not the borrower, so don’t go blaming borrowers for setting up this mess. In 2005, 8,000 appraisers signed a petition to Congress to warn of these practices. They were ignored. Now it will take decades to clear out the mess that could have been avoided by a quick nip in the bud.

The effect on borrowers is that they were victims of the fraud and if properly presented the liability goes all the way up the fake securitization chain leading, like the bridge to nowhere, to no loan pool that actually owns the obligation, note or mortgage. Investors (pension funds etc) bought faked mortgage-backed bonds that were neither bonds nor mortgage-backed and the borrowers bought homes or loan packages (refinance was 50% of the market) based upon a contract whose premise was that the market was rising and the value of their homes was rising with spectacular results and would never come down.

BOTH investors and borrowers deserve better treatment than they are getting. It is like the veterans coming back from combat tours. Whether or not you agree with the policies that sent these brave men and women to war they should be treated like heroes, and not victimized by a society that no longer has any use for them. When do we reach the point of outrage where the people march on government and the banks and take back their power?

The reason that homeowners didn’t get the benefit of the bargain they made when they bought these sham loan products, is because the deal was never there. That is the essence of fraud. The banks. media and regulators will tell you that the market went down. No. It actually didn’t “go down” it crashed back to the real value of the property as soon as the scam was over. by Justin T Hilley

Audits by Quality Mortgage Service indicate that many demands by financial institutions that lenders buy back mortgages are based on fraudulent appraisal schemes in an attempt to increase the success of repurchase claims.

The Brentwood, Tenn.-based quality control and assurance company believes some appraisers are systematically being pressured to use a subset of market data that skews the calculated market value of the property backing the disputed mortgage.

QMS says the scheme, which it calls FRAFing, or field review appraisal fraud, is often found in appraisals when mortgage repurchase demands are pushed backed to lenders for a claim based on a field review appraisal value.

“The appraiser or someone is manipulating data and/or information in sections of the appraisal to obtain a targeted value result,” QMS President Tommy A. Duncan says. “They are ignoring the higher value of comparable so that a lower value is supported in the appraisal.”

The data used to compare to the property is nearly always restricted to the bottom 20% to 30% of sale prices in the market area, Duncan says.

“What we are finding, when supporting repurchase defenses, is a concerted effort to base an opinion of market value on the lower one-third of market data that produces erroneous estimates for approximately 65% of the properties appraised — assuming equal market distribution,” he adds.

Financial institutions are FRAFing because of intense pressure to successfully push back loans for repurchase, Duncan claims. “It is a conclusion I am making because it does not make sense for an appraiser to overlook the obvious,” Duncan says. “Therefore, the act must be based on pressure and not sloppy work.”

The QMS repurchase defense audit compares the information contained in mortgage loans and supported material in the claim usually at the lender’s second attempt to defend. QMS employs human analytics and asymmetrical methodology in its review to ensure that the document has been prepared correctly and that the information reported is accurate.

Duncan recommends mortgage lenders perform the highest level of due diligence when field review appraisals are used to support a repurchase claim in order to combat FRAFing.


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