Who Can Help Me with Mortgage Problems?

Posted on July 18, 2013 by Neil Garfield

A number of people have been contacting me about the work of people other than my company that produces reports and analysis and expert witnesses and my law firm, Garfield, Gwaltney, Kelley and White based in Tallahassee.

My first rule is that I don’t attack or smear anyone who might provide some service that has any chance of helping someone with a consumer debt, mortgage problem, foreclosure etc. Everyone is invited to the party and with more than 5 million foreclosures behind us and another 5 million projected into the future, there is plenty of room for everyone to take a share of the market.

My second rule is that this should be a collaborative effort in which anyone with an idea should have a platform to put forth their ideas.

And my third rule is that I don’t recommend anyone unless I have seen their work, examined their credentials (education, licenses and experience) and discussed their approach with them. Their are many approaches that work for a while then stop working because the banks change their tactics in response. There are many legal theories that are correct but the Judges refuse to apply them. What is important is that you develop a strategy for NOW, with those tactics and strategies, defenses and causes of action that are getting traction with Judges.

CAVEAT: There are many people and companies that are offering bogus relief programs — some with a lot of cash to do advertising and marketing. Be careful and ask questions. If you must take their word for it because they have no historical presence in the bank scam arena be extra careful. What I mean is how have they been contributing to the assistance of distressed consumers and homeowners?

With that in mind, here are some general guidelines for who can help and who might be well intended but ineffectual in achieving a satisfactory result. People that might possibly be of assistance include the following:

  1. LAWYERS: Simply because in the final analysis these are legal problems that usually end up in court where rules of procedure and rules of evidence usually determine the outcome. Within this category are lawyers with foreclosure defense experience, bankruptcy lawyers, property lawyers, and civil litigation lawyers. Anyone without a lot of trial experience should only be used for advice.
  2. HUD COUNSELORS: often overlooked, these people have relationships with the banks that neither lawyers nor forensic examiners have and can often ferret out facts that might not be available even through the process of legal discovery. The good ones have a pretty good track record of settling or modifying loans. AND they usually have relationships with lawyers, real estate brokers, appraisers, investigators, mortgage brokers, hard money lenders. They are licensed and regulated the same as lawyers, brokers, appraisers, and investigators.
  3. FORENSIC ANALYSTS: Very few of the people who perform this work can claim any credentials as an expert witness whose credibility will be accepted by the court. But on the other hand they often have become very adept at ferreting out information of value to your lawyer or whoever is helping you.
  4. EXPERT WITNESSES: Almost anyone will be allowed to testify as an expert witness these days because the rules are so relaxed. But the Judge is not going to give their testimony any weight unless the expert can clearly explain the facts, opinions and conclusions in a compelling way. An expert witness who is not licensed in any relevant field, possessing no academic degrees relating to a relevant field, who has no experience in the relevant field (e.g. a current or former banker, investment banker, broker etc.) might be allowed to testify but nobody is listening. On the other hand, such a witness can testify as a FACT witness rather than an opinion witness as to the results of their forensic examination of the loan, assignments or current status of the alleged loan. There are very few expert witnesses who can testify as to all aspects of securitization but many who can testify as to parts of it. You might need more than one. Lastly, even an unqualified expert witness with little credibility might give you or your lawyer an idea that had escaped your attention so there is no harm in talking or consulting with someone, even if they appear on paper to have few attributes of an actual expert.
  5. BROKERS: REAL ESTATE AND MORTGAGE: Firstly, as licensed, educated, experienced individuals they command some attention. They might have their own agenda they are pushing but when asked the right questions they can be worth the fee if they are able to describe past and current practices and their opinion of certain transactions alleged by your opposition. Keep in mind that real estate and mortgage brokers have a stake in the marketplace — to keep things moving, buying and selling, borrowing and refinancing.
  6. APPRAISERS: Usually licensed and experienced with many years behind them, they can provide very helpful insights as to whether the property was really worth anywhere near the loan value and the current fair market value. They could be a key ingredient, where it applies, to showing that that the originator was not acting as a lender because custom and practice in the industry was to take a lower appraisal righter than a higher one and that custom and practice was to “go back to the well” several times where the market appeared volatile — all things that were absent in the “underwriting” practices of the time. It was the the appraisers in 2005 who warned of the coming catastrophe and many of them suffered by getting no business because they refused to sign off on an appraisal that was misleading.
  7. INVESTMENT BANKERS: Lots of them exist, very few are willing to testify. But they obviously know a lot of shocking details if they were involved in the bundling and sale of mortgages. But remember there are several moving parts in securitization and some investment bankers might know nothing of value to your case. Only a few people at the top truly know what happened to the money and what decisions were made as to fabrication of paperwork to cover up the misappropriation of funds, title and rights to enforce.
  8. MORTGAGE ORIGINATORS: Lots of them exist, few are willing to testify. But there are some. They can tell you that they were never at risk on the Loan” and how the money came from a source outside the circle of parties at the loan closing table. TILA and RESPA claims can be corroborated with their testimony as well as questions regarding title and thee right to enforce.
  9. WHISTLE-BLOWERS: Like “experts” anyone can claim to be one. But if the person has information that can be corroborated they can be an excellent guide through the maze of curtains and obstacles that currently prevent most borrowers from figuring out and proving what is really going on.
  10. LOAN MODIFICATION PROGRAMS: As greater regulation and enforcement is starting to get some traction, so has the possibility of modification or settlement. Keep in mind that with so many successful illegal foreclosures behind them, the banks are more likely to seek finality to the situation since we have passed the half way mark and the possibilities of liability for buy-backs and refunds are declining. Be careful about anyone who tells you that you should stop paying the payments — a strategic default is something you should thoroughly examine and research and get advice before doing it. That includes especially the banks who are doing that as a matter of policy. If you do enter into a modification program make sure that the end result is going to be a modification and not just another excuse to foreclose on you with more information about you than they had before. And make sure you clear up title as well as the debt. Without that you are raising the probability that you will be fighting title issues later in court.

There are no doubt many other types of people who can or want to help. I can only mention the ones I know about. Be careful and don’t let desperation get the better of you.

FOOTNOTE: I am besieged by people trying to bait me into a “discussion” where I defend the strategies and tactics I use and describe on my blog. I won’t enter into such a discussion for the same reason that a judge would ignore what an “expert” says who has no credibility and no credentials. The only place where I will defend is in court for the benefit of clients. If someone doesn’t like my views because they think it discredits them or their services, then maybe they should do more research into what they are doing.

Filed under: AMGAR, CDO, CORRUPTION, Eviction, foreclosure, GARFIELD GWALTNEY KELLEY AND WHITE, GTC | Honor, Investor, Mortgage | Tagged: , , , , , , , , , , | 33 Comments »

Mortgage Rates in U.S. Decline to Record Lows With 30-Year Loan at 3.84%

Posted on May 7, 2012 by Neil Garfield

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Editor’s Comment:

It appears as though Bloomberg has joined the media club tacit agreement to ignore housing and more particularly Investment Banking or relegate them to just another statistic. The possibilities of a deep, long recession created by the Banks using consumer debt are avoiđed and ignored regardless of the writer or projection based upon reliable indexes.

Why is it that Bloomberg News refuses to tell us the news? The facts are that median income has been flat for more than 30 years. The financial sector convinced the government to allow banks to replace income with consumer debt. The crescendo was reached in the housing market where the Case/Schiller index shows a flash spike in prices of homes while the values of homes remained constant. The culprit is always the same — the lure of lower payments with the result being the oppressive amount of debt burden that can no longer be avoided or ignored. The median consumer has neither the cash nor credit to buy.

Each year we hear predictions of a recovery in the housing market, or that green shoots are appearing. We congratulate ourselves on avoiding the abyss. But the predictions and the congratulations are either premature or they will forever be wrong.

The financial sector is allowed to play in our economy for only one reason— to provide capital to satisfy the needs of business for innovation, growth and operations. Instead, we find ourselves with bloated TBTF myths, the capital drained from our middle and lower classes that would be spent supporting an economy of production and service. That money has been acquired and maintained by the financal sector giants, notwithstanding the reports of layoffs.

From any perspective other than one driven by ideology one must admit that the economy has undergone a change in its foundation — and that these changes are ephemeral and cannot be sustained. With GDP now reliant on figures from the financial sector which for the longest time hovered around 16%, our “economy” would be 50% LESS without the financial sector reporting bloated revenues and profits just as they contributed to the false spike in prices of homes. Bloated incomes inflated the stampede of workers to Wall Street.

Investigative reporting shows that the tier 2 yield spread premium imposed by the investment bankers — taking huge amounts of investment capital and converting the capital into service “income” — forced a structure that could not work, was guaranteed not to work and which ultimately did fail with the TBTF banks reaping profits while the rest of the economy suffered.

The current economic structure is equally unsustainable with income and wealth inequality reaching disturbing levels. What happens when you wake up and realize that the real economy of production of goods and service is actually, according to your own figures, worth 1/3 less than what we are reporting as GDP. How will we explain increasing profits reported by the TBTF banks? where did that money come from? Is it real or is it just what we want to hear want to believe and are afraid to face?


Filed under: foreclosure | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , | 3 Comments »

Swaps as Breach of Fiduciary Duties

Posted on March 9, 2010 by Neil Garfield

“That’s right. Issuers are essentially paying twice for flawed deals that bestowed great riches on the bankers and advisers who sold them. Taxpayers should be outraged, but to be angry you have to be informed — and few taxpayers may even know that the complicated arrangements exist.”

Editor’s Note: At some point, it will become obvious and axiomatic that Wall Street works for itself and their pattern of selling is devoted to making money whether the investment sold goes up, down or sideways. As long as money moves Wall Street makes money. One of the crazier aspects of their hold on Government is that while they make all this money, they don’t get taxes, because they usually pick and choose when they report the income even as it is sitting safely in off-shore havens or buried in holding or contingency accounts. Much of the federal and State deficits would be partially or completely offset if they just enforced their tax laws — collecting taxes owed to them by Wall Street players.
Meanwhile, back at the ranch, everyone and everything is dying, drained of all lifeblood in what is left of our “free market” economy. The current case in point, deftly pointed out and explained by Gretchen Morgenstern of the New York Times, is local government officials who were misled into buying into a credit default swap program without knowing the risks. They thought they were increasing income and decreasing risk. Instead they were , like the borrowers on teaser rates, drawn into complicated instruments, relying upon the advice of the people who sold it to them. These isntruments gave them the initial appearance of something beneficial while in the end it wrecked them.
Sound familiar? Whether it is simply outright fraud, or breach of fiduciary duty there is no doubt that the public officers who bought into this plan thought that it would be good for them politically because it would be haled as a smart move.
They bought into this program because the investment bankers who sold it to them had knowledge so far superior to the public officials that there was no choice but to rely on the investment banker on the issues of value and risk. Most authorities claim that when that situation arises, a fiduciary relationship arises whether it was intended or not. And when a party has knowledge and skills far superior to the counter-party in a transaction, they have a duty to use those skills and inform the customer accordingly.
The same holds true in mortgage financing. In the last 10 years, underwriters tell me that the number of loan products grew from 4 to 400. The huge array of potential loan products alone made the choice out of the reach of knowledge and experience of most borrowers. Add the complexity of securitization and we were all sitting ducks, relying on the mortgage broker, appraiser, the party originating the loan (who often was confused as being a bank or acting as bank when they were acting as a broker or conduit), the closing agent, the real estate broker, developer, insurance companies (title and property) to assess the value and risks of each transaction. In truth no underwriting was being done because no bank would have approved the loan in most cases.
Investment bankers created a chain of participants to create layers and plausible deniability, in the process, millions of homeowners are losing their homes to companies they never knew existed and thousands of municipalities and local government projects are going broke.
March 5, 2010 NY Times

The Swaps That Swallowed Your Town

By GRETCHEN MORGENSON

AS more details surface about how derivatives helped Greece and perhaps other countries mask their debt loads, let’s not forget that the wonders of these complex products aren’t on display only overseas. Across our very own country, municipalities, school districts, sewer systems and other tax-exempt debt issuers are ensnared in the derivatives mess.

Like the credit default swaps that hid Greece’s obligations, the instruments weighing on our municipalities were brought to us by the creative minds of Wall Street. The rocket scientists crafting the products got backup from swap advisers, a group of conflicted promoters who consulted municipalities and other issuers. Both of these camps peddled swaps as a way for tax-exempt debt issuers to reduce their financing costs.

Now, however, the promised benefits of these swaps have mutated into enormous, and sometimes smothering, expenses. Making matters worse, issuers who want out of the arrangements — swap contracts typically run for 30 years — must pay up in order to escape.

That’s right. Issuers are essentially paying twice for flawed deals that bestowed great riches on the bankers and advisers who sold them. Taxpayers should be outraged, but to be angry you have to be informed — and few taxpayers may even know that the complicated arrangements exist.

Here’s how municipal swaps worked (in theory): Say an issuer needed to raise money and prevailing rates for fixed-rate debt were 5 percent. A swap allowed issuers to reduce the interest rate they paid on their debt to, say, 4.5 percent, while still paying what was effectively a fixed rate.

Nothing wrong with that, right?

Sales presentations for these instruments, no surprise, accentuated the positives in them. “Derivative products are unique in the history of financial innovation,” gushed a pitch from Citigroup in November 2007 about a deal entered into by the Florida Keys Aqueduct Authority. Another selling point: “Swaps have become widely accepted by the rating agencies as an appropriate financial tool.” And, the presentation said, they can be easily unwound (for a fee, of course).

But these arrangements were riddled with risks, as issuers are finding out. The swaps were structured to generate a stream of income to the issuer — like your hometown — that was tethered to a variable interest rate. Variable rates can rise or fall wildly if economic circumstances change. Banks that executed the swaps received fixed payments from the issuers.

The contracts, however, assumed that economic and financial circumstances would be relatively stable and that interest rates used in the deals would stay in a narrow range. The exact opposite occurred: the financial system went into a tailspin two years ago, and rates plummeted. The auction-rate securities market, used by issuers to set their interest payments to bondholders, froze up. As a result, these rates rose.

For municipalities, that meant they were stuck with contracts that forced them to pay out a much higher interest rate than they were receiving in return. Sure, the rate plunge was unforeseen, but it was not an impossibility. And the impact of such a possible decline was rarely highlighted in sales presentations, municipal experts say.

Another aspect to these swaps’ designs made them especially ill-suited for municipal issuers. Almost all tax-exempt debt is structured so that after 10 years, it can be called or retired by the city, school district or highway authority that floated it. But by locking in the swap for 30 years, the municipality or school district is essentially giving up the option to call its debt and issue lower-cost bonds, without penalty, if interest rates have declined.

Imagine a homeowner who has a mortgage allowing her to refinance without a penalty if interest rates drop, as many do. Then she inexplicably agrees to give up that opportunity and not be compensated for doing so. Well, some towns did exactly that when they signed derivatives contracts that locked them in for 30 years.

Then there are the counterparty risks associated with municipal swaps. If the banks in the midst of these deals falter, the municipality is at peril, because getting out of a contract with a failed bank is also costly. For example, closing out swaps in which Lehman Brothers was the counterparty cost various New York State debt issuers $12 million, according to state filings.

Termination fees also kick in when a municipal issuer wants out of its swap agreement. They can be significant.

New York State provides a good example. An Oct. 30, 2009, filing describing its swaps shows that for the most recent fiscal year, April 2008 to March 2009, the state paid $103 million to terminate roughly $2 billion worth of swaps — more than a quarter of which resulted from the Lehman bankruptcy in September 2008.

(You can find this report online at bit.ly/cS8ZFV.)

As of Nov. 30, 2009, New York had $3.74 billion worth of swaps outstanding. Even so, New York doesn’t have as much of a problem with swaps as other jurisdictions. Still, New York could have spent that $103 million on many other things that the state needs.

The prime example, of course, of a swap-imperiled issuer is Jefferson County, Ala. Its swaps were supposed to lower the county’s costs, but instead they wound up increasing its indebtedness. Groaning under a $3 billion debt load, the county is facing the possibility of bankruptcy.

Critics of swaps hope that increased taxpayer awareness of these souring deals will force municipalities to think twice. “When municipalities enter into these swaps they end up paying more and receiving much less,” said Andy Kalotay, an expert in fixed income.

Why is that? One reason, Mr. Kalotay said, is the use of swap advisers.

“The basic problem is the swap adviser gets paid only if there is a transaction — an unbelievable conflict of interest,” he said. “It’s the adviser who is supposed to protect you, but the swap adviser has a vested interest in seeing something happen.”

WHAT is especially maddening to many in the municipal securities market is that issuers are now relying on the same investment banks that put them into swaps-embedded debt to restructure their obligations. According to those who travel this world, issuers are afraid to upset their relationships with their bankers and are not holding them accountable for placing them in these costly trades.

“We need transparency where Wall Street discloses not only the risks but also calculates the potential costs associated with those risks,” said Joseph Fichera, chief executive at Saber Partners, an advisory firm. “If you just ask issuers to disclose, even in a footnote, the maximum possible loss or gain from the swap they probably wouldn’t do it. And if they did that, then investors and taxpayers would know what the risks are, in plain English.”

Mr. Fichera is right. At this intersection of two huge and extremely opaque arenas — the municipal debt market and derivatives trading — sunlight is sorely needed.

Filed under: bubble, CDO, CORRUPTION, currency, Eviction, foreclosure, GTC | Honor, Investor, Mortgage, securities fraud | Tagged: , , , , , , , , , , , | 4 Comments »

Foreclosure Defense: Fraudulent Appraisals, Teaser Rates, and Manufactured Defaults: Boons to Borrowers in Defending Foreclosure

Posted on June 11, 2008 by Neil Garfield
Fraudulent Appraisals, Teaser Rates, and Manufactured Defaults: Boons to Borrowers in Defending Foreclosure
As more and more lender misconduct hits the Internet airwaves and more of us continue our investigation into and scrutiny of the practices of originating lenders and their downline successors, certain themes are developing which give rise to numerous defenses to mortgage foreclosure actions. Three such issues are discussed here which are not mutually exclusive; which are “inextricably intertwined”; and which, when properly presented, may force a foreclosing party to bring additional parties into a foreclosure action, each of which is not only a potential additional “settlement pot” for the borrower’s claims, but also, on playing the “blame game”, can provide the borrower with free information to bolster the borrower’s claim as well.
The first is the fraudulent appraisal, particularly in foreclosure actions involving equity lines of credit (also called home equity lines of credit or “HELOC”s) and refinance transactions where “cash out” is provided to the borrower. It goes without saying that a mortgage loan of any type depends in material part on the outcome of the appraisal of the property, which directly affects the loan-to-value (“LTV”) which percentage is used to calculate the maximum amount of money which can be disbursed as a “cash out” on a refinance, or amount of credit line which is extended on a HELOC. Given the literature concerning the tremendous pressure by the investment bankers to get mortgage loans signed up so that they could be sold to an aggregator and then bundled and used to “back” a “mortgage-backed” security, it was incumbent upon the appraiser to make sure that the appraised value of the property came in at the right number to close the loan, whether the appraisal was accurate or not. What is being learned is that a great many of these appraisals were inaccurate, misleading, or outright false and based not on true “comparable sales” as required for a proper appraisal.
The second is the so-called “teaser rate” in Adjustable Rate Mortgage (ARM) loans. Literally hundreds of thousands of these loans, made to borrowers with unproven, dubious, little, or no income, “teased” or lured the borrower in with a promise from the mortgage broker or “lender” that the interest rate on the loan would be small for the first couple of years before it would go up, but with the attitude that “Hey, don’t worry, your property keeps going up in value, so by the time the new rate kicks in, you will have more equity and you can just do another ARM for a low rate”. What the mortgage broker and lender knew, however (but which was not disclosed to the borrower) was that the loan was only qualified for the borrower, in view of the borrower’s unproven, dubious, little, or no income, on the “teaser” interest rate, with the “lender” knowing that the borrower, once the “new” rate kicked in, DID NOT AND COULD NOT qualify for the loan and would not be able to make the increased mortgage payment based on the borrower’s income. As such, a default was built into the loan from the outset. But hey, no matter, as the originating “lender” had no intention of keeping the loan anyway, that would be someone else’s problem later on and down the line.
Which brings us to the effects of the manufactured default. Teaser rate loans to borrowers with unproven, dubious, little, or no income were doomed from the start. The originating lender knew or had to know that a default upon instance of the new and higher interest rate on the loan was almost inevitable, but hey again (to my friend purchasing these loans), YOU CAN FORECLOSE ON THE PROPERTY, SO YOU ARE PROTECTED!  This line had to have been repeated down the line at least through the first few layers of resale of the loans before bundling and being used as alleged “backing” for a “mortgage backed security”, when it really didn’t matter anymore except to those who now seek to foreclose on something they may not really even legally own or have rights to, and is probably not worth what the lender said it was worth.
So now, as a hypothetical (based on existing facts from certain pending cases), mortgage broker sucks in low-income borrower to take a cash-out refi on his house on a 2-year ARM with a low initial interest rate. Mortgage broker convinces borrower that Bank A has the best deal for borrower and that loan WILL be approved shortly despite no proof of borrower’s income, or on whatever income figure borrower claims (also known in mortgage parlance as “stated” income). Mortgage broker and Bank A make sure that appraiser inputs the “right” value for property on the appraisal so that the proper LTV is met to make the loan work even if true comps are not available. Bank A makes loan and immediately sells off mortgage to aggregator who in turn sells it off to investment banker in bundles for mortgage-backed-securities purposes. Bank A sells off right to “service” the loan to Servicing Agent, which collects payments from borrower, who defaults when teaser rate expires. Although there are numerous legal issues in this process, the focus here is on the interplay of the effect of the fraudulent appraisal, teaser rate, and manufactured default as they relate to assisting the borrower defending a foreclosure.
Servicing Agent now sues borrower for foreclosure claiming default in payment. Borrower defends against the Servicing Agent (as the purported “lender”) and asserts claims against Servicing Agent for lender liability, violation of lending laws, and other remedies. Servicing Agent claims “not me”, then looks to see who it can blame for borrower’s claims, and is thus forced to bring in Bank A, appraiser, and mortgage broker, who are each going to cry “not me” as well and start pointing fingers. The beauty of this is that the Servicing Agent has now provided the borrower with several other parties to seek relief from and has also provided the claims to be asserted against these additional parties. Further, one or more of these new parties may agree to “cooperate” with the borrower by disclosing the truth in exchange for a quick settlement either directly or through their professional liability insurance carriers rather than risk the potential of an adverse Final Court Judgment being entered against them and/or a professional license suspension or revocation, or loss of professional liability insurance coverage.
Given the enormity of the resale/aggregation/bundling/securitizing of mortgage loans and the myriad legal issues involved in the broad scheme of these transactions, a borrower threatened with foreclosure should never be shy to seek an opinion as to their potential defenses from an attorney who has a working knowledge of the pertinent concepts and how they operate in synergy to the benefit of the borrower. The investment in obtaining such an opinion could literally save the roof over the head of you (the borrower) and your family.
Jeff Barnes, Esq.

Filed under: CDO, Eviction, foreclosure, GTC | Honor, Mortgage | Tagged: , , , , , , , , , , , | Leave a comment »

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