If you don’t challenge the smoke and mirrors the smoke becomes law and the mirrors become an inescapable nightmare.

Bottom Line: Failure to attack the facial validity of the documents is virtually hanging the homeowner letting him/her twist in the wind. Without such a relentless attack based upon scrutiny of the exact wording on documents revealing that nobody is actually identified as a real party in interest, you will be trapped by an endless cascade of legal presumptions against the homeowner.

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Let us help you plan for trial and draft your foreclosure defense strategy, discovery requests and defense narrative: 202-838-6345. Ask for a Consult or check us out on www.lendinglies.com. Order a PDR BASIC to have us review and comment on your notice of TILA Rescission or similar document.
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THIS ARTICLE IS NOT A LEGAL OPINION UPON WHICH YOU CAN RELY IN ANY INDIVIDUAL CASE. HIRE A LAWYER.
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In response to an email from a fellow attorney asking me about bankruptcy (BKR), the statute of limitations (SOL) adn renewing the debt after BKR discharge or renewing the payment by acknowledging it after BKR, I wrote the following.

  1. If the loan was scheduled as secured in favor of a particular creditor it is probably incorrect. If the loan was subject to a valid encumbrance at all, it almost certainly was not in favor of the current claimant, who has not purchased the debt and therefore no debt was transferred in fact despite paperwork appearing to state the contrary. Nor has the current claimant obtained authorization from the real owner of the debt as agent or representative.
  2. SOL: You are right but courts got tricky with this and they rule, like in Florida, that the statute ran out only on payments that were due and that there is a presumption of deceleration at some point. Check NY law. Florida is changing back to the old rule slowly which supports your view.
  3. Any payment on a debt can restart the statute running. Check Federal BKR law and NY Law. Payment while in BKR presents problems if not done with court approval.
  4. Under “modification” there are several problems. First every such modification is in actuality the transfer of the debt from an old pretender to a new pretender (servicer). In most respects it is a new loan agreement entirely, probably subject to TILA disclosure requirements because the old chain of title is being abandoned and a new one is being started — all without any reference to or formal grant of authority from the actual owner of the debt.  Payments under such a “modification” agreements are not really payments on the debt because the payment is neither going to the owner of the debt nor anyone formally authorized by the owner of the debt. Such payments could be construed as a new and probably unenforceable obligation.
  5. Acknowledgment by borrower of the debt owed to Pretender A directed to Pretender B is not acknowledgment of the debt if neither of them was the owner of the debt or an authorized representative or agent of the owner of the debt. But unless you attack the facial validity of the instruments, the law of the case will slide toward treating both pretenders as real. Once final that becomes irreversible.
  6. BKR discharge operates by law and not individual action. See BKR law and procedure. A promise to pay AFTER discharge might subject both the pretender creditor and the borrower to sanctions.
  7. An unconditional promise is just that and it is enforceable if supported by consideration. But there is no consideration.
  8. At a minimum there should be disclosure to the court and possibly seek court approval for agreements signed. But if you do that you are again creating law of the case that essentially requires treatment of the pretenders as real parties.

SIGTARP HAMP FINDINGS: SERVICERS REVOKING COMPLIANT HAMP PLANS

Why are modifications being undermined when they would so obviously preserve the value of the “loan?” The answer is because the real party in interest in the foreclosures is the servicer, not the trust, which doesn’t own the loan anyway, nor even the investor/beneficiaries, who reap very little out of the proceeds of foreclosure.

The servicer wants the loan to fail. The investor expects the servicer and trustee of the REMIC trust to make sure value is preserved. But that isn’t the game. If the property goes to foreclosure sale then the “servicer” can make its claim for “recovery” of “servicer advances.” The fact that “servicer advances” are made from a pool of funds established by investor money and the fact that the servicer accesses these funds to make payments, regardless of whether the borrower pays or not — all of that makes no difference in the game.

In that context a modified loan is worthless. A failed loan is the gold standard.

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HAMP Modifications Sabotaged to Fail by the Usual Suspects

By William Hudson

https://www.sigtarp.gov/Audit%20Reports/Homeowners_Wrongfully_Terminated_Out_of_HAMP.pdf

On January 27, 2016 The Special Inspector General over the Troubled Asset Relief Program (SIGTARP) released data on the poorly executed and enforced Home Affordable Mortgage Program (“HAMP”) that shows that the banks not only have the right to modify loans they don’t own, but have no interest in helping homeowners save their homes through modification when they can set the homeowner up to fail.

HAMP was created to provide sustainable and affordable mortgage assistance to homeowners at risk of foreclosure but has instead forced many homeowners into foreclosure by requiring homeowners to miss payments, revoking approved modifications and a slew of other unethical practices.

The Inspector General writes that, “mortgage servicers administering HAMP will continue to need strict oversight in upcoming years because apparently the servicers are unable to implement and properly administer the program without resorting to sabotaging compliant homeowners.”

The audit notes that  the “largest seven mortgage servicers in HAMP over the most recent four quarters show disturbing and what should be unacceptable results, as 6 of 7 of the mortgage servicers had wrongfully terminated homeowners who were in “good standing”  with their HAMP modifications.”

These failure rates demonstrate that servicer misconduct is continuing to contribute to homeowners falling out of HAMP by terminating the agreement when homeowners are making timely payments.  This practice is an obvious attempt to put homeowners at risk of losing their home so that when the foreclosure occurs, the servicer can swoop in and steal the home while keeping all of the homeowner’s equity, payments and improvements.

This study provides further documentation that homeowners are being forced out of the HAMP program for no reason and that servicers are using HAMP as another tool to steal homes.  If the servicer can keep the homeowner in a state of vulnerability, create further arrearages and provide the homeowner contradictory and confusing information- their chances of taking back the home increase exponentially. This is the modification business model of the major loan servicers.

The servicers are running the show and the government is apparently impotent to stop them from their illegal tactics. The treasury admits that they have no idea how many other homeowners were forced out of HAMP.  I can attest that I was one of the homeowners forced out of a loan modification in which I was 100% compliant. For a year I repeatedly applied for modifications, sending in documentation and spending hours and hours going through CitiMortgage’s futile application process.  Either CitiMortgage representatives are completely incompetent or their modification process is intentionally set-up to create such a diabolical application process that most borrowers give up.

Thirteen applications later and a year later I was granted an “approved repayment plan” that required three timely payments before becoming permanent.  If all three payments were made  by the first of each month I would be given a permanent modification with no need for further qualification.  After making the third timely payment by certified mail I didn’t hear back from CitiMortgage. By then I was familiar with their lack of competence and accountability so I continued to make payments hoping I would hear from them any day.

When I received the “approved repayment plan” I celebrated thinking that I was finally free from seven years of servicer torment.  The modification would allow me to immediately sell the home in which I had several buyers- and make Citi 100% whole including being paid over 15k in fees they had assessed.  At the time I received the loan modification I had over 100k in equity.  I would have paid CitiMortgage any amount they claimed I owed to be free of their tyrannical servicing practices.

Not trusting CitiMortgage to honor their word- I called CitiMortgage and once again confirmed that “approved” meant “approved” and that I could prepare the home for sale. The CitiMortgage agent promised me that as long as all three payments were made it was a done deal.  I didn’t want any surprises down the road if they changed their minds.  The home needed some updating prior to being placed on the market so I took 35k from my retirement account and went to work renovating the home top to bottom.  By the time my third payment was made I had a beautifully restored home and two anxious buyers for the property.  I was close to grasping the golden ring…..until CitiMortgage grasped the ring right out of my hands.

When I didn’t hear from Citimortgage I continued to make the modification payments for three more months while waiting to hear from them about the new loan terms. Unbeknownst to me the modification payments I had made were not being applied to my loan but placed in a suspense account while CitiMortgage was continuing to add on late payments and other delinquent fees.  I had not agreed to this arrangement but was powerless to complain.

I finally received a letter from CitiMortgage stating my check (my fifth payment) was being returned to me with no reason provided. I knew CitiMortgage was up to something, so I checked the internet to discover that CitiMortgage was dual-tracking me and had filed to foreclose on me while compliant with the modification plan. To add further injury,  I received two more offers from CitiMortgage that week offering to modify my loan! CitiMortgage did not want full payment- they wanted my house and the financial windfall that follows a successful foreclosure.

It has now been six years and the house has sat vacant since Citi revoked my modification.  All the work I did has been reversed by humidity and vacancy.  I no longer have any equity in the property.  I sued CitiMortgage over this egregious bait and switch scheme and even provided evidence to the court that I was granted an “approved repayment plan” with no contingencies.  The judge in my case, with 20 percent of his retirement in CitiMortgage, did not recuse himself but instead threw out my entire complaint and provided no reason for his decision.  Not only did CitiMortgage get away with this fraud, the corrupt judge dismissed my case on summary judgement stating there was no controversy.  Even when you have irrefutable evidence of fraud- if you have a biased and unethical judge you will not prevail.   I reported my experience to SigTarp, the CFPB, FCC and the Office of the Comptroller- and not one agency bothered to respond to my complaint or sanction CitiMortgage for this blatant contract violation.  I requested that CitiMortgage return the modification payments they fraudulently extorted from me- and of course they refused.

My situation appears to be the norm, not the exception.  SigTarp reported that one out of every three homeowners in HAMP re-defaults on their payments. They suggest that the Treasury, “research and analyze whether, and to what extent, the conduct of HAMP mortgage servicers contributed to homeowners redefaulting on HAMP permanent mortgage modifications.”  I can tell them from experience that examining the behaviors and motivations of the servicers would be a great place to start. I can almost guarantee in most modification cases that it isn’t the homeowner who defaults.  In the first place, a homeowner who prevails in obtaining a loan modification may work diligently for years before being granted a modification and persevere against great odds! I would estimate I spent around 45 hours on the phone, faxing and following up with CitiMortgage before receiving my modification.  In fact, dealing with CitiMortgage became my occupation.  The homeowner who receives a modification, in most cases, has fought a long and hard battle for the modification and has no idea that the bank can refuse to honor the agreement.

To get the true story about what is going on, the Treasury could begin by sending out questionnaires to prior homeowners in HAMP that were compliant when their modifications were revoked for no other reason than the servicer wanting to take another stab at stealing the home.  SIGTARP’s concerns over servicer misconduct contributing to homeowner redefaults in HAMP was revealed through the Treasury’s on-site visits to the largest seven mortgage servicers in HAMP over the last year and apparently reveal disturbing and unacceptable results, finding that 6 of 7 of the mortgage servicers had wrongfully terminated homeowners who were in “good standing”.

It doesn’t take a rocket scientist to assume that servicers are up to their same old tricks and forcing compliant homeowners out of HAMP.  Servicers have no incentive to not unjustly enrich themselves at the expense of the homeowner when a successful foreclosure is more lucrative than modifying a mortgage.  The usual six non-compliant culprits are named in the report:

WRONGFUL TERMINATIONS OF HOMEOWNERS FROM HAMP BY SERVICERS:

Q4 2014 TO Q3 2015    

Servicer                                       Wrongful Termination of Homeowner  From HAMP

Bank of America, N.A.                                        X

CitiMortgage Inc                                                  X

JPMorgan Chase Bank, N.A.                              X

Nationstar Mortgage LLC                                    X

Ocwen Loan Servicing, LLC                               X

Select Portfolio Servicing, Inc.

Wells Fargo Bank, N.A.                                       X

According to SIGTARP, homeowners who make their modified mortgage payments on time, or who do not fall three months behind on those payments are entitled to remain in HAMP. However, the Treasury’s results found that, within the last year, Bank of America,CitiMortgage, JP Morgan Chase, Nationstar, Ocwen and Wells Fargo all claimed that homeowners had redefaulted out of HAMP by missing three payments when, in reality, they had not.

These six mortgage servicers account for 74% of non-GSE HAMP modifications funded by TARP since the start of the program. Upon further reading, and despite the fact that the Treasury has done nothing to stop this misconduct, the servicers are engaging in a process of holding the homeowner’s payments in suspense accounts (so they can continue accruing late fees and other delinquent charges), reversing and reapplying the homeowner’s payments improperly and terminating homeowners who have not defaulted on the required three payments.

This misconduct is also probably much larger in scale than it appears because the Treasury only samples 100 redefaulted homeowners per servicer each quarter.  It is possible that the number of homeowners impacted is much, much larger.  This has been going on since the inception of the program and the Treasury’s response over time has been anemic and unresponsive.  The servicers appear to have an understanding that if they don’t comply there is no consequence other than a little bad publicity (as if a little more bad publicity would impact them at this point).

The potential profit of a fraudulent foreclosure is incentive enough to kick compliant homeowners out of the HAMP program. It should be known that many of the servicers making offers to modify do not have legal standing to make an offer to modify the loan in the first place and are simply engaging in a process to get the homeowner further into default.

In my particular case, all I wanted was to modify my mortgage, sell my home, and go forward with my life.  CitiMortgage did NOT want payment- they WANTED the HOME and used modification as a tool to  obtain this goal.  A modification is nothing short of a tool of deception used by servicers to steal a home.  Servicers use modification for these purposes:

1.  Intimidate the unsophisticated or vulnerable Homeowner- Create Fear and Confusion by processes of circular phone transfers, lost documents, false claims, conflicting messages and blatant lies.

2. Time Destruction- Time spent in modification compromises other available options like refinancing, a short sale or hiring an attorney.  A consumer’s options diminish as time goes by. It is to the bank’s benefit to not modify the loan but to paint the homeowner into a corner.

3. Equity Erosion- Every month while in a modification the equity in the home is eroded by late fees and other charges the consumer is not advised about in advance.

4. Payment Hostage- The servicer retains the monthly modification payment in a suspense account.  These funds then cannot be used for a more beneficial purpose like retaining an attorney or refinancing. The consumer is not told that the payment will not be applied to their mortgage or if the modification fails that the payments will not be returned.

5. Dual-Tracking- A homeowner in the process of modifying their mortgage or who has an approved modification may be subsequently foreclosed upon in violation of law.

6. Government Kickbacks- Servicers who engage in the modification process receive compensation for each modification attempt and successful modification.  Servicers are accepting government payments (from tax payers) only to sabotage modifications.

The time has come for a full investigation into the behavior of loan servicers.  Not only do servicers make offers to modify loans they have no legal right to modify, but they engage in fraudulent practices that are not in the best interest of the homeowner, investor or community.  This article won’t get into the fact that servicers lie about their relationship to the loan, the balance owed and need to be heavily fined and sanctioned for forging documents, filing false affidavits and other criminal acts.  The bottom line is that a servicer is incentivized to lie, to cheat and to steal by a lack of governmental oversight and by the  potential windfall of profits that occur upon a successful foreclosure (including insurance, “servicer advances” and other compensation).  The bank has bet your mortgage will fail, and you can bet they will resort to every trick in the book to take your home including the use of faux modifications.

It is ironic that two months ago I received a letter from CitiMortgage offering to modify again.  This is despite the fact that the note and mortgage were rescinded under TILA.  I’m not sure what CitiMortgage thinks they are going to modify now that the note and mortgage are void by operation of law- but why would I expect rogue servicer CitiMortgage to comply with any state or federal law?

Advice: Your servicer is not your friend and will act only in their best interest.

I have attached copies of my “approved repayment plan” as evidence of the modification agreement.

If you would like to share your modification story with us please email us at: lendingliesconsulting@gmail.com.  We would like to hear about your experiences.

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Repayment Plan One cleanRepayment Plan Two clean

Will Florida’s Supreme Court protect the Homeowner or Bank?

Florida Supreme Court to rule on the Five Year Statute of Limitations

by William Hudson

In Florida, a five-year statute of limitations rule may prevent banks from being able to foreclose despite ongoing litigation.  As a result of this rule, mortgage servicers are actively attempting to preserve their right to foreclose pending the Florida Supreme Court Decision.  The Florida Supreme Court is reviewing the case, U.S. Bank v. Bartram, and will decide if servicers can restart foreclosures after five years, or if they will be barred by the Florida statute of limitations. The key question in Bartram is: When does the clock start ticking to sue to foreclose on a mortgage?  Mortgage servicers are prepared that they may not be able to collect on accounts where the homeowner has not made a payment for over five years and will be barred from pursuing foreclosure or other debt collection activity.

The Supreme Court will also determine if servicers can restart the clock.  If they are prevented from pursuing the outstanding debt, it is possible that banks will start making earnest attempts to modify loans by lowering the monthly payment or attempt to get the borrower to short-sale the property.  However, the real issue is that these homeowners will be able to live mortgage free in their homes indefinitely.  The banks had an opportunity to modify mortgages in good faith and failed to do so.  If the Florida Supreme Court upholds the five-year statute of limitations on debt collection it is probable that other states will institute the same consumer protection.

Moody’s Investor Service stated that, “The court ruling will have only a minor impact on overall RMBS performance because the number of previously dismissed foreclosure actions that are seriously delinquent or in foreclosure is minimal,” the report said. “Only approximately 3% of private label loans backed by properties in Florida had a prior foreclosure dismissed and are greater than 60 days delinquent or in foreclosure.”  Moody’s brought up the fact that only 3% of private label loans had a prior foreclosure dismissed, when the real question should be how many GSE (Government Sponsored Enterprise) loans guaranteed by Fannie Mae or Freddie Mac are near or beyond the five year statute of limitations?  The GSE loans have a higher portion of subprime loans on their books.  As usual, we hear only part of the true story.

Does the clock start ticking with the bank’s acceleration and pursuit of foreclosure, and end after five years, as the law had been in Florida prior to the Fifth DCA’s Bartram decision? In almost every other state in the country that has a mortgage foreclosure statute of limitations the clock starts ticking when the loan is accelerated leaving the bank only five years to take action.  The Bantram case will clarify if a lender can restart the clock by simply declaring a new default date- even if the statute of limitations is past the lenders original acceleration date of the loan.

Statute of limitation timelines are generally straightforward. In personal injury or fraud the right to sue expires after four years in Florida (check your state’s statutes). In written contracts, the law in Florida states the statute of limitations is five years and this includes the collection of rental payments and mortgages.  Every plaintiff knows if you fail to take action, you are out of luck if you fail to file a claim prior to the statute of limitations running out.  However, in the eyes of the Florida judiciary,  the law is not the law when it comes to mortgage claims.  As we have seen in foreclosure litigation, mortgage forgery is labeled “robosigning”, while a bank’s criminal trespass into an occupied home is called a “civil” matter.  When it comes to matters of foreclosure there is a tendency to make presumptions in favor of the bank- let’s hope the Supreme Court rules according to law.

According to Florida law, when the borrower defaults, the lender accelerates the debt and then files to foreclose.  If the Supreme Court rules for the lenders, Florida would be the only state permitting a judicial exception to the statute of limitations for mortgages. It is inevitable that this decision would unleash an explosion of litigation against homeowners in default while also inspiring banks to abandon their offers to modify mortgage loans.  The end result would be chaos for the Florida housing market.

The Bartram case is from the resulting fallout from the fraudulent robosigning (forgery) practices of the Law Offices of David J. Stern that began May 16, 2006, when U.S. Bank filed a mortgage foreclosure action against Lewis Bartram of Ponte Vedra Beach through their counsel David J. Stern. On May 4, 2011, nearly five years after the original suit, U.S. Bank missed a conference and the court dismissed the foreclosure.

In March 2011 Bartram’s ex-wife instituted a series of cross-claims against U.S. Bank and Bartram.  Eventually in July 2012, the trial court entered summary judgment in Bartram’s favor because the five-year statute of limitations had expired. The bank appealed and in 2014 the Fifth District ruled in favor of the bank concluding that a new five-year clock starts to tick with each mortgage payment that is missed. However, the Fifth District ignored the fact that there are no more mortgage payments due once a lender elects to accelerate the mortgage, as was the case in Bartram.

Acceleration is the key to understanding how a mortgage foreclosure action is supposed to work.  The Fifth District showed their bias in favor of the banks and should have ruled in favor of Bartram.  Standard mortgage contracts typically carry an acceleration clause that gives the lender two options in the event that a borrower defaults: 1) sue for missed payments or 2) call the entire loan due immediately.  As we know, the banks prefer to accelerate the debt so that they can auction the property. However, acceleration requires that the lender has five years from the debt acceleration to take legal action.

The Florida Fifth District effectively ruled in Bartram that a lender could restart the clock any time they wanted.  Interestingly, the mortgage contract doesn’t permit such an action by a lender.  It is noteworthy that apparently res judicata does not apply and that the Fifth District found that each missed payment creates a new cause of action, thereby permitting a lender to sue again and again and literally make a homeowner’s life a living hell- indefinitely if desired.

The Fifth District’s erroneous interpretation of the mortgage foreclosure statute of limitations is yet another attempt to legislate from the bench. It is the judge’s job to enforce the rules of the legislature.  If the Supreme Court upholds the Fifth District’s ruling, the Florida legislature will need to remove the mortgage foreclosure statute of limitation from the Florida Statutes because it will no longer be relevant.  Maybe they could do away with all statutes that protect homeowners while they are at it- because apparently that is what the judges’ would do if they weren’t constrained by an annoying legislative branch.

 

Getting Your Goals Set on the Right Conclusions

For further information please call 954-495-9867 or 520-405-1688.

This for general information only and NOT an opinion on your case.
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I was responding to a client about the goals in opposing the wrongful foreclosures. These are hard to write or say. It might seem to be a contradiction in terms to walk away with a waiver of deficiency or some other “Settlement” or “Modification” with a party whom you know (but may not be able to prove) is false party with fake papers.

You might believe there might be as much as $50,000 in equity if and when repairs are made. My concern is that we don’t get pulled into reverse logic here. If the house is barely break-even without the repairs, then it could be wise to pursue short-sale or modification.  The real question is how much will it really cost to make the required repairs and where would you get the money from?

This is where most lay people put the cart before the horse. Equity in the home is not a matter for speculation, nor should it be calculated from a starting point of “after repairs.”

If you are looking for the pretenders to pay you damages sufficient to pay for the repairs and for them to give up on the foreclosure, it would be a mistake to assume that is going to happen without full scale litigation for wrongful foreclosure seeking money damages. That would require a lot of money in fees, costs and other expenses. You should determine whether  you have any appetite for that.

If you did have the money for repairs, then it would seem that you would have made the repairs and then sold the house, taking your equity and paying off whoever is claiming to own the loan, even if they don’t. If you don’t have the repair money, that leaves the only source of money to fix the house as the parties who wish to foreclose on it.

I have never seen them  agree to anything like that for one simple reason: They are not interested in either the house or the money. They want a foreclosure judgment and sale — that is the only path that will give them some protection against accusations of stolen money and stolen homes.

 

Since the goal of your opposition is NOT to break-even or minimize damages on the loan itself, and since their real goal is more closely related to off-record transactions in which your loan was sold multiple times, they obviously are not going to make it easier for you to save the home, save the equity, and especially [not] save the loan. They want the loan to fail not succeed. They want the foreclosure sale.

 

Now the anger and frustration nationwide with all forms of institutions flows in large part from the simple fact that we all know that the banks committed serious fraud and other illegal acts in creating these loans. We all know that there was nothing but pretense and presumption in transferring these loans and steering loans to foreclosure — rather than a workout where the original loan investments were protected, and of course foreclosure with fabricated, forged, back-dated documentation that included notes and sometimes mortgages — even if they were rescinded.

“We all know” is insufficient to prove a case or a defense. The courts have added to the problem by restricting discovery, restricting evidence on the basis that the off-record transactions (even in discovery) are irrelevant, that the money trail for the subject loan is irrelevant, and then entering orders and judgments consistent with the conclusion that might be stated as follows: “Judgment is entered in favor of the one with the most paper even if the paper does not speak the truth.”

 

My tentative conclusion, if all of my presumptions are correct, is that in situations where this analysis is relevant, on an individual basis, as a life decision, the only real goal might be to walk away without a deficiency judgment and leave it at that. Any other course of action in litigation will lead to a judgment in the trial court that statistically speaking is going to be against the homeowner, leaving the issues to be decided on appeal. That is process that will likely take at least one year and probably 2 years to complete.
From my perch of course I want all notes and mortgages to be contested if there are any claims of securitization or sale. And the proof of concept is already established — those who truly litigate all the way down to trial, have a much better chance to see a much better result than those who simply walk away. But that costs money, time and energy. And that is why I often tell lawyers and homeowners that the only right decision is what the homeowner decides to do and is willing to pay for.

LOAN MODIFICATIONS

Modifications are like a dirty word in the marketplace. Frustration, chicanery, luring borrowers into default, and crating modifications that are bound to fail so that the banks can get that ever precious foreclosure sale. But there is another side to it, as our guest writer David Abellard points out below.

And while I think the entire mortgage foreclosure thing is a complete sham, it is nonetheless true that homeowners want a a modification far more often than just getting a “free home.” Most of us understand that litigation is about preventing the banks from getting a “free home” — which is to say not just any home, but the home that a family resides in.

Litigation also provides the homeowner with presenting a credible threat, especially if they are after discovery on the money trail. So it is impossible to say how much litigation is necessary to get the best terms, or even if the homeowner SHOULD litigate, because much of that has more to do with personal decisions than the likelihood of success in litigation.

There is also a point I want to make to people who are not sophisticated in finance. An interest rate that is far under market rates IS the equivalent of a principal reduction. If you want to learn more about this, Google “present value” and “future value.” If you stay in the home for the duration of the loan, the impact gets larger and larger. But if you are staying in the home for only a short while then reducing the interest rate won’t do much without an actual principal reduction. As pointed out in prior broadcasts and articles here on livinglies, make sure whoever you are talking to about modification, short-sale or any other settlement is aware of two things:

  1. There are hidden programs throughout the country that provide direct financial assistance to those who want to bring their loan current or who need a reduction in principal. The “expert” you are hiring had better know about them or you might turn down a deal that would otherwise be acceptable.
  2. Get a court order approving the modification as a settlement. Submit an agreed order that expressly refers tot he legal description of the property, the fact that the homeowner is the owner in fee simple absolute — by name — and that the holder of the mortgage and note is identified by name. The order should approve the settlement even if the the settlement agreement is confidential and even if the settlement agreement is not attached to the order.
  3. Snatch and Grab: Many of the banks are still secretly scripting their customer service people to lure you into a default with the promise of a modification, even accepting trial payments, and then foreclosing anyway. The courts are not amused and they are getting banged by this practice — but only where the homeowner brings it up loudly.
  4. People ask me “should I stop paying?” The answer is universally that you don’t want to put yourself in a worse position than the one in which you are already stuck. Voluntary nonpayment is only for those who are pursuing strategies based upon strategic default. If the bank tells you to fall behind by 90 days, don’t believe it — it’s a trap. At best they are trying to steer you into an in house modification where the interest rates and payments are higher than in HAMP, HARP or other programs that do NOT require you to be i default for modification, no matter what anyone tells you.

But modifying the mortgage is a legitimate way of ending your problem as long as you take the necessary steps to protect your title. Thus I am inviting people to write in about modification. David Abellard sketches the modification process below:

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Loan Modification Information

Most homeowners have lost faith in loan modifications. Lenders have been alleged to routinely used the process to trick unsuspected homeowners into agreeing to consent judgment in pending foreclosure cases. The skepticism of some is understandable. However, the foreclosure landscape has shifted a bit in favor of the homeowners. The new Consumer Financial Protection Bureau recently promulgated rules that make loan modification more effective.

Lenders and their servicers could face serious penalty for not complying with the federal regulations that went into effect January 10, 2014. If a loan is modified, the new payment will be based on the household income; which is generally 31% of the household monthly gross income. Loans on a primary residence as well as non-owner residence can be modified.  There are several loan modification programs. The Home Affordable Modification Program (“HAMP”) is a government  program that has been extended until 12/31/15.  If a homeowner does not qualify for HAMP, or the investor doesn’t participate in the HAMP program, banks and servicers also offer internal private modification programs as an alternative.  Loan modifications are primarily designed to create an affordable payment plan for the homeowner based on their current income; it does not create equity by reducing the principle balance of a loan based on current property value.

There are mainly three ways a loan can be modified to create an affordable payment:
1) reduction of interest rate;
2) extension of loan term;
3) waiver or deferment of principle balance.

Regardless of what someone may tell you, applying for a loan modification does not guarantee that you will receive one, nor can anyone guarantee specific results.
Normally, the homeowner will have to complete a trial period which usually last 3 months before the modification becomes final.  Applying for a loan modification under certain circumstances may stop the court from entering a final judgment or selling the property while the modification application is being reviewed.  The application process can be daunting and intimidating. There are some law firms which concentrate on loan modification. They can become a very effective interface between the lender and the borrower and facilitate the process.

David Abellard at The Law Office of Paul A. Krasker, P.A.
Office: 561.328.2268,  or 877-332-1965 ext 194
Email: dabellard@kraskerlaw.com,

 

Modifications Up, Foreclosures Down, Scams Up

Thanks to all who inquired about my health. I am fine. Just busy with cases getting ready for trial.

Recent trends show a number of things. First, more actual judgments are being rendered in favor of borrowers. Sometimes, it is procedural, like the statute of limitations that limits actions to 5 years in Florida. But most times, it is simply that the Plaintiff or forecloser could not make its case. They produce professional witnesses who know nothing, were previously employed outside of the industry and are basically being thrown under the bus by the banks who already know they will lose if the homeowner’s attorney is an experienced trial attorney.

Recent laws and local rules are getting more and more judges applying laws and rules that require the forecloser to have their ducks in a row. The answer is that they have no ducks, so they can’t get them in a row or any other configuration. They are strangers to the transaction with the homeowner. And there is a growing awareness that homeowners are not seeking a free house but a true lender or creditor with whom they can engage in meaningful discussions. But the banks are still successful in insulating the real parties in interest from any contact with each other or even any knowledge of who the other party is or where they can be contacted.

As one Judge told me recently, he has come to realize that clearing his docket is easier than he thought. Just require the a party seeking foreclosure to prove that they or the predecessor actually made a loan to the homeowner. Add to that a comprehensible chain of documentation that tracks actual transactions, and you end up with nearly zero foreclosures. This is especially true where the foreclosing party has failed to allege the existence of a loan and instead has alleged only that paperwork was signed. Judges who continue to “infer” that the loan was made are skipping a basic premise of pleading. Either it happened or it didn’t. The use of inference requires the homeowner to state an affirmative defense and prove it when he should only be required to deny that allegation. Motions to dismiss based on that premise are starting to be granted.

So it is no wonder that I am getting daily calls from previously intractable parties seeking foreclosure pursuing a global settlement. They want it “Global” because they know we will pursue damages for slander and wrongful foreclosure. They also want “settlement” because they know they can’t win in court. But it remains true that where the client comes to a lawyer after judgment has been entered or after the sale, the road remains rough and unpaved. And the fact remains that if they can’t make case for foreclosure they don’t have the authority to settle or modify the loan. But that can be bridged if the Judge approves the settlement in words that prevent anyone else from making a claim, and if a Guarantee of Title is issued by the title company. (Different from the normal owner’s policy).

Modifications are being offered with increasing sincerity as lawyers start balking at filing documents that they know or believe were fabricated and forged. The recent tribulations of David Stern and Marshall Watson sounds a warning bell to all firms “processing” foreclosures that they might face disbarment or worse.

But wherever there is desperation and fear and vulnerability, the scam artists come out of the woodwork spouting phrases, laws and rules they know nothing about and promising to end the ordeal of the investor who bought homes during the mortgage meltdown or the homeowner who bought or refinanced homes during that period. Some of them use the word “asset protection” which is in reality a highly complex world in which navigation is extremely challenging. The bottom line is that if the person is not a licensed professional with some obvious credentials their advice should be neither sought nor taken with anything larger than a grain of salt. That ought to get some more hate mail coming my way. Some of the old-time tricksters are finding it difficult to get gigs as “experts” because, well, they are not experts, they have insufficient knowledge, and they don’t know how to explain anything to the court.

In the end, you must accept the premise that the transactions were fatally defective from the beginning (most of them). Signing a note might enable someone to START a lawsuit but it doesn’t allow them to win it. A judge is committing error when he or she denies a motion to dismiss based upon the fact that the “lender” failed to allege that he ever fulfilled his side of the bargain — i.e., that he made a loan to the “borrower.” That allegation alone will knock out at least half of all foreclosures. Judges who are faithfully following the rules of pleading and proof are having no difficulty in clearing their dockets because most of the foreclosures are being initiated in judicial and non-judicial states by parties who, as the San Francisco study put, are “strangers to the transaction.”

While the paperwork on loans is mysterious and opaque the facts of the deal are not. Either there was a transaction for which the paperwork is evidence, or there was no transaction, in which case the paperwork is worthless.

Report of Referee: Former ‘Foreclosure King’ David Stern Could be Disbarred for Foreclosure Fraud
http://4closurefraud.org/2013/10/30/report-of-referee-former-foreclosure-king-david-stern-could-be-disbarred-for-foreclosure-fraud/

Financial Crime: Foreclosure Rescue Schemes Have Become More Complex, and Efforts to Combat Them Continue
http://gao.gov/products/GAO-14-17

Increased mortgage modifications have scaled foreclosure down
http://www.foreclosuredefenseinny.com/2013/increased-mortgage-modifications-have-scaled-foreclosure-down/

Who You Should Write: Resources

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Washington, DC 20515
T (202) 225-7502 Press (202) 226-0471
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House Financial Services Committee
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The Democrat side of this subcommittee is at http://democrats.financialservices.house.gov/singlepages.aspx?NewsID=404

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(855-411-2372)
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Whistleblowers
The Bureau welcomes tips from sources that know of potential violations of Federal consumer financial law. Whistleblowers and law enforcement tipsters – including current or former employees of potential violators, contractors, vendors, or industry competitors – should contact the CFPB directly at:
whistleblower@consumerfinance.gov
(855) 695-7974
http://www.consumerfinance.gov/the-cfpb-wants-you-to-blow-the-whistle-on-lawbreakers/

Residential Mortgage-Backed Securities (“RMBS”) Working Group
c/o Robert Khuzami, Co-Chair
S.E.C. Director of Enforcement
U.S. Securities and Exchange Commission (SEC):
Center for Complaints and Enforcement Tips
Office of the Whistleblower
SEC, 100 F Street, NE, Mail Stop 5971
Washington, DC 20549
https://denebleo.sec.gov/TCRExternal/index.xhtml

Financial Fraud Enforcement Task Force,
(RMBS Working Group)
c/o Lanny Breuer
Assistant Attorney General for the Criminal Division
U.S. Department of Justice
Criminal Division
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
(202) 514-2000
e-mail ffetf@usdoj.gov , Criminal.Division@usdoj.gov
http://www.justice.gov/criminal/about/contact.html
http://www.justice.gov/criminal/about/aag.html

Office of the Associate Attorney General
Associate Attorney General Thomas J. Perrelli
950 Pennsylvania Avenue, NW
Washington, DC 20530-0001
(202) 514-9500
http://www.justice.gov/iso/opa/asg/speeches/2011/asg-speech-111115.html
http://www.justice.gov/asg/

To report Mortgage Fraud or Loan Scams to FBI:
Federal Bureau of Investigation
Phone: 1-800-CALLFBI (225-5324)
Online Tips: FBI Tips and Public Leads Form
https://tips.fbi.gov/
http://www.fbi.gov/contactus.htm

 

Occupy Wall Street Groups Protest Foreclosure, Try To Halt Evictions

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Occupy Wall Street Foreclosures

Monique White of North Minneapolis has been hosting weekend barbecues for friends and family for years. On Sunday, her usual guest list of friends and neighbors expanded to include protesters from the local spinoff of the Occupy Wall Street movement. They’d come to try and stop the bank from throwing White out of her house.

“These people are here to support me — and not only me, just to let other people know and be aware of what’s going on,” White said.

What’s going on is American homeowners are still slogging through the aftermath of a recession caused by the near-collapse of the financial sector in 2008. Since then, bailed-out banks have allegedly treated struggling homeowners so badly that state and federal law enforcement agencies are negotiating a multi-billion dollar settlement, and federal bank regulators have offered to check for wrongdoing in any foreclosure that happened in 2009 or 2010.

Occupy Wall Street kicked off in September to protest economic injustice, and now in at least three American cities, Occupy protesters are using the stories of local residents losing their homes to dramatize and protest the ongoing foreclosure crisis. In each case, Occupy-affiliated protesters have pitched their tents on the lawns where they don’t want to see local sheriff’s deputies pile the belongings of an evicted family.

On Sunday evening, 15 or so protesters came to Elizabeth Sommerer’s home in Cleveland. They’d heard via Twitter that Sommerer, a mother of two, would be evicted on Tuesday.

“We’d been talking for a few weeks about ways to draw attention to what’s going on with the foreclosure crisis,” said protester Chris Soboleski, a 29-year-old web developer from Painesville, Ohio.

Sommerer’s home went into foreclosure in 2009, Cuyahoga County records show. Her husband postponed the sheriff’s sale by filing for bankruptcy. But they couldn’t keep up with their Chapter 13 payments, and then, Sommerers said, she and her husband split up. Fannie Mae, the government-sponsored mortgage company, bought the property in August.

Soboleski and other Occupy protesters helped Sommerer connect with her local representative on the Cleveland City Council, Brian Cummins, whose staff helped her get to court on Monday to file a request to postpone the eviction for 30 days. Her request was granted, court records show.

“I think it was a huge day for the movement,” said Cummins, a member of the Green Party. “This is really great because it got them out in the community and in touch with someone in a very real life situation.”

“They stand up for the little guy,” Sommerer said of the protesters in a video uploaded to YouTube on Monday. (Soboleski said Sommerer did not want to do another interview about her situation after already providing details to local reporters. Independent attempts to reach her were unsuccessful.) “This is Main Street. Wall Street can take care of itself. Main Street needs everybody.”

Sommerer said she’s looking for work and a nearby place to live so her kids don’t have to change schools. She’d be happy to rent her former home from Fannie Mae if possible. “I was not raised to be a freeloader. I don’t want to be a freeloader. I will pay my way. I just need time to put it together,” she said in the video.

“Even if you do have to foreclose on someone, you can do it with a certain amount of compassion and humanity,” Soboleski said. “There’s a certain amount to be said for rules, but on the other hand we all want to live in a society where humanity matters more than bureaucracy.”

Not all of the Occupy actions have been successful. In Snellville, Ga., protesters failed to prevent the eviction of the Rorey family, who told the Gwinnett Daily Post they fell victim to a scam artist who promised them lower monthly payments in 2010. The difficulty of obtaining loan modifications since the collapse of the housing bubble has made it easy for scam artists to prey on desperate homeowners, who have been susceptible to claims that a hired “expert” knows secrets to obtaining loan mods they don’t.

Fannie Mae, which has owned the property since last year, said it works to prevent foreclosures.

“We have a Mortgage Help Center in Atlanta where homeowners can meet with a trusted housing counselor to discuss their mortgage situation and options to avoid foreclosure,” a Fannie Mae spokeswoman said in a statement. “Unfortunately, the homeowner did not seek assistance from our Help Center.”

Occupy protesters in Minneapolis hope they’ll have better luck with Monique White. Thirty or so protesters have been camping in her living room and kitchen, with some spilling out onto her lawn, since November 8.

“I’ve never had this many people in my house before. It gets kind of overwhelming sometimes,” White said. All the same, she added, “I appreciate everything that they’ve done for me.”

White fell behind on her payments in 2009. The following February, as she was trying to get a loan modification from U.S. Bank, she said, budget cuts cost her her job counseling at-risk kids for a non-profit. “That’s when everything started spiraling out.”

The Occupy protesters say U.S. Bank should cut White some slack.

“They just had record profits this quarter, and the CEO of US Bank, Richard Davis, just doubled his salary to $19 million,” said Nick Espinosa, 25. “So what we’re talking about with a family like Monique’s is pennies to them.”

Government-backed mortgage company Freddie Mac bought her house as a foreclosure in January, and U.S. Bank said what happens is now up to Freddie. Freddie Mac said White’s eviction has already been postponed and that the company was considering her for a program that would allow her to rent the property.

White said she has been working a part-time job at a liquor store and is desperately looking for new work.

“Basically what I’m looking for is for U.S. Bank to rewrite my loans in order for me to stay in my home and make it affordable for me,” White said. “I’m not asking for a handout. All I’m asking is for time or for Freddie Mac or U.S. Bank, whoever owns the house or is trying to take the house, to come to the table.”

 

Magnetar Echoes Livinglies call for Alignment of Investors, Servicers and Borrowers

see Magnetar%20Mortage%20Recovery%20Backstop%20Whitepaper%20Jun09.pdf

Magnetar Mortage Recovery Backstop Whitepaper Jun09

Two things jump out at me with this paper from June, 2009.

First it is obvious that the “real money” investors are defined as those seeking low risk and willing to take lower yield. The fact that they are called “Real Money Investors” underscores my point about the identity of the creditor. Those “traditional” investors are no longer available to buy the mortgage backed securities or any other resecuritized derivative package based upon mortgage backed securities. Legal restrictions requiring the securities to be investment grade would prevent them from jumping back in even if they wanted to do so, which they obviously don’t.

Thus the inevitable conclusion drawn almost a year ago and borne out by history, is that the fair market value of the securities, trading as pennies on the dollar, is reflective of a lack of demand for mortgage backed securities no matter how high the yield (i.e., no matter how low the price).

Second there is a growing realization that the interests of the investor and the borrowers are actually aligned in many ways and that the solution to mortgage modification, principal reduction, and other aspects of the mortgage mess and the foreclosure crisis lies in recognizing certain realities and then dealing with them in an equitable manner. The properties were never worth the amount of the appraisal in most instances and now they are worth even less than they were when the loan deals were closed. The securities were also “appraised” far too high thus creating a giant yield spread premium for the investment bank-created seller of mortgage backed securities.

In my opinion, based upon a sampling of the data available, it is entirely possible that the “true” fair market value of those securities in the best of circumstances is probably less than 40% of the initial offering price. It is this well-hidden analysis that is not getting the attention of the Obama administration and which completely explains why servicers are obstructing modifications under instruction from investment banking intermediaries like the “Trustee”.

Leaving the servicers and other parties as the middlemen “in the middle” to sort this out is another license to steal creating another mark-up applied against both borrowers and investors as the “real money” parties. The status quo is what is causing the stagnation in lieu of recovery. Until everyone accepts basic notions of “real party in interest” and eliminates those who don’t fit that description, the moral hazards will remain and escalate.

As concluded in this paper, either judicial or executive intervention is required to kick the middlemen out of the way and let the light in. When investors and borrowers are able to compare notes and work with each other the figures for both will be enhanced, foreclosures will decline, losses will be taken, and yes it is highly probable that the number of investor lawsuits will proliferate against those who defrauded them.

The lender is identified as the investor in this paper (indirectly) and the party who defrauded them is not some greedy borrower with stars in his eyes, it was the usual suspect — a financial wizard making a sales pitch that was so complex, the buyer basically was forced to rely upon the integrity of the investment banking house for appropriate pricing. That is where the system fell apart. Moral hazard escalated to moral mess.

800-Numbers Lead to Runaround as Banks Refuse to Modify Mortgages

Rule of Thumb: If they can’t execute a release or satisfaction of the mortgage, then they can’t foreclose. And if they did, it is reversible.

Whistle-Blower: Banks Give Homeowners the Runaround

“In our managers meeting, which can last eight or nine hours, we probably addressed mortgage modifications five minutes or less,” the banker said.

Editor’s Note: The reason is simple. They want the property. They can get the property because of pandemic confusion over securitization. They can’t modify mortgages as easy as they can foreclose. They don’t have the right, title, interest or authorization to modify mortgages because they never advanced a dime for the funding of those mortgages. But because non-judicial states make it real easy for anyone with a bogus piece of paper to foreclose and get title to the property, and because investors who are the real creditors are not asserting their right, title and interest, it’s easy for a pretender lender to pick up a free house.

And due to heavy caseloads and poor understanding of securitized mortgages in judicial states, the same rules seem to apply as non-judicial states — homeowners are generally not heard on the merits of their defenses and claims. The foreclosure proceeds, automatic stays are lifted in bankruptcy court, all because the Judge is not directed to look at the paperwork.

By DAVID MUIR
March 23, 2010
// A vice president for one of the nation’s biggest banks claims customers looking for help in lowering their mortgage payments are often told to call an 800 number — where he says representatives then give homeowners the runaround.

//

//

David Muir gets answers from a vice president of one of the biggest banks.

The bank executive spoke to ABC News on the condition that ABC News not show his face or name him, because he feared coming forward would cost him his job.

Of the 1.1 million homeowners who’ve signed up for the federal program aimed at avoiding foreclosures, only 168,000, or 15 percent, of homeowners have had their mortgages permanently modified.

“In our managers meeting, which can last eight or nine hours, we probably addressed mortgage modifications five minutes or less,” the banker said.

Americans Frustrated by Banks

Jay and LeeAnn Givan are two of those frustrated Americans who reached out to ABC News about their banks. They say they’ve run out of time and money. Both lost their jobs in the recession, and they have been begging their bank since last September to modify or refinance their mortgage. Six months later, all the paperwork and phone calls have amounted to nothing.

“The bank’s not interested in helping us,” LeAnn said. “Just a couple of weeks ago, Jay was on the phone for two hours being transferred from department to another department until finally somebody told him, ‘Look, we can’t help you until you stop paying on your house.'”

//

The couple made its last mortgage payment last week.

“I have heard that,” the banker said. “That will affect their credit card, their insurance, [have] a big effect on their credit history.”

The banker described homeowners pleading to him for help, but he said his bank is not interested in modifying mortgages, even after taxpayers helped bail out the nation’s biggest banks.

“It’s just not happening,” said the banker.

The banker said there is significant pressure on bank employees to get customers to take on more accounts than they need because of the late fees and penalty fees that will then co

I have watched the news story about Banks helping with Foreclosure etc…..THEY WILL NOT HELP if they are WELLS FARGO…..They were terrible with my 82 year old mothers mortgage.After being a loyal customer for years shw was not able to get help from me with her mortgae because I was laid off and at that time for a year already….They ASSURED us that a modification was to be done and to NOT PAY anything until it was completed because those payments would be included in new mortgage….we called for months and tried to make some payments only to have house start into foreclosure with their lawyers, be served embarassing papers and be put into undue stress. Went thru Wells President John Stump and 4 other Board members to only be told BANK OWNING YOUR MORTGAGE WILL NEVER AND WOULD NEVER HAVE DONE A MODIFICATION. Why were we told it was being worked on for over 6 months…why a run around like that to a senior citizen who has worked her whole life. End result was COME UP WITH $4500 IN 2 WEEKS or bye bye home your out of there. Terrible to do to anyone. I had found out we were one of 10’s of thousand that Wells did exactly this to also. Just google that problem and you will see. SHAME ON WELLS FARGO and all these banks taking money from us and the government and putting people in worse trouble.
barkleyandme1 11:16 AM
Americans like to sue over everything. Seems like there is grounds for a class action suit against the banks. They used my money for what seems to be strictly their benefit and bonuses. Where are all the lawyers now. Let’s bring suit against the banks for not fulfiling their obligation to the publc. We bailed them out in good faith and they turned around and screwed us.
tjbmeb 9:33 AM

S.W.Florida..I have applied for a modification with Select Portofolio Service, as of this date I have NOT received any information other that it is under review. After reading all the horror stories on this site. I have deceiced that if the modification doesn’t go thru I will foreclose. I will walk away with no hesitation. Why should I pay good money for a bad investment. My money was solid when I purchased the home. However with all the greed from lenders over inflating homes I have no pity. I worked too hard for the American Dream only to be disappointed by Wall Street greed. Come on Obama put your money where your mouth is!

Want to Buy Your Loan?: Toxic Asset Plan Foresees Big Subsidies for Investors

To start the program, Treasury will ask banks, like Citigroup or JPMorgan Chase, to identify pools of residential and commercial real estate loans that they will be willing to sell through an auction. Private investors will bid against each other, setting a market price. No bank will be required to participate.
Editor’s Note: it’s starting. Principal reductions are coming. The original plan I proposed in which everyone shares the loss is falling into place. Make sure you get a judgment quieting title as part of your mortgage modification or settlement.
March 21, 2009

Toxic Asset Plan Foresees Big Subsidies for Investors

This article is by Edmund L. Andrews, Eric Dash and Graham Bowley.

WASHINGTON — The Treasury Department is expected to unveil early next week its long-delayed plan to buy as much as $1 trillion in troubled mortgages and related assets from financial institutions, according to people close to the talks.

The plan is likely to offer generous subsidies, in the form of low-interest loans, to coax investors to form partnerships with the government to buy toxic assets from banks.

To help protect taxpayers, who would pay for the bulk of the purchases, the plan calls for auctioning assets to the highest bidders.

The uproar over the American International Group’s bonuses has not stopped the Obama administration from plowing ahead. The plan is not expected to impose restrictions on the executive pay of private investors or fund managers who participate.

The three-pronged approach is perhaps the most central component of President Obama’s plan to rescue the nation’s banking system from the money-losing assets weighing down bank balance sheets, crippling their ability to make new loans and deepening the recession.

Industry analysts estimate that the nation’s banks are holding at least $2 trillion in troubled assets, mostly residential and commercial mortgages.

The plan to be announced next week involves three separate approaches. In one, the Federal Deposit Insurance Corporation will set up special-purpose investment partnerships and lend about 85 percent of the money that those partnerships will need to buy up troubled assets that banks want to sell.

In the second, the Treasury will hire four or five investment management firms, matching the private money that each of the firms puts up on a dollar-for-dollar basis with government money.

In the third piece, the Treasury plans to expand lending through the Term Asset-Backed Securities Loan Facility, a joint venture with the Federal Reserve.

The goal of the plan is to leverage the dwindling resources of the Treasury Department’s bailout program with money from private investors to buy up as many of those toxic assets as possible and free the banks to resume more normal lending.

But the details have been treacherously difficult, politically and financially, and some of the big decisions are the same as those that bedeviled the Treasury Department under President George W. Bush last year.

Timothy F. Geithner, the Treasury secretary, provoked scathing criticism from investors in February by announcing the broad outlines of the plan without addressing the tough questions, like how the government planned to share the risk with investors or arrive at a fair price for the assets that would neither cheat taxpayers nor harm the banks.

Although the details of the F.D.I.C. part were still being completed on Friday, it is expected that the government will provide the overwhelming bulk of the money — possibly more than 95 percent — through loans or direct investments of taxpayer money.

The hope is that such a generous taxpayer subsidy will attract private investors into the market and accelerate the recovery of the country’s banks.

The key protection for taxpayers, according to people briefed on the plan, is that the private investors will bid in auctions against each other for the assets. As a result, administration officials contend, the government will be buying the troubled loans of the banks at a deep discount to their original face value.

Because the government can hold those mortgages as long as it wants, officials are betting the government will be repaid and that taxpayers may even earn a profit if the market value of the loans climbs in the years to come.

To entice private investors like hedge funds and private equity firms to take part, the F.D.I.C. will provide nonrecourse loans — that is, loans that are secured only by the value of the mortgage assets being bought — worth up to 85 percent of the value of a portfolio of troubled assets.

The remaining 15 percent will come from the government and the private investors. The Treasury would put up as much as 80 percent of that, while private investors would put up as little as 20 percent of the money, according to industry officials. Private investors, then, would be contributing as little as 3 percent of the equity, and the government as much as 97 percent.

The government would receive interest payments on the money it lent to a partnership and it would share profits and losses on the equity portion of the investment with the private investors.

Ever since last fall, industry analysts and policy makers in Washington have argued that the banking system’s biggest problem was the huge pile of troubled mortgages and other loans on bank balance sheets.

Risk-taking institutional investors, like hedge funds and private equity funds, have refused to pay more than about 30 cents on the dollar for many bundles of mortgages, even if most of the borrowers are still current. But banks holding those mortgages, not wanting to book huge losses on their holdings, have often refused to sell for less than 60 cents on the dollar.

The result has been a paralyzing impasse. Banks, unwilling to sell their loans at fire-sale prices, have had less capital available to make new loans. Mortgage investors, unable to leverage their investments with borrowed money, have been unwilling to pay more than fire-sale prices.

To break that impasse, the government’s crucial subsidy is meant to provide investors with the kind of low-cost financing that has been utterly unavailable in today’s credit markets.

Administration officials refused to comment on the details of the plan, and refused to say what kind of interest rates the government would be charging investors. But government officials have long maintained that they could charge slightly more than the Treasury’s own cost of money and still offer rates far less than the private markets would demand.

To start the program, Treasury will ask banks, like Citigroup or JPMorgan Chase, to identify pools of residential and commercial real estate loans that they will be willing to sell through an auction. Private investors will bid against each other, setting a market price. No bank will be required to participate.

Analysts worry whether the prices investors offer will be high enough to induce the banks to sell assets. The hope is that high valuations at the auctions will increase the price of assets that remain on the books of banks, bolstering confidence in the sector.

Still, the Treasury Department’s biggest obstacle may be the current political environment in Washington, where Democratic lawmakers are furious about the pay packages and bonuses received by executives at companies being rescued by taxpayers.

Many investment executives said they were worried that participating in any bailout program would expose them to political wrath and potentially steep new restrictions on their own pay.

Treasury and Fed officials have remained firmly against imposing any restrictions on pay for companies investing money in the rescue effort rather than receiving money from it.

The plan comes as financial institutions continue to fail. Federal regulators Friday seized control of the two largest wholesale credit unions — U.S. Central Federal Credit Union and Western Corporate Federal Credit Union — which together had $57 billion in assets. They provide financing, check-clearing and other tasks for retail credit unions.

Michael J. de la Merced contributed reporting from New York.

Non-Profit Lenders Step in to Provide Post-Foreclosure Modification

Editor’s Note: Principal reduction can be achieved in more ways than one. Here Non-profit Lenders see the clear opportunity to buy mortgages from dubious sources and then enter into new mortgages with the homeowner thus preventing eviction and restoring the homeowner to non-distress status.

The problem here is that title is not clear and eventually there is going to be a day of reckoning. The underlying theme here is that principal reduction is the ONLY way this mess will be cleared up and getting it right about WHO can sell a mortgage, execute a satisfaction of mortgage, or otherwise enforce or foreclose a mortgage is still in flux.
The reason is that it is in flux is that Judges and lawyers are just starting to get the the counter-intuitive idea that the finance sector actually set out to make bad loans because that was how they made money.
It’s not counter-intuitive if you realize that the real creditor is the investor who put up the money and all the rest are pretenders who pocketed a big portion of the proceeds of securities sale before funding mortgages. It is those pretenders who are “selling” and “enforcing” the “loans.”
My suggestion is that regardless of how and with whom you resolved your mortgage dispute, a quiet title action needs to filed naming all potential claimants in which a Judge declares the rights of the parties and confirms your title subject to whatever new mortgage or modified mortgage you executed. I don’t see any other immediate way to resolve the title problems
March 21, 2010

Finding in Foreclosure a Beginning, Not an End

By JOHN LELAND

BOSTON — Jane Petion lived in her home for 15 years and saw its value rise slowly, rise rapidly and, when the housing bubble burst, plunge at a sickening pace that left her owing $400,000 on a house worth closer to $250,000. Last June, her lender foreclosed on the property. The family received notices of eviction and appeared in housing court.

Then they discovered a surprising paradox within the nation’s housing crisis: Their power to negotiate began after foreclosure, rather than ending there.

In December Ms. Petion signed a new mortgage on her house for $250,000, with monthly payments of less than half the previous level. She and her husband now have a mortgage they can afford in a neighborhood that benefits from the stability they provide. A nonprofit lender made the deal possible by buying the house from her original mortgage company and selling it to her for 25 percent more than its purchase price — a gain to hedge against future defaults.

“It was exactly what we needed to get back on our feet,” said Ms. Petion, who works for a state agency. “We have income. But another bank, it would have been easy to look at our foreclosure and say, ‘I’m sorry, we have nothing for you now.’ ”

This counterintuitive solution — intervening after foreclosure rather than before — is the brainchild of Boston Community Capital, a nonprofit community development financial institution, and a housing advocacy group called City Life/Vida Urbana, working with law students and professors at Harvard Law School.

Though the program, which started last fall, is small so far, there is no reason it cannot be replicated around the country, especially in areas that have had huge spikes in housing prices, said Patricia Hanratty of Boston Community Capital. “If what you’ve got is a real estate market that went nuts and a mortgage market that went nuts, what you’ve got is an opportunity.”

Two years into the nation’s housing meltdown, and after hundreds of billions of dollars of federal rescue programs, government officials and housing advocates denounce the unwillingness of lenders to adjust the balances on homes that are worth less than the mortgage owed on them.

Research suggests that such disparity, rather than exotic interest rates, is the main driver of foreclosures, in tandem with a job loss or another financial setback. The financial industry lobbied aggressively to defeat legislation that would empower bankruptcy judges to adjust mortgage balances to properties’ market value.

That reluctance, however, eases after foreclosure, when lenders find themselves holding properties they need to unload, Ms. Hanratty said.

“We found, frankly, the industry wasn’t ready to do much pre-foreclosure,” she said. “But once it was either on the cusp of foreclosure or had been taken into the bank portfolio, banks really do not want to hold on to these properties because they don’t know how to manage them, don’t know what to do with them.”

Working with borrowed money, Boston Community Capital buys homes after foreclosure and sells or rents them to their previous owners, providing new mortgages and counseling to the owners, who typically have ruined credit. During the process the families remain in their homes. Since late fall it has completed or nearly completed deals on 50 homes, with an additional 20 in progress, Ms. Hanratty said. The organization is now trying to raise $50 million to expand the program.

Steve Meacham, an organizer at City Life/Vida Urbana, is one reason banks may be willing to sell their foreclosed properties to Boston Community Capital. When families receive eviction notices, his group holds demonstrations or blockades outside the properties, calling on lenders to sell at market value. It also connects the residents with the Harvard Legal Aid Bureau, whose students work to pressure lenders to sell rather than evict by prolonging eviction and “driving up litigation costs,” said Dave Grossman, the clinic’s director.

“So they’re being defended legally, and we’re ramping up the pressure publicity-wise,” Mr. Meacham said. “And B.C.C. came in; they had a part that buys properties and a part that writes mortgages. It wouldn’t work without all three.”

A focus of the program has been the working-class neighborhood of Dorchester, where home prices dropped 40 percent between 2005 and 2007, compared with a 20 percent drop statewide, according to research by the Federal Reserve Bank of Boston. Foreclosures and delinquencies there are more than twice the state average, the bank found.

In such neighborhoods, lenders and residents are hurt by evictions, which often leave vacant properties that invite crime and drive down values of neighboring houses, Ms. Hanratty said. “So it’s in the lenders’ interest to get fair market value as quickly as possible, and in the interest of the community to have as little displacement as possible.”

The program is not a solution for all lenders or distressed homeowners. After months of post-foreclosure negotiations with her bank, Ursula Humes, a transit police detective, is waiting for her final 48-hour eviction notice. Her belongings are in boxes.

Mrs. Humes owed $440,000 on her home; her lender offered to sell it to Boston Community Capital for $260,000. But after assessing Mrs. Hume’s finances, the nonprofit asked for a lower selling price, and the lender refused.

On a recent evening, Mr. Grossman of the Harvard law clinic counseled Mrs. Humes on her options. “This is a case that doesn’t have a happy ending,” Mr. Grossman said.

Mrs. Humes said, “I depleted my retirement account and everything I owned, but I’m still going to lose it.”

Many commercial lenders, similarly, would shy away from such a program because it involves writing mortgages for borrowers who have already defaulted once — a high risk for a small reward.

For other homeowners, though, the program is a rescue at the last possible second. Roberto Velasquez, a building contractor, lost his home to foreclosure last November, owing the lender $550,000. After extensive wrangling, during which his family stayed in the house, he bought it again in March for $280,000, a price he can afford.

On the night after he closed, he joined other members of City Life/Vida Urbana at a foreclosed four-unit building in Dorchester from which most of the tenants had been evicted. A group of artists projected videos on sheets in the windows, showing silhouettes of families re-enacting their last 72 hours before eviction. Garbage filled one of the units. Mr. Velasquez said it hurt to stand amid such loss, but he was jubilant at his own perseverance.

“We’ve been fighting for so long,” he said, “and we win, because we’re still in the house.”

Principal Reduction Unavoidable: Get Over it

“Reducing the loan’s principal balance is more valuable because it lowers monthly payments and restores equity. Various studies show that having equity also reduces the likelihood of redefault on a modified loan.

It’s not just the moral thing to do. It also would help avoid the spillover effects of the next expected round of defaults. Coupled with high unemployment, a coming surge in foreclosures is likely to further depress house prices. That would hurt an already fragile recovery and, in a worst case, could provoke a double-dip recession.

It would take 100,000 successful modifications a month, starting now, to significantly counter the threat that so many foreclosures would pose to the economy, according to estimates by Moody’s Economy.com.”

January 23, 2010
Editorial New York Times

Here’s How to Help

President Obama promised this week to reconnect to the concerns and needs of Americans who are suffering from the recession. One important way to do that is to help hard-pressed families hang on to their homes.

It’s not just the moral thing to do. It also would help avoid the spillover effects of the next expected round of defaults. Coupled with high unemployment, a coming surge in foreclosures is likely to further depress house prices. That would hurt an already fragile recovery and, in a worst case, could provoke a double-dip recession.

Unfortunately, advance word of coming changes to the antiforeclosure effort are not encouraging.

When the effort was announced nearly a year ago, the administration said it would help as many as nine million at-risk families keep their homes by the end of 2012 — by lower payments through loan modifications, mainly lower interest rates, or by refinancing loans for borrowers who have little or no equity.

Yet recent tallies show that through 2009, only 66,465 loans had been successfully modified, and through last November, 155,700 loans had been refinanced. That’s abysmal. An estimated 2.4 million borrowers are expected to lose their homes this year alone because of joblessness, negative equity and, in many cases, unaffordability as teaser rates expire on adjustable mortgages.

It would take 100,000 successful modifications a month, starting now, to significantly counter the threat that so many foreclosures would pose to the economy, according to estimates by Moody’s Economy.com.

As early as next week, the administration is expected to ease up on the paperwork requirements for a loan modification and to announce temporary assistance — probably low-cost loans or grants — to help unemployed people pay their mortgages. A loan would likely be tacked on to the mortgage, for repayment over time.

Those changes, however, would not correct the program’s biggest flaw: the current preferred way to modify a loan — reducing the interest rate — is of limited use to millions of so-called underwater borrowers, those who owe more than their homes are worth. Reducing the loan’s principal balance is more valuable because it lowers monthly payments and restores equity. Various studies show that having equity also reduces the likelihood of redefault on a modified loan.

Administration officials, however, have been unwilling or unable to persuade lenders to reduce the principal on underwater loans. [Editor’s Note: That is because they refuse to state the obvious. The servicers and nominees and other intermediaries are not creditors, lenders or decision-makers.] One obstacle is that many troubled borrowers have two loans on their home, and conflicts exist between the first and second mortgage holders over who gets how much out of a loan whose principal has been cut. Several months ago, the Treasury Department detailed a plan aimed at resolving the conflicts, but lenders have yet to cooperate.

It is less clear why the refinancing arm of the antiforeclosure program has flopped. But for many borrowers, refinancing may not be worth the cost unless mortgage rates drop and stay low, which is not likely.

Treasury officials say that they continually review the antiforeclosure effort and consider changes. It’s hard to see what they need to convince them that it’s time to restore some equity to drowning borrowers.

Home Sales Stall: Millions of Homes in Real Inventory

Editor’s Comment: Any lawyer who does not think that issues relating to foreclosure will not dominate his or her practice of law is in a state of denial and delusion. The 16% drop in new home-sale contracts (see article below) means a similar or worse drop in sales over the next 30-60 days.

As we have said repeatedly along with the major newspapers, there is no relief in sight without principal reduction on mortgages. It’s not a matter of ideology or even law. It is a matter of pure practicality. The choice is between a total loss and a partial loss.

More and more articles and reports are emerging that clearly show that millions of homes are going to be abandoned and suddenly added to the foreclosure lists simply because the owners choose to take the FICO credit score hit and rent a comparable house for a fraction of the payments demanded under their crazy inflated mortgages.  Really, why continue to pay on a $500,000 note for a property that is worth $300,000? Why? hope you will break even in 5-10 years? Just not a good business decision.

In the anti-deficiency states like Arizona the “lenders” (who incidentally don’t qualify as creditors) can only take the house. In the states that permit pursuit of the deficiency judgment, it is a waste of time and money because nearly everyone is basically cleaned out — no cash, no savings and no available credit. So there is no point in continuing this farce any further. The homes are not worth what is owed and never will be worth that amount even after the market “recovers”.

Now add to the equation that the parties being ordered into mediation, modification or attempting short sales or settlements are mismatched: one of these things is not like the other. On the one side you have people who really own a home and on the other you have people who don’t even know who the creditor is much less possess the authority to approve a short sale or settlement or issue a satisfaction of mortgage.

There is no way out except through principal reduction or letting the entire housing market collapse into chaos. The real crisis is coming over the next few months. The “Great Recession” was just the appetizer and although there is time to avoid the full impact of what was done on Wall Street, it seems unlikely that anyone in office is willing to “call it” like the doctor announcing the time of death.
January 6, 2010

Slowing Pace of Home Sales Raises Fears of New Retreat

The number of houses placed under contract fell sharply in November in the first drop in nearly a year, figures released Tuesday show. It was the clearest sign yet that predictions of another downturn in real estate may become a reality.

The National Association of Realtors said that its index of pending home sales plunged to 96 from a revised level of 114.3 in October. Analysts had predicted a drop, but nothing like that.

“We thought it would drop 2 percent,” said Jennifer Lee of BMO Capital Markets. “When you see 16 percent, the first thing you say is, what the heck happened here?”

Since the majority of pending sales become final in six weeks to two months, the index is considered a reliable indicator of where the market is headed. The index is calculated by comparing the number of pending sales with the level of 2001, when the index was formulated.

The data indicates that the weakest parts of the country are the Northeast and Midwest, both of which fell 26 percent in November from the previous month after adjusting for seasonal variations. The South dropped 15 percent, while the West was off 3 percent.

Ms. Lee called the drop from October to November “unnerving” but said that the index remained well above the level of a year ago. In November 2008, when the financial crisis was at its peak and buying a home required a faith in the future that many did not feel, the index was 83.1.

As the overall economy improves and the employment situation grows a little less dire, the question becomes whether real estate can muddle through — or if it will need a new round of government support to ward off another damaging downturn.

There are plenty of reasons for worry. The Obama administration’s effort to compel lenders and servicers to modify loans has not been a success. Many of these owners will eventually lose their homes to foreclosure.

Meanwhile, a quarter of homeowners with mortgages owe more than their houses are worth. If prices start dropping again, some will be induced to walk away, further undermining the market.

“I wouldn’t rule out more stimulus, especially in an election year,” said Ivy Zelman, an analyst.

Last year’s stimulus efforts, however expensive and divisive, calmed a market where prices had plummeted by a third. Even now, the government’s efforts to push down interest rates and entice buyers with a tax credit appear to be having an effect, keeping a weak market from getting weaker.

Walter Martin and Paloma Munoz, artists in Dingmans Ferry, Pa., are a stimulus success story. They are paying $360,000 for a new home 10 miles away without even having an offer for their current home.

“The new home has enough space for us both to have studios,” Ms. Munoz said. “The price is amazing, we are getting a mortgage at a 5.125 rate, and we qualify for a $6,500 credit.”

It is a leap of faith, she acknowledged, but an eminently sensible one. “When houses were expensive, everyone wanted to buy, and now that they’re cheap everyone is scared,” she said.

Buyers like Ms. Munoz and Mr. Martin are outnumbered, however, by people who think the market still has room to fall. While some of these may indeed be scared, others simply see a virtue in patience.

“With two growing boys, we are busting out of our small house,” said Stephen Sencer, deputy general counsel at Emory University in Atlanta. “But I’m still waiting for sellers to capitulate.” His agent is telling Mr. Sencer that may happen in the spring.

Starting from a low of 80.4 last January, pending sales rose for nine consecutive months in 2009. The index proved a harbinger of both completed sales, which began climbing in April, and prices, which started rising over the summer.

As the Nov. 30 expiration of the tax credit drew near, would-be buyers hastened to secure deals. Sales in November roared at a 6.54 million annual pace, the highest since February 2007.

At the last minute, Congress extended and broadened the credit. The urgency immediately dissipated. “We were really, really pushing hard, and I think everyone just wore out,” said Steve Havig, president of Lakes Area Realty of Minneapolis.

Buyers now have until April 30 to qualify for the credit. Many analysts say the effect this time around will be mild.

“It could turn out the second credit has such a small impact it doesn’t show up in the data,” said Patrick Newport of IHS Global Insight.

Nevertheless, he predicts the downturn this time will be gentler. “The economy is improving, and that is what the market needs to get back on a sustainable path,” Mr. Newport said.

Long before the tax credit ends, another stimulus effort is due to disappear. The Federal Reserve has bought more than a trillion dollars of mortgage-backed securities in a successful effort to push down mortgage rates. The Fed is scheduled to wind down the program by March 31.

Rates are already moving higher, exceeding 5 percent in some lender surveys. Perhaps as a result, mortgage applications to buy homes in late December were a third lower than during the corresponding period in 2008, the Mortgage Bankers Association said.

The Fed’s Open Market Committee left itself leeway in its December meeting to start buying again, saying it “will continue to evaluate the timing and overall amounts of its purchases of securities.”

Rising rates could hamper Mr. Martin and Ms. Munoz’s search for a buyer for their old house.

“It’s been on the market for almost three months,” she said. “We have had very few viewings.”

The Emperor’s New Clothes: THOSE FORECLOSURES ARE NOT REAL FOLKS, GET IT?

NOW AVAILABLE on KINDLE/AMAZON

The Emperor\’s New Clothes: THOSE FORECLOSURES ARE NOT REAL FOLKS, GET IT?

1-in-10-u-s-mortgage-delinquencies-reach-a-record-high-going-up

The Emperor is still strutting around as though he was fully clothed in the best silk, color and design. Wall Street is still the darling of government and a whole lot of other people, even if it was a little bad these past few years. We’ve been through the part where the swindler’s came to town, where the government officials ashamed of their apparent blindness and ignorance raved about the new derivative innovations, and the parade of foreclosures based upon invisible clothes. But we have not arrived at the part in the story where the little child yells out that the old fool has no clothes on. And we still don’t hear everyone laughing at wall Street and sending them home to lick their own wounds instead of inflicting it on everyone else.

The swindlers are still in town selling invisible clothes to everyone gullible enough to buy nothing and call it something. We are running on vapor since 1983 when derivatives were zero. Now we have credit derivatives with a nominal value of somewhere over $500 Trillion — that is ten times the total money in circulation from government origins. That’s “nominal value” because they don’t exist and they have no value. There is no substance to them to the extent that they are based on secured debt and possibly all other debt. There is no mortgage, there is no note, although there might be an obligation. But if there is an obligation it probably has been extinguished by either set off for predatory “lending” (actually illegal sale of unregistered securities fraudulently masquerading as loan products) or extinguished by payment directly or indirectly from Uncle Sam, more investors or others. In this fairy tale (national nightmare), the swindler’s take over the government instead of sneaking out of town with their hoard of ill-gotten gains.

Think about it. If virtually ALL of the securitized residential mortgages that were originated for the last 10 years are in some sort of trouble, how much brain power does it take to conclude that there was something wrong with them to begin with?

If virtually ALL of the mortgage backed securities that were created and sold in the last 10 years went into default, how much brain power does it take to conclude that there was something wrong with them to begin with?

So if virtually all the transactions originating the source money and all the transactions that were funded from the source money went bad, how much brain power does it take to conclude that there was no substance to the transaction and that the whole thing was a fantasy from Wall Street, who are now strutting around with their pockets bulging with the all the money everyone else (investors and “borrowers”) lost?

I’ve been as gentle as I could, giving everyone a chance to catch up but we are now on the precipice of a cliff far deeper than anything we have seen before including one year ago. And nobody on the side lines is really getting it. We continue our march toward the edge of the cliff, push the ones in front off, in the hope or belief that we won’t ever get there. So here it is, my opinion to be sure, but anyone who has been following my writings since April, 2007 knows that I called the stock market crash, the credit freeze and the collapse of the world economies and why. So it’s not like I don’t have a track record. I wasn’t the only one and people with far more credibility than me spotted the same things and continue to scream bloody murder, “the emperor has no clothes!” See comments by Roubini, Krugman, Volcker et al.

  1. Geithner and Summers have to go. They are the emperor’s closest confidants who don’t want to look stupid even if it destroys the entire country. The current emperor is still on a learning curve so we have to cut him some slack. The prior ones, well….read on.
  2. The recession is real but most of it could be reversed by simply admitting the obvious: those derivatives have no value, the mortgages are mostly invalid, the notes are mostly invalid, and the obligations are mostly extinguished by the swindlers’ own chicanery with Federal bailouts and Credit Default Swaps, which were the cloth of the Emperor’s invisible clothes.
  3. The need for the AIG bailout can be argued. But nobody can argue that the people who benefited from it are the same people who got us into this mess. They took a system that was working and turned it into a system that couldn’t work. They turned mortgage lending on its head: mortgages that were likely to perform were valuable only as cover for most of the illegal activities underneath. The real incentive was to create mortgage pools that would fail and where they could collect on credit default swaps worth as much as 30 times the original nominal value. Vapor on Vapor.
  4. That means they have every motivation to make certain you go into default and no motivation whatsoever to modify, settle, allow short-sale or do anything for the benefit of a homeowner who wants to settle the matter honorably. You can’t do that when you are dealing with dishonorable people with motives that amount to acts of domestic terrorism. There is no talking to them because if they can get you to default on that $300,000 loan they probably are going to get paid $9,000,000 just on your default. How do you like them apples? Check it out. It is true.
  5. Any obligation — whether it is a loan for refinancing a house, buying a house, student loan, auto loan etc. that have the attributes discussed in this blog — does NOT have any security or note that can be enforced and all of them can be extinguished in bankruptcy — probably even including the nondischargeable student loans. (More on that another time).
  6. Therefore, much of the recession, all of the foreclosures and much of the lost wealth that is “missing” is legally, morally and ethically and in actuality and reality, a fantasy. Some 20 million homeowners or more with these residential mortgages securitized through a money laundering scheme are sitting on wealth they have been convinced they don’t have. But they do. Those houses are free and clear — legally, morally and ethically.
  7. All the homes in the MERS database are probably free from any encumbrance legally, ethically and morally. Trillions of dollars of wealth that is claimed as “lost” is still possessed by people who don’t know they have it and the game is on to make sure that if they ever figure it out it will be too late.
  8. Imagine the purchasing power in our consumer economy if the mortgage obligations and other obligations simply vanished. What would happen to the recession? What would happen to unemployment? What would happen to tax revenues without ever raising the rate of taxation? It would all self correct. And speaking of taxes, how about all those trillions of dollars in “fees” and “profits” that were sequestered off shore, never reported and thus never taxed? what would happen to the national and state deficits?
  9. All this is happening because the wrong people are controlling the conversation and most people are listening because the “experts” because they are so smart “must know better.” Consider me the child who yelled “But the Emperor has no clothes.” A million experts with long resumes, PhD’s and persuasive catch words can’t change the fact that the money laundering scheme of the last 10 years was clothed in “Apparent” legality but in substance was simply fraud perpetrated by people who were not any smarter or better than the common swindler. They did, however, have one ace in the hole — the Emperors were in on it. Maybe we have a chance with the current administration, maybe not.
  10. Unless we do something about this, we will suffer the indignity of decline into third world status as the wealthy few squeeze the life out of the rest of the country. Is this too extreme for you? Go to the International Money Fund website or the World Bank website or any other website or book that addresses basic economics. You won’t find anything different there. Just words, like these, with a little more polish and a little more academic tone, with the same message.


Beware of those offers of “modification”

The lenders are out in force trying to get you to sign something new. Most of the offers accomplish only two things: (1) ratification of a loan that was unenforceable and (2) a virtual guarntee that you will end up with worse problem than when you started in as little as 3 months;

QUESTION: I have been working with Wachovia, and they have granted me a three month deferment of my mortgage. I need to respond to them by Monday.
QUESTION 1: If I do accept this modification with them, would that mean we will be unable to continue to try to review and correct my loan?
 
ANSWER: Wachovia is attempting to get anything they can in the way of a signature on a new piece of paper — it will mean that the borrower is ratifying the mortgage and note. A three month deferment is in my view insufficient to give up all the rights the borrower has at the present time under Predatory Loan law (TILA, RESPA, HOEPA, Securities Law) and Securitization Law (SEC, UCC, Holder, Holder in due course, and defense of third party PAYMENT). The best way to deal with this is to say that you are willing to enter into an agreement if they answer a few questions. The main question is whether this loan, note, mortgage and/or obligation has been assigned, transferred and/or securitized and whether they can identify the real party “owning” or claiming to own the note, mortgage, and/or obligation. The way to put them up against the wall is by including a self serving statement that if they cannot answer this question, you must assume that they either cannot or will not answer the question — despite your right to know the identity of the party to whom you allegedly owe money. Your request MUST include a demand for copies of any applicable documents including Pooling and Service Agreement, Assignment and Assumption Agreement, the location of the actual original note, any allonge, and any assignment together with any documents specifying the duties of any Trustee or successor Trustee, including substitution of Trustee on Deed of Trust, appointment of Trustee for Pooled Assets, appointment of Trustee for any Structured Investment Vehicle, appointment of Trustee for owners of certificates of asset backed securities, and whether there is any record of transfer, sale, bailout, insurance payment etc to the investor.
 
QUESTION 2: Before I can fill out the form you sent me, it says I need two years previous to settlement of taxes. I have been remiss in filing, and am currently working on getting 2006 and 2007 filed. I do not owe money, but do not have records. WILL THIS KEEP US FROM BEING ABLE TO WORK THIS?
 
ANSWER: NO. The tax returns are only evidence of your ability to pay for the period of time that the tax returns cover. If you had no tax returns at the time that the loan was granted, you should add an addendum page describing what, if anything, they asked for to confirm or verify your income and who asked for it.

AUDITORS, CREDIT REPAIR, LOAN MODIFICATION ETC.

For the most part they are operating either illegally or unethically but there are an increasing number of firms that are playing by the rules and actually helping their clients.

beware-of-credit-repair-firms-but-dont-throw-the-baby-out-with-the-bathwater

DISCLOSURE:

I must disclose both an agenda and an interest here. Having been disappointed by the results or conduct of many supposed “audit” or loss mitigation or loan modification firms, either because they gave out bad advice, were engaged in the unauthorized practice of law, or their work product was poor or insufficient, I took the pieces from the public domain and put them together into one plan of action. THEN gave them to my good friend Brad Keiser with a request that he create a central point for those people who wish to receive referrals from us and to create a team of people who would create a product that included all the elements that I think are necessary. So when you go to “In Trouble Now?” you will get to one of our volunteers and probably be screened by Brad.

RIGHT NOW, THE ONLY WORK PRODUCT APPROVED BY ME AS COMPLETE IS THE ONE COMING FROM THE TEAM BRAD BROUGHT TOGETHER UNDER THE NAME FORECLOSURE DEFENSE GROUP. HOWEVER, THE ABSENCE OF OTHER NAMES DOES NOT MEAN THEY DON’T DO GOOD WORK. IT ONLY MEANS THEY DON’T DO EVERYTHING I BELIEVE SHOULD BE PART OF THE FINAL WORK PRODUCT.

I DO HAVE A FINANCIAL INTEREST IN THE GROUP BRAD HAS ASSEMBLED. ONE OF THE WAYS YOU CAN SUPPORT THIS BLOG AND THE REST OF OUR EFFORTS IS TO USE FDG SERVICES. But we are NOT the only game in town and you are free to use whoever you want and still get help from us.

That said, we are hopeful of adding other groups that will do the work. Here is a partial checklist of the work involved. We have commoditized it so that instead of costing many thousands of dollars it can be done for a fraction of the price of hiring the professionals separately — BUT the result is a work product that does not purport to be a full forensic audit — just enough information an the opinion of experts, on the violations of statute and common law, ownership of the mortgage and note, and this is based upon the information received and what we are able to find without in depth research on each lender.

If you want to be certified by the Foreclosure Defense Institute to be a vendor that performs audits etc. you must be familiar the differences, between lender, servicer, pool trustee, mortgage broker, mortgage originator, depositor, appraiser, mortgage aggregator, investment banker, special purpose vehicle and have available expertise on your team with the following:

1. TILA

2. RESPA

3. HOEPA

4. Appraisal Fraud and its effect on APR

5. Securitization and its effect on ownership of the note

6. Qualified Written Request — see our blog entries

7. Rescission — 3-day, extended 3 year, fraud, common law.

8. Usury and legal limit on interest rates and exemptions

9. Table Funded Loans and finding the holder in due course.

10. Evaluation of results by an attorney, demand letters, and follow up by qualified group to negotiate with the “lender” or “servicer.”

As soon as we have qualifiled additional firms, they will appear here without guarantee just like everything else on this blog.

Mortgage Meltdown: Fixing Broken Mortgages — Getting New terms

CLINTON — MCCAIN FORECLOSURE FREEZE GETS COLD SHOULDER BUT SOUNDS GOOD

Well here is a version (SEE ARTICLE BELOW) of what we have been pushing for months —- changing the terms of the mortgages so that the homeowner can stay in the house and the mortgage can be modified, sold or recast for capital accounting. This is a lot more sophisticated than the “mortgage freeze” proposed by Clinton and McCain and it is working already so we can’t dispute the success.

  • The problem with a “mortgage foreclosure freeze” is that it is a sound bite that doesn’t really mean anything — like the gas tax holiday. It doesn’t address any of the problems but it gives rise to the illusion that the homeonwer is getting some relief.
  • The problem for Obama is that he sounds like he is against providing relief because he understands the nuances of how to get that relief — without pandering for votes. People don’t like nuance and don’t have the time for complex answers. So they vote against themselves based on sound bites, hoping gas prices will go down (they won’t) and that their house will be saved by just doing one thing like a freeze on foreclosures that lasts ninety days (that won’t work either).

There is no Clinton-McCain plan for relief because no order, legislation or rule is pending that will freeze anything and nothing is pending. Hillary and John are just blathering. They haven’t ACTUALLY proposed the plan by introducing a bill on the Senate floor. The plan of these pandering politicians is get elected (the people be damned): the method is to make use of time-honored sound bites that consist of misleading statements and outright lies. The truth is that neither McCain nor Clinton has a clue about gas prices or mortgages.

Although this trading of mortgage obligations is obviously providing some relief, it doesn’t address the root cause of the mortgage meltdown. And much as I don’t care for the people or their methods who perpetrated this fraud on the world, there is no REAL solution unless some value is restored to the balance sheet of financial institutions and investors who purchased the collateralized mortgage obligations. Thus combining attributes of this plan with a more comprehensive plan to restore the capital reserves of financial institutions and investors would be preferable.

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HOUSING

Investors move in to save broken mortgages

Homeowners who owe more than their property is worth are offered new terms.

By E. Scott Reckard
Los Angeles Times Staff Writer

May 1, 2008

Jared Lanning, struggling to pay a home loan on which he owed more than his house was worth, was thinking he might just let the lender take back the property. Then he got a call one evening from an Orange County investor who had bought his mortgage.

“I want out of your loan,” said the investor, Evan Gentry, chief executive of G8 Capital of Ladera Ranch, who offered to lower the balance and the interest rate.

Lanning, a crane operator in Englewood, Colo., was skeptical. A phone pitch, after all, had led to his getting the unaffordable loan in the first place. But Gentry was legit: He helped Lanning get a new Federal Housing Administration-insured mortgage — with a $12,000 lower balance. Gentry also paid $5,000 in closing costs for the new loan. Lanning’s new monthly payment is $200 less than before.

Investors — including big fish like former Countrywide Financial Corp. President Stanford Kurland as well as smaller fry like Gentry — are buying loans on the cheap from lenders who want them off their books. By paying less than face value for the mortgages, the new holders can modify loan terms, including shrinking the amount owed, and still make money.

With some economists projecting 2 million foreclosures this year, legislators and regulators are hoping to encourage wide use of this model. They want lenders and investors in mortgage bonds to mark down what borrowers owe and then provide them with lower-cost loans. It’s a tricky business: No one wants to be seen as bailing out speculative buyers or imprudent lenders, but they also don’t want mass foreclosures to devastate neighborhoods and the economy.

The Federal Deposit Insurance Corp. described the problem Wednesday as “a self-reinforcing cycle of default, foreclosure, home price declines and mortgage credit contraction, the likes of which we have not experienced since the 1930s.” The agency is proposing that the government lend $50 billion to 1 million borrowers to help them replace unaffordable loans.

Sub-prime mortgages with interest rates ratcheting higher have proved less of a problem than once feared, because interest rates overall have dropped. But a “toxic combination” of falling home prices and borrowers who can’t afford even the initial low rates on adjustable loans is now the issue, FDIC Chairwoman Sheila C. Bair said in an interview this week.

“Many more borrowers are under water,” she said. “And many more are just walking away.”

Many people bought homes with nothing-down loans at the peak of the housing boom — 29% of all buyers in 2007 made no down payments, Treasury Secretary Henry S. Paulson Jr. said recently. Others have sucked all their equity out of their properties with refinancings.

According to Moody’s Economy.com, some 8.8 million Americans — more than 10% of all homeowners — owe more than their houses are worth, although a Mortgage Bankers Assn. economist contended the figure was lower, perhaps 8%. In any case, there is wide agreement that many of those troubled borrowers have proved surprisingly ready to abandon their properties, even when lenders offer to modify their loan terms as they were encouraged to do by the Bush administration.

“We are working with borrowers to keep them in their homes, but a lot of them really don’t want to stay,” said Babette Heimbuch, chairwoman of FirstFed Financial Corp. of Los Angeles, a savings and loan operator that specialized in adjustable-rate mortgages, including many that were made without full documentation of borrowers’ incomes.

FirstFed has about $6.3 billion in loans on its books. It said that $667 million of that balance, more than 10%, was delinquent or in foreclosure as of March 31, up from just $46 million a year earlier. FirstFed said Wednesday that it lost $69.8 million, or $5.11 a share, during the first quarter this year compared with a profit of $8.4 million, or 61 cents, a year earlier. It set aside $150.3 million for loan losses during the quarter, up from $3.8 million during the first quarter of 2007.

Because FirstFed kept most of its loans on its books rather than selling them, it should have been easier for the company to work with borrowers to modify the loans. Heimbuch said FirstFed forecloses only after analyzing 10 other options to offer the borrower, including lowering the interest rate; changing to a five-year, fixed-rate loan requiring payment of interest only; and writing down the loan balance.

Still, she said, up to 50% of borrowers who miss payments don’t respond to letters and repeated telephone calls to see if something can be worked out.

Some customers had acquired second mortgages and couldn’t make new arrangements with the other lender, she said. “I think some know they told us the wrong income and are afraid to come clean, though we would still work with them . . . to keep them in their homes if possible.”

For struggling borrowers, it’s a big mistake not to return such calls these days, said Gus A. Altazurra, a veteran mortgage executive who recently raised $10 million from private investors to buy and modify loans for which homeowners are still making payments.

“They’re probably going to help you, given the current situation,” said Altazurra, whose Irvine-based Vertical Fund Group has been negotiating with lenders of all sizes to buy loans. He said “a flood” of mortgages went up for sale in April after lenders closed their books on a horrendous first quarter.

Altazurra, who has paid as little as 31 cents on the dollar for some loans, said the terms of some mortgages made at the peak of the boom were hard to believe. One loan he bought from a Texas bank was to a borrower with a very low credit score — 484 — who refinanced and cashed out 100% of the equity in the property, he said.

Gentry, the other Orange County loan buyer, said he had obtained commitments from investors to provide $100 million in capital for workouts on loans that have stopped paying, current loans that can no longer be sold and foreclosed properties. He has bought nearly $50 million in mortgages and property so far.

Gentry purchased Lanning’s loan in a pool of mortgages from a San Diego lender that was going out of business. He said that on average his private venture was paying 70 cents to 80 cents on the dollar for loans like Lanning’s that were still current, and “less if the loans are nonperforming.”

Lanning had no home equity left — and thus had little incentive to keep sacrificing to make payments — before he got the smaller, cheaper FHA loan. Now his outlook has changed.

“We can’t do anything frivolous now,” he said. “But if we do it right, we have enough. That other loan was just pushing us over the top.”

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