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But she also revealed in some instances, they would be final. In some cases, a borrower would not be able to bring future claims against the servicer if he or she takes the payout.”

I don’t think the American people are going to continue to endure these hardships when they realize that the banks are getting paid over and over again for the same non-existent mortgages securing the same defective promissory notes evidencing the same fraudulently induced obligations. Neil Garfield,

EDITOR’S COMMENT: Whether it is through the deal with the attorney generals, or through the modification process or now, through the OCC review process, the Banks are hell-bent on getting amnesty for their infuriating behavior. They will try to slip in language to almost anything you sign to get you to waive rights against them or to have them deemed waived, creating one more layer to penetrate when you go to court. It’s a good strategy for the Banks and a really bad idea.

No matter how you cut it, we are still dealing with a process in which the assumption is that the problem was just a “paperwork” issue. It was not. The main problem is well known to the banks involved in the securitization scam. And now they are trying to get it solved in the settlement with the attorney generals — leaving the rest of the country to deal with the Great Title Crisis in the years to come.

The main problem is the loan origination. It broke all the rules and everyone knows it. They used straw-men without disclosing even the possibility that there was a principal much less identifying the principal. They cooked the applications and gave loans out knowing and hoping they would fail so they wouldn’t have to account for how much money they stole from investors before the loan failed.

Under existing law there is a high probability that the mortgages were never perfected into liens, and so the loans are unsecured obligations that can be discharged in bankruptcy, with the homeowner keeping the property if homestead laws permit it. There is an equally high probability that the loan has already been converted into unsecured obligation by virtue of rescission that many homeowners sent to servicers and “lenders” which were routinely ignored.

What they are trying to do is to give value to figures on their balance sheets which right now are made out of smoke and mirrors. And in their process, the transfer of wealth from the middle class and now some new “poor” people has been catastrophic to the nation and the world. The truth is that they used other people’s money to fund the mortgages and pocketed a substantial portion of the money advanced by investors instead of using it to fund mortgages. They had no losses but they got insurance and federal bailouts.

Everything that is happening in the courts, in regulatory actions, and in politics and the press is essentially missing the point. They are based upon false premises. And maybe it will indeed work out for them in the end. But I don’t think the American people are going to continue to endure these hardships when they realize that the banks are getting paid over and over again for the same non-existent mortgages securing the same defective promissory notes evidencing the same fraudulently induced obligations.


A mortgage servicer may be granted a waiver from future claims depending on what sort of remediation a borrower gets from the foreclosure reviews conducted under federal consent orders.

Independent consultants, approved by the Office of the Comptroller of the Currency and the Federal Reserve, will review nearly 4.5 million foreclosure files over the next several months. They will be looking for any harm caused by improper practices uncovered last year.

The OCC, Federal Reserve and the 14 largest servicers are working out how to pay for any borrower claims for which consultants find the banks culpable. OCC Chief Counsel Julie Williams faced down skeptical lawmakers in a Senate subcommittee hearing Tuesday, pledging the consultants were independent and that the reviews would be thorough.

But she also revealed in some instances, they would be final. In some cases, a borrower would not be able to bring future claims against the servicer if he or she takes the payout.

“There could be situations where it may be sensible where a servicer gets a waiver. If the borrower gets the home back, expenses paid, maybe a lump sum payment on top of that, for a package of remediation like that, a waiver would be appropriate,” Williams said, adding that borrowers would be able to make that decision before agreeing to the deal.

A mailing campaign began Nov. 1. Borrowers who went through the foreclosure process at some point in 2009 or 2010 are eligible to apply by April.

It’s still unknown how any borrowers affected by the problems will be paid. The OCC provided 22 examples for what would constitute a “financial injury” (found on page 13 of Williams’ testimony).

But on the form filled out during the claims process, borrowers will have other options.

“The way the form is designed is it clusters some specific questions around the injury guidance,” Williams said. “But there is a portion of the form where the borrower can tell their story. What we want is the borrower to tell their story for how they were injured, and we will certainly try to get the message out about those.”

Anthony Sanders, a professor of finance at George Mason University, was concerned about the cost and time spent during the reviews, which may not net very many actual claims. He estimates the reviews will cost more than $11 billion if costs $2,500 per loan file. He said he expects less than 100 instances of wrongful foreclosures on military members and less than 50,000 modification errors would be found.

“In terms of technical errors (such as robo-signing), it is difficult forecast how many there will be, but technical errors like robo-signing should not result in any financial harm to borrowers since they would be foreclosed upon after the documentation error is corrected,” Sanders said in testimony.

It is still up in the air how borrowers would be compensated for robo-signing, the term used to describe how servicers and their third-party firms signed foreclosure affidavits en masse without review of the loan documentation.

According to Williams’ testimony, one of the examples of financial harm would be when “the servicer was not the proper party, or authorized to act on behalf of the proper party, under the applicable state law to foreclose on the borrower’s home, and this resulted in or may result in multiple foreclosure actions or proceedings.”

Konrad Alt is the managing director for Promontory Financial Group, which is conducting the reviews for Wells Fargo (WFC: 25.94 +0.58%) and Bank of America (BAC: 5.2311 -1.67%). He said they are still waiting on direction from the OCC on whether robo-signing would result in a pay out to the borrower.

“Many things can go wrong with a mortgage or a foreclosure, and reviewing a particular file to ascertain what if anything did go wrong can be both difficult and time consuming,” Alt said.

The OCC did not disclose any past history between the consultants and the servicers but Williams did assure the subcommittee it caught any conflicts of interest. The Fed has not released engagement letters, yet.

Chief Counsel Scott Alvarez said in written testimony he expects the Fed “to disclose significant portions of the final engagement letters, consistent with the need to protect proprietary financial information and personal privacy.”

“We believe we are independent,” Alt said. “Our entire business model is based on independence not only in this instance but in all instances. If we fall short in this manner it would be fundamentally detrimental to our long-term success.”

Lawmakers on the subcommittee were not convinced the reviews will be transparent nor fair enough. Foreclosures will continue for those borrowers still in the process while being considered for remediation, and some senators were concerned the servicers were given too much room when choosing the consultants.

“The last thing homeowners need after so many challenges is one more process where there’s not full and accurate disclosure. The failure to stop the foreclosure process while saying there may be a remedy is a continuation of this,” said Sen. Jeff Merkley, D-Ore. “It’s disturbing.”

Write to Jon Prior.

Follow him on Twitter @JonAPrior.




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SEE MANN order_br_cally_so_dist_salazar_vs_us_bank_denying_mfrs_mers_4_11_2011

Bankruptcy Judge Margaret M. Mann GETS IT!

1 Posted by Dan Edstrom on April 12, 2011 at 8:19 pm

Bankruptcy Judge Margaret M. Mann GETS IT!

By Daniel Edstrom
DTC Systems, Inc.

Coming off of the heels of in re: Agard (, the Honorable Judge Mann from the United States Bankruptcy Court Southern District of California took 76 days to review the Motion for Relief From Automatic Stay for the in re: Salazar Chapter 13 bankruptcy (Bankruptcy No: 10-17456-MM13).   The findings of fact and conclusions of law were an amazing reading that confirms many of the issues we have been discussing in regards to loans, securitization and foreclosure.  Like Judge Grossman in the agard case, Judge Mann goes to great lengths to research the details that are applicable to this case.   Here are some highlights:

  • Assignments must be recorded before the foreclosure sale

  • Civil Code Section 2932.5 applies to Deeds of Trust

  • Recorded assignments are necessary despite MERS’ role

  • The Gomes case does not apply [to the Salazar case]

  • US Bank or MERS cannot contract away their obligations to comply with the foreclosure statutes

  • As a matter of law, Salazar’s acknowledgment cannot be read as a waiver of his right to be informed of a change in beneficiary status.

  • MERS System is not an alternative to statutory foreclosure law

  • US Bank as the foreclosing assignee was obligated to record its interest before the sale despite MERS’ initial role under the DOT, and this role cannot be used to bypass Civil Code section 2932.5.  Since US Bank failed to record its interest, Salazar has a valid property interest in his residence that is entitled to protection through the automatic stay

  • Cause does not exist to grant relief from stay

  • Denying relief from stay at this time is the least prejudicial option for both parties


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