Wells Fargo Robosigning

Posted by kevin on March 16, 2014 under Foreclosure Blog | Comments are off for this article

Back in February, 2012, the six largest servicers entered into a $25 billion settlement with the US DOJ and the AG’s from 49 states. Thank god. No more robo-signing. No more servicer fraud. A great day for the consumer.

Not really. I started to see evidence of robo-signing after that “historic” settlement. In fact, almost all endorsements now are on allonges, and all the allonge forms are identical irrespective of the lender. What a coincidence. I am sure that Judges who saw hundreds of these “new” allonges made the same observation. One could only hope that those observations were made on the record.

Moreover, the $65-70 million earmarked to reduce principal on NJ mortgages never really materialized. I had heard from HUD counselors that the banks were walking away from underwater second mortgages (which they would have done anyway) and getting credit toward their share of the $65-70 million.

So, my take was that the $25 billion settlement may not have been a total canard, but certainly was a lot less than met the eye

Last week, in a case pending in the federal district court for the Southern District of New York, the borrower’s counsel made reference to a 150 page Foreclosure Attorney Procedures Manual which, according to the NY Post, details a procedure for processing [mortgage] notes without endorsements and obtaining endorsements and allonges. That would be fraud on a massive level. However, a Wells Fargo spokesman denied that the manual could be used to order improper documents, and admonished the public not to believe their own lying eyes, but to take WF’s word for it. Well, at least I can now sleep peacefully.

I have a few WF cases. I also have access to the manual. The next few nights of reading may prove very interesting. If so, the next few months in discovery will be worth the price of admission. I plan to take depositions including attorney depositions in the proper cases. Stay tuned. I look forward to reporting back to you

JP Morgan Settlement Finalized

Posted by kevin on November 23, 2013 under Foreclosure Blog | Comments are off for this article

Periodically, we have been tuning in to the negotiations between the Justice Dept and JP Morgan Chase (“JPMC”). It is clear that JPMC wanted to settle to put a cap on its liabilities and to probably also to keep from the public damaging information about the types of loans it was making, servicer improprieties, and robo-signing issues (although technically part of $25 Billion settlement, chance that negative info could have come out in discovery). At any rate, this past Tuesday, the deal with the Justice Dept (which included pro-active States) was finalized for $13 Billion. Here is the breakdown:

$4 Billion to help struggling homeowners of which $2 Billion to lower principal balances and $2 Billion for other homeowner relief including lowering interest rates;
$4 Billion to FHFA for questionable loans sold to Fannie and Freddie;
$1.4 Billion to National Credit Union Administration;
$300 Million to California AG;$515 Million to FDIC;
$2 Billion to Justice Dept.
$300 Million to California AG;
$20 Million to Delaware AG;
$100 Million to Illinois AG;
$34.4 Million to Massachusetts AG; and
$614 Million to NY AG.

(Nothing for NJ because we have been less than pro-active in this fight (as we were in the Revolutionary War and Civil War- but let’s not get into that). The deal does not include a “get out of jail free” pass for possible criminal activity.

In addition, on November 15, JPMC agreed to pay $4.5 Billion to an investor group including Black Rock, Goldman Sachs Asset Management, LP and others based on sale of securities by JP Morgan and Bear Stearns.

Now, if these settlements were based on bad loans sold by JPMC to investors or Fannie and Freddie, how come the loans that backed up these securities are not viewed as equally bad? On the positive side, however, money is available for settlements. Although servicers still dance borrowers around during the modification process (and that is not going to change dramatically no matter what MHA says), we believe that Borrowers with JPMC, or Bear Stearns loans should actively pursue modification. The money is there.

States Not Using $25B Settlement Money to Help Homeowners

Posted by kevin on October 22, 2012 under Foreclosure Blog | Be the First to Comment

In February, 2012, 5 Too Big to Fail banks, the federal government and 49 of the States announced a $25B settlement of the “robo-signing” investigation. From this settlement, States recently received $2.5 billion from the major banks for foreclosure prevention and related help for homeowners. But much of that is not being used for those purposes.

So what is supposed to happen to that money?

The answer to that should be found in the Consent Judgment, the document signed by all 49 states, the federal government and the banks, AND by the federal judge approving the settlement. Actually there are five consent judgments, one for each of the banks, but all containing identical language for our purposes. This language says:

“To the extent practicable, such funds shall be used for purposes intended to avoid preventable foreclosures, to ameliorate the effects of the foreclosure crisis, to enhance law enforcement efforts to prevent and prosecute financial fraud, or unfair or deceptive acts or practices and to compensate the States for costs resulting from the alleged unlawful conduct of the Defendants. Such permissible purposes for allocation of the funds include, but are not limited to, supplementing the amounts paid to state homeowners under the Borrower Payment Fund, funding for housing counselors, state and local foreclosure assistance hotlines, state and local foreclosure mediation programs, legal assistance, housing remediation and anti-blight projects, funding for training and staffing of financial fraud or consumer protection enforcement efforts, and civil penalties.”

(See pp. B-2 and B-3 of Exhibit B of the Consent Judgment.)

But the money is not being used for these purposes in many states, according to two different sources.

A report by Enterprise Community Partners called $2.5 Billion: Understanding How States are Spending their Share of the National Mortgage Settlement says that “despite the language contained in the settlement, a number of states have diverted the settlement funds away from housing and foreclosure prevention activities.”

A more recent article by ProPublica, the independent investigative organization, is titled “Billion Dollar Bait & Switch: States Divert Foreclosure Deal Funds.” Its analysis concludes that “[s]tates have diverted $974 million from this year’s landmark mortgage settlement to pay down budget deficits or fund programs unrelated to the foreclosure crisis… . That’s nearly forty percent of the $2.5 billion in penalties paid to the states under the agreement.” This interactive map and table shows each state’s use of the funds.

How can this happen? Easy. No one has the public’s back on this. Why? Because one must conclude cynically that the real purpose of the settlement was not to help the people but to help the big banks. It was the big bank’s that bought off a huge potential liability for a few pennies on the dollar. Now that the States have some of that money in their hands, who is there to protect the borrowers that need help to save their homes? You would think, their elected officials. However, it appears, that for the most part, this may not be the case.

Servicer v Lender

Posted by kevin on May 13, 2012 under Foreclosure Blog | Comments are off for this article

A couple of months ago, we informed you that the various Attorneys General entered into a settlement with the 5 largest servicers over robo-signing and other servicing irregularities. In the next few posts, I want to explain to you the terms of the settlement. However, before we can get into the details, we need to understand the basics. Why was the deal made with servicers and not lenders?

What is a servicer and how does it differ from your lender? It is not always clear. In fact, most borrowers think that their servicer is actually their lender. If you go on the Freddie Mac website, a borrower is advised to contact its lender for details and then in parentheses it says (servicer). So, Freddie Mac is acknowledging the confusion.

A lender is the entity that gives the borrower the money or buys the loan from the original lender. A servicer is an entity that collects your mortgage payments on behalf of the lender and distributes those payments pursuant to the terms of the loan agreements. In the old days (before 1970), the entity that lent you the money actually collected your payments and did the bookkeeping associated with your mortgage loan. So, the lender and the servicer were one and the same.

For purposes of this paper, let’s refer to the lender as a bank. Historically, the bank made a mortgage loan and made its money, primarily, on interest payments. They serviced their own loans; that is, they collected the money, paid the taxes and insurance, performed the paperwork, and dealt with any defaults on the loan by foreclosure or otherwise.

With the advent of Fannie Mae, Freddie Mac, and later private securitizations, however, a marketplace was set up where banks could sell their mortgage loans to investors. By selling their loans, the bank would get most, if not all of its money back, and thereby have money to make more loans. So, instead of making its money primarily from interest payments, banks started to become involved in high volume lending and made the bulk of their money on first mortgages on the fees that it charged to the borrowers. Those fees included application fees, points, credit report fees and the like.

When banks started selling their loans, they quickly noticed that investors who wanted to buy the income stream of the mortgage notes did not necessarily want to collect the payments each month and perform the paperwork. But banks, especially large banks, had the infrastucture already in place to do the servicing. So, what happened? The banks that sold the loans to investors, in some cases, made a deal with the investor to service the loans that it sold- for a fee.

Now to finish off the scenario, many large banks did not sell all their loans. For the most part, large banks retained or held their second mortgages. In this circumstance, the bank acted in the like it did in the old days- it was both lender and servicer.

How did the servicers get involved in the 25 Billion dollar settlement? Well, although foreclosures are supposed to be brought in the name of the lender, the reality is that the servicer is the entity that deals with the defaulted loan. The servicer is the one that calls or writes to the borrower to find out why payments have stopped and whether the loan could be put back on track by modification, forbearance, short sale or the like. In addition, it is the servicer that has all the information necessary to prosecute the foreclosure. So, the servicer usually hires the lawyers, appraisers, real estate people, litigation support companies and the like on the behalf of the lender. And it was the servicer that was involved in all the shenanigans relating to robo-signing, lost notes, improper charges, fraudulent endorsements and more which were being investigated by the various AG’s and led to the 25 billion dollar settlement.