Settlements/ Servicers

Posted by kevin on March 9, 2015 under Foreclosure Blog | Comments are off for this article

Over the last few years, the major players including Bank of America, Citigroup, Goldman Sachs, JPMC, Morgan Stanley and Wells Fargo, have agreed to over $63 billion to settle cases involving mortgages or mortgaged backed securities. Just last week, the courts gave final approval to BOA’s settlement of claims related to Countrywide. The price tag was $8.5 billion. Two major cases are up for final approval in the next month- JP Morgan Chase and Wells Fargo.

I heard Bill Maher ravage Chris Christie because he settled a supposed $8.9 billion claim against Exxon Mobil for $225 MM. But, isn’t that settlement comparable to the settlements that DOJ has gotten against the major banks for taking down the economy. The $25 billion dollar settlement dealt with claims in excess of a trillion dollars. Moreover, the details of those settlements often indicate that the payments or credits to be made by the banks was illusory. In NJ, the vast majority of mortgage modifications or forgiveness was on second loans that were completely underwater. So, the banksters “forgave” loans that they had long written off, and got credit toward the settlement 100 cents on the dollar.

Sorry for the rant.

Although many publications say that mortgage foreclosure litigation is winding down, and that it is getting progressively more difficult to get a down the middle ruling, the next battlefield is going to be in the area of mortgage servicing. TILA (Truth in Lending) and RESPA (Real Estate Settlement Procedures Act) and the 2014 regulations administered by the CFPB open the door a bit to smack servicer violations. Figure that door is open as long as the Democrats control the White House. I suspect that federal district court judges will not be happy with the prospect of these cases, but the regs do provide a private right of action with attorneys fees.

We’ll see.

Happy Anniversary Follow Up

Posted by kevin on November 29, 2014 under Foreclosure Blog | Comments are off for this article

In my previous blog, I told of a mortgage modifcation application that is pending for over a year. For me, the telling point of the whole episode was when the point of contact person told me that Freddie Mac owned the loan. Brought back chilling memories.

A few years back (before Guillaume), I got a case dismissed on the day of trial for failure to comply with the Fair Foreclosure Act (Notice of Intent requirements). The Judge held open the dismissal so that my clients could go to mediation which is what they wanted. (Note that my other argument was that plaintiff sold the note to Freddie Mac and therefore lacked standing. In chambers, my adversary vehemently denied that charge.)

Well, we were assigned a HUD counselor (who was excellent) and started the process. The mediator was nice but powerless as all mediators are in the NJ program. The mediators basically defer to to the servicer who runs the show other than scheduling. Note that unless something very egregious happens, the judges do not get involved. I have heard stats at meetings that 35% of the parties in mediation get mods. I think they get those numbers from the same place that they get the Obamacare enrollment numbers.

At any rate, at the first session, we are told that Freddie Mac was not ready to proceed. So much for the veracity of my adversary. By session 6 we were still getting nowhere since Freddie Mac said it was not ready to make a decision. In a letter to my clients and the HUD counselor, I suggested that the only way that we would be able to get a reasonable decision was through escalation. That is the fancy term that MHA uses for an appeal. At the 8th or 9th session (about 10 months into the process), Freddie Mac turned my clients down with some bogus rationale. I was terminated by frustrated clients, and the clients then went the escalation route with the counselor where they finally got their mod well after a year into the process.

Traditionally, judges in NJ have been excellent at the arm twisting and sausage making that goes into the settlement process. For some reason, however, State court judges have shown a reluctance to jump into the settlement fray on foreclosures. Why? I do not know. But one thing I do know is that if those judges took their usual hands on attitude toward settlement, there would be a lot more loans being repaid, while at the same time court calendar’s would become more manageable. But what do I know? I’ve only been doing this for 35 years.

Ocwen Settlement

Posted by kevin on December 24, 2013 under Foreclosure Blog | Comments are off for this article

The federal government and the AG’s from 49 states including NJ announced a $2.1 billion settlement with Ocwen Financial Services and Ocwen Loan Servicing. In New Jersey, Ocwen will provide troubled borrowers with an estimated $151 million in loan reductions. Moreover, over $2MM is being set aside for cash payments to borrowers who were already foreclosed on (great deal for Ocwen and its lenders- they get the house and the homeless borrower gets a whopping $1,000 or a little more if less homeowners sign up for the deal).

Among the charges against Ocwen Financial Corporation and its subsidiary, Ocwen Loan Servicing, were charging unauthorized fees, misleading borrowers about alternatives to foreclosure, providing false or misleading information about the status of accounts, denying loan modifications to eligible homeowners and filing robosigned documents with the courts (you mean those certifications filed with the courts by the servicers and the lender’s attorneys are fugazies ? I’m shocked.)

In addition, Ocwen will be subjected to the the so-called heightened standards of the Consumer Financial Protection Bureau.

As I have said in previous blogs, HAMP 4.1 is better than previous HAMP roll outs. I get a fair amount of decent modification offers, but I get some insulting offers as well and servicers still play games. With this settlement still fresh in Ocwen’s corporate mind, I would surmise that in the next few months anyway, Ocwen will probably be offering pretty decent modifications.

So, if your loan is serviced by Ocwen, you may want to look into this or retain counsel to look into it.

Merry Christmas to all.

BOA Settles W/ Freddie

Posted by kevin on December 4, 2013 under Foreclosure Blog | Comments are off for this article

Freddie Mac buys mortgage loans either for its own portfolio or for sale to investors. Under the terms of these purchases, Freddie has the right to put back the loan to the originator if it is found that the loan does not meet the standards set forth in the purchase agreements. The so-called “put back” loans defaulted because, for the most part, the loans were made to people who could not afford to repay them. That is the essence of predatory lending.

As of September, 2013, Freddie Mac had $1.4 billion in put back loans that were previously owned by BOA, and they wanted BOA to take them back. The settlement reached has Freddie Mac receiving $404 million.

This is not the first time that BOA has settled with Freddie Mac. In January, 2011, BOA made a $1.35 billion settlement over loans sold by Countrywide which was acquired by BOA in 2008. Moreover, BOA recently settled with Fannie Mae for over $11 billion.

Why is BOA settling for these vast sums of money? Well, the standard line is that they want to cut litigation costs and move on. While both statements are technically true, my take is that a primary motivating source in the settlements is that BOA (and other settling banks) does not want the government conducting a methodical and in depth investigation into its lending practices. That would uncover “irregularities” that make everything else look like child’s play.

Let’s play a little detective. Did you ever ask why there was widespread robo-signing of documents which included everything from people signing other people’s name on endorsements and assignments on thousands of documents to outright forged endorsements. I would say the question is, why were these notes not endorsed at the closing or shortly thereafter? I mean, the banks and investment houses had all the best legal minds in their stables telling them exactly what to do and when to do it. Do you really believe they all collectively dropped the ball on doing something as simple as signing an endorsement on a note or signing an assignment of mortgage?

I have been in the trenches for 4 years fighting foreclosures. I have seen a lot of “stuff”, both from the banks and the courts. Perhaps, I have become a bit jaded. But one question that I ask, over and over again, is, ‘was there a reason that the banks and investment houses allegedly did not endorse notes until they were robo-signed just before the foreclosure action was filed? Well, here’s one theory. Banks and investment houses are required to borrower billions of dollars daily at the repo desk. To get their hands on that kind of money, they have to put up collateral. A note that is endorsed to someone else or in blank cannot be used for collateral. But if, by chance (or not by chance), you had notes that were made out to you but not endorsed to a third party or in blank, perhaps, just perhaps, those notes could be used as collateral at the repo desk. Who would know the difference?

That would be a massive fraud. It would make Bernie Madoff look small time. Now, I am not saying that this happened. But, what I am saying is that there has to be a reason that BOA and other banks and investment houses are paying millions and more often billions of dollars in settlements, right and left. There has to be a reason that they do not want any in-depth discovery of their paperwork or e-work. It is not because of a few predatory loans.

Think about it. Then ask yourself, why aren’t the courts and the feds asking this same question?

MBIA Settlement

Posted by kevin on May 9, 2013 under Foreclosure Blog | Comments are off for this article

Historically, MBIA wrote insurance on municipal bonds. It made good, but not spectacular, money for years. In the early 2000’s, however, it saw how much $ AIG was making on insuring mortgage backed securities (“MBS’s”), and wanted in. To induce investment in MBS’s, the sponsor would offer insurance or credit default swaps to investors. MBIA would be paid a premium to issue that insurance. An easy way to make lot’s of money because the MBS’s were rated triple A by S&P, or other rating agencies. However, notwithstanding the triple A rating, the mortgages that backed the MBS’s were ticking timebombs which started to go off in 2007. The results were disasterous for companies like MBIA.

Countrywide (“CW”) was one of the leading purveyors of toxic mortgages. It sold many of its loans to securitized trusts. MBIA wrote the insurance on these MBS’s. When the proverbial s*%t hit the fan, MBIA had to pay out about $3 billion in claims. By that time, Bank of America (“BOA”) had bought out CW. MBIA sued BOA on the grounds that the representations and warranties made in the various prospectuses that securitized CW mortgages were nothing but a pack of lies. These were not safe investments made to well qualified borrowers. They were predatory loans that should never have been written in the first place. After years of litigation, BOA agreed to pay MBIA $1.7 billion the case.

A victory? For MBIA, yes. But what about the average borrower who got screwed by CW? I mean CW lied to MBIA and the investors about the quality of the loans. Borrowers were lied to or taken advantage of by CW who put the borrower in loans that the borrowers could not afford. Without the underlying bad loans, there would be no MBS’s, no investors, and no insurance or credit default swaps. So, does the borrower have a new defense that the various chancery judges in NJ will be eager to enforce?

Don’t bet on it. I am afraid that most Jersey judges will ignore the argument on the grounds that the borrowers do not have standing to raise the breach of warranty issue because the borrower is not a party to or a third party beneficiary of the Pooling & Servicing Agreement (“PSA”). That’s precious considering that the breaches of warranty and misrepresentations deal with the underlying loans made by the banks to the borrowers. Without borrowers, there would be no representations and warranties.

We have lots of laws, but who do they protect?

Blessing in Disguise?

Posted by kevin on April 4, 2013 under Foreclosure Blog | Comments are off for this article

In a prior blog, I informed you that the mediation program was being cut back because it ran out of funds. Bad thing, right? Well, my grandmother used to tell me that God closes one door only to open another. I am hoping that is the case with the mediation program.

As my website states, we fight foreclosures. Why? Because we like to fight? We hate the lenders? We live to litigate? No, because by pushing back, we hope to get a better settlement.

There is certainly room for settlement. Properties all over NJ are underwater, particularly in urban areas in Passaic, Hudson and Essex Counties. People from all over NJ got mortgages that they could not afford based on inflated property values that may or may not have been legit in 2006, but certainly bear no resemblence to reality in 2013. In other words, you may owe $500,000 on a house that is worth only $300,000. If the lender throws you out on the street in a foreclosure, then the lender has to sell the property. No one today will pay more than $300,000 (and probably less) for a property whose fair market value is $300,000. It is irrelevant that $500,000 is owed. Moreover, many of my clients don’t want to make a deal where they owe twice what the house is worth because it will take 20 years to dig out. So, why don’t the lenders make a deal based on fair market value? (I have theories on that which I will share with you in future blogs- but let’s stick with this point.)

One of the reasons for lender intransigence is that their lawyers perceive that the courts are not beating them over a head with a hammer to be reasonable. Up until now, the judges have been pretty much invisible in settlement negotiations. Now, I am not blaming the judges entirely. Chancery judges got hit with a tsunami of foreclosure lawsuits with little help. They were buried. The mediation program pretty much sidestepped the judges, who historically have been the architects of settlement in the NJ court system. Mediators try hard but the lenders know that they have no teeth. So, in effect, the lenders or, more appropriately, their servicers have taken over the process and not for the benefit of the borrowers.

Now, mediation is in trouble. There is no funding for lawyers helping borrowers or HUD counselors. Pretty soon there will be no money for mediators. How can that be good? I’ll tell you. If no one else is left, the judges will be forced to step into the fray. Just yesterday at a discovery conference, a judge in Bergen nearly floored me when he said that he is available for settlement conferences. Believe me, I have not heard that often in the last 3 years. In the Guillaume case, the Supreme Court said that, historically, chancery judges have the power and flexibility to make case by case determinations relating to the Fair Foreclosure Act. Why not use that power, experience and flexibility to effect reasonable, practical settlements?

Maybe the right door will open.

JP Morgan Settlement?

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

On October 2, 2012, I blogged that the NY AG, Eric Schneiderman, sued JP Morgan, purchaser of the imploded Bear Stearns based on BS’s sale of mortgage backed securities. Yesterday, it was reported that the SEC’s staff recommended settlement will with JP Morgan based on the BS mortgage backed securities and will not bring charges against individuals. The dollar amount of the “slap on the wrist” has not been set but JP Morgan will not be required to admit to any wrongdoing. Looks like an investigation into the same areas that Schneiderman is tackling in his lawsuit. How will this impact on the Schneiderman lawsuit considering that Schneiderman and SEC enforcement chief, Robert Khazami, are both on the federal mortgage task force that President Obama announced with great fanfare at his last State of the Union message (but did nothing until just before the election..

What is the purpose of the various investigations? Is it to make a news splash and then get some settlement money out of the “too big to fail” banks that pretty much ruined our economy. Or is it to get to the bottom of this mess, gets the facts and punish the wrongdoers? It looks like the SEC staff does not have the stomach to do the latter. Where do these staff members go to work after they leave government service? I hate to sound cynical but I am sure that it is not some consumer non profit.

So, what is going to happen with the lawsuit brought by Schneiderman? Another quick settlement with check written but no real investigation and no punishment of the bad guys? We shall see. It would be a shame if Schneiderman follows suit with the SEC staff.

Educated Consumer Can Save her Home

Posted by kevin on September 6, 2011 under Foreclosure Blog | Comments are off for this article

If you have been checking into this blog with any frequency, you know that we are providing both facts and comments on what is happening in foreclosure defense, especially in New Jersey.  We are giving you cutting edge information- what the law is and where it is going; what settlement strategies are bearing fruit; how the trial courts are reacting to issues and how the appellate courts are reacting to the trial courts.

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