Bank of America- Jury Weighs In

Posted by kevin on October 28, 2013 under Foreclosure Blog | Comments are off for this article

This past week, a jury in Manhattan found Bank of America (BOA) liable for mortgage fraud. BOA, as successor to the infamous Countrywide Home Loans, was found to have fudged its system for detecting bad loans which were sold to investors. They even had a name for the scheme- High Speed Swim Lane- acronmym “Hustle”. 57% of the Swim Lane loans defaulted, and the government claimed that 43% of the loans were defective or fraudulent. In addition, the jury found Rebecca Mairone, who oversaw the program, liable. Just an aside- when you call a loan program “Hustle”, I think that you are flirting with danger.

Now, these loans were originally Countrywide Loans which were sold to investors through Fannie and Freddie. BOA bought Countrywide in 2008 for $2.5 billion. The Hustle program ended just prior to the purchase. The case is entitled US ex rel O’Donnell v. BOA, et al because the case stems from a whistleblower action brought by former Countrywide executive, Edward O”Donnell. The penalty phase of the case will be going forward. The government is looking for a shade under $1 billion in damages. Because fraud is involved, the Judge could tack on punitive damages and fees.

This case is significant for two reasons: first, we are talking about a jury verdict. What we commonly see is a settlement usually way before trial to reduce costs to the bank and , more importantly, with no admission on the part of the bank of liability or wrongdoing. Second, the verdict is against the bank and an executive. It puts a face on the wrongdoing. Moreover, it will have a strong chilling effect on bank executives who are actively involved in hustling the public and even those that just look the other way when wrongdoing is rampant.

The case was brought under the FIRREAA. This was a statute that was promulgated during the Savings & Loan crisis of the late 80’s and early 90’s. The benefit is that the statute of limitations is 10 years. BOA may take the case up on appeal to challenge the applicability of that statute more so to attack the long statute of limitations.

Clearly, a victory for the investors and possible all consumers since we have a jury verdict on fraud. How NJ judges will consider this fraud when dealing with borrowers is another question. Borrowers and investors are two sides of the same coin. If borrowers did not get the predatory and often fraudulent loans, investors would not be sold those same loans. It is rather incongruous that courts blame the banks for the loans vis-a-vis the investors, but blame the borrowers for taking the bad loans as opposed to the originating lenders for granting them.

Freddie Mac Streamlined Mod

Posted by kevin on August 7, 2013 under Foreclosure Blog | Comments are off for this article

Effective July 1, 2013, Freddie Mac came out with its Streamlined Modification program. It applies to loans that are more than 90 days but less than 720 days delinquent. It does not require financial information.

According to the Guide, the servicer is supposed to solicit applications for the program. If an application is filed by the borrower and he or she otherwise qualifies, the servicer obtains a Broker Price Opinion (we generally refer to that as a Comparative Market Analysis (“CMA”), but a BPO is not required for a manufactured home or 2-4 family homes. Once the analysis is completed by the servicer, a trial payment plan is sent to the borrower. If all payments are made timely during the three month trial period, a permanent modification is given.

Say you had a HAMP mod proposal pending on the effective date, and your servicer sends you an invitation to the Streamlined Modification program. You apply for a streamlined mod and get it. You also get a regular HAMP modification. In that case, you get to keep the modification which is most beneficial to you and your family.

As part of the streamlined mod process, Freddie Mac is sending out to servicers a new software package called Workout Prospector which was supposed to be available July 15.

One caveat. Under the streamlined mod program, the servicer is required to offer a mod that is better than what you are currently paying. There is no provision that it must be a minimum of 10% better or that it is tied into your ability to pay. So, if you are currently paying $3000 per month P&I, a reduction to $2950 is deemed an acceptable mod. Clearly, with substantial arrearages, a de minimus reduction such as the example is not going to help anybody.

NO DOC sounds good on its face. Certainly, it is easy. But without your financial data, how does Freddie know whether the mod offer is affordable? Isn’t a predatory loan one that the borrower cannot afford to pay based on his or her income? I am concerned that the streamlined mod program may give us a slew of predatory modifications.

Let’s see how this plays out.

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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