06/21/2010 | FORECLOSURE FRAUD | by DinSFLA

Archive | June 21st, 2010

Inflated House Value the MAIN SOURCE in Lawsuits against Banks

Inflated House Value the MAIN SOURCE in Lawsuits against Banks

Another SMASHING article by The NyTimes Gretchen Morgenson! Outstanding work!

Fair Game

The Inflatable Loan Pool

By GRETCHEN MORGENSON Published: June 18, 2010

AMID the legal battles between investors who lost money in mortgage securities and the investment banks that sold the stuff, one thing seems clear: the investment banks appear to be winning a good many of the early skirmishes.

But some cases are faring better for individual plaintiffs, with judges allowing them to proceed even as banks ask that they be dismissed. Still, these matters are hard to litigate because investors must persuade the judges overseeing them that their losses were not simply a result of a market crash. Investors must argue, convincingly, that the banks misrepresented the quality of the loans in the pools and made material misstatements about them in prospectuses provided to buyers.

Recent filings by two Federal Home Loan Banks — in San Francisco and Seattle — offer an intriguing way to clear this high hurdle. Lawyers representing the banks, which bought mortgage securities, combed through the loan pools looking for discrepancies between actual loan characteristics and how they were pitched to investors.

You may not be shocked to learn that the analysis found significant differences between what the Home Loan Banks were told about these securities and what they were sold.

The rate of discrepancies in these pools is surprising. The lawsuits contend that half the loans were inaccurately described in disclosure materials filed with the Securities and Exchange Commission.

These findings are compelling because they involve some 525,000 mortgage loans in 156 pools sold by 10 investment banks from 2005 through 2007. And because the research was conducted using a valuation model devised by CoreLogic, an information analytics company that is a trusted source for mortgage loan data, the conclusions are even more credible.

The analysis used CoreLogic’s valuation model, called VP4, which is used by many in the mortgage industry to verify accuracy of property appraisals. It homed in on loan-to-value ratios, a crucial measure in predicting defaults.

An overwhelming majority of the loan-to-value ratios stated in the securities’ prospectuses used appraisals, court documents say. Investors rely on the ratios because it is well known that the higher the loan relative to an underlying property’s appraised value, the more likely the borrower will walk away when financial troubles arise.

By back-testing the loans using the CoreLogic model from the time the mortgage securities were originated, the analysis compared those values with the loans’ appraised values as stated in prospectuses. Then the analysts reassessed the weighted average loan-to-value ratios of the pools’ mortgages.

The model concluded that roughly one-third of the loans were for amounts that were 105 percent or more of the underlying property’s value. Roughly 5.5 percent of the loans in the pools had appraisals that were lower than they should have been.

That means inflated appraisals were involved in six times as many loans as were understated appraisals.

David J. Grais, a lawyer at Grais & Ellsworth in New York, represents the Home Loan Banks in the lawsuits. “The information in these complaints shows that the disclosure documents for these securities did not describe the collateral accurately,” Mr. Grais said last week. “Courts have shown great interest in loan-by-loan and trust-by-trust information in cases like these. We think these complaints will satisfy that interest.”

The banks are requesting that the firms that sold the securities repurchase them. The San Francisco Home Loan Bank paid $19 billion for the mortgage securities covered by the lawsuit, and the Seattle Home Loan Bank paid $4 billion. It is unclear how much the banks would get if they won their suits.

Among the 10 defendants in the cases are Deutsche Bank, Credit Suisse, Merrill Lynch, Countrywide and UBS. None of these banks would comment.

As outlined in the San Francisco Bank’s amended complaint, it did not receive detailed data about the loans in the securities it purchased. Instead, the complaint says, the banks used the loan data to compile statistics about the loans, which were then presented to potential investors. These disclosures were misleading, the San Francisco Bank contends.

In one pool with 3,543 loans, for example, the CoreLogic model had enough information to evaluate 2,097 loans. Of those, it determined that 1,114 mortgages — or more than half — had loan-to-value ratios of 105 percent or more. The valuations on those properties exceeded their true market value by $65 million, the complaint contends.

The selling document for that pool said that all of the mortgages had loan-to-value ratios of 100 percent or less, the complaint said. But the CoreLogic analysis identified 169 loans with ratios over 100 percent. The pool prospectus also stated that the weighted average loan-to-value ratio of mortgages in the portion of the security purchased by Home Loan Bank was 69.5 percent. But the loans the CoreLogic model valued had an average ratio of almost 77 percent.

IT is unclear, of course, how these court cases will turn out. But it certainly is true that the more investors dig, the more they learn how freewheeling the Wall Street mortgage machine was back in the day. Each bit of evidence clearly points to the same lesson: investors must have access to loan details, and the time to analyze them, before they are likely to want to invest in these kinds of securities again.

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in foreclosure, foreclosure fraud, foreclosures1 Comment

RECALL ‘Bryan J. Bly’ Robo-Signer Foreclosure Documents

RECALL ‘Bryan J. Bly’ Robo-Signer Foreclosure Documents

By DinSFLA 6/20/2010

Now if this isn’t another means to a massive mandatory recall for any of this robo-signer’s documents, then our judicial systems are playing with an enormous fire getting ready to ignite even more angry individuals who has his documents sworn into court!

Then again, they’re one of the same.

Today Susan Taylor Martin for Tampabay.com wrote an interesting article about a too too familiar robo-signer “Bryan J. Bly”.

In this article She states

“Over the past few years, Bly has signed countless mortgage assignments as either a notary public or “vice president” of various lenders.

In reality, Bly works for Nationwide Title Clearing, a Palm Harbor company. And he was recently reprimanded by state regulators after acknowledging in a sworn statement that Nationwide Title had him notarizing so many documents that he scribbled his initial instead of signing his full name as required by law.

Such a pace, critics say, shows that Bly and other so-called “robo signers” can’t possibly be sure that what they’re signing is accurate.”

Just by these statements alone why aren’t any of these assignments or any documents executed by Mr. Bly being pulled out from court shelves?

It’s quite simple and you don’t need to be an Einstein.

If there is a product that is shown to cause human any harm there is a mandatory recall. So where is this recall on these products? Where on earth is the government to put a stop to all this assembly line?

Does it have to take a Chinese toymaker with toxic paint, a drywall that deteriorates the guts of a home and possibly lead to possible health issues or how about a Japanese car manufacturer that makes faulty brakes? Again, where is the authority looking into these claims? And why are they NOT pulling these defective items out of our records  in the court houses? Exactly who is being notified that these documents can cause harm to you or that if you were a victim of such irresponsibility to come forward?

My point is these documents are making one extremely ill, homeless and even in some cases suicidal. If this isn’t harm than what is?

This is just wrong in every possible way! Fraud is Fraud.

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in Bryan Bly, CONTROL FRAUD, foreclosure, foreclosure fraud, foreclosures, robo signers, Uncategorized0 Comments

Statute of Limitations coming for Foreclosures?

Statute of Limitations coming for Foreclosures?

Mortgage Players Look to Soften Bill

By NICK TIMIRAOS JUNE 21, 2010 NYTimes

As Congress moves to finalize new financial regulations, the mortgage industry is working to soften a series of provisions that reshape how most Americans obtain home loans.

The provisions in the legislation seek to eliminate questionable practices that proliferated during the housing boom by outlining clear underwriting standards, holding lenders more responsible for loans, and changing the way loan originators are paid. In addition, consumers would get new rights to seek damages when the mortgage process goes awry.

New Rules Take Shape

Requirements in proposed legislation:

  • Lenders required to hold 5% of the loans they originate that are sold to investors as securities
  • Borrowers get greater protections when the mortgage process goes awry
  • Fees must be charged upfront or reflected in the mortgage interest rate, but not both

Changes wanted by mortgage industry:

  • Exception for “qualified mortgages” that meet certain underwriting standards
  • Lenders get greater protection from lawsuits if they satisfy tougher loan standards
  • Ability to charge fees upfront and to embed them in the mortgage interest rate

Industry officials are trying to limit their liability on new consumer-friendly provisions while pushing for greater flexibility on rules that aim to improve underwriting standards by forcing the original mortgage lender to keep a stake in the loan.

A panel of lawmakers reconciling the differences between the House and Senate bills is set to take up the mortgage provisions on Tuesday.

Both bills would require lenders to retain a 5% stake in loans that are bundled with others and sold in pieces to investors. The idea is that if lenders hold on to a stake, they are more likely to make sound loans.

Lenders want to secure a provision, included in the Senate bill, to exempt mortgages that meet certain underwriting standards from the risk-retention requirement that they keep 5% of loans they sell off. Such loans would have to fully document a borrower’s income and assets and couldn’t include features such as interest-only payments, negative amortization or balloon payments. Loans would also have to cap certain mortgage-origination fees at 3% of the loan.

Risk-retention rules are likely to raise the costs of making loans because banks will be required to hold more capital, a particular challenge for smaller lenders.

While consumer groups generally support exceptions for certain loans perceived as safer, some analysts say the provision would effectively promote certain loan types over others.

“One thing that disappoints me is that it revives the fetish of the traditional, fixed-rate, 30-year loans … without examining any of the risks of those loans,” such as higher interest-rate costs, said Todd Zywicki, a professor of law at George Mason University in Fairfax, Va.

Already, both bills would limit the ability of mortgage lenders to charge borrowers fees if they refinance or pay off their loans early.

The proposed legislation would also require lenders to ensure that borrowers can repay their loans and to prove that any refinancing provides a “net tangible benefit” to the borrower.

The industry wants to limit lenders’ legal liability when they make loans that meet the new standards. “If you comply with the provisions in the law…the borrower shouldn’t be able to challenge you later on,” said Glen Corso, managing director of the Community Mortgage Banking Project, which represents independent nonbank mortgage lenders.

Consumer groups oppose efforts to weaken the ability of borrowers to take legal action if they believe lenders have run afoul of the new rules.

Lenders also want to limit the amount of time that borrowers can dispute a foreclosure if they later find that their loan didn’t satisfy the new standards. Right now, the bill doesn’t include a statute of limitations on those claims. Consumer groups say time limits shouldn’t be added because some loans could contain features that don’t take effect for several years. But lenders say that a loan that defaults long after its origination isn’t likely to fail because of underwriting defects.

All together, the measures should lead banks to become more diligent about documenting a borrower’s income and assets. While that will curtail the abuse of “liar’s loans” that saw many borrowers and brokers report false incomes on loan applications during the past decade, the tougher standards could make it harder or more expensive for self-employed borrowers to get a loan.

Another key provision in the bill would change the compensation model for loan originators and mortgage brokers to prevent them from steering borrowers into loans with a higher rate. The bill would bar lender-paid commissions based on the rate or type of loan; origination costs would have to be paid upfront or over the life of the loan in a higher rate, but not a mix of both.

Brokers say that the rule would make it harder for them to compete with banks and that it would reduce competition, raising costs for consumers. “Most mortgage brokers will have to charge their fees upfront, which means the competitive landscape just shifted to banks and lenders,” said Roy DeLoach, chief executive of the National Association of Mortgage Brokers.

Consumer advocates say the changes will make it easier for borrowers to shop for loans and compare prices.

The new provisions will shift the burden of proof “from the consumers having to protect themselves from unreasonable fees to the providers of services justifying their costs,” said Barry Zigas, director of housing policy for the Consumer Federation of America.

“The whole market should be much safer now,” said Julia Gordon, senior policy counsel at the Center for Responsible Lending.

Meanwhile, brokers and real-estate-industry lobbyists want to relax new home-valuation rules imposed last year to ensure appraiser independence. Those rules bar mortgage brokers and loan officers from selecting appraisals by requiring the use of third-party appraisal management firms. Many banks, which own or have stakes in those firms, oppose the effort to alter the rules, as do consumer groups that say any attempt to weaken them could lead to appraisal fraud.

But brokers and real-estate agents say the rules have produced unrealistic appraisals from individuals who aren’t familiar with specific neighborhoods. Brokers say a new system should be created that allows them to order appraisals without being able to select the actual appraiser, and that consumers should be free to use an appraisal ordered by one lender even if they decide to get a loan from a different lender.

Write to Nick Timiraos at nick.timiraos@wsj.com

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in Bank Owned, foreclosure, foreclosure fraud0 Comments

House Republicans Want Penalties for WALK AWAYS

House Republicans Want Penalties for WALK AWAYS

WAKE UP PEOPLE!

So now it appears that the this ARTICLE written a few weeks back has struck a nerve with the GOP. You know something does not fit well here. I mean why are they looking to punish anyone when the ones they should be punishing is the Banks for lying, corruption, stealing and fraud. Perhaps this all was instigated by these crooks to start a war game?

First you take our money to bail out these imbeciles then we find out it’s all a scam and NOW you want to penalize people because they have nothing invested?? I mean REALLY?? If I know this is coming better pack up now than later!

So my friends it is clear here that they are obviously being trained to act by the banks themselves.

House Republicans Want Penalties for Strategic Defaulters

By. Carrie Bay 06/17/2010 DSNEWS

Tumbling property values have left nearly a quarter of borrowers owing more on their mortgage than the home is worth, and recent studies have shown that when underwater, more and more of these homeowners are opting to walk away from their loan obligation even if they can afford to make the payments.

This idea of “strategic default” has become a universal concern within the industry, particularly since the social stigma attached to foreclosure has changed so dramatically in the aftermath of the housing crisis.

While defaulting strategically is not as frowned upon by the general public as it used to be, there are some lawmakers whose disdain for the practice has sparked a push to institute stronger deterrents for walking away and penalize those that do.

Last week, the U.S. House of Representatives passed the FHA Reform Act, with measures designed to replenish the Federal Housing Administration’s (FHA) depleted reserves.

A lesser publicized provision that was tacked onto the bill at the last minute would make homeowners who strategically default ineligible for an FHA-insured loan in the future.

The rider was introduced by Rep. Chris Lee (R-New York). Speaking on the House floor, Lee, who already had the backing of those in his party, tried to drum up Democratic support for the add-on stipulation.

“If a borrower makes the decision to strategically default on a loan, they certainly should not be allowed to benefit from a government-subsidized program,” he said.

The provision passed in a voice vote, without opposition.

“We are not talking about those families who have no choice or who simply can no longer afford their payments,” Lee said. “We are talking about the new phenomenon of a person who voluntarily chooses to stop paying their mortgage even though they still have the ability to pay.”

The FHA reform bill, including the agency ban on strategic defaulters, has not yet been approved by the Senate. And some onlookers say the part targeting borrowers who up and walk away will be particularly tricky.

It would require the HUD secretary to devise a strategy for defining and pinpointing strategic defaulters, implement screening procedures to ensure these homeowners are not granted an FHA-backed mortgage, and then enforce the new policy.

© 2010-19 FORECLOSURE FRAUD | by DinSFLA. All rights reserved.



Posted in foreclosure, foreclosure fraud, foreclosures, walk away1 Comment


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