COURT OF APPEAL,
FOURTH APPELLATE DISTRICT
DIVISION ONE STATE OF CALIFORNIA
OC INTERIOR SERVICES, LLC as Trustee, etc.,
Plaintiff and Respondent,
v.
NATIONSTAR MORTGAGE, LLC et al.,
Defendants and Appellants.
In this case, plaintiff OC Interior Services, Inc. (OCI) purchased real property
knowing about a recorded default judgment in the chain of title that vacated the lien
interest of the predecessor-in-interest to appellants Deutsche Bank National Trust
Company, in Trust for the Harborview Mortgage Loan Pass-Through Certificates, Series
2007-7 (Deutsche Bank) and Nationstar Mortgage, LLC (Nationstar, together appellants).
The default judgment was later adjudicated as void. The question presented is whether
OCI, a purported bona fide purchaser for value, took title to the property subject to
appellants’ lien. The trial court found that OCI was a bona fide purchaser for value that
took title to the property free of appellants’ lien. We reverse as the void default judgment
was a nullity for all purposes, including as against a purported bona fide purchaser for
value.
[…]
As we shall explain, we agree with appellants. We first address the concept of a
judgment that is void on the face of the record versus a judgment that appears valid on
the face of the record and explain why this distinction makes no difference when a
judgment is ultimately declared void. We then explain why even a bona fide purchaser
cannot claim title clear of the First DOT based on a void judgment.
Real Estate Brokers and Mortgage Servicer That Took Kickbacks from Prospect Also Ordered to Pay $495,000
WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against Prospect Mortgage, LLC, a major mortgage lender, for paying illegal kickbacks for mortgage business referrals. The CFPB also took action against two real estate brokers and a mortgage servicer that took illegal kickbacks from Prospect. Under the terms of the action announced today, Prospect will pay a $3.5 million civil penalty for its illegal conduct, and the real estate brokers and servicer will pay a combined $495,000 in consumer relief, repayment of ill-gotten gains, and penalties.
“Today’s action sends a clear message that it is illegal to make or accept payments for mortgage referrals,” said CFPB Director Richard Cordray. “We will hold both sides of these improper arrangements accountable for breaking the law, which skews the real estate market to the disadvantage of consumers and honest businesses.”
Prospect Mortgage, LLC, headquartered in Sherman Oaks, Calif., is one of the largest independent retail mortgage lenders in the United States, with nearly 100 branches nationwide. RGC Services, Inc., (doing business as ReMax Gold Coast), based in Ventura, Calif., and Willamette Legacy, LLC, (doing business as Keller Williams Mid-Willamette), based in Corvallis, Ore., are two of more than 100 real estate brokers with which Prospect had improper arrangements. Planet Home Lending, LLC is a mortgage servicer headquartered in Meriden, Conn., that referred consumers to Prospect Mortgage and accepted fees in return.
The CFPB is responsible for enforcing the Real Estate Settlement Procedures Act, which was enacted in 1974 as a response to abuses in the real estate settlement process. A primary purpose of the law is to eliminate kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services. The law covers any service provided in connection with a real estate settlement, such as title insurance, appraisals, inspections, and loan origination.
Prospect Mortgage
Prospect Mortgage offers a range of mortgages to consumers, including conventional, FHA, and VA loans. From at least 2011 through 2016, Prospect Mortgage used a variety of schemes to pay kickbacks for referrals of mortgage business in violation of the Real Estate Settlement Procedures Act. For example, Prospect established marketing services agreements with companies, which were framed as payments for advertising or promotional services, but in this case actually served to disguise payments for referrals. Specifically, the CFPB found that Prospect Mortgage:
Paid for referrals through agreements: Prospect maintained various agreements with over 100 real estate brokers, including ReMax Gold Coast and Keller Williams Mid-Willamette, which served primarily as vehicles to deliver payments for referrals of mortgage business. Prospect tracked the number of referrals made by each broker and adjusted the amounts paid accordingly. Prospect also had other, more informal, co-marketing arrangements that operated as vehicles to make payments for referrals.
Paid brokers to require consumers – even those who had already prequalified with another lender – to prequalify with Prospect: One particular method Prospect used to obtain referrals under their lead agreements was to have brokers engage in a practice of “writing in” Prospect into their real estate listings. “Writing in” meant that brokers and their agents required anyone seeking to purchase a listed property to obtain prequalification with Prospect, even consumers who had prequalified for a mortgage with another lender.
Split fees with a mortgage servicer to obtain consumer referrals: Prospect and Planet Home Lending had an agreement under which Planet worked to identify and persuade eligible consumers to refinance with Prospect for their Home Affordable Refinance Program (HARP) mortgages. Prospect compensated Planet for the referrals by splitting the proceeds of the sale of such loans evenly with Planet. Prospect also sent the resulting mortgage servicing rights back to Planet.
Under the consent order issued today, Prospect will pay $3.5 million to the CFPB’s Civil Penalty Fund for its illegal kickback schemes. The company is prohibited from future violations of the Real Estate Settlement Procedures Act, will not pay for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.
ReMax Gold Coast and Keller Williams Mid-Willamette
ReMax Gold Coast and Keller Williams Mid-Willamette are real estate brokers that work with consumers seeking to buy or sell real estate. Brokers or agents often make recommendations to their clients for various services, such as mortgage lending, title insurance, or home inspectors. Among other things, the Real Estate Settlement Procedures Act prohibits brokers and agents from exploiting consumers’ reliance on these recommendations by accepting payments or kickbacks in return for referrals to particular service providers.
The CFPB’s investigation found that ReMax Gold Coast and Keller Williams Mid-Willamette accepted illegal payment for referrals. Both companies were among more than 100 brokers who had marketing services agreements, lead agreements, and desk-license agreements with Prospect, which were, in whole or in part, vehicles to obtain illegal payments for referrals.
Under the consent orders filed today, both companies are prohibited from violating the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services. ReMax Gold Coast will pay $50,000 in civil money penalties, and Keller Williams Mid-Willamette will pay $145,000 in disgorgement and $35,000 in penalties.
In 2012, Planet Home Lending signed a contract with Prospect Mortgage that facilitated the payment of illegal referral fees. The company’s practices violated the Real Estate Settlement Procedures Act and the Fair Credit Reporting Act. Specifically, the CFPB found that Planet Home Lending:
Accepted fees from Prospect for referring consumers seeking to refinance: Under their arrangement, Planet Home Lending took half the proceeds earned by Prospect for the sale of each mortgage loan originated as a result of a referral from Planet. Planet also accepted the return of the mortgage servicing rights of that consumer’s new mortgage loan.
Unlawfully used “trigger leads” to market to Prospect to consumers: Planet ordered “trigger leads” from one of the major consumer reporting agencies to identify which of its consumers were seeking to refinance so it could market Prospect to them. This was a prohibited use of credit reports under the Fair Credit Reporting Act because Planet was not a lender and could not make a firm offer of credit to those consumers.
Under the consent order filed against Planet Home Lending, the company will directly pay harmed consumers a total of $265,000 in redress. The company is also prohibited from violating the Fair Credit Reporting Act and the Real Estate Settlement Procedures Act, will not pay or accept payment for referrals, and will not enter into any agreements with settlement service providers to endorse the use of their services.
Banks and lenders bury terms in the fine print to block consumers from challenging fraud or hidden fees in court. Instead, these “ripoff clauses” force harmed consumers to challenge large corporations one by one in arbitration – a secretive system designed to favor banks and lenders.
Known as forced arbitration, this practice deprives consumers of their constitutional right to an impartial judge or jury. Instead, banks choose a private arbitration firm to decide the dispute, and consumers have little opportunity to present evidence or appeal a bad decision.
Many ripoff clauses also bar consumers from talking about what happened to them, keeping corporate scams and fraud out of the public eye. Indeed, reports show Wells Fargo customers tried to sue the bank over fake accounts as far back as 2013. But customers were kicked out of court and unable to share their stories because of these fine-print provisions – while Wells Fargo knowingly profited from fraud for another three years.
Acting at the direction of Congress, the U.S. Consumer Financial Protection Bureau (CFPB) spent over three years conducting the most comprehensive study on arbitration ever done. The data revealed that just 25 consumers pursue arbitration claims of less than $1,000 each year, as the vast majority of Americans simply give up when forced into arbitration. The study also suggests that consumers lose in arbitration, even when they win. Only 9% of consumers succeed in arbitration, and even those who win recover just 12 cents of every dollar claimed. In contrast, companies win 93% of the time, recovering 98 cents per dollar.
Following the study, the CFPB proposed a rule to restore customers’ ability to join together in court to hold banks and lenders accountable when they break the law and return transparency to arbitration by creating a public record of claims and outcomes.
The question could not have been more straightforward: During the foreclosure crisis that began after the housing bubble burst, did OneWest Bank engage in the illegal practice of “robo-signing” to speed foreclosures of homeowners? OneWest was formerly known as Indy Mac, the troubled thrift taken over by the federal government and sold to a group led by Steven Mnuchin, President Donald Trump’s nominee to be Treasury secretary.
Mnuchin’s answer was straightforward, too. “OneWest Bank did not robo-sign documents,” he replied in a letter to the Democrats on the Senate Finance Committee who had repeatedly pressed him during his confirmation hearing. “And,” he added, “as the only bank to successfully complete the Independent Foreclosure Review required by federal banking regulators to investigate allegations of ‘robo-signing,’ I am proud of our institution’s extremely low error rate.”
As has so often been the case in the early days of the Trump administration, Mnuchin’s answer isn’t remotely true.
Casting a ray of sunlight on a case that has been shrouded in secrecy, a federal appeals court ruled on Monday that the government must produce a raft of documents to plaintiffs suing over its decision to seize all the profits of Fannie Mae and Freddie Mac, the mortgage finance giants that were put into conservatorship in September 2008, at the depths of the financial crisis.
The case against the government was brought in 2013 by Fairholme Funds, a mutual fund that owns shares of Fannie Mae and Freddie Mac. Its lawyers contend that the government’s surprise decision to divert the companies’ profits to the United States Treasury in August 2012, just as the companies were turning around, was an illegal seizure of private property.
The government has argued that the profit sweep was necessary to protect taxpayers against further losses; taxpayers advanced $187 billion to the companies after they were put into conservatorship. But documents unsealed last year in the case cast doubt on this argument, showing that the timing of the profit sweep coincided with a rebound in the companies’ operations and occurred just before they began generating profits again.
Amends the Mortgage Foreclosure Article of the Code of Civil Procedure. Provides that provisions concerning an additional fee paid by residential foreclosure plaintiffs is operative until January 1, 2020 (instead of January 1, 2018). Effective immediately.
The recent hearing on the nomination of Steven Mnuchin for secretary of the Treasury Department revealed a man unable or unwilling to provide many additional facts about his controversial history running OneWest Bank.
Mnuchin said in his Senate confirmation hearing that he was proud of his work, but the facts show there’s little to admire about Mnuchin’s tenure, but much doubt about his ability to be a good Treasury secretary.
Mnuchin purchased the loans of struggling homeowners at an enormous discount, with the benefit of billions of dollars in government backstops.
In the latest example of an apparent information purge by the Trump administration, bank employee complaints against Wells Fargo have vanished from the federal Department of Labor’s website.
The entire page established to help protect whistleblowers and collect complaints against the bank has been “disappeared.” The page was created in September when the Labor Department launched an investigation into the bank’s treatment of its workers after Wells Fargo admitted setting up secret phony customer accounts to capture bank fees and charge consumers for them. Labor officials sought to aid whistleblowers and to determine if the company violated any wage and overtime regulations while branch employees were pressed to meet tough sales quotas, including setting up the phony accounts.
The bank fired 5,300 workers for creating as many as 2 million fake accounts amid employee complaints about an incredibly high-pressure sales culture andmistreatment of workers.
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Sunday – January 29, 2017
Foreclosure Workshop #26: OneWest v. Katonah Development — A Case Study Documenting Ten Ways in Which Steve Mnuchin’s OneWest Appears To Have Ruthlessly and Criminally Defrauded America’s Homeowners, State and Federal Courts, and the United States Treasury from 2009 to 2015
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In recent weeks The Foreclosure Hour has been bombarded with inquiries from homeowners, reporters, and consumer activists seeking more information and examples, in connection with current Congressional Treasury Secretary appointment hearings, of the ways in which Steve Mnuchin may have abusively managed OneWest Bank from 2009 to 2015.
Unable time-wise to individually respond to the hundreds of such inquires, we have decided instead to explore the topic and such claims on this Sunday’s radio show.
While The Foreclosure Hour has no direct information concerning Steve Mnuchin’s personal involvement in OneWest’s many mortgage abuses, we are aware of hundreds if not thousands of such court cases nationally illustrating such abuses carried out in the name of OneWest.
Was Steve Mnuchin the “King of Foreclosures” and the “King of Robo-Signers” as many claim, or the “King of Loan Modifications” as he reportedly claims — or both? Tune in and decide for yourself.
We have selected one such OneWest foreclosure case on the Big Island of Hawaii to illustrate the apparent wide range of such claimed OneWest abuses, involving insider trading, robo-signing, submitting into evidence of false court documents including those falsely recorded, fraudulent credit bidding, insurance fraud, unfair and deceptive property flipping, false claims act violations, corruption of the legal profession, federal and state financial crimes, and RICO yielding racketeering ill-gotten gains.
Listeners are encouraged to call in with their own personal experiences with OneWest, good or bad, in their individual foreclosure cases.
Those who miss this important live broadcast can listen to it on the Past Broadcast Section of our Website at www.foreclosurehour.com shortly after it airs live on KHVH-AM News Radio in Honolulu and simultaneously throughout the United States on the iHeart Internet App.
Mortgage giant Fannie Mae is getting into the single-family rental business in a big way.
The government-backed agency said it is going into business with private equity giant and major housing player Blackstone by backing $1 billion in debt. Blackstone’s Invitation Homes filed for an initial public offering this week, and the Fannie Mae relationship was disclosed afterward. Blackstone is looking to raise $1.6 billion by selling shares to the public.
Fannie Mae, currently under government conservatorship, will back $1 billion in debt collateralized by rental homes owned by Blackstone.
Washington D.C., Jan. 26, 2017 —The Securities and Exchange Commission today announced that Citigroup Global Markets has agreed to pay $18.3 million to settle charges that it overbilled investment advisory clients and misplaced client contracts.
The SEC’s order finds that at least 60,000 advisory clients were overcharged approximately $18 million in unauthorized fees because Citigroup failed to confirm the accuracy of billing rates entered into its computer systems in comparison to fee rates outlined in client contracts, billing histories, and other documents. Citigroup also improperly collected fees during time periods when clients suspended their accounts. The billing errors occurred during a 15-year period, and the affected clients have since been reimbursed.
“Advisory clients have every expectation that the fees charged by their financial adviser reflect the negotiated rate. Citigroup failed to take the necessary precautions to ensure clients were billed in a manner consistent with their advisory agreements,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.
The SEC’s order further finds that Citigroup cannot locate approximately 83,000 advisory accounts opened from 1990 to 2012. Without those missing advisory contracts, Citigroup could not properly validate whether the fee rates negotiated by clients when accounts were opened were the same advisory fee rates being billed to clients over the years. It is estimated that Citigroup received approximately $3.2 million in excess fees from advisory clients whose contracts were lost.
“It’s a fundamental responsibility of a financial adviser to preserve key account documents such as advisory contracts. Citigroup failed to safeguard its client contracts, which seriously impeded its ability to determine the proper amount of fees the firm was authorized to charge,” said Sanjay Wadhwa, Senior Associate Director of the SEC’s New York office.
Citigroup consented to the SEC’s cease-and-desist order and agreed to undertakings related to its fee-billing and books-and-records practices. The firm is censured and must pay $3.2 million in disgorgement of the excess fees collected due to the missing contracts plus $800,000 in interest and a $14.3 million penalty.
The SEC’s investigation has been conducted by Olivia Zach and Celeste Chase in the New York office and supervised by Mr. Wadhwa.
F L O R I D A H O U S E O F R E P R E S E N T A T I V E S
HB471
1 A bill to be entitled 2 An act relating to mortgage foreclosures; creating s. 3 702.12, F.S.; authorizing certain lienholders to use 4 certain documents as an admission in an action to 5 foreclose a mortgage; providing that submission of 6 certain documents in a foreclosure action creates 7 certain presumptions; authorizing a lienholder to make 8 a request for judicial notice; providing construction; 9 providing an effective date. 10 11 Be It Enacted by the Legislature of the State of Florida: 12 13 Section 1. Section 702.12, Florida Statutes, is created to 14 read: 15 702.12 Actions in foreclosure.— 16 (1)(a) A lienholder, in an action to foreclose a mortgage, 17 may submit any document the defendant filed in a bankruptcy case 18 under penalty of perjury for use as an admission by the 19 defendant. 20 (b) The lienholder’s submission of a document that 21 evidences the defendant’s intention to surrender to the 22 lienholder the property that is the subject of the foreclosure, 23 which document has not been withdrawn by the defendant, together 24 with the submission of a final order entered in the bankruptcy 25 case that discharges the defendant’s debts or confirms the defendant’s repayment plan which intention is contained therein, 27 creates a rebuttable presumption that the defendant has: 28 1. Surrendered to the lienholder the defendant’s interest 29 in the mortgaged property; and 30 2. Waived any defenses to the foreclosure. 31 (2) In addition to a request set forth in s. 90.203, the 32 lienholder may request that the court take judicial notice of 33 any final order entered in a bankruptcy case. 34 (3) This section does not preclude the defendant in a 35 foreclosure action from raising a defense based upon the 36 lienholder’s conduct subsequent to the filing of the document 37 filed in the bankruptcy case that evidenced the defendant’s 38 intention to surrender the mortgaged property to the lienholder. 39 Section 2. This act shall take effect July 1, 2017.
United States Attorney Robert L. Capers announced today that Société Générale, S.A. will pay a $50 million civil penalty to resolve claims related to its activities, which were conducted through several affiliates (together, “SocGen”), in connection with the marketing, sale, and issuance of a residential mortgage-backed security (“RMBS”) named SG Mortgage Securities Trust 2006-OPT2 (“SG 2006-OPT2”). As part of the agreement, SocGen has acknowledged in writing that it made false representations to prospective investors in SG 2006-OPT2. Investors, including federally insured financial institutions, suffered significant losses on their investments in SG 2006-OPT2.
The settlement includes a statement of facts agreed to by SocGen, whereby SocGen acknowledges responsibility for its conduct. For example, SocGen acknowledges that it falsely represented to investors that the loans underlying SG 2006-OPT2 were originated generally in accordance with the loan originator’s underwriting guidelines. Indeed, as detailed in the statement of facts, SocGen’s third-party due diligence vendor for SG 2006-OPT2 determined that almost 40% of the loans it reviewed were underwritten outside of guidelines and lacked adequate compensating factors to make the loans eligible for securitization. SocGen acknowledges that it did not disclose these results to investors.
Likewise, SocGen represented to investors that, at the time of origination, no loan in SG 2006-OPT2 had a loan-to-value or combined loan-to-value ratio of more than 100% (in other words, that the value of any mortgage on a property did not exceed the value of the property itself) – a representation that SocGen now acknowledges was false. Moreover, SocGen knew that there were industry-wide problems with subprime loan origination practices. As described by a senior member of SocGen’s Contract Finance group, “The whole process [was] a joke.”
“SocGen’s acknowledgement of its misconduct in the securitization of SG 2006-OPT2 was a critical component of this resolution. It severely impacted investors and institutions across the United States, including in this district. Most emphatically, it was not a ‘joke’”, stated United States Attorney Capers. “We will not tolerate investment banks making false representations to investors – if and when they do so, they will be held accountable.” Mr. Capers extended his grateful appreciation to the Office of the Inspector General for the Federal Housing Finance Agency for its assistance in conducting the investigation in this matter.
The $50 million civil monetary penalty resolves claims under the Financial Institutions Reform Recovery and Enforcement Act of 1989, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. As part of the settlement, SocGen has agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.
Assistant U.S. Attorneys Clayton P. Solomon, Morgan J. Clark, and Katharine E.G. Brooker led the government’s investigation.
About the RMBS Working Group: The RMBS Working Group, part of the Financial Fraud Enforcement Task Force, was established by the Attorney General in late January 2012. The Working Group has been dedicated to initiating, organizing, and advancing new and existing investigations by federal and state authorities into fraud and abuse in the RMBS market that helped precipitate the 2008 Financial Crisis. The Working Group’s efforts to date have resulted in settlements providing for tens of billions of dollars in civil penalties and consumer relief from banks and other entities that are alleged to have committed fraud in connection with the issuance of RMBS.
Board of Governors of the Federal Reserve System
Federal Deposit Insurance Corporation
Office of the Comptroller of the Currency
NR 2017-13
FOR IMMEDIATE RELEASE
January 24, 2017
Federal Banking Agencies Fine ServiceLink Holdings $65 Million
WASHINGTON—The federal banking agencies today fined ServiceLink Holdings, LLC (ServiceLink Holdings), $65 million for improper actions by its predecessor company, Lender Processing Services, Inc. (LPS), which resulted in significant deficiencies in the foreclosure-related services that LPS provided to mortgage servicers.
The penalty assessed by the three federal banking agencies–the Federal Reserve Board, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency–against ServiceLink Holdings satisfied the document review provision of the previous enforcement action. The agencies continue to monitor the company’s compliance with other provisions of that order.
A U.S. judge on Monday narrowed but refused to dismiss a lawsuit seeking to hold Deutsche Bank AG (DBKGn.DE) liable to investors, including dozens of portfolios from BlackRock Inc (BLK.N) and Pacific Investment Management Co, for losses on poorly underwritten residential mortgage-backed securities.
The proposed class-action lawsuit sought to recover “significant monetary damages” arising from Deutsche Bank’s alleged “failure to discharge its essential duties” as trustee of 62 trusts created between 2004 and 2008, and which issued notes backed by about $90.3 billion of home loans.
In a docket entry, U.S. District Judge Jesse Furman in Manhattan granted Deutsche Bank’s bid to dismiss conflict-of-interest claims but denied its request to dismiss representations-and-warranties, servicer-notification and event-of-default claims.
The Justice Department announced today a $5.28 billion settlement with Credit Suisse related to Credit Suisse’s conduct in the packaging, securitization, issuance, marketing and sale of residential mortgage-backed securities (RMBS) between 2005 and 2007. The resolution announced today requires Credit Suisse to pay $2.48 billion as a civil penalty under the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA). It also requires the bank to provide $2.8 billion in other relief, including relief to underwater homeowners, distressed borrowers and affected communities, in the form of loan forgiveness and financing for affordable housing. Investors, including federally-insured financial institutions, suffered billions of dollars in losses from investing in RMBS issued and underwritten by Credit Suisse between 2005 and 2007.
“Today’s settlement underscores that the Department of Justice will hold accountable the institutions responsible for the financial crisis of 2008,” said Attorney General Loretta E. Lynch. “Credit Suisse made false and irresponsible representations about residential mortgage-backed securities, which resulted in the loss of billions of dollars of wealth and took a painful toll on the lives of ordinary Americans. Under the terms of this settlement, Credit Suisse will pay $2.48 billion as a fine for its conduct. And Credit Suisse has pledged $2.8 billion in relief to struggling homeowners, borrowers, and communities affected by the bank’s lending practices. These sums reflect the huge breach of public trust committed by financial institutions like Credit Suisse.”
“Credit Suisse claimed its mortgage backed securities were sound, but in the settlement announced today the bank concedes that it knew it was peddling investments containing loans that were likely to fail,” said Principal Deputy Associate Attorney General Bill Baer. “That behavior is unacceptable. Today’s $5.3 billion resolution is another step towards holding financial institutions accountable for misleading investors and the American public.”
“Resolutions like the one announced today confirm that the financial institutions that engaged in conduct that jeopardized the nation’s fiscal security will be held accountable,” said Principal Deputy Assistant Attorney General Benjamin C. Mizer, head of the Justice Department’s Civil Division. “This is another step in the Department’s continuing effort to redress behavior that contributed to the Great Recession.”
“Credit Suisse’s mortgage misconduct hurt people, including in Colorado,” said Acting United States Attorney for the District of Colorado Bob Troyer. “Unscrupulous lenders knew they could get away with shoddy underwriting when making mortgage loans, because they knew Credit Suisse would buy those defective mortgage loans and put them into securities. When those mortgages went into foreclosure, many people got hurt: families lost their homes, communities were blighted by empty houses, and investors who had put their trust in Credit Suisse’s supposedly safe securities suffered huge losses. Our office led this investigation into Credit Suisse to protect homeowners, communities, and investors across the country, including here in Colorado. Credit Suisse is paying a hefty penalty and acknowledging its misconduct, but that is not all. Years after the Great Recession, many families still struggle to afford a home, so we also crafted an agreement to bring needed housing relief to such families, including specifically in Colorado.”
This settlement includes a statement of facts to which Credit Suisse has agreed. That statement of facts describes how Credit Suisse made false and misleading representations to prospective investors about the characteristics of the mortgage loans it securitized. (The quotes in the following paragraphs are from that agreed-upon statement of facts, unless otherwise noted.):
Credit Suisse told investors in offering documents that the mortgage loans it securitized into RMBS “were originated generally in accordance with applicable underwriting guidelines,” except where “sufficient compensating factors were demonstrated by a prospective borrower.” It also told investors that the loans “had been originated in compliance with all federal, state, and local laws and regulations, including all predatory and abusive lending laws.”
Credit Suisse has now acknowledged that “Credit Suisse repeatedly received information indicating that many of the loans reviewed did not conform to the representations that would be made by Credit Suisse to investors about the loans to be securitized.” It has acknowledged that in many cases, it purchased and securitized loans into its RMBS that “did not comply with applicable underwriting guidelines and lacked sufficient factors” and/or “w[ere] not originated in compliance with applicable laws and regulations.” Credit Suisse employees even referred to some loans they securitized as “bad loans,” “‘complete crap’ and ‘[u]tter complete garbage.’”
Credit Suisse acquired some of the mortgage loans it securitized by buying, from other loan originators, “Bulk” packages containing numerous loans.For example, in December 2006, Credit Suisse purchased a “Bulk” pool of approximately 10,000 loans originated by Countrywide Home Loans. Credit Suisse selected fewer than 10 percent of these loans for due diligence review. “Reports from Credit Suisse’s due diligence vendors showed that approximately 85 percent of the loans in this sample violated Countrywide’s underwriting guidelines and/or applicable law,” but “Credit Suisse securitized over half of the loans into various RMBS it then sold to investors.” Credit Suisse did not review the remaining unsampled 90 percent of the pool to determine whether those loans had similar problems. Instead, it “securitized an additional $1.5 billion worth of unsampled—and therefore unreviewed—loans from this pool into various RMBS it then sold to investors.” A Credit Suisse manager wrote to another manager who was reviewing these loans, “Thanks for working thru this mess. If it helps, it looks like we will make a killing on this trade.”
Credit Suisse acquired other mortgage loans for securitization through its “Conduit” channel. Through this channel, Credit Suisse bought loans from other lenders one-by-one or in small packages, and also itself extended loans to borrowers as “Wholesale” loans. Approximately 25-35 percent of the loans Credit Suisse acquired from 2005 to 2007 were acquired through its mortgage “Conduit.”
Credit Suisse employees discussed in internal emails that for Conduit loans, the loan review and approval process was “‘virtually unmonitored.’” For loans Credit Suisse purchased through its Conduit, Credit Suisse told investors, ratings agencies and others, “‘Credit Suisse senior underwriters make final loan decisions, not contracted due diligence firms.’” Credit Suisse has now acknowledged, “For Conduit loans, these representations were false.”
Credit Suisse has acknowledged that “[a] September 2004 audit by Credit Suisse’s audit department gave the Conduit a C rating on an A-D scale (the second worst possible rating) and a level 4 materiality score on a 1-4 scale (the highest possible score),” and that a March 2006 evaluation by Credit Suisse of one of the third-party vendors it used to review Conduit loans “similarly reported that ‘There are serious concerns as to compliance[.]’”
Between 2005 and 2007, Credit Suisse managers made comments in emails about the quality of Conduit loans and its process for reviewing those loans. For example, a top Credit Suisse manager wrote to senior traders, “‘Of course we would like higher quality loans. That’s never been the identity of our [mortgage] conduit, and we’re becoming less and less competitive in that space.’” A senior Credit Suisse trader, discussing the “fulfillment centers” Credit Suisse used to review Conduit loans, stated in an email: ‘we make these underwriting exceptions and then we have liability down the road when the loans go bad and people point out that we violated our own guidelines. . . . The fulfillment process is a joke.’”
For example, in one instance Credit Suisse approved, through its Conduit, a purchase of over $700 million worth of loans originated by Resource Bank. Credit Suisse senior traders “referr[ed] to Resource Bank loans as ‘complete crap’ and ‘[u]tter complete garbage.’” Despite this, “Credit Suisse provided Resource Bank with financial ‘incentives’ in exchange for loan volume [and] securitized Resource Bank loans into various RMBS it then sold to investors.”
Credit Suisse has acknowledged that it also “received reports from vendors that it might have been acquiring and securitizing loans with inflated appraisals” and that its approach for reviewing the property values associated with the mortgage loans “could lead to the acceptance of inflated appraisals.” In August 2006, a Credit Suisse manager wrote to two senior traders, “How would investors react if we say that 20 percent of the pool have values off by 15 percent? If we are comfortable buying these loans, we should be comfortable telling investors.”
Credit Suisse used vendors to conduct quality control on a small subset of loans it acquired. Credit Suisse has now acknowledged that its quality control review vendors reported that “more than 25 percent of the loans that they reviewed for quality control were designated ‘ineligible’ because of credit, compliance, and/or property defects.”
Credit Suisse has now acknowledged that its “Co-Head of Transaction Management expressed concern that the quality control results could serve as a written record of defects, and sought to avoid documented confirmation of these defects.” In May 2007, a top Credit Suisse manager met with others “to discuss implementing this reduction of quality control review.” Credit Suisse’s Co-Head of Transaction Management wrote that “this change was to ‘avoid the previous approach by which a lot of loans were QC’d . . . creating a record of possible rep/warrant breaches in deals . . . .’”
In another example, in May 2007, a Credit Suisse employee identified two wholesale loans Credit Suisse itself had originated and wrote, “‘I would think that we would want to see loans like these that seem to represent confirmed problems, especially on our own originations. Why do we have an appraisal watch list and broker oversight group if we aren’t going to review the bad ones and take action appropriately? . . . I just see so many of these cross my desk, fraud, value, etc., it’s hard to just let them go by and not do something.’” Credit Suisse’s Co-Head of Transaction Management responded, “‘I think the idea is that we don’t want to spend a lot of $ to generate a lot of QC results that give us no recourse anyway but generate a lot of negative data, so no need to order QC on each of these loans.’” The employee then stated, “‘I think the lack of interest in bad loans is scary.’”
As another example, in June 2007, a Credit Suisse employee identified 44 Wholesale loans Credit Suisse had itself originated that had gone 60 days delinquent. Credit Suisse’s Co-Head of Transaction Management wrote in response, “‘if we already know: that the loans aren’t performing . . . the only thing QC will tell us is that there were compliance errors, occupancy misreps etc. I think we already know we have systemic problems in FC/UW [fulfillment centers/underwriting] re both compliance and credit. The downside of QC’ing these 44 loans is, after we get the QC results, we will be obligated to repurchase a fair chunk of the loans from deals, assuming the loans are securitized and the QC results look like the QC we’ve done in the past. So based on a wholesale QC historical fail rate of over 35 percent (major rep defects), the avg bal of wholesale loans and the loss severities, it is reasonable to expect this QC may cost us a few million dollars.’” Credit Suisse has now acknowledged that it “did not inform investors or ratings agencies that its Wholesale loan channel had a ‘QC historical fail rate of over 35 percent (major rep defects).’”
Credit Suisse commented about the mortgage loans that accumulated in its inventory.For example, Credit Suisse’s Co-Head of Transaction Management wrote to another Credit Suisse manager that “loans with potential defects ‘pile up in inventory . . . . So my theory is: we own the risk 1 way or another. . . . I am inclined to securitize loans that are close calls or marginally non-compliant, and take the risk that we’ll have to repurchase, if we can’t put them back, rather than adding to sludge in inventory. . . .’ One of the senior traders responded, ‘Agree.’” In another instance, a Credit Suisse senior trader commented in 2007 that “‘we have almost $2.5B of conduit garbage to still distribute.’” In another instance, a Credit Suisse trader wrote to a top manager, discussing another bank to which Credit Suisse was seeking to sell loans from its inventory, and stated, “‘[The other bank] again came back with an embarrassing number of diligence kicks this month. . . . If their results are in any way representative of our compliance with our reps and warrants, we have major problems.’ But rather than holding these loans in its own inventory, Credit Suisse securitized certain of these loans into its RMBS.”
Assistant U.S. Attorneys Kevin Traskos, Hetal J. Doshi, Shiwon Choe, Ian J. Kellogg, Lila M. Bateman, and J. Chris Larson of the District of Colorado investigated Credit Suisse’s conduct in connection with RMBS, with the support of the Federal Housing Finance Agency’s Office of the Inspector General (FHFA-OIG).
“Credit Suisse knowingly put investors at risk, and the losses caused by its irresponsible behavior deeply affected not only financial institutions such as the Federal Home Loan Banks, but also taxpayers, and contributed significantly to the financial crisis,” said Special Agent in Charge Catherine Huber of the Federal Housing Finance Agency-Office of Inspector General’s (FHFA-OIG) Midwest Region. “This settlement illustrates the tireless efforts put forth toward bringing a resolution to this chapter of the financial crisis. FHFA-OIG will continue to work with our law enforcement partners to hold those who have engaged in misconduct accountable for their actions.”
The $2.48 billion civil monetary penalty resolves claims under FIRREA, which authorizes the federal government to impose civil penalties against financial institutions that violate various predicate offenses, including wire and mail fraud. The settlement expressly preserves the government’s ability to bring criminal charges against Credit Suisse or any of its employees. The settlement does not release any individuals from potential criminal or civil liability. As part of the settlement, Credit Suisse has agreed to fully cooperate with any ongoing investigations related to the conduct covered by the agreement.
Credit Suisse will pay out the remaining $2.8 billion in the form of relief to aid consumers harmed by its unlawful conduct. Specifically, Credit Suisse agrees to provide loan modifications, including loan forgiveness and forbearance, to distressed and underwater homeowners throughout the country. It also agrees to provide financing for affordable rental and for-sale housing throughout the country. This agreement represents the most substantial commitment in any RMBS agreement to date to provide financing for affordable housing—a crucial need following the turmoil of the financial crisis.
The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force’s RMBS Working Group, which has recovered tens of billions of dollars on behalf of American consumers and investors for claims against large financial institutions arising from misconduct related to the financial crisis. The RMBS Working Group brings together attorneys, investigators, analysts and staff from multiple state and federal agencies, including the Department of Justice, U.S. Attorneys’ Offices, the FBI, the U.S. Securities and Exchange Commission (SEC), the Department of Housing and Urban Development (HUD), HUD’s Office of Inspector General, the FHFA-OIG, SIGTARP, the Federal Reserve Board’s OIG, the Recovery Accountability and Transparency Board, the Financial Crimes Enforcement Network and multiple state Attorneys General offices around the country. The RMBS Working Group is led by Director Joshua Wilkenfeld and four co-chairs: Principal Deputy Assistant Attorney General Mizer, Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, Director Andrew Ceresney of the SEC’s Division of Enforcement, and New York Attorney General Eric Schneiderman. This settlement is the latest in a series of major RMBS settlements announced by the Working Group.
The Appellate Division of the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, Florida recently reversed summary judgment in favor of a mortgage loan servicer in a case filed by a borrower under the Florida Consumer Collections Practices Act (FCCPA), holding that:
(a) the account statement at issue improperly attempted to collect a debt that was no longer owed, and was not preempted by the federal Truth in Lending Act (TILA); and
(b) sending the statement to the borrower’s attorney did not avoid liability because the “competent lawyer” standard adopted by the Seventh Circuit does not apply to the FCCPA in the Eleventh Circuit.
A copy of the opinion in Murray v. Nationstar Mortgage LLC is available at: Link to Opinion.
IN THE CIRCUIT COURT OF THE 11TH
JUDICIAL CIRCUIT, IN AND FOR
MIAMI-DADE COUNTY, FLORIDA
CASE NO: 2016-8579-CA-01
LIBERTY HOME EQUITY SOLUTIONS
INC. FORMERLY KNOWN AS GENWORTH
FINANCIAL HOME EQUITY ACCESS INC.,
Plaintiff,
vs.
FELICIA EL HASSAN, et al.,
Defendant.
________________________________/
ORDER GRANTING DEFENDANT’S MOTION FOR ATTORNEY’S FEES AND COSTS
THIS MATTER came before the Court upon Defendant’s Motion for Attorney’s Fees
and Costs pursuant to Fla. Stat. 57.105(7); the Court having reviewed the court file, the motion,
response, memoranda, case law, and, having heard argument of counsel during the hearings held
on November 30, 2016 and December 21, 2016, 2016, the Court finds as follows:
Background
1. LIBERTY HOME EQUITY SOLUTIONS INC., filed the instant action to foreclose a
Reverse Mortgage regarding Real Property at 1315 Jann Ave, Opa Locka, FL 33054
(“Subject Property”) against Ms. El Hassan on April 5, 2016.
2. The Complaint alleged that Defendant had breached the terms of the mortgage as
follows:
FELICIA EL HASSAN ceased occupying the subject property for reasons other
than death and the subject property is not the principal residence of any surviving
borrower. The Secretary of Housing and Urban Development approved this
occurrence as grounds for acceleration of the debt on or about the September 28,
2015.
3. On April 26, 2016, Plaintiff filed a Return of Service showing Ms. El Hassan was served
with process at the Subject property on April 19, 2016.
4. On April 28, 2016, this Court entered an “Agreed Order” allowing the Defendant 20 days
to respond to the complaint.
5. Notwithstanding the Agreed Order extending the time to respond to the Complaint, the
Plaintiff sought a Final Judgment of foreclosure via an Order to Show Cause on May 11,
2016, the Plaintiff further provided the Court with a proposed Final Judgment of
Foreclosure which included inter alia Plaintiff’s Attorneys’ Fees in the amount of
$2,800.00.
6. On May 17, 2016, Ms. El Hassan, through her Counsel, filed a Motion to Dismiss.
7. On August 25, 2016, the Plaintiff filed its Notice of Voluntary Dismissal.
8. On September 14, 2016, Defendant timely filed a Motion for Attorneys’ Fees.
Findings of Fact
This Plaintiff and its counsel commenced the instant litigation against the Defendant,
alleging Ms. El Hassan ceased living in the subject property. The Court finds that the Defendant
never ceased occupying the subject property and that Defendant did not breach any provision of
the Mortgage which was alleged in Plaintiff’s Complaint.
The Plaintiff insists that the dismissal was the result of a “cure of default by the defendant
and not as a result of being a prevailing party.” Plaintiff then asserts that the case was “settled”
and the fact of the settlement meant that no party was a prevailing party. The Defendant denies
that the parties entered into a stipulation. The Plaintiff was given an opportunity to present any
evidence which would suggest a settlement or stipulation, yet Plaintiff provided no evidence to
this Court of any such agreement. Accordingly, the Court hereby finds that there was no
agreement or stipulation whereby Defendant waived her right to pursue attorneys’ fees.
Additionally, The Plaintiff’s alleges that it was forced to bring the foreclosure action
because of “Defendant’s failure to occupy the subject property which resulted from the
Defendant’s failure to certify her occupancy using the annual certification”. However, as stated
above, the Defendant never failed to occupy the subject property and there is no clause in either
the promissory note or the Mortgage that requires Defendant to provide an annual certification of
occupancy. Quite the opposite, Paragraph 9(b) of the Mortgage states that “Borrower shall
notify the Lender whenever any of the events listed in Paragraph 9(a)(ii)-(v) occur.” Mortgage at
4.1 places an affirmative duty on Defendant to notify Plaintiff if one of the occurrences listed in
Paragraph 9(a)(i)-(iv) happens.
The Defendant’s alleged failure to provide the Plaintiff with a certificate of occupancy is
not an allegation in the Complaint and is not a bargained for agreement pursuant to the terms of
the note or Mortgage.
Paragraph 20 of the Mortgage, which was attached to the Complaint as an Exhibit,
provides:
20. Foreclosure Procedure… Lender shall be entitled to collect all
expenses incurred in pursuing the remedies provided in this
Paragraph 20, including, but not limited to, reasonable attorneys’
fees and costs of title insurance.
Paragraph 20 of the Mortgage speaks only of the right of Liberty Home to collect attorneys’ fees.
However, section 57.105(7) provides a basis for the award of fees to all parties to a contract with
such a provision.
When Liberty Home voluntarily dismissed its case on August 25, 2016, the Defendant
became the prevailing party. Florida courts have been clear that a voluntary dismissal of a
foreclosure case means that a defendant is a prevailing party who is entitled to an award of
attorneys’ fees. See Nudel v. Flagstar Bank, FSB, 60 So.3d 1163 (Fla. 4th DCA 2011)(mortgagor
who succeeded in having foreclosure action dismissed without prejudice was entitled to recover
her attorney fees; mortgage provision that entitled mortgagee to reasonable attorney fees and
costs in foreclosure proceedings was made reciprocal by operation of statute, and involuntary
dismissal made mortgagor the prevailing party); Raza v. Deutsche Bank Nat. Trust Co., 100
So.3d 121 (Fla. 2d DCA 2012)(mortgagor who was the prevailing party in bank’s action to
foreclose a mortgage and to recover monies due under related promissory note was entitled to
award of attorney fees, where mortgage and promissory note contained attorney fee provisions in
favor of bank); Landry v. Countrywide Home Loans, Inc., 731 So.2d 137 (Fla. 1st DCA
1999)(mortgagors were entitled to attorney fees after mortgagee voluntarily dismissed
foreclosure action; pursuant to statute, contractual attorney fee provisions included in underlying
mortgage note were reciprocal obligations).
CONCLUSION
The facts of this case demonstrate that Defendant is the prevailing party and is entitled
under the terms of the Mortgage to a fee award. Pursuant to the language in the Mortgage
coupled with the clear provisions of section 57.105(7) regarding the reciprocity of attorney fee
contractual language means that Defendant’s motion for fees is both supported by the facts and
by the law.
Therefore, pursuant to section 57.105(7), Florida Statutes, the Defendant, Felicia El
Hassan is entitled to recover their reasonable attorneys’ fees, to be paid by the Plaintiff Liberty
Home Equity Solutions Inc. Formerly Known as Genworth Financial Home Equity Access Inc.
The matter shall be scheduled for an evidentiary hearing to determine the amount of
attorneys fees assessed.
DONE AND ORDERED in Chambers at Miami-Dade County, Florida, on 01/10/17.
_______________________________
JORGE E. CUETO
CIRCUIT COURT JUDGE
The Supreme Court of the United States recently decided that it will review the decision of the U.S. Court of Appeals for the Fourth Circuit in Henson v. Santander Consumer USA, Inc.
As you may recall from our prior update, the U.S. Court of Appeals for the Fourth Circuit held that the fact that a debt is in default at the time it is purchased by an entity does not necessarily make that entity a “debt collector” subject to the federal Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq.
The plaintiff consumer filed a petition for a writ of certiorari with the Supreme Court of the United States, asking the Court to resolve a “deep, mature circuit conflict that has only become more entrenched with time.” The conflict refers to a circuit split over whether a creditor, such as a bank or finance company, collecting on a debt acquired in default is a “debt collector” subject to the FDCPA.
Mortgage Servicers Kept Borrowers in the Dark About Options, Demanded Excessive Paperwork
WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today took separate actions against CitiFinancial Servicing and CitiMortgage, Inc. for giving the runaround to struggling homeowners seeking options to save their homes. The mortgage servicers kept borrowers in the dark about options to avoid foreclosure or burdened them with excessive paperwork demands in applying for foreclosure relief. The CFPB is requiring CitiMortgage to pay an estimated $17 million to compensate wronged consumers, and pay a civil penalty of $3 million; and requiring CitiFinancial Services to refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million.
“Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” said CFPB Director Richard Cordray. “Consumers were kept in the dark about their options or burdened with excessive paperwork. This action will put money back in consumers’ pockets and make sure borrowers can get help they need.”
CitiFinancial Servicing
CitiFinancial Servicing is made up of four entities incorporated in Delaware, Minnesota, and West Virginia, and headquartered in O’Fallon, Mo. All are direct subsidiaries of CitiFinancial Credit Company, and an indirect subsidiary of New York-based Citigroup, Inc. As a mortgage servicer, CitiFinancial Servicing collects payments from borrowers for loans it originates. It also handles customer service, collections, loan modifications, and foreclosures.
CitiFinancial Servicing originates and services residential daily simple interest mortgage loans. With these loans, the interest amount due is calculated on a day-to-day basis, unlike a typical mortgage, where interest is calculated monthly. With a daily simple interest loan, the consumer owes less interest and pays more toward principal when they make monthly payments before the due date. But if payments are late or irregular, more of the consumer’s payment goes to pay interest. Some consumers who notified CitiFinancial Servicing that they faced a financial hardship were offered “deferments.” This postponed the consumer’s next payment due date, and the consumer could still be considered current on payments. But CitiFinancial Servicing did not treat a deferment as a request for foreclosure relief options, also called loss mitigation options, as required by CFPB mortgage servicing rules.
CitiFinancial Servicing violated the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on deceptive acts or practices. Specifically, CitiFinancial Servicing:
Kept consumers in the dark about foreclosure relief options: When borrowers applied to have their payments deferred, CitiFinancial Servicing failed to consider it as a request for foreclosure relief options. As a result, borrowers may have missed out on options that may have been more appropriate for them. Such requests for foreclosure relief trigger protections required by CFPB mortgage servicing rules. The rules include helping borrowers complete their applications and considering them for all available foreclosure relief alternatives.
Misled consumers about the impact of deferring payment due dates: Consumers were kept in the dark about the true impact of postponing a payment due date. CitiFinancial Servicing misled borrowers into thinking that if they deferred the payment, the additional interest would be added to the end of the loan rather than become due when the deferment ended. In fact, the deferred interest became due immediately. As a result, more of the borrowers’ payment went to pay interest on the loan instead of principal when they resumed making payments. This made it harder for borrowers to pay down their loan principal.
Charged consumers for credit insurance that should have been canceled: Some borrowers bought CitiFinancial Servicing credit insurance, which is meant to cover the loan if the borrower can’t make the payments. Borrowers paid the credit insurance premium as part of their mortgage payment. Under its terms, CitiFinancial Servicing was supposed to cancel the insurance if the borrower missed four or more monthly payments. But between July 2011 and April 30, 2015, about 7,800 borrowers paid for credit insurance that CitiFinancial Servicing should have canceled under those terms. These payments were still directed to insurance premiums instead of unpaid interest, making it harder for borrowers to pay down their loan principal.
Prematurely canceled credit insurance for some borrowers: CitiFinancial Servicing prematurely canceled credit insurance for some consumers. Some of those borrowers later had claims denied because CitiFinancial Servicing had improperly canceled their insurance.
Sent inaccurate consumer information to credit reporting companies: CitiFinancial Servicing incorrectly reported some settled accounts as being charged off. A charged-off account is one the bank deems unlikely to be repaid, but may sell to a debt buyer. At times, the servicer continued to send inaccurate information about these accounts to credit reporting companies, and didn’t correct bad information it had already sent.
Failed to investigate consumer disputes: CitiFinancial did not investigate consumer disputes about incorrect information sent to credit reporting companies within the required time period. In some instances, they ignored a “notice of error” sent by consumers, which should have stopped the servicer from sending negative information to credit reporting companies for 60 days.
Under the consent order, CitiFinancial Servicing must:
Pay $4.4 million in restitution to consumers: CitiFinancial Services must pay $4.4 million to wronged consumers who were charged premiums on credit insurance after it should be been canceled, or who were denied claims for insurance that was canceled prematurely.
Clearly disclose conditions of deferments for loans: CitiFinancial Servicing must make clear to consumers that interest accruing on daily simple interest loans during the deferment period becomes immediately due when the borrower resumes making payments. This means more of the borrowers’ loan payment will go toward paying interest instead of principal. CitiFinancial Servicing must also treat a consumer’s request for a deferment as a request for a loss mitigation option under the Bureau’s mortgage servicing rules.
Stop supplying bad information to credit reporting companies: CitiFinancial Servicing must stop reporting settled accounts as charged off to credit report companies, and stop sending negative information to those companies within 60 days after receiving a notice of error from a consumer. CitiFinancial Servicing must also investigate direct disputes from borrowers within 30 days.
Pay a civil money penalty: CitiFinancial Servicing must pay $4.4 million to the CFPB Civil Penalty Fund for illegal acts.
CitiMortgage is incorporated in New York, headquartered in O’Fallon, Mo., and is a subsidiary of Citibank, N.A. CitiMortgage is a mortgage servicer for Citibank and government-sponsored entities such as Fannie Mae and Freddie Mac. It also fields consumer requests for foreclosure relief, such as repayment plans, loan modification, or short sales.
Borrowers at risk of foreclosure or otherwise struggling with their mortgage payments can apply to their servicer for foreclosure relief. In this process, the servicer requests documentation of the borrower’s finances for evaluation. Under CFPB rules, if a borrower does not submit all the required documentation with the initial application, servicers must let the borrowers know what additional documents are required and keep copies of all documents that are sent.
However, some borrowers who asked for assistance were sent a letter by CitiMortgage demanding dozens of documents and forms that had no bearing on the application or that the consumer had already provided. Many of these documents had nothing to do with a borrower’s financial circumstances and were actually not needed to complete the application. Letters sent to borrowers in 2014 requested documents with descriptions such as “teacher contract,” and “Social Security award letter.” CitiMortgage sent such letters to about 41,000 consumers.
In doing so, CitiMortgage violated the Real Estate Settlement Procedures Act, and the Dodd-Frank Act’s prohibition against deceptive acts or practices. Under the terms of the consent order, CitiMortgage must:
Pay $17 million to wronged consumers: CitiMortgage must pay $17 million to approximately 41,000 consumers who received improper letters from CitiMortgage. CitiMortgage must identify affected consumers and mail each a bank check of the amount owed, along with a restitution notification letter.
Clearly identify documents consumers need when applying for foreclosure relief: If it does not get sufficient information from borrowers applying for foreclosure relief, CitiMortgage must comply with the Bureau’s mortgage servicing rules. The company must clearly identify specific documents or information needed from the borrower and whether any information needs to be resubmitted. Or it must provide the forms that a borrower must complete with the application, and describe any documents borrowers have to submit.
Freeze any foreclosures related to the flawed application process and reach out to harmed consumers: For consumers covered under the order who never received a decision on their application, CitiMortgage must stop all foreclosure-related activity, and reach out to these borrowers to determine if they want foreclosure relief options.
Pay a civil money penalty: CitiMortgage must pay $3 million to the CFPB Civil Penalty Fund for illegal acts.
The consent order reflects that CitiMortgage took affirmative steps to reach out to some borrowers before it may have been required to by CFPB rules. While those borrowers also would have benefited from more tailored and accurate notices, and the institution will provide compliant notices to them going forward, those individuals were not included the affected group of consumers in this settlement. This will avoid penalizing the institution for making additional effort, which the Bureau encourages other institutions to make as well.
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.
COMING TO YOU LIVE DIRECTLY FROM THE DUBIN LAW OFFICES AT HARBOR COURT, DOWNTOWN HONOLULU, HAWAII
LISTEN TO KHVH-AM (830 ON THE AM RADIO DIAL)
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Sunday – January 22, 2017
Ten Things That Every Foreclosure Judge Needs To Know: An Educational Guide Specially Prepared for New Foreclosure Judges
It is of course well known how many difficulties homeowners have had with foreclosure judges favoring pretender lenders, ordering foreclosures despite well documented lender abuses.
In large part that has been because no effort has been made in judiciaries nationwide to educate foreclosure judges regarding homeowner statutory, evidentiary, and constitutional rights.
On a recent broadcast we have discussed vital changes in the foreclosure process that only state legislatures can and should make, and soon we will be recommending for adoption nationwide a new model Mortgage Integrity Act (MIA).
This Sunday we are emphasizing the leadership that in the meantime our state judiciaries can contribute with the provision of proper education and training for foreclosure judges.
For example, when new judges are assigned to foreclosure calendars, that creates a special need as well as a special opportunity for such advance training, yet new foreclosure judges receiving no training seem to quickly continue the practices of their predecessors.
There are many reasons for that, such as their being assisted, at least temporarily, by the same closed minded staff, or schooled by their draconian predecessors — with no homeowner input whatsoever.
This Sunday’s live show, available shortly posted also on our Website at www.foreclosurehour.com, summarizes what new foreclosure judges especially need to know before they become indoctrinated into the usual lender dominated judicial culture.
In Honolulu, for instance, we now have a new foreclosure judge with no obvious prejudices or bank stock ownership conflicts and with a reputation for fair decision making in other areas, but with little if any adequate foreclosure experience, undoubtedly shortly to be inducted into the usual lenders-can-do-no-wrong judicial foreclosure club.
Homeowners should not be hesitant to seek ethical ways of educating especially new foreclosure judges before their minds become closed.
Hopefully, if efforts are made to get foreclosure judges, particularly new foreclosure judges, to become aware of the issues discussed on this Sunday’s show and listen in on our Website (if not listening live) to even more of our broadcasts, we might stimulate more equitable foreclosure decision making in your jurisdiction while waiting for needed broader ranging legislative changes.
John and I will therefore be inviting our new foreclosure judge in Honolulu to appear on the Foreclosure Hour and share her thoughts with us, calling attention to this Sunday’sshow.
And if any of our listeners will send us information on foreclosure judges in their jurisdiction, John and I will be pleased to specially invite each of them (without mentioning your name), referencing this Sunday’s show, to appear on a future show to discuss with John and me what every foreclosure judge needs to know.
Such discussions would have to be non-individual case specific of course, and any questioning respectful.
Freedom of speech should not be restricted by the wearing of black robes.
Even United States Supreme Court Justices have recently continually appeared on radio and television shows to explain in general their judicial views.
Why not foreclosure judges?
Those who miss this important live broadcast can listen to it on the Past Broadcast Section of our Website at www.foreclosurehour.com shortly after it airs live on KHVH-AM News Radio in Honolulu and simultaneously throughout the United States on the iHeart Internet App.
Banks that settle government investigations often receive an outside monitor to ensure that they make good on their promises to reform.
Deutsche Bank AG now has five.
To resolve the Justice Department’s investigation over its mortgage-backed securities business, the bank agreed Tuesday to a $7.2 billion penalty, more than half of which will provide relief to consumers hurt by its conduct. To check its remediation work, the bank agreed to hire an independent monitor, Michael Bresnick, a former prosecutor.
The monitoring job brings Bresnick full circle. He was a Justice Department lawyer who helped start the task force that investigated Deutsche Bank and many other U.S. and European banks. The probes led to multibillion-dollar settlements with the banks — which created work for monitors like Bresnick, who’s now with the law firm Venable LLP.
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