1. In mid-2006, Bear Stearns induced investors to purchase, and Ambac as a financial guarantor to insure, securities that were backed by a pool of mortgage loans that – in the words of the Bear Stearns deal manager – was a “SACK OF SHIT.”1 Within the walls of its sparkling new office tower, Bear Stearns executives knew this derogatory and distasteful characterization aptly described the transaction. Indeed, Bear Stearns had deliberately and secretly altered its policies and neglected its controls to increase the volume of mortgage loans available for its “securitizations” made in patent disregard for the borrowers’ ability to repay those loans. After the market collapse exposed its scheme to sell defective loans to investors through these transactions, JP Morgan executives assumed control over Bear Stearns and implemented an across-the-board strategy to improperly bar EMC from honoring its contractual promises to disclose and repurchase defective loans through a series of deceptive practices. In what amounts to accounting fraud, JP Morgan’s bad-faith strategy was designed to avoid and has avoided recognition of the vast off-balance sheet exposure relating to its contractual repurchase obligations – thereby enabling JPMorgan Chase & Co. to manipulate its accounting reserves and allowing its senior executives to continue to reap tens of millions of dollars in compensation
following the taxpayer-financed acquisition of Bear Stearns.
Las Vegas: Attorney General Catherine Cortez Masto announced today that her office is filing a lawsuit against Bank of America Corporation, N.A., BAC Home Loans Servicing, LP, Recon Trust Company (“Bank of America”) for engaging in deceptive trade practices against Nevada homeowners.
The lawsuit, filed in the Eighth Judicial District of the State of Nevada, was triggered by consumer complaints and follows an extensive investigation into Bank of America’s alleged deceptive practices involving its residential mortgage servicing, particularly its loan modification and foreclosure practices.
The Complaint alleges that Bank of America is:
1)
Misleading consumers by promising to act upon requests for mortgage modifications within a specific period of time;
2)
Misleading consumers with false assurances that their homes would not be foreclosed while their requests for modifications were pending, but sending foreclosure notices, scheduling auction dates, and even selling consumers’ homes while they waited for decisions;
3)
Misrepresenting to consumers that they must be in default on their mortgages to be eligible for modifications when, in fact, current borrowers are eligible for assistance;
4)
Making false promises to consumers that their modifications would be made permanent if they successfully completed trial modification periods, but then failing to convert these modifications;
5)
Misleading consumers with inaccurate and deceptive reasons for denying their requests for modifications;
6)
Falsely notifying consumers or credit reporting agencies that consumers are in default when they are not;
7)
Misleading consumers with offers of modifications on one set of terms, but then providing them with agreements on different sets of terms, or misrepresenting that consumers have been approved for modifications.
MERS Response to D.C. Attorney General’s Oct. 28, 2010 Statement of Enforcement
RESTON, Va., Oct. 28, 2010—In response to the Statement of Enforcement by the Attorney General for the District of Columbia, we agree that no homeowners should be subjected to deceptive practices during the foreclosure process. To ensure that homeowners readily have necessary information available to them, the MERS® System provides free access to any member of the general public to identify the current servicer and the note owner, if the note-owner has agreed to be disclosed, on their loan. Ninety-seven percent of MERS members agree to be disclosed. The MERS®System is the only comprehensive publicly available source of servicing and ownership of more than 64 million mortgage loans.
Mortgage Electronic Registration Systems, Inc. (MERS) holds the security interest in the deed of trust when MERS is identified as the beneficiary of record, as nominee for the lender and the lender’s successors and assigns. At closing, the lender and borrower name MERS as the beneficiary. The deed of trust is recorded with the Recorder of Deeds in compliance with the District of Columbia’s laws. MERS executes an assignment if the security interest is transferred from MERS to another entity and the assignment is recorded. For example, if the mortgage loan goes into default, and MERS is not the foreclosing entity, then MERS will execute an assignment showing the transfer of the security interest from MERS to the note-holder who will be foreclosing. The assignment is recorded as required under DC’s laws.
When MERS forecloses, MERS is already recorded in the land records as the security interest holder and requires under its membership rules to be in possession of the note in order to be the note-holder. Under either option, in compliance with DC’s laws, the notice of foreclosure sale represents to the homeowner the identity of the note-holder and that the note-holder’s security interest has been recorded.
Any MERS member who experiences a problem related to the recent Statement from the Attorney General for the District of Columbia is asked to immediately notify MERS. We will take steps to protect the lawful right to foreclose that the borrower contractually agreed to if the borrower defaults on their mortgage loan.
Attorney General Issues Statement on Foreclosures in DC
Attorney General Peter Nickles issued an enforcement statement today describing when the notices used to commence foreclosures in DC may mislead homeowners and violate the District’s consumer protection law. The statement clarifies that a foreclosure may not be commenced against a DC homeowner unless the security interest of the current noteholder is properly supported by public filings with the District’s Recorder of Deeds.
A noteholder’s security interest in a DC home should normally be reflected in the public land records maintained by the District’s Recorder of Deeds. Under District law, in contrast to the laws of many states, each deed or other document transferring a mortgage interest must be recorded with the Recorder of Deeds within 30 days of execution. This requirement is not satisfied by private tracking of mortgage interests through the Mortgage Electronic Registration Systems (MERS).
The District has a non-judicial foreclosure process that begins with a Notice of Foreclosure on a form prescribed by the Recorder of Deeds. The form requires identification of a “Holder of the Note” and a “Security Instrument recorded in the land records of the District of Columbia.” According to today’s enforcement statement: “The homeowner who receives such a notice is entitled to presume that the recordation of the security interest complies with District law, and that each intermediate transfer of the security interest between the original maker of the note and the current holder of the note is documented in the public record.”
When a foreclosure sale notice misrepresents to a homeowner that the foreclosing noteholder has a recorded security interest, the homeowner may fail to seek legal help in determining whether there may be a good basis for challenging the foreclosure in court. Misrepresentations of material facts, when made to homeowners or other consumers, violate the District’s Consumer Protection Procedures Act, which is enforced by the attorney general.
The enforcement statement invites “homeowners or their advocates” to inform the Office of the Attorney General (OAG) if foreclosures “continue to be commenced or pursued with deceptive foreclosure sale notices” so that the Office may consider bringing enforcement actions to stop foreclosure proceedings and seek restitution for consumers.
“A homeowner should not be misled into believing that a threatened foreclosure is supported by the District’s public records when it is not,” Nickles said.
Continued use of deceptive foreclosure sale notices may be reported to the attorney general’s consumer hotline at 202-442-9828.
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