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Calling All Whistleblowers: PLEASE, Your Country Needs You

Calling All Whistleblowers: PLEASE, Your Country Needs You


Abigail Field-

Everyday brings more proof the Bailed-Out Bankers (those B.O.Bs) are running our country to their liking. Exhibit A: the Obama Administration, the B.O.Bs and the rest of state and federal law enforcement agree to violate contracts so taxpayers, pension funds, 401ks and other investors can pay for the B.O.B.s misdeeds. So what’s an American to do to reclaim her country?

Well, if you work for the B.O.Bs and are in a position to witness banker wrongdoing, tell law enforcers. You know, like the anti-terrorism ads say: If you see something, say something.

Perhaps you know your B.O.B bosses are ripping people off by lying about the bank’s borrowing costs; perhaps you know your B.O.B. bosses are systematically ripping off our government via the HAMP program, via inflated appraisals for FHFA insured mortgages; or perhaps, like whistleblower Linda Almonte, your B.O.B. bosses demanded that you participate in their fraud.

[REALITY CHECK]

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Lori Wigod v. Wells Fargo | Wells LOSES at 7th Cir. Appellate…Excoriating opinion regarding a HAMP Class Action & a Judicial Request for a Fed. Amicus Curiae

Lori Wigod v. Wells Fargo | Wells LOSES at 7th Cir. Appellate…Excoriating opinion regarding a HAMP Class Action & a Judicial Request for a Fed. Amicus Curiae


H/T DEONTOS

In the
United States Court of Appeals
For the Seventh Circuit
No. 11-1423

LORI WIGOD,
Plaintiff-Appellant,

v.

WELLS FARGO BANK, N.A.,
Defendant-Appellee.

<excerpts>

HAMILTON, Circuit Judge. We are asked in this appeal

to determine whether Lori Wigod has stated claims

under Illinois law against her home mortgage servicer

for refusing to modify her loan pursuant to the federal

Home Affordable Mortgage Program (HAMP).

She brought this putative class action alleging violations

of Illinois law under common-law contract and tort

theories and under the Illinois Consumer Fraud and

Deceptive Business Practices Act (ICFA). The district

court dismissed the complaint in its entirety under

Rule 12(b)(6) of the Federal Rules of Civil Procedure.

This appeal followed, and it presents two sets of issues.

The first set of issues concerns whether Wigod

has stated viable claims under Illinois common law and

the ICFA. We conclude that she has on four counts …

These allegations support garden-variety

claims for breach of contract or promissory estoppel.

She has also plausibly alleged that Wells Fargo com-

mitted fraud under Illinois common law and engaged in

unfair or deceptive business practices in violation of the

ICFA.

The second set of issues concerns whether these

state-law claims are preempted or otherwise barred by

federal law. We hold that they are not.

We accordingly reverse the judgment of

the district court on the contract, promissory estoppel,

fraudulent misrepresentation, and ICFA claims …

IV. Conclusion

The judgment of the district court is therefore

REVERSEDas to Counts I, II, and VII, and the

fraudulent misrepresentation claim of Count V …

RIPPLE, Circuit Judge, concurring. I am very pleased

to join the excellent opinion of the court written by

Judge Hamilton. I write separately only to note that, in

my view, our task of adjudicating this matter would

have been assisted significantly if the United States had

entered this case as an amicus curiae.

In this case, this last consideration justifies the

decision to proceed without further delay. Prompt resolution

of this matter is necessary not only for the good

of the litigants but for the good of the Country.

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UNSEALED COMPLAINT | Whistleblower says BofA defrauded HAMP

UNSEALED COMPLAINT | Whistleblower says BofA defrauded HAMP


REUTERS-

Bank of America NA prevented homeowners from receiving mortgage-loan modifications under a federal program in order to avoid millions of dollars in losses while benefitting from financial incentives for participating in the program, according to a complaint unsealed in federal court Wednesday.

The suit is the second whistleblower complaint unsealed so far with apparent ties to the $1 billion False Claims Act settlement announced by Bank of America and the U.S. Attorney’s Office for the Eastern District of New York on February 9.

[REUTERS]

H/T Bill Behrens for the complaint

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Abigail Field: Insider Says Promontory’s OCC Foreclosure Reviews for Wells are Frauds. Brought to You by HUD Sec. Donovan

Abigail Field: Insider Says Promontory’s OCC Foreclosure Reviews for Wells are Frauds. Brought to You by HUD Sec. Donovan


If anyone can set the record straight, Abigail is just the person to do it!

Naked Cap-

U.S. Housing Secretary Shaun Donovan has embarrassed himself yet again. This time, though, he’s gone in for total humiliation. See, he praised the bank-run Office of the Comptroller of the Currency’s (OCC) foreclosure reviews as an important part of the social justice delivered by the mortgage “settlement“. But thanks to an insider working on an OCC review, we know that process is a sham. Worse, the insider’s story shows that enforcement of the settlement is likely to be similar, which is to say, meaningless. Doesn’t matter how pretty the new servicing standards are if the bankers don’t have to follow them.

Let’s start with Donovan’s sales pitch for the OCC reviews:

For families who suffered much deeper harmwho may have been improperly foreclosed on and lost their homes and could therefore be owed hundreds of thousands of dollars in damages — the settlement preserves their ability to get justice in two key ways.

First, it recognizes that the federal banking regulators have established a process through which these families can receive help by requesting a review of their file. [ACF: That's the OCC process] If a borrower can document that they were improperly foreclosed on, they can receive every cent of the compensation they are entitled to through that process.

Second, the agreement preserves the right of homeowners to take their servicer to court. Indeed, if banks or other financial institutions broke the law or treated the families they served unfairly, they should pay the price — and with this settlement they will. [bold throughout mine]

Now, the justice of the settlement has been debunked many times over. And David Dayen debunks Donovan’s OCC pitch here. What’s important is that Bank Housing Secretary Donovan wants you to believe the Wells Fargo OCC process is a meaningful contribution to holding bankers accountable and compensating victims.

Wells Fargo’s Fraudulent OCC ‘Independent’ Foreclosure Reviews

[NAKED CAPITALISM]

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Insider Says Wells Fargo’s Independent Foreclosure Review for OCC is “a Sham” – Mandelman Matters

Insider Says Wells Fargo’s Independent Foreclosure Review for OCC is “a Sham” – Mandelman Matters


I got an email the other night from one of my readers.  It said…

 

“I was hired as one of those “Independent File Review Specialist” at a company called Promontory working on Wells Fargo Bank. I have 15 years industry experience in all facets of the mortgage & title industry, and just needed a job at the moment.  I must say the whole project is a mess, and a terrible joke on the victims of foreclosure and the American people. It’s a total sham.”

 

No kidding, I said to myself.  Or, as Yves Smith would say… “Quelle surprise.”  The email continued…

 

“I have found errors that should be moved up through the ranks, but am told “quit digging so deep”…”put your shovel away”…Focus on the questions “in scope”… The review forms are set up so no harm could ever be found. It’s equivalent of an attorney presenting his case to a judge with just 20% of the evidence.”

 

Well, that can’t be good, right?  He went on…

 

“I would also like to mention that I was brought in through a temp agency…..some of the people brought in with me do not know the difference between a truth in lending statement, and a note. It’s a shame, these are your reviewers!!! The supervisors don’t want any trouble…they are mostly temps too, just trying to get a promotion to full time. Does this sound like a fair and impartial review to you? Since we’re temps I suppose that’s impartial, not to mention they made us “affiant notaries” so we can so-called “notarize each others reviews.”

 

Doesn’t sound “fair and impartial” in the least, now does it?  But I do like the ability to notarize each other’s reviews.  That sounds handier than a pocket on a man’s shirt.  He closed by saying…

 

“The foreclosed victims don’t realize if they do not provide specific dates on the intake forms… their complaints are considered “general comments” out of scope. They should specifically ask for a “full file review” and hopefully their info has not been scrubbed or purged… I could go on and on, but I just felt I needed to share this.”

 

And in my opinion, you’ve done a very good thing.

 

Our insider says he was hired by Promontory Compliance Solutions, LLC to do work on the Independent Foreclosure Review for Wells Fargo Bank.  The company’s Website describes itself as follows:

 

Promontory excels at helping financial companies grapple with and resolve critical issues, particularly those with a regulatory dimension. Taken as a whole, Promontory professionals have unparalleled regulatory credibility and insight, and we provide our clients with frank, proactive advice informed by evolving best practices and regulatory expectations.

Promontory is a leading strategy, risk management and regulatory compliance consulting firm focusing primarily on the financial services industry. Led by our Founder and CEO, Eugene A. Ludwig, former U.S. Comptroller of the Currency, our professionals have deep and varied expertise gained through decades of experience as senior leaders of regulatory bodies, financial institutions and Fortune 100 corporations. 

 [Continue to Mandelman Matters] it gets much better!

.

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Phillips vs. U.S. Bank | JUDGE DENNIS BLACKMON NAILS US BANK IN GEORGIA ON HAMP, WRONGFUL FORECLOSURE AND EMOTIONAL DISTRESS DAMAGES

Phillips vs. U.S. Bank | JUDGE DENNIS BLACKMON NAILS US BANK IN GEORGIA ON HAMP, WRONGFUL FORECLOSURE AND EMOTIONAL DISTRESS DAMAGES


H/T Living Lies For This Superb Find

“Sometimes, only courts of law stand to protect the taxpayer. Somewhere, someone has to stand up. Well, sometimes is now, and the place is the Great State of Georgia. The Defendant’s Motion is hereby Denied”

“The United States Government paid taxpayer dollars to the largest of our financial institutions, and to European Union Banks, in order to prop up those poorly run organizations. Twenty Billion of those dollars were handed over to the defendant, U.S. Bank.”

“The HAMP guidelines require U.S. Bank to perform modification services for all mortgage loans its services. Otis Philips applied to modify his mortgage with U.S. Bank. U..S. Bank denied the request, without numbers, figures, or explanation, reasoning, comparison to the guidelines, or anything.”

“A cynical Judge might believe that this entire motion to dismiss is a desperate attempt to avoid the discovery period, where U.S. Bank would have to tell Mr. Phillips how his financial situation did not qualify him for a modification. Or, perhaps he was [Judge's emphasis, not mine] qualified, yet didn’t receive the modification, in violation of U.S. Bank’s Service Participation Agreement (SPA).”

“U.S. Bank’s silence on this issue might heighten the suspicions of such a cynical jurist.”

“Clearly, U.S. Bank cannot take the money, contract with our government to provide a a service to the taxpayer, violate that agreement, and then say no one on earth can sue them for it. That is not the law in Georgia. In fact, since no administrative review is provided in HAMP [which is something you should put in your OCC letter demanding review], the courts are the only recourse.”

 

Scribd

 

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Homeowners, Investors in Mortgage Backed Securities Feel Your Pain. Hear Their Lawyer Talk About Servicer Nightmares.

Homeowners, Investors in Mortgage Backed Securities Feel Your Pain. Hear Their Lawyer Talk About Servicer Nightmares.


Absolutely do not miss this piece from Abigail Field – So head over and please absorb the information.

 

Abigail C. Field-

If you want to cut through some of the nonsense the banks have managed to sell as information about the housing situation, robosigning, mortgage modifications, check out this very accessible interview of attorney Talcott Franklin by Martin Andelman.

Tal represents the majority of investors hosed once by Wall Streeers selling AAA-rated mortgage backed junk, and constantly being hosed again by the big bank servicers of those mortgages. Interestingly, his perspective sounds very much like homeowners’. Yes, a couple of times it gets a little too legalistic, but only for about 5 minutes of the slightly longer than the hour chat—when you hit the overview of the contracts structuring securitization, or any other topic that is more in the weeds than you want to go, take a deep breath and keep going. Most of the interview is in a rhythm and a language that creates clarity I’ve not seen or heard elsewhere.

[REALITY CHECK]

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The World of the Investor with Attorney Talcott Franklin – A Mandelman Matters Podcast

The World of the Investor with Attorney Talcott Franklin – A Mandelman Matters Podcast


Please find some time today or over the weekend to listen to this excellent podcast of Martin Andelman’s interview with Attorney Talcott Franklin, who represents more than half of all the investors in mortgage-backed securities on the planet.  Tal’s the co-author of the “Mortgage and Asset-backed Securities Litigation Handbook,” and he’s a very experienced and highly sophisticated litigator. You will learn a whole lot and many thanks to Martin for this super interview.

Please head over to Mandelman Matters for the full article.

The podcast is available in two versions… MP4 and MP3.  The MP4 version includes a couple of slides that show diagrams of the basic securitization process, but the MP4 format may not play on some computers.  The MP3 version is audio only, and should play on most any computer.  Most listeners will have no trouble following along either way.

So, turn up the volume on your speakers, and click the MP4 or MP3 version.  I loved recoding this podcast.  If you want to know more about the foreclosure crisis, you’re about to learn from an expert on the other side of the foreclosures, the investor side… it doesn’t get any better than this!

CLICK HERE TO PLAY THE ENHANCED MP4 VERSION

… INCLUDES SLIDES ON SECURITIZATION

 OR

CLICK HERE TO PLAY THE MP3 VERSION

Mandelman out.


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Adam Levitin | Make The Banks Pay

Adam Levitin | Make The Banks Pay


Obama and the AGs still balk at the only solution to the housing-driven recession

Salon-

There is $700 billion in negative equity in the U.S. housing market. That means Americans owe $700 billion more than their homes are worth. Any plan for the housing sector or the U.S. economy, that doesn’t take a serious bite out of negative equity isn’t serious.

Yet un-serious is what we continue to get from elected officials. This week the Obama Administration announced a new plan to help underwater homeowners refinance their mortgages to lower rates.  The plan, really an expansion of an existing program, is the latest in a series of programs designed to deal with the moribund housing market. Each has proven a more dismal disappointment than the next.

So too with the latest version of the proposed settlement between the state Attorneys General, led by Iowa’s Tom Miller, and the mortgage servicing industry. Yes, the deal has been sweetened by the addition of some interest rate reductions for underwater homeowners who are current on their payments. But that’s small potatoes.

[SALON]

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Secret Docs Show Foreclosure Watchdog Doesn’t Bark or Bite

Secret Docs Show Foreclosure Watchdog Doesn’t Bark or Bite


by Paul Kiel ProPublica, Oct. 4, 2011, 11:26 a.m.

Why has the administration’s flagship foreclosure prevention program been so ineffective in helping struggling homeowners get loan modifications and stay in their homes? One reason: The government’s supervision of the program has apparently ranged from nonexistent to weak.

Documents obtained by ProPublica – government audit reports of GMAC, the country’s fifth largest mortgage servicer – provide the first detailed look at the program’s oversight. They show that the company operated with almost no oversight for the program’s first eight months. When auditors did finally conduct a major review more than a year into the program, they found that GMAC had seriously mishandled many loan modifications – miscalculating homeowner income in more than 80 percent of audited cases, for example. Yet GMAC suffered no penalty. GMAC itself said it hasn’t reversed a single foreclosure as a result of a government audit.

The documents also reveal that government auditors signed off on GMAC loan-modification denials that appear to violate the program’s own rules, calling into question the rigor and competence of the reviews.

Some of the auditors’ mistakes are “appalling,” said Diane Thompson of the National Consumer Law Center, an advocacy group. “It suggests the government isn’t taking the auditing process seriously.”

In a written response to ProPublica questions [1], a spokeswoman for the Treasury Department, which runs the program, denied there were serious flaws in its oversight system, calling it “effective and unprecedented in many ways.”

The audits of GMAC, though revealing, give only a limited view into the program, because the Treasury has refused to release the documents for other servicers. For more than a year, ProPublica has sought the audits for ten of the largest program participants through a Freedom of Information Act request. The Treasury provided only GMAC’s audits, because the company consented to their release. ProPublica continues to seek all of the reports.

Abuses of the foreclosure process, in which banks and mortgage servicers cut corners or even created false documents [2] to move trouble borrowers out of their homes, have been extensively documented [3], along with failures by government [4] to regulate the industry. But the lapses revealed in the documents obtained by ProPublica stand out because they occurred within the government’s main effort to prevent foreclosures, the Home Affordable Modification Program, or HAMP.

Oversight Shrouded in Secrecy

For HAMP’s first two years, the government offered very little public detail about its oversight efforts. It was virtually impossible for the public – or even Congress – to know how well the banks and mortgage servicers were complying with the government’s effort to prevent struggling homeowners from losing their homes. Those years were crucial, because that’s when the vast majority of homeowners eligible for a modification – about three million – were evaluated by servicers.

The documents obtained by ProPublica show auditors finding serious problems at a major servicer during that time. Instead of publicly revealing the findings, Treasury chose to privately request that GMAC fix the problems.

“For two years, they’ve known how abysmal servicers were performing and decided to do nothing,” said Neil Barofsky, the former special inspector general for the Troubled Asset Relief Program, better known as TARP or the bank bailout, which provided the money for HAMP.

“It demonstrates that if you have a set of rules for which compliance is completely voluntary and no meaningful consequences for those who violate them, having all the audits and reviews in the world are not going to make a bit of difference,” he continued. “It’s why the program has been a colossal failure.”

Treasury continued to release few details about its audits until this June, when it began publishing quarterly reports based on the audits’ results. The public report showed what Treasury called “substantial” problems at four of the ten largest servicers – Bank of America, JPMorgan Chase, Wells Fargo, and Ocwen – and Treasury for the first time [5] withheld taxpayer subsidies from three of them.

Mortgage servicers that signed up for the program agreed to follow strict guidelines on how to evaluate struggling homeowners seeking a reduced mortgage payment. In exchange, they’d receive taxpayer subsidies. But as we’ve reported extensively, the largest servicers haven’t abided by the guidelines [6]. Homeowners have often been foreclosed on in the midst of review for a modification [7] or been denied due to the servicer’s error. For many homeowners, navigating what was supposed to have been a simple, straightforward program has proven a maddening ordeal [6].

Meanwhile, HAMP has fallen dramatically short of the administration’s initial goals to help three to four million homeowners. So far, fewer than 800,000 homeowners have received a loan modification through HAMP, less than one in four of those who applied [8].

Part of the $700 billion TARP, HAMP launched in early 2009 with a $50 billion budget to encourage loan modifications by paying subsidies to servicers, investors, and homeowners. But in another example of how the program has fallen short, only about $1.6 billion has gone out so far [9].

GMAC said it agreed to release its audits under the program because the company “believes in honoring the spirit of the Freedom of Information Act process” and “elected to be transparent on our work with the [modification] program,” spokeswoman Gina Proia said.

GMAC has changed its parent company’s name to Ally Financial, but its mortgage division is still called GMAC. The government owns a majority stake in Ally, because it rescued the company with TARP funds, but both the company and the Treasury said that didn’t factor into the company’s decision to allow the documents to be released.

ProPublica contacted all nine servicers who objected to the reports’ release. All either declined to comment on why they wanted the audits kept secret or defended keeping them out of the public domain by saying the reports contained confidential information. Collectively, these companies have so far been paid more than $471 million in cash – dubbed “servicer incentive payments” – through the program. They are eligible for hundreds of millions more. The country’s four largest banks – Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup – are also the largest servicers of mortgage loans.

In its written response, Treasury’s spokeswoman said it agreed to withhold the records in part because they could undermine “frank communications between mortgage servicers and compliance examiners” and hurt the program’s effectiveness. The department declined to provide either redacted versions or an index of the documents.

Early Reviews “Useless” and Flawed

Since the program’s beginning, homeowner advocates have wondered where HAMP’s watchdog was [10] and why it was having so little effect. That watchdog is Freddie Mac, tapped by Treasury in February 2009 and working under a contract worth $116 million and rising. The Freddie Mac unit, now staffed with 121 employees and employing about 150 more through contractors, is supposed to regularly audit servicers in the program to make sure they are following the rules. Treasury is ultimately responsible for deciding whether to punish a servicer, but it relies on auditors’ findings to make that decision.

It took several months for the unit to even get off the ground. In August of 2009, Treasury rejected Freddie Mac’s first reviews of servicers as inadequate [10], because they were “inconsistent and incomplete” and its staff was “unqualified,” according to a report by the TARP’s special inspector general. Freddie Mac promised to improve. That process took several more months.

As a result, for the program’s crucial first eight months there effectively was no watchdog. Nationwide, servicers filed to pursue foreclosure on about two million loans during that time.

Treasury disputed the idea that there was no watchdog for those months, saying that auditors had performed “readiness reviews” of servicers as early as the May of 2009, one month after the program began. The documents obtained by ProPublica show, however, that Freddie Mac’s auditing unit, called Making Home Affordable – Compliance (MHA-C), didn’t issue its first report for GMAC until early December, 2009 [11].

That audit was a modest effort that involved collecting a sample of 323 loans handled by GMAC and determining whether they’d been properly reviewed for the program. Because of the delays in starting the reviews, the report was based on a sample of loans that was five months old [12]. Such delays continued into 2010. Another Freddie Mac review, completed at the end of March 2010, was based on GMAC loans selected in October of the previous year [13].

The delays make those reviews “largely useless to homeowners,” said Thompson of the National Consumer Law Center. If a homeowner lost the house to foreclosure in July, it wouldn’t help to have an auditor notice that several months later, she explained.

The December 2009 audit notes that GMAC might have already foreclosed on loans auditors had flagged as potentially mishandled, but didn’t order remedial steps. It only requests that GMAC not take “further action.” [14]

GMAC said it had never reversed a foreclosure action as a result of a HAMP audit. ProPublica asked the other nine servicers who objected to the audits’ release the same question. American Home Mortgage Servicing, the only other servicer that answered the question, said it had also never reversed a foreclosure action due to a HAMP audit.

American Home handles about 384,000 loans [15], putting it among the ten largest servicers in the program.

A Treasury spokeswoman said that auditors have reviewed more than 50,000 loan files, but did not directly answer whether a servicer had ever reversed a foreclosure action because of a HAMP audit. Where auditors have found problems, she wrote, the department has “required servicers to take steps to tighten controls” and “re-evaluate any borrowers who may have been potentially impacted.”

In early 2010, around the same time that the auditing unit was issuing its first reports, auditors complained that servicers’ lack of responsiveness to their requests was hampering their efforts. Getting the right documents from servicers was “a cumbersome process,” the head of Freddie Mac’s audit team, Paul Heran, said in February 2010 at a mortgage industry conference. It seemed, he added, that servicers often relegated responding to the auditors to low-level staff who didn’t understand the requests. Another manager in the unit, Vic O’Laughlen, said servicers tended to respond with “at best fifty percent of what we’re expecting to see.”

However uncooperative the banks and mortgage services may have been, Freddie Mac’s auditing reports contain errors that call into question their reliability.

Every few months, the auditors examine a sample of the servicer’s loans that have been denied a HAMP modification to check whether the denials are legitimate. In each GMAC report reviewed by ProPublica, auditors found that the servicer had, with very few exceptions, given the homeowner fair and appropriate consideration. But among the justifications listed in the audits are some that violate the program’s rules or simply don’t make sense.

For instance, the December 2009 review says that 35 of the 247 loans auditors reviewed were denied because the homeowner was “less than 60 days delinquent.” [16] In the report, auditors said that was the right decision in all but one case. But being less than 60 days delinquent is never on its own a legitimate reason for a servicer to deny a modification, according to the program rules. Homeowners are eligible for a modification even if they’re current on their loans, as long as they can show they’re in imminent danger of defaulting.

Another example: Auditors agreed that GMAC had correctly denied a homeowner because of a failure to sign a trial modification offer by Dec. 31, 2012, HAMP’s end date [17]. That makes no sense, because the review took place in 2009. Treasury’s spokeswoman said this was a typo and that the homeowner was denied for a completely different reason.

There are several other examples in later reports of auditors signing off on denial reasons that have no apparent basis in the program’s rules. For instance, auditors cited “grandfathered foreclosure” [18] as a legitimate reason for some denials. The spokeswoman said such loans had been in the foreclosure process before GMAC signed up for the program, but the program rules explicitly stated at the time that such loans were eligible.

When ProPublica asked GMAC if it had denied homeowners loan modifications for these reasons, the company said it couldn’t comment because auditors, not GMAC, had generated those descriptions of why homeowners had been denied. In some cases, Proia said, the descriptions were simply wrong: GMAC had never denied homeowners simply because they weren’t 60 days delinquent.

But Treasury defended the questionable denials, and in so doing raised even more questions. For instance, the spokeswoman said HAMP “does not specifically require servicers to evaluate loans that are less than 60 days delinquent.” But Treasury’s official guidance to servicers said such borrowers “must be screened.”

“It makes you wonder if the Treasury even knows the rules for their own program,” said National Consumer Law Center’s Thompson.

A Congressionally-appointed panel, among others, has pointed to a fundamental flaw in the way the oversight was carried out: Auditors have had no direct contact with homeowners. The program has been dogged by servicers’ inadequate document systems. Borrowers have long reported [6] faxing and mailing the same documents over and over, because servicers kept losing them. Servicers have denied about a quarter of all modification applications due to an alleged lack of documentation [19]. Because HAMP’s auditors do not contact borrowers, there’s no way for them to ascertain if a denial for inadequate documentation was correct.

In response to this criticism from the Congressional Oversight Panel for the TARP last December [20], Treasury said auditors did not contact homeowners to avoid giving them added stress. The panel rejected that reason, saying that contacting borrowers was “critical to assessing the accuracy of a servicer’s determination.”

Instead of talking with borrowers, auditors conduct on-site reviews of mortgage servicing companies, Treasury’s spokeswoman said in her written response to ProPublica. Treasury believes that focusing “on servicer processes and internal controls is the most effective deployment of our compliance efforts,” she wrote.

Detailed Audit Shows Serious Problems

It wasn’t until July 2010, sixteen months after HAMP launched, that the unit performed their first major audit of GMAC. The review included a visit to GMAC’s offices and a detailed review of a sample of loans.

The report enumerated various rule violations, including in how GMAC evaluated homeowners for modifications. GMAC’s practice was to begin the foreclosure process too quickly [21]: The program required the servicer to give the homeowner 30 days to respond to a trial modification offer, but GMAC’s procedure was to wait only 20.

GMAC’s Proia said no homeowners were “negatively impacted by this issue.”

Auditors also found that GMAC was regularly miscalculating the homeowner’s income. In a review of 25 loan files of homeowners who had received a modification, the auditors said 21, or 84 percent, involved a miscalculation of income [22]. Since the borrower’s income is a key factor in whether the homeowner qualifies for a modification, the high error rate raises obvious questions about whether GMAC was accurately evaluating homeowners’ applications.

Asked about this the frequent income miscalculations, GMAC’s Proia said that the “issue was identified in the early stages of the program,” that calculating the borrower’s income is a “complicated process,” and that GMAC has improved since the mid-2010 review – an assertion backed up by recent audit results published by the Treasury.

The July 2010 review also found that GMAC had been aware of certain problems such as “incorrect income and expense calculations,” [23] but had not fixed them. Proia said the company does its best to fix problems when it becomes aware of them.

Penalties: Late and Weak

Typical of the Treasury’s oversight of the program, GMAC was never penalized for any of the rule violations. For the first two years of the program, Treasury officials publicly threatened servicers with the possibility of penalties, but instead followed a cooperative approach [24]. When auditors found problems, servicers were asked to fix them.

The documents illustrate that back and forth. In response to the auditors’ findings, GMAC was required to develop an “action plan.” GMAC refused to provide the action plan to ProPublica and recommended seeking it and other similar documents by filing a Freedom of Information Act request with the Treasury.

Treasury has sent mixed messages about its ability to penalize banks over the course of the program [24], threatening “monetary penalties and sanctions” in late 2009, and then later saying it lacked the power to enforce such penalties. Treasury finally departed from its cooperative approach this June, when it withheld incentive payments [5] from three of the top ten servicers. (GMAC was not among them.) The companies would not receive the public subsidies for completing modifications until they made certain changes. The companies were cited for some of the same problems for which auditors had criticized GMAC, such as regularly miscalculating the borrower’s income. JPMorgan Chase, for instance, had erred in estimating income in about a third of the homeowner loan files reviewed.

The punishment hasn’t had much sting to it. Two of the three companies had their incentive payments restored when Treasury’s most recent report [25] declared they’d improved. Only Chase and Bank of America, the country’s largest servicer, would continue to have their incentives withheld, Treasury said.

But while those incentives have slowed, they have not stopped, according to Treasury’s monthly TARP reports [26]. Since June, when Treasury first announced it would be withholding incentives, Bank of America has received $2.5 million in taxpayer incentives. While that’s a steep reduction from the roughly $7.5 million it had been receiving monthly, the bank is supposed to be receiving nothing. Chase received $404,000 during that same time.

Treasury responded that it has programs to encourage modifications on both first and second mortgages, and that the payments Bank of America and Chase received were related to second mortgages. “Current system limitations” meant the Treasury couldn’t withhold these payments, according to the Treasury spokeswoman. Treasury is working to fix the problem, she said.

 

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Iowa Class Action Against CitiMortgage “agressively and falsely advertised its commitment to help homeowners obtain affordable loan modifications.”

Iowa Class Action Against CitiMortgage “agressively and falsely advertised its commitment to help homeowners obtain affordable loan modifications.”


H/T   Adam Belz

UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF IOWA
CENTRAL DIVISION

KEITH GOODYK, on behalf of himself and all
others similarly situated,
Plaintiff,

V.

CITIMORTGAGE, INC.,
Defendant.

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DEUTSCHE BANK TRUST Co. of Am. V. DAVIS | NYSC “Smoke and Mirrors, Assignment Flawed?, Genuineness of plaintiff’s possession of the mortgage?, Plaintiff Atty Sanctioned, HAMP”

DEUTSCHE BANK TRUST Co. of Am. V. DAVIS | NYSC “Smoke and Mirrors, Assignment Flawed?, Genuineness of plaintiff’s possession of the mortgage?, Plaintiff Atty Sanctioned, HAMP”


Decided on June 29, 2011

Supreme Court, Kings County

Deutsche Bank Trust Company of America as Trustee for RALI 2006QS10, Plaintiffs,

against

Charmaine Davis, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. AS NOMINEE FOR HOMECOMINGS FINANCIAL NETWORK, INC., NEW YORK CITY ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY TRANSIT ADJUDICATION BUREAU, MR. DAVIS, ET AL., Defendants.

EXCERPTS:

4210/09

Herbert Kramer, J.

The following papers have been read on this motion:

Notice of Motion/Order to Show Cause/Papers Numbered

Petition/Cross Motion and

Affidavits (Affirmations) Annexed

Opposing Affidavits (Affirmations)

Reply Affidavits (Affirmations)

_______________(Affirmation)_

Other Papers

Are parties required to negotiate in good faith during the foreclosure settlement conferences?In light of the state and federal statutes, particularly CPLR §3408, this Court holds that not only are the parties required to come to this Court in good faith, but also to negotiate in good faith towards creation of a mutually satisfactory modification agreement.

[...]

Therefore, this Court stays the entire matter until such time as the plaintiff moves the Court to resume negotiations in good faith.[FN2] Additionally, plaintiff’s attorney is sanctioned 50% of interest due to the plaintiff from April 23, 2009, the date of first HAMP conference, until June 3, 2011, the date of the parties appearance in Part 13, due to delay directly attributable to plaintiff. Further, defendant is directed to pay $3,000 per month [FN3] to the County Clerk until the stay is lifted or the [*3]amount of the mortgage repaid.[FN4]

As a final note, the record reflects that there is a question as to the genuineness of plaintiff’s possession of the mortgage, and the possession of the mortgage at the inception of this action. There is indication that the assignments may have been flawed. It is this Court’s position that the plaintiff, who assigns and receives mortgages with reasonable frequency, cannot avoid the obligations of the state and federal statutes by the continued sale and transfer of mortgages. This Court will not be a willing participant in plaintiff’s smoke and mirrors.

[...]

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Bank of America Loses Bid to Dismiss Homeowner Mortgage Modification Suit

Bank of America Loses Bid to Dismiss Homeowner Mortgage Modification Suit


BLOOMBERG-

Bank of America Corp. (BAC) must face claims from homeowners who accuse the biggest U.S. bank of failing to honor agreements for modifying their mortgage loans, a federal judge ruled.

Homeowners who say they met requirements for permanent modifications can proceed with their cases, according a decision filed today by U.S. District Judge Rya Zobel in Boston. Zobel dismissed some claims against the bank.

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Proposed class-action lawsuit alleging breach of contract by Bank of America NA and subsidiary BAC Home Loans Servicing LP

Proposed class-action lawsuit alleging breach of contract by Bank of America NA and subsidiary BAC Home Loans Servicing LP


AP-

LOS ANGELES (AP) —It seemed Maria Campusano’s financial problems were behind her when the mortgage on her Victorian home in a Massachusetts mill town was chopped by hundreds of dollars a month.

She soon learned that her troubles had just begun.

Weeks after making her first payment under the new rate, the school district staffer began receiving past-due notices, documents showing wildly inaccurate loan balances and letters threatening foreclosure. She now fears she’ll lose her home.

“How can they take away what I have worked so hard for?” Campusano said.

Campusano is one of two named plaintiffs in a proposed class-action lawsuit alleging breach of contract by Bank of America NA and subsidiary BAC Home Loans Servicing LP.

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Aames Funding Corp. v Houston | NY Appeals Court Reversal “HAMP, Should not have scheduled a foreclosure sale while the appellant’s application was pending”

Aames Funding Corp. v Houston | NY Appeals Court Reversal “HAMP, Should not have scheduled a foreclosure sale while the appellant’s application was pending”


Decided on June 28, 2011

SUPREME COURT OF THE STATE OF NEW YORK

APPELLATE DIVISION : SECOND JUDICIAL DEPARTMENT

MARK C. DILLON, J.P.
JOSEPH COVELLO
CHERYL E. CHAMBERS
SHERI S. ROMAN, JJ.
2010-11013
(Index No. 430/05)

[*1]Aames Funding Corporation, etc., respondent,

v

Leonard W. Houston, appellant, et al., defendants.

Leonard W. Houston, Middletown, N.Y., appellant pro se.
Hogan Lovells US, LLP, New York, N.Y. (Allison J.
Schoenthal, Victoria McKenney, and Jessica
L. Ellsworth of counsel), for
respondent.

DECISION & ORDER

In an action to foreclose a mortgage, the defendant Leonard W. Houston appeals from an order of the Supreme Court, Orange County (Cohen, J.), dated October 21, 2010, which denied his motion to stay a foreclosure sale until a determination of his application for a residential mortgage modification pursuant to the Home Affordable Mortgage Program.

ORDERED that the order is reversed, on the law and in the exercise of discretion, with costs, and the appellant’s motion is granted.

On August 15, 2006, a judgment of foreclosure and sale was entered against the appellant and in favor of the plaintiff. In January 2008 the Supreme Court granted a motion by the plaintiff to extend a notice of pendency for an additional three years. By letter dated December 10, 2009, the loan servicer, America’s Servicing Company (hereinafter ASC), notified the defendant Leonard W. Houston (hereinafter the appellant) that he might be eligible for the federal Home Affordable Mortgage Program (hereinafter HAMP). As a result, the appellant submitted an application to ASC. On March 24, 2010, the United States Department of the Treasury issued Supplemental Directive 10-02, which stated, in pertinent part, that “[a] servicer may not refer any loan to foreclosure or conduct a scheduled foreclosure sale unless and until . . . [t]he borrower is evaluated for HAMP and is determined to be ineligible for the program” (emphasis in original).

By letter dated April 30, 2010, ASC notified the appellant that his loan was “currently under review by [ASC's] Loss Mitigation Department for a loan modification,” and that ASC “currently [had] all the necessary information.” ASC informed the appellant that he would “be contacted with the outcome of the review or if any additional information [was] needed.” The appellant sent additional documents to ASC on July 2, 2010, and August 5, 2010. Meanwhile, the plaintiff published a notice of a foreclosure sale scheduled for August 26, 2010.

By order to show cause dated August 23, 2010, the appellant moved for an emergency stay of the foreclosure sale pending a determination on his application for a residential mortgage modification pursuant to HAMP. The plaintiff opposed the appellant’s application, and requested an order “directing that the foreclosure sale take place immediately.” The plaintiff argued that [*2]Supplemental Directive 10-2 was “no longer in effect and was superseded by the Making Home Affordable Handbook,” and, therefore, that directive was “not controlling.” By order dated October 21, 2010, the Supreme Court denied the appellant’s motion, vacated all stays imposed by the court, and permitted the plaintiff to proceed with the foreclosure sale. We reverse.

The record establishes that ASC participated in the HAMP program and accepted the appellant’s application for loan modification under the HAMP program. Under the circumstances, the plaintiff should not have scheduled a foreclosure sale while the appellant’s loan modification application was pending (see Matter of Cruz v Hacienda Assocs., LLC, 446 BR 1). The plaintiff contends that the appellant is not entitled to a stay of the foreclosure sale because Supplemental Directive 10-2 was superseded by the Making Home Affordable Program Handbook. However, Version 2.0 of the “Making Home Affordable Program Handbook,” in effect at the time the order appealed from was issued, contained the same language as Directive 10-2, to wit: “[a] servicer may not refer any loan to foreclosure or conduct a scheduled foreclosure sale unless and until . . . [t]he borrower is evaluated for HAMP and is determined to be ineligible for the program [emphasis added].” Accordingly, the Supreme Court should have granted the appellant’s motion to stay the foreclosure sale pending a determination of his application for a residential mortgage modification pursuant to HAMP.

As we previously stated on a prior appeal in this matter, the appellant’s contention that the plaintiff lacked standing to commence the foreclosure action is barred by the doctrine of law of the case (see Aames Funding Corp. v Houston, 57 AD3d 808).

In light of our determination, we need not reach the appellant’s remaining contentions.
DILLON, J.P., COVELLO, CHAMBERS and ROMAN, JJ., concur.

ENTER:

Matthew G. Kiernan

Clerk of the Court

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Bryan Kanefield Joins MERSCORP as Senior Vice President and Chief Risk Officer

Bryan Kanefield Joins MERSCORP as Senior Vice President and Chief Risk Officer


MERSCORP, Inc. announced today that Bryan Kanefield has joined the company’s executive leadership team in the newly created role of Senior Vice President and Chief Risk Officer. He will be responsible for implementing and administering a new corporate risk management framework, developing and reporting on key risk indicators, and overseeing the Risk Management Committee.

Kanefield joins MERSCORP from Fannie Mae, where he was most recently a member of the senior leadership team responsible for building and managing key operational units of the Making Home Affordable Program. Prior to serving in this role, he was a director in Fannie Mae’s Divisional Risk Office, where he developed and implemented corporate-wide risk control self assessment framework standards, implemented the company’s initial Sarbanes-Oxley compliance program, served on the leadership team responsible for developing the corporate compliance and governance program covering records management, delegations of authority, policy and procedures, and directed divisional business recovery planning efforts. Kanefield first joined Fannie Mae in 1992, and his earlier roles were in eBusiness Marketing and Development, the Office of the Vice Chair, and Corporate Strategy and Development.

Source: Mersinc.org

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