Last week was a big one for the banks. On Monday, the foreclosure settlement between the big banks and federal and state officials was filed in federal court, and it is now awaiting a judge’s all-but-certain approval. On Tuesday, the Federal Reserve announced the much-anticipated results of the latest round of bank stress tests.
How did the banks do on both? Pretty well, thank you — and better than homeowners and American taxpayers.
That is not only unfair, given banks’ huge culpability in the mortgage bubble and financial meltdown. It also means that homeowners and the economy still need more relief, and that the banks, without more meaningful punishment, will not be deterred from the next round of misbehavior.
A: When the deal documents punt on contentious issues, merely agreeing to agree later.
Sadly, that’s what this “deal” does. This “deal” is a hybrid contract and term sheet, with all the crucial, operational aspects of compliance unresolved. A smallish to-be-dealt-with-later item is the timing for implementing the servicing standards. The biggie is the Work Plans; those have not been negotiated at all.
Yes, part of compliance has been finalized; the metrics, and the basic enforcement structure. But it’s not enough to have metrics; you also need processes for gathering the metric data and computing the results. Similarly you need more than a structure for enforcement; you need how-to details. The not-yet-existing Work Plan will cover all that. Worse, the negotiations will happen while the clock is ticking on the deal.
March 15 (Bloomberg Law) — The $25 billion mortgage settlement between lenders and state attorneys general won’t help nearly as many people as its touted to, Neil Barofsky, the former Special US Treasury Department Inspector General for the Troubled Asset Relief Program (TARP), tells Bloomberg Law’s Lee Pacchia. He’s joined by Matthew Stoller, a fellow at the Roosevelt Insitute, who says the government and banks delayed filing details of the settlement to give investors less time to challenge the deal in court.
I’ve been going over the mortgage settlement documents over the past few days – a lot has been released, with many implications. There is plenty to criticize. Subprime Shakeout has a great summary, and David Dayen has done a wonderful job going through the nitty gritty. Abigail Field has a spectacular review of the problems with the servicing standards. I’ll make a few criticisms of my own below. But I think the most interesting parts of the document release were the HUD Inspector General reports on the five banks and the DOJ complaint. What these prove is what we’ve always known – the law enforcement community knew exactly what these banks were doing. DOJ simply chose not to prosecute. There was intent to defraud, fraud, and frankly, according to HUD.
In fact, it’s not clear that the past tense is the correct tense to use. The Wells Fargo report is particularly interesting on that last point. Take it away, HUD OIG (italics are mine).
At the time of our review, affidavits continued to be processed by these same signers, who may not have been qualified, and these signers may not have adequately verified certain figures because they accessed a computer screen of data showing a compilation of figures instead of verifying the data against the information through review of the books and records kept in the regular course of business by the institution.
The nation’s five biggest banks will pay $25 million to the New York attorney general’s office to settle certain claims related to the use of Mortgage Electronic Registration Systems.
The agreement with New York Attorney General Eric Schneiderman releases Bank of America ($8.84 0.35), Citigroup ($35.21 -1.24), JPMorgan Chase ($43.58 0.19), Wells Fargo ($33.37 0.04) and Ally Financial from certain claims of robo-signing foreclosure documents.
Schneiderman sued Bank of America, JPMorgan and Wells Fargo, as well as MERS, in early February. The AG’s office said in the complaint the banks “created the MERS system as an end-run around the property-recording system.”
MERS is not involved in the agreement, and a company spokeswoman declined to comment.
Does anyone know the judge that is going to look over this case? If so, please forward their name or post in the comment section.
Business Week-
An audit of foreclosure practices at the Federal Housing Administration’s five largest mortgage servicers uncovered widespread failures to ensure the banks had proper legal documents.
According to reports released today by the inspector general of the Department of Housing and Urban Development, banks including Bank of America Corp. and Wells Fargo & Co. (WFC) violated the federal False Claims Act when they improperly foreclosed on homes insured by the FHA.
The audits, spurred by revelations in 2010 that mortgage servicers were seizing homes using improper paperwork, were forwarded to the Department of Justice last year. They formed part of the basis for a $25 billion settlement with five banks filed in U.S. court in Washington yesterday.
“I believe the reports we just released will leave the reader asking one question: How could so many people have participated in this conduct?” the inspector general, David Montoya, said in a statement accompanying the reports. “The answer: simple greed.’”
Top law enforcement officers from most of the 50 states gathered last week in Washington, D.C., for the annual spring meeting of state attorneys general, where the hot topic was the $25 billion foreclosure settlement finally filed in federal court on Monday.
More than a dozen state and federal officials who crafted the deal, which resolves charges that banks wrongfully foreclosed on homeowners, say it is the most ambitious of its kind ever reached, far outstripping the complexity and political machinations of the decade-old case against the giant tobacco companies.
But instead of high-fives and fist-bumps, officials, who had sniped at each other — and at the deal — for the better part of a year, tried to come to grips with the aftermath. The deal had to overcome disagreements between the banks and government officials, and between liberal Democrats and Tea Party-backed Republicans.
“It was like the Battle of Verdun, every square inch was fought over,” said George Jepsen, the Connecticut attorney general, of the 16 months of negotiations between federal officials, state attorneys general and five major financial institutions — Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial (formerly GMAC) — over the foreclosures and a host of other nasty “servicing” abuses.
Five of the nation’s biggest banks have agreed to pay New York a total of $25 million to settle claims brought by New York State Attorney General Eric Schneiderman regarding their use of a private national mortgage electronic system.
The agreement, filed in federal court Tuesday, resolves certain monetary claims by the New York attorney general against Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co.
The agreement preserves the New York attorney general’s right to sue for damages suffered by consumers …
IN THE GENERAL COURT OF JUSTICE SUPERIOR COURT DIVISION
COUNTY OF GUILFORD
GUILFORD COUNTY, ex rel. JEFF L. THIGPEN, GUILFORD COUNTY REGISTER OF DEEDS, Plaintiff,
v.
LENDER PROCESSING SERVICES, INC.; DOCX, LLC; LPS DEFAULT SOLUTIONS, INC.; MERSCORP HOLDINGS, INC.; MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC.; WELLS FARGO BANK, N.A.; WELLS FARGO HOME MORTGAGE, INC.; BANK OF AMERICA, N.A.; JPMORGAN CHASE BANK, N.A.; CHASE HOME FINANCE LLC; EMC MORTGAGE CORPORATION; MIDFIRST BANK; SAND CANYON CORPORATION; CITI RESIDENTIAL LENDING, INC.; GREEN TREE SERVICING, LLC; AMERIQUEST MORTGAGE COMPANY; USAA FEDERAL SAVINGS BANK; AMERICAN HOME MORTGAGE SERVICING, INC.; MOREQUITY, INC.; U.S. BANK NATIONAL ASSOCIATION; EQUICREDIT CORPORATION OF AMERICA; NATIONSCREDIT FINANCIAL SERVICES CORP.; ARGENT MORTGAGE COMPANY, LLC; THE BANK OF NEW YORK MELLON; THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.; CAPITAL ONE, N.A.; FIRST FRANKLIN FINANCIAL CORP.; NAVY FEDERAL CREDIT UNION; and WEICHERT FINANCIAL SERVICES; Defendants.
For Immediate Release: March 13, 2012 Contact: Ginger Cavanaugh (704) 246-3896 ginger@talcottfranklin.com
Guilford County Sues To Clean Up Banks’ “Mess” at the Register of Deeds
Guilford County, ex rel. Jeff L. Thigpen, Guilford County Register of Deeds, filed suit today against LPS/DocX, MERSCORP, MERS, Inc., and numerous banks, loan servicers, and foreclosure specialists seeking to clean up the “mess” Defendants created in the County’s property records registry.
“Our office uncovered an abundance of falsified, forged, and fraudulently executed mortgage documents,” said Thigpen. “But our investigation only found the tip of the iceberg. We need the banks to clean up their mess.”
The suit cites as evidence, Thigpen’s identification of over 6,100 mortgage documents (4,519 of those by DocX) which were filed with the Register of Deeds and signed in the names of known robo-signer aliases: “Linda Green,” “Christie Baldwin,” “Pat Kingston,” “Korell Harp,” “Jessica Ohde,” “Rita Knowles,” “Linda Thoresen,” and “Brent Bagley.”
“How can we maintain accurate records of title with fraudulent documents? The banks are also maintaining their own private registry called ‘MERS’ that prevents the public from discovering who owns what loans. Because there is no accountability for MERS, its records are also a mess,” said Thigpen. “The system is broken and it needs to be fixed. We’re telling MERS and the banks: you broke it, you fix it.”
In an April 6, 2011 letter, Thigpen and Southern Essex (MA) District Registry of Deeds John O’Brien urged Iowa Attorney General Tom Miller to investigate MERS and its impact on Registers of Deeds as part of the national attorneys general robo-signing investigation. The suit cites numerous reasons why MERS fails to keep reliable chains of title, and notes that the recent attorneys general settlement did not address MERS’s and robo-signing’s impact on Registers of Deeds.
“When you combine the fraudulent documents with MERS, it is difficult if not impossible to trace title for property. Potential title defects hurt Guilford County homeowners and businesses by impacting property values,” said Thigpen. “We need to clean up chains of title to ensure certainty in the land records system.”
Under Thigpen, the Guilford County Register of Deeds strives to serve as a model register. The Register of Deeds implemented electronic filing, created an audit software program to improve indexing and correct filing errors, intensified staff training, redacted social security numbers from land records, and significantly upgraded technology.
In 2009, the Register of Deeds received a Local Government Federal Credit Union Productivity Award from the North Carolina Association of County Commissioners for technological innovations.
“It is unbelievably frustrating to expend County resources in an attempt to create an efficient, accurate registry and have these banks wreak havoc on our efforts through fraudulent documents and a secret registry. If we don’t fix this now, the future impact on land records and property values could be severe and incurable.”
“Registries of deeds pre-date the founding of this country and are essential functions of government,” said Guilford County Attorney Mark Payne. “The Guilford County
Register of Deeds has created an outstanding infrastructure, but no registry can work if it is filled with falsified documents.”
The lawsuit, filed by Payne and Deputy County Attorney Matthew Turcola, describes the process by which the Defendants made and sold loans, created and maintained MERS, filed robo-signed documents, and damaged the Register of Deeds and the people of Guilford County. Among other things, the suit seeks the appointment of a special master to oversee an audit of the mortgage documents on file at the Register of Deeds and make necessary corrections.
“While the suit goes into detail on a complex series of transactions, the message is pretty simple,” said Payne. “We’re saying to the banks: ‘You made the mess, you clean it up.’”
Guilford County is located in central North Carolina. Its population is approximately 500,000. Greensboro is the largest city within Guilford County. Guilford County was established in 1771, the same year it began its Registry of Deeds. To assist with the suit, Guilford County retained Talcott Franklin P.C., the nation’s preeminent securitization litigation law firm. Talcott Franklin P.C. has offices in Dallas, Texas and Davidson, North Carolina. Links:
In a conference call on Feb. 14, Secretary Shaun Donovan of the Department of Housing and Urban Development promised about 90 mortgage-backed bondholders that the $25 billion national mortgage settlement would include a 15 percent cap on the number of investor-owned loans that the five settling banks would be permitted to modify, according to the three participants in the call.
Donovan made the promise in response to MBS investor concerns that banks would shift the cost of the settlement onto their shoulders by writing down the principal in securitized mortgages, rather than in the loans banks hold in their own portfolios. He had already said in a press conference that the settlement would provide incentives for the settling banks — Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, and Ally Financial — to reduce the principal in their own portfolio loans, estimating that “a relatively small share, in the range of 15 percent” of the write-downs would be in investor-owned mortgages. In the Feb. 14 call with bondholders, according to the three participants, Donovan went a step farther, assuring MBS investors that the written settlement agreement would limit the percentage of investor-owned loans the banks were permitted to modify.
Best way to rob a bank is to own one – William Black
Reuters-
Top banks impeded a federal inquiry into their foreclosure processes, according to a report released Tuesday, dragging their feet on turning over documents and blocking investigators’ attempts to interview bank employees.
The inquiry led to the wide-ranging $25 billion mortgage settlement with the five largest mortgage servicers that was announced last month and filed in federal court on Monday.
But the banks hampered an early investigation into whether they were pursuing unlawful foreclosures through shoddy paperwork and lax controls, the inspector general’s office at the U.S. Department of Housing and Urban Development said in its report.
Bank of America (BAC.N), for example, provided only excerpts of files, incomplete documents, and conflicting information to government investigators, and refused to provide some of its foreclosure policies.
It also limited employee interviews, and refused to let employees answer certain questions, the report said.
As Abigail Field says “I thought the indictment that led to the far-too-weak settlement was damning enough;” check out the HUD OIG reports:
Audit Reports
The following reports disclose conditions noted during the identified audit period. They do not necessarily reflect current conditions at the subject auditee. Any questions regarding the current status of corrective actions recommended in these reports should be directed to the report addressee.
FEATURED
To save time we have provided these quick access links to the recently featured Audit Memorandums. You can also find all memorandums in their respective state sections with summaries.
The $25 billion mortgage servicing settlement means more due diligence work for servicers when assessing the work of law firms and other third parties assisting with foreclosures and bankruptcies.
The national mortgage servicer settlement involving the nation’s top five mortgage servicers shows firms taxed with ensuring that all law firms, trustees, subservicers and other third parties handling foreclosure or mortgage servicing activities are in line with best practices outlined in the settlement agreement.
The settlement, agreed to in February, was officially filed with the court on Monday.
Servicers are required to survey the firm’s qualifications, practices, information security for document handling and financial viability, according to settlement documents.
This famous postgame rant from former Arizona Cardinals coach Denny Green after his team’s epic meltdown on Monday Night Football against the Bears could just as easily apply to my reaction to reading the official terms of the Attorney General Foreclosure Settlement (the “AGFS”), filed today. The nation’s largest banks get off with a relatively small penalty (much of it paid by investors or in “credits” for things the banks should already be doing) in return for releases across a broad spectrum of misconduct that pervades just about every dark corner of mortgage servicing. The categories of servicer misconduct are laid out in detail in the complaint filed today in D.C. Federal Court, and include the following:
Providing false or misleading information to borrowers,
Overcharging borrowers and investors for services of dubious value,
Denying relief to eligible borrowers,
Foreclosing on borrowers who were pursuing loan mods in good faith,
Submitting forged or fraudulent documents and making false statements in foreclosure and bankruptcy proceedings
Losing or destroying promissory notes and deeds of trust,
Lying to borrowers about the reasons for denying their loan mods,
Signing affidavits without personal knowledge and under false identities,
Improperly charging excessive fees related to foreclosures,
Foreclosing on servicemembers on active duty,
Making false claims to the government for insurance coverage, and
Being unorganized, understaffed, and generally slower than molasses to respond to borrowers desperately in need of relief, while servicing fees continue to accrue.
57. In the course of their conduct, management and oversight of loan modifications in the plaintiff States, the Banks have engaged in a pattern of unfair and deceptive practices.
58. The Banks’ failure to discharge their required loan modification obligations, and related unfair and deceptive practices, include, but are not limited to, the following:
a. failing to perform proper loan modification underwriting;
b. failing to gather or losing loan modification application documentation and other paper work;
c. failing to provide adequate staffing to implement programs;
d. failing to adequately train staff responsible for loan modifications;
e. failing to establish adequate processes for loan modifications;
f. allowing borrowers to stay in trial modifications for excessive time periods;
g. wrongfully denying modification applications;
h. failing to respond to borrower inquiries;
i. providing false or misleading information to consumers while referring loans to foreclosure during the loan modification application process;
j. providing false or misleading information to consumers while initiating foreclosures where the borrower was in good faith actively pursuing a loss mitigation alternative offered by the Bank;
k. providing false or misleading information to consumers while scheduling and conducting foreclosure sales during the loan application process and during trial loan modification periods;
l. misrepresenting to borrowers that loss mitigation programs would provide relief from the initiation of foreclosure or further foreclosure efforts;
m. failing to provide accurate and timely information to borrowers who are in need of, and eligible for, loss mitigation services, including loan modifications;
n. falsely advising borrowers that they must be at least 60 days delinquent in loan payments to qualify for a loan modification;
o. miscalculating borrowers’ eligibility for loan modification programs and improperly denying loan modification relief to eligible borrowers;
p. misleading borrowers by representing that loan modification applications will be handled promptly when Banks regularly fail to act on loan modifications in a timely manner;
q. failing to properly process borrowers’ applications for loan modifications, including failing to account for documents submitted by borrowers and failing to respond to borrowers’ reasonable requests for information and assistance;
r. failing to assign adequate staff resources with sufficient training to handle the demand from distressed borrowers; and
s. misleading borrowers by providing false or deceptive reasons for denial of loan modifications.
Recent Comments