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VaCap Second Letter to Attorney General Cuccinelli Regarding UAD

VaCap Second Letter to Attorney General Cuccinelli Regarding UAD


08/29/2011

Kenneth T. Cuccinelli, II

Office of the Attorney General
900 East Main Street
Richmond, VA 23219
Re: September 1st Implementation by GSEs

Dear Sir:

In a letter dated July 19th, 2011, the Virginia Coalition of Appraiser Professionals (VaCAP) brought to your attention the serious concerns that we have about the impending implementation of new appraisal reporting requirements by the Government Sponsored Enterprises (GSEs), which are The Federal National Mortgage Association (FNMA) and The Federal Home Loan Mortgage Corporation (FHLMC). Since Fannie Mae and Freddie Mac control a very large percentage of the mortgage market, this requirement st will impact the majority of residential appraisal reports starting September 1st. In our July 19 letter, we provided specific information on how this proprietary code, which is called the Uniform Appraisal Dataset (UAD) and is specific to Fannie Mae and Freddie Mac, will result in incomplete and/or misleading information in appraisal reports.

VaCAP has presented this information to the Virginia Real Estate Appraisal Board (VREAB) in an effort to explain how the UAD will result in widespread violation of USPAP, which is the law for appraisals in The Commonwealth of Virginia. The VREAB has reviewed the information provided by state licensed and certified appraisers, the Association of Appraiser Regulatory Officials (AARO), and the Appraisal Standards Board (ASB). The VREAB agrees that the UAD is likely to cause significant harm to its licensees as well as to the homeowners who will rely on the misleading information that UAD requires. The VREAB has issued a letter to this effect to the Federal Housing Finance Agency, along with copies to Senator Mark Warner, Senator Jim Webb, and yourself. This letter from the VREAB affirms VaCAP’s strong belief that implementation of the UAD should be delayed until the potential harm can be more carefully studied and the unintended consequences corrected.

It should be noted that the UAD is NOT federal law, and does not take precedence over Virginia law. Rather, it is a reporting format that standardizes appraisal report fields. The published reason for this is to create more consistent data that can be easily filtered and interpreted, but the reality is exactly the opposite. The standardized fields for important items like quality of construction, condition, location, sales type, etc are given short codes or abbreviations (C1, Q4, ArmLth, etc) that are confusing to even the developers themselves, let alone the intended users or readers of the appraisal reports. Additionally, appraisers are not permitted to fill in certain lines of the appraisal report with anything except pre-programmed choices from drop-down boxes or numeric characters. If there are no correct options in the preset lists, the appraiser is forced to provide incorrect information because the appraisal cannot be uploaded until it meets the UAD requirements. This leaves the appraiser in the precarious position of either violating USPAP or going out of business for lack of work. If the Federal Housing Finance Agency fails to delay the implementation of the UAD as requested, the Attorney General may be put in an equally uncomfortable position of enforcing Virginia state law (USPAP) against its own regulates.

The effects of the UAD, however, will have much more far-reaching consequences than just killing the small businesses of appraisers. Since the vast majority of residential appraisals are done for either home purchases or refinances, the borrower will receive a copy of the appraisal report that they will not be able to understand and that may be very misleading. Forcing data to fit into very narrowly defined fields and then adjusting values based on these false categorizations will also result in incorrect value estimates. Homeowners and home buyers will be making one of the most important financial decisions of their lifetime based on information that is unreliable and misleading, and on estimated values that may be too high or too low. This will cause further decline in the already devastated housing market, undermine consumer confidence, and cause needless financial burden to the citizens of Virginia. Virginians have already suffered greatly from the ever-increasing government regulation that is crippling our economy. Fannie Mae and Freddie Mac have already taken hundreds of billions of dollars from taxpayers to cover the losses that their faulty policies have generated. There is considerable talk at the federal level of disbanding them altogether. Yet they are still pushing through another disastrous plan for which the public will have to pay the price.

VaCAP understands that there are numerous important issues with which the Attorney General is tasked. However, because time is so short before September 1st and because this matter will greatly impact such a large percentage of the public, we beg you to give it immediate priority. There are other state Attorneys General and Appraisal Boards who share these concerns, but many hesitate for want of a leader to take the first step. Virginia has a long and proud history of strength and leadership that has contributed to this great nation’s success, and all Americans need her to be that leader now. We urge you to prohibit the implementation of the UAD until its harmful consequences can be corrected and the format conforms to USPAP and state law. It is the sole responsibility and duty of each individual State, including The Commonwealth, to enforce the laws written to protect the citizens. There is no Federal Agency which has that jurisdiction or distinction. Send the message that we are a nation and a state of laws, and they cannot be trampled for the private interests of two companies that have become “too big to fail” on the backs of struggling taxpayers.

Sincerely,

Heather Fox
President-Elect
Virginia Coalition of Appraiser Professionals

~ Source VaCAP

Virginia Coalition of Professional Appraisers (VaCAP) is a coalition of individual appraisers working together to unite, promote and protect the collective interests of all appraisal professionals in Virginia; to promote needed changes in laws, rules, regulations, policies and standards affecting all appraisers in Virginia; to observe and report the actions of regulatory, legislative, oversight, and standards-setting entities of the Commonwealth. Please check out their website and consider becoming a member.

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VOICE Demands Immelt, GE, Bank of America, JP Morgan Address Foreclosure Crisis

VOICE Demands Immelt, GE, Bank of America, JP Morgan Address Foreclosure Crisis


Uploaded by on Apr 22, 2011

On April 10th 2011, 250 religious leaders and homeowners from VOICE (Virginians Organized for Interfaith Community Engagement) gathered in Manassas, Virginia to launch a campaign to hold key financial institutions accountable for the foreclosure crisis in northern Virginia. They are demanding bank executives streamline the mortgage modification system, fund non-profit housing counselors, and rebuild devastated communities (led by the worst lender in Prince William County, Manassas, and Manassas Park – GE and Jeff Immelt).

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Judge Calls Shapiro & Burson Law Firm, Notaries To Explain Signatures on Foreclosure Documents

Judge Calls Shapiro & Burson Law Firm, Notaries To Explain Signatures on Foreclosure Documents


You might recall this law firm who is accused of forging 1,000+ deeds, and most recently Freddie Mac instructed its mortgage servicers to stop referring foreclosure cases to them.

From The Baltimore Sun-

A Baltimore judge summoned attorneys from a large foreclosure law firm Monday to explain whether signatures on key documents were genuine, part of the fallout from revelations last year that foreclosures nationwide were being processed based on deficient — or fraudulent — paperwork.


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SHAPIRO & BURSON Under Investigation For Fraudulent Signatures, FREDDIE MAC Drops Them

SHAPIRO & BURSON Under Investigation For Fraudulent Signatures, FREDDIE MAC Drops Them


From the Baltimore Sun [link]

Freddie Mac has instructed its mortgage servicers to stop referring foreclosure cases to Shapiro & Burson, the Virginia law firm accused of improper handling of more than 1,000 deeds for Maryland homes in foreclosure, the mortgage giant reported this week.

Prosecutors in Prince George’s County began investigating the firm in March after a paralegal formerly employed there filed a complaint alleging that deeds and foreclosure paperwork contained fraudulent signatures.

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US BANK Tells Virginia BK Court MERS Web Site Would Have Been Enough for Constructive Notice of It’s Interest, NOT!!! In RE: TANEJA

US BANK Tells Virginia BK Court MERS Web Site Would Have Been Enough for Constructive Notice of It’s Interest, NOT!!! In RE: TANEJA


In re: VIJAY K. TANEJA et al., Chapter 11, Debtors.

Case No. 08-13293-SSM, (Jointly Administered).

United States Bankruptcy Court, E.D. Virginia, Alexandria Division.

March 15, 2011.


Andrew L. Cole, Esquire, Franklin & Prokopik, Baltimore, MD, Counsel for U.S. Bank National Association

H. Jason Gold, Esquire, Wiley Rein, LLP, McLean, VA, Chapter 11 trustee.

James Bruce Davis, Esquire, Bean, Kinney & Korman, P.C., Arlington, VA, Counsel for Virginia Commerce Bank.

John E. Rinaldi, Esquire, Walsh, Colucci, Lubeley, Emrich & Walsh, P.C., Prince William, VA, Counsel for Ann DiMiero and Marshall Vosteen

MEMORANDUM OPINION

STEPHEN S. MITCHELL, Bankruptcy Judge

Before the court is the motion of Specialized Loan Servicing, LLC, as attorney in fact for U.S. Bank National Association, as trustee for Terwin Mortgage Trusts (“U.S. Bank”) to vacate an order entered more than a year ago approving the sale of real estate located at 4621 Holly Avenue, Fairfax, Virginia, free and clear of liens. U.S. Bank, whose deed of trust had been released prior to the bankruptcy filing by what appears to have been a false certificate of satisfaction, was not served with, or given notice of, the sale motion, and the proceeds of the sale (less escrowed sums to satisfy disputed mechanic’s liens) were paid to Virginia Commerce Bank on account of three deeds of trust securing loans it had made. The motion to vacate the sale order is opposed by the chapter 11 trustee; by Ann DiMiero and Marshall Vosteen, the purchasers of the property; and by Virginia Commerce Bank.

Background

On June 9, 2008, Vijay K. Taneja (“the debtor”) and four companies controlled by him, including a mortgage loan originator known as Financial Mortgage, Inc. (“FMI”), filed voluntary petitions in this court for reorganization under chapter 11 of the Bankruptcy Code.[1] H. Jason Gold was appointed as chapter 11 trustee in all five cases, which are being jointly administered. On June 18, 2008, U.S. Bank filed a proof of claim (Claim No. 1) asserting a secured claim in the amount of $458,449.27. Attached to the proof of claim were copies of a deed of trust note and deed of trust executed by Taneja, both of which identified the collateral as real property located at 4621 Holly Avenue, Fairfax, Virginia. That same day, a “request for special notices and services [sic]” was filed. Although the docket entry states that the request was filed by “U.S Bank National Assciation [sic], as Trustee for Terwin Mortgage Trust 2005-12ALT, Asset-Backed Certificates, Series 2005-12ALT, without recourse, Specialize [sic] Loan Servicing, LLC,” the actual notice does not mention either U.S. Bank or Terwin and identifies only Specialized Loan Servicing, LLC, as the “creditor” and Moss Codilis, L.L.P. as its agent for service of notice. Aside from filing the proof of claim and request for notices, Specialized, U.S. Bank, and Terwin took no other action in the case with respect to the property, such as filing a motion for relief from the automatic stay.

Taneja acquired title to 4621 Holly Avenue by deed dated May 16, 2005. Contemporaneously with the purchase, deeds of trust were recorded securing a $480,000 loan and a $120,000 loan, both made by FMI. The deed of trust at issue here is dated eight days later (May 24, 2005). It secures $480,000 and contains language that the loan constitutes a refinance of an existing debt with the same lender. Like the original deed of trust, it identifies FMI as the lender and Mortgage Electronic Registration Systems, Inc. (“MERS”)—as nominee for the lender—as the beneficiary. The May 24, 2005, loan was immediately sold into the secondary market and was ultimately assigned to U.S. Bank as trustee for a securitized mortgage pool. No assignments of the deed of trust were recorded in the land records. However, U.S. Bank asserts that the identity of the current holder, or at least servicer, of the loan could be obtained from an Internet web site maintained by MERS using the “mortgage identification number” that appears on the first page of the deed of trust. In any event, in June and July 2005, Taneja, as president of FMI, signed two certificates of satisfaction purporting to release the deed of trust. Oddly, no release of the original (May 16, 2005) $480,000 deed of trust was recorded prior to the bankruptcy filing. Contemporaneously with the releases, Taneja obtained loans from Virginia Commerce Bank (“VCB”) secured by three deeds of trust against the property totaling $2,750,000.

On September 2, 2009, the trustee filed a motion to approve the sale of the property to DiMiero and Vosteen free and clear of liens for $800,000. The motion represented that the chapter 11 trustee had obtained a title report reflecting three VCB deeds of trust, two mechanic’s liens, and two deeds of trust in favor of FMI for which releases had been recorded with incorrect recording references for the original instruments. Notice of the motion was mailed or electronically transmitted to a number of parties, but not to Specialized.[2] On September 25, 2009, an order was entered approving the sale of the property to DiMiero and Vosteen free and clear of liens, with the order making a finding under § 363(m), Bankruptcy Code, that they were good faith purchasers. The order was amended on October 20, 2009, to address a criminal restitution lien that had been filed by the United States in connection with Taneja’s federal criminal conviction for money laundering, but the substantive provisions otherwise remained the same. The closing took place on November 3, 2009. In connection with the sale, someone—no one seems to know who—recorded a dummied-up certificate of satisfaction of the original (May 16, 2005) $480,000 deed of trust. The report of sale filed by the trustee reflects that $704,401 of the proceeds were paid to Virginia Commerce Bank and $40,465.86 into an escrow for the mechanic’s liens. After payment of commission and closing costs, there were no proceeds for the bankruptcy estate. The present motion to vacate was filed on November 24, 2010.

Discussion

I.

Rule 9024, Federal Rules of Bankruptcy Procedure, incorporates—with certain limitations not relevant here—Rule 60, Federal Rules of Civil Procedure. Rule 60 in turn allows a court to grant relief from a final judgment or order on various grounds, including that “the judgment is void.” Fed.R.Civ.P. 60(b)(4). As the Supreme Court has recently explained in the context of a bankruptcy court order,

[A] void judgment is one so affected by a fundamental infirmity that the infirmity may be raised even after the judgment becomes final. The list of such infirmities is exceedingly short; otherwise, Rule 60(b)(4)’s exception to finality would swallow the rule. “A judgment is not void,” for example, “simply because it is or may have been erroneous.” . . . Instead, Rule 60(b)(4) applies only in the rare instance where a judgment is premised either on a certain type of jurisdictional error or on a violation of due process that deprives a party of notice or the opportunity to be heard.

United Student Aid Funds, Inc. v. Espinosa, 559 U.S. ___, 130 S.Ct. 1367, 1377, 176 L.Ed.2d 158 (2010) (internal citations omitted).

II.

That the trustee’s failure to provide Specialized with notice of the proposed sale constitutes a serious procedural error is clear. Specialized requested copies of all notices, and the court’s order limiting notices in the case required that notice be sent to any party that had filed requests for notices. There is also a larger issue. Rule 6004(c) requires that a motion for authority to sell property free and clear of liens or other interests must “be served on the parties who have liens or other interests in the property to be sold.” By the time the motion to sell had been filed, the trustee had actual notice that Taneja had engaged in a number of fraudulent mortgage loan practices, including the fraudulent release of mortgage loans that had been sold into the secondary market. See HSBC Bank USA, N.A. v. Gold (In re Taneja), 427 B.R. 109 (Bankr. E.D. Va. 2010).[3] Given the variety and pervasiveness of Taneja’s fraudulent activity, it is astonishing, to say the least, that the trustee would rely solely on a title report in terms of giving notice to possible lien holders, and would not, for example, review the proofs of claim and other pleadings filed in the case to determine if there were parties other than those reflected in the land records with arguable claims. To be sure, the trustee’s strong-arm powers might well, as in HSBC, ultimately allow him to prevail over parties with unrecorded or falsely-released deeds of trust, but due process is not measured by expectations as to the final outcome but by adequate notice and an opportunity to be heard.

III.

Be that as it may, relief under Rule 60(b)(4) vacating the sale order would be appropriate only if there were a reasonable likelihood that U.S. Bank—had it been properly served with the motion—could have successfully objected to the sale of the property free and clear of its lien. The answer seems clear that it could not. Section 363(f)(4) allows a trustee to sell property free and clear of an interest if “the interest is in bona fide dispute.” Given the recorded certificate of satisfaction, U.S. Bank’s lien interest was plainly in bona fide dispute. For that reason, a sale free and clear of its deed of trust could have been approved, with the lien of the deed of trust attaching to the proceeds of sale, thereby leaving for another day the merits of the claimed lien.

This, in turn, squarely raises the question of whether, under this court’s decision in HSBC v. Gold, the trustee could have avoided U.S. Bank’s falsely-released deed of trust under his strong-arm powers as a bona-fide purchaser for value. In HSBC, this court concluded that under Virginia law, a bona fide purchaser would prevail over the holder of a falsely-released deed of trust. U.S. Bank, however, argues that the availability of the MERS web site would have provided constructive notice of U.S. Bank’s interest in the supposedly-released loan, such that a bona fide purchaser could not have relied on the certificate of satisfaction. The court does not concur. No Virginia statute, and no reported decision in Virginia, has recognized a privately-maintained database—which is all the MERS web site is—as an extension of the land records system or as providing constructive notice of mortgage assignments. Nor is there any evidence that title examiners in Virginia, as a matter of custom or practice, review the MERS web site to verify the validity of recorded releases.

The only real difference, but nevertheless a significant one, between the noteholder in HSBC and U.S. Bank in this case is that the deed of trust securing the loan that was purportedly refinanced by the loan that U.S. Bank purchased had not yet been released of record at the time the bankruptcy case was filed. Under the Virginia doctrine of equitable subrogation, as recognized and applied by this court in Mayer v. United States (In re Reasonover), 236 B.R. 219, 231-32 (Bankr. E.D. Va. 1999), vacated and remanded on other grounds, 238 F.3d 414 (4th Cir. 2000) (unpublished table decision), op. on remand, 2001 WL 1168181, 2001 Bankr. LEXIS 2109 (Bankr. E.D. Va., April 16, 2001), U.S. Bank could have claimed the benefit of the May 16, 2005, deed of trust to the extent the loan it purchased had paid off the loan secured by the earlier, and still unreleased, deed of trust. On the present record, it is by no means certain that U.S. Bank could show that the loan it purchased actually paid off the earlier loan (or, for that matter, that the earlier loan had actually been made). In a number of other adversary proceedings filed by the trustee, it is alleged that Taneja, though FMI, operated what was essentially a Ponzi scheme, with the proceeds of new loans not necessarily going to pay off the prior loans on a particular parcel. But even if U.S. Bank might have an uphill battle establishing its equitable subrogation claim, elementary due process requires that it be given the opportunity to do so.

IV.

A determination that U.S. Bank’s due process rights were infringed when it was not given notice of the proposed sale does not, however, require that the sale itself be set aside. As noted, even if U.S. Bank had been given notice and had objected, the court could—and likely would—have approved a sale free and clear of U.S. Bank’s disputed lien. What would have been different is that the sale order would have expressly provided for all the liens, including U.S. Bank’s disputed lien, to attach to the proceeds of sale without alteration of priority, and further proceedings would have been set to adjudicate the validity and relative priority of those liens. That being the case, no basis has been shown for setting aside the sale to DiMiero and Vosteen or for calling into question their title to the property. This is particularly so given the finding of good faith made in the sale order. Under § 363(m), Bankruptcy Code, “[t]he reversal or modification on appeal of an authorization . . . of a sale . . . of property does not affect the validity of a sale . . . under such authorization to an entity that purchased . . . such property in good faith, whether or not such entity knew of the pendency of the appeal, unless such authorization and such sale . . . were stayed pending appeal.” Although § 363(m) speaks specifically of appeal and does not specifically address a motion to vacate a sale based on a failure to give adequate notice, the policy favoring the title of a purchaser at a bankruptcy sale is very strong, and only the most exceptional circumstances would justify setting such a sale aside. No such circumstances are present in this case.

Instead, the court determines that the appropriate remedy is to vacate only that portion of the sale order directing payment of the sales proceeds to VCB, and to grant relief from the sale order by providing that any non-avoidable lien that U.S. Bank may have shall attach to the proceeds of sale, whether or not subsequently disbursed by the trustee to VCB or other lien claimants. Such relief will be conditioned upon U.S. Bank promptly commencing an adversary proceeding to determine the validity, priority, and extent of its lien. VCB must obviously be made a party to the action, since a ruling establishing the validity of U.S. Bank’s lien would require the trustee to demand repayment from VCB of any sales proceeds previously paid to it.

A separate order will be entered consistent with this opinion.

[1] The four companies were Elite Entertainment, Inc., Case No. 08-13286-SSM; Financial Mortgage, Inc., Case No. 08-13287-SSM; NRM Investments, Inc., Case No. 08-13290-SSM; and Taneja Center, Inc., Case No. 08-13292-SSM.

[2] Notice of the motion was, however, sent to counsel representing U.S. Bank with respect to a different loan.

[3] The complaint in HSBC v. Gold—which outlined precisely the sort of fraud of which U.S. Bank appears to have been a victim—was filed on February 24, 2009, approximately six months prior to the trustee’s motion to sell the Holly Avenue property.

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PARTIAL TESTIMONY OF MERS’ WILLIAM C. HULTMAN BEFORE HOUSE COURTS Of JUSTICE COMMITTEE

PARTIAL TESTIMONY OF MERS’ WILLIAM C. HULTMAN BEFORE HOUSE COURTS Of JUSTICE COMMITTEE


Excerpt:

COMMITTEE MEMBER: Can you explain what you are in
4 relation to that?

5 MR. HULTMAN: We’re the beneficiary, but we’re an
6 agent of the lender. So instead of having two — one party be
7 both the payee on the note and the beneficiary in deed of
8 trust, we’re the beneficiary as their agent. In other words,
9 we’re holding title to the mortgage lien on their behalf.
10 COMMITTEE MEMBER: Through this process called
11 nominee?

12 MR. HULTMAN: Well, nominee is just another word for
13 agent.

Continue below…

After you read the transcript, you might be interested in reading the post below

Lender can’t modify the mortgage without the “mortgagee’s” consent

[ipaper docId=47186388 access_key=key-dtq9qgi10yhubp35jev height=600 width=600 /]

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Proposed Foreclosure Legislation Could Make MERS History in Virginia

Proposed Foreclosure Legislation Could Make MERS History in Virginia


By Michael Kraus on January 18, 2011

Right now Virginia has one of the fastest foreclosure processes in the country.  As detailed in this Washington Post article by David Hilzenrath, there are several bills currently debated in the Virginia legislature that would slow the process and cause big changes in the way foreclosures are handled in that state.

The first proposed change would require judicial approval before a lender can seize a home.  This would serve to ensure the veracity of the documentation that is required in the foreclosure process. Flawed documentation has proven to be an issue in foreclosures across the country time and time again.

The next piece of legislation would force banks to give borrowers longer advance notice before they are able to auction a home.  Under the changes, homeowners would have 30-45 days warning that their home was to be sold rather than the two weeks that is currently required.

The last proposed bill is particularly interesting, because it would cause seismic shifts in mortgage lending in Virginia.  The law would require lenders to keep records on real estate transactions in local records offices (which is the way real estate transfers were done for hundreds of years).  This would make it harder, although not impossible, to securitize Virginia mortgages.  It would, however, effectively doom the Mortgage Electronic Registration Systems (MERS) in the State of Virginia.

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Bills May Mean GOOD BYE For MERS In Virginia

Bills May Mean GOOD BYE For MERS In Virginia


“Not only do banks and mortgage lenders oppose the bill, a Reston-based corporation known as MERS (Mortgage Electronic Registration Systems) is battling it.”

Va. bills slow foreclosures

Updated: Monday, 17 Jan 2011, 7:59 PM EST
Published : Monday, 17 Jan 2011, 7:59 PM EST

RICHMOND, Va. (AP) – Virginia House and Senate bills are taking aim at “drive-by foreclosures” by big banks without judicial review and aggravated by incomplete records.

Witnesses at a hearing on some of the legislation Monday told chilling, tearful tales of giant banks foreclosing on their homes, then had to deal with conflicting statements by an unconcerned bureaucracy when they tried to contact their lenders and reason with them.

The legislation is in the works because of the flood of foreclosures that resulted from the 2008 mortgage lending industry collapse.

The bills would slow the state’s swift foreclosure pace. They would increase the time for required foreclosure notice from two weeks to 30 or 45 days. That would give borrowers time to locate records and hire attorneys to challenge foreclosures if necessary.

Link to bills introduced to the 2011 Virginia legislative session –

keyword search: Foreclosure; Deed of Trust; Assignment –

http://lis.virginia.gov/cgi-bin/legp604.exe?111+men+SRB

Who are my Virginia legislators, and how to contact them:

http://legis.virginia.gov/1_cit_guide/contacting_my.html

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Virginia resident gets foreclosure notice on Port St. Lucie home she sold in 1994

Virginia resident gets foreclosure notice on Port St. Lucie home she sold in 1994


By Nadia Vanderhoof
TCPalm
Posted December 3, 2010 at 11:46 a.m.

PORT ST. LUCIE — About 10 p.m. the Saturday after Thanksgiving, Cathy Hammers abruptly was woken up by a continuous loud banging on the front door of her Virginia home.

With two kids in college and a third touring the country in a rock band, she thought law enforcement was at her door with bad news of a possible car accident involving a family member.

Instead, Hammers was served foreclosure papers by Texas-based Nationstar Mortgage and the Fort Lauderdale law firm of Marshall Watson on a Port St. Lucie home Hammers and her parents sold in 1994 — a property she hasn’t owned or seen in 15 years.

“He was ringing the door bell, banging real hard on the door … the dogs were going crazy,” Hammer said. “When I asked him who he was. He asked me if I was Cathy and told me I was being served foreclosure papers. He said he was a process server with ASAP Legal Services and then just took off.”

According to court documents filed in St. Lucie County, a quit claim deed and satisfaction of mortgage were filed by Hammers and her parents on the home at 2291 S.W. Susset Lane in 1994.

Treasure Coast legal experts say Hammers’ case could be one of the most unusual to occur within the 19th Judicial Circuit, which encompasses Martin, St. Lucie, Indian River and Okeechobee counties.

“When I talked to Marshall Watson, Sonya in their litigation department, and asked why I was being served foreclosure papers on a mortgage I did not sign, on a property I haven’t lived in for almost 20 years, she got snippety with me and asked if I had an attorney. Why would I need an attorney when they’ve made the mistake?” Hammers said.

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Loan recording mess in Va. allows homeowners who don’t qualify to get tax break

Loan recording mess in Va. allows homeowners who don’t qualify to get tax break


“It’s almost impossible to know who the actual noteholder is in this day and age,” said Frey, the Fairfax County Circuit Court clerk.

Washington Post Staff Writer
Wednesday, November 3, 2010; 9:01 PM

Countless homeowners in Virginia are getting a tax break for which they don’t really qualify because a mortgage documentation mess makes it hard to determine who qualifies, officials say.

The loss of tax revenue for local governments and the state is another result of the lending industry growing so fast and becoming so complex during its go-go years that it outstripped its paper trail.

Because the problem involves blind spots in official records, no one can say how much revenue is being lost. But the amount could be significant.

“I’m trying to do my best to follow Virginia law here,” said John T. Frey, clerk of the Fairfax County Circuit Court, but “people are getting the break that aren’t eligible.”

When Virginia homeowners refinance their mortgages, they are required to pay a recordation tax. On a loan of $400,000, the tax would typically total $1,333.

The state’s portion of recordation taxes soared to $669.8 million in fiscal 2006 and declined by more than half to $298.4 million in fiscal 2009. Those numbers include taxes on deeds, mortgages to buy homes, and other recorded documents, not just refinancings. Extrapolating from the state figure, in fiscal 2009, roughly $100 million more would have gone to localities.

In a refinancing, if the lender issuing the new loan is the same as the lender holding the old loan, the borrower is exempt from the tax.

The trouble is figuring out who holds the old loan.

After issuing mortgages to homeowners, banks routinely sell the IOUs to other banks or institutions such as Fannie Mae and Freddie Mac. Huge volumes of mortgages have been packaged into securities and sold on Wall Street.

Unbeknown to the borrower, the note can change hands again and again – at least electronically – while the bank that issued the loan continues to collect the monthly payments on behalf of the new owner.
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The buyers of the mortgages were not required to record the note assignments in county courthouses, and, as the lending business sped up, many transfers went unfiled, county clerks say.

As a result, the clerks who process claims for the tax exemption are ordinarily unable to tell whether the lender whose name appears on the paperwork owns the loan or is merely servicing it, officials say.

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Lawmaker Questions Power to Foreclose “MERS”

Lawmaker Questions Power to Foreclose “MERS”


  • NOVEMBER 1, 2010, 7:53 P.M. ET

Lawmaker Questions Power to Foreclose

By ROBBIE WHELAN

A Virginia lawmaker asked the state’s attorney general to launch an investigation of Mortgage Electronic Registration Systems, the middleman firm in millions of court filings that helps keep the mortgage-securitization machine moving.

Robert G. Marshall, a Republican member of the Virginia House of Delegates, requested that Virginia Attorney General Ken Cuccinelli determine whether the Reston, Va., company violates state law because it doesn’t pay a fee every time a loan changes hands. Opinions differ as to whether MERS must pay local fees every time it sells an interest in a loan.

“There are too many people getting foreclosed on not properly,” said Mr. Marshall, who represents two counties near Washington, adding that he is drafting a Virginia law that would require lenders to pay county fees before being allowed to proceed with foreclosures. “The disdain with which the conditions of law have been treated by those who want to make money too fast is very troubling to me.”

Brian J. Gottstein, a spokesman for Mr. Cuccinelli, said the attorney general is required to produce an opinion on the matter but declined to comment “on any particular industry participant right now.”

R.K. Arnold, MERS’s chief executive, said the company’s activities are legal in all 50 states and have held up under previous scrutiny.

The challenge is the latest sign lawmakers and lawyers for borrowers are taking aim at MERS as the foreclosure mess drags on. Created 13 years ago by Fannie Mae, Freddie Mac and several large U.S. banks as an electronic registry of land records, the company’s name is listed as the agent for mortgage lenders on documents for 65 million home loans. But that same streamlining has made MERS a target of critics who say the company might not have the legal right that it claims to foreclose on borrowers.

In a state-court lawsuit filed in Georgia last week seeking class-action status, lawyer David Ates says MERS isn’t a secured creditor, meaning it lacks the power to foreclose on behalf of lenders, mortgage servicers or other parties.

Mr. Ates said he is seeking to have all Georgia foreclosures by the company “be declared invalid and the title be returned to the debtor.”

Mr. Arnold said the company’s role in foreclosing on a mortgage is unquestionable because every time a loan is registered with MERS, the borrower must sign a document saying the company assumes all rights and responsibilities on behalf of the creditor or lender.

“The legal concept is as sound as any concept in America: You made a loan to a homeowner,” Mr. Arnold said in an interview. “They granted you a mortgage, and that’s recorded in the land records, and the company that has the mortgage and can foreclose is MERS.”

Mr. Arnold added: “We can foreclose in all 50 states, and we will continue to do that.”

Tom Kelly, a spokesman for J.P. Morgan Chase, said last month that the New York bank hasn’t used the MERS record-keeping system since at least 2008 to foreclose in the bank’s name because “some local courts wouldn’t accept MERS.” J.P. Morgan still uses MERS for mortgages originated by other banks or brokers.

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