What are we to make of the servicing settlementannounced today with much hoopla? The short answer is not much. The settlement is the large consumer fraud settlement ever, but it accomplishes remarkably little in terms of either alleviating the foreclosure crisis of holding to account those responsible for the housing bubble and subsequent foreclosure abuses. As my Texas relatives say, it’s “All sizzle, no steak.”
Instead, I think the settlement needs be seen as the conclusion to round one of an on-going struggle for accountability and reparations for the enormous damage the housing bubble did to the United States. Whether we will ultimately see meaningful accountability and reparations in the end is very much in question. Round two, featuring the Residential Mortgage-Backed Securities Fraud taskforce, could well be stillborn; the taskforce combines more motivated and more capable agencies, but it isn’t clear of the motivated can leverage the more capable or will be bogged down by them. But as for this settlement, if this is all that we get, it’s a big nothing.
There are two big issues to parse in the settlement: what does it cover and what sort of relief does it provide. Not surprisingly, both are quite limited; the banks wouldn’t pay big dollars for a small release.
The sweetheart deal the feds just finished forcing down the throat of the state AGs is only the latest piece of evidence–evidence enough to reach ‘beyond a reasonable doubt’–that your federal government works for the banks and not you. Team Obama has placed the economic interests of the banks and the freedom of bankers above your economic interests, the rule of law, and any notion of good faith, fair dealing and justice. They won’t admit it; Team Obama will run hard as champions of the 99% on all things, including being Tough On Banks! and Helping Homeowners! But neither is true, and it’s critical that you not believe them when they say it.
That said, please understand; I’m not hawking the Republicans: Mitt Romney, Newt Gingrich and Rick Santorum are no better on banking and housing. The only candidate I heard make some sense on these issues was John Huntsman, and he’s no longer in the race. On banking and housing policy, we currently have no good candidates.
My slim hope for good bank and housing policy rests on you. If Team Obama is confronted with an informed and active electorate over the next several months–confronted with enough voters demanding good policy instead ofeasily disprovable talking points–I think it’s possible to goad a-scared-we-won’t-be-reelected Team Obama into actually doing good policy.
“Let me help a few victims I created by ripping them off and illegally throwing them out of their homes by false court filings that I swore were true.” That’s what the so-called mortgage settlement talks are really all about: fraud, perjury and crimes. That’s what these banks did and that’s what they are trying to buy their way out of.
The settlement discussions are the same: eliminate all or almost all liability for the bank and, most importantly, all bank officers and employees in exchange for a loan forgiveness or modification program. Think about this: the banks engaged in a years’ long pattern and practice of what can only be described as fraudulent if not criminal conduct that would put anyone else in prison for years if not decades, yet banks get to buy off the cops with some money to help just a few of the victims they created.
A little birdie sent me some settlement details. You can see how much little your state got, as well as whether your state bothered rewriting the official PR:
OCC Settles Civil Money Penalties Against Large National Bank Mortgage Servicers for $394 Million; Penalty Assessment Coordinated with Servicers’ Actions and Payments Under Federal-State Settlement
WASHINGTON — The Office of the Comptroller of the Currency (OCC) today announced agreements in principle with four large national bank mortgage servicers to settle civil money penalties in connection with the unsafe and unsound mortgage servicing and foreclosure practices that were the subject of comprehensive cease and desist orders issued by the OCC in April 2011.
Today’s announcement involves Bank of America, Citibank, JPMorgan Chase, and Wells Fargo. The OCC’s actions were announced in coordination with the Board of Governors of the Federal Reserve System and the announcement of the federal-state settlement involving the U.S. Department of Justice, the Department of Housing and Urban Development, other federal agencies, and state attorneys general.
In the agreements in principle struck by the OCC with these mortgage servicers, the servicers do not contest the OCC’s ability to impose penalties aggregating $394 million, and the OCC agrees to hold in abeyance imposition of such penalties provided the servicers make payments and take other actions under the federal-state settlement with a value equal to at least the penalty amounts that each servicer acknowledges that the OCC could impose. The amounts for each servicer are $164 million for Bank of America, $34 million for Citibank, $113 million for JPMorgan Chase, and $83 million for Wells Fargo. If after three years, a servicer has not paid an amount equal to its respective penalty, the OCC will assess a penalty against the servicer for the difference between the aggregate value of the actions and payments under the agreement and that servicer’s OCC penalty amount.
“The actions announced today mark important progress in addressing the problems associated with foreclosure processing and are a critical step toward restoring a functioning industry that protects the rights of the customers it serves,” said acting Comptroller of the Currency John Walsh. “The OCC has worked closely with the Department of Justice and other federal agencies throughout the federal-state foreclosure settlement negotiations. We have worked to coordinate the comprehensive fixes to mortgage servicing and foreclosure practices that we required in our April 2011 cease and desist orders to ensure that work complements actions required by the federal-state settlement.”
These actions follow the issuance of consent orders in April 2011 against Bank of America, Citibank, JPMorgan Chase, and Wells Fargo to correct deficient, unsafe and unsound mortgage servicing and foreclosure practices.
Those enforcement actions required extensive fixes to mortgage servicing and foreclosure processes. Much of that work will continue throughout the balance of 2012. The orders also required servicers to retain independent consultants to conduct a comprehensive review of foreclosure activity by these servicers in 2009 and 2010. As part of that effort, an independent foreclosure review process began in November 2011 which gives more than four million people the opportunity to request a review of their case if they believe they suffered injuries as a result of errors, misrepresentations, or other deficiencies in a foreclosure action on their primary residence in 2009 or 2010 by one of these servicers. More information about that process is available at www.independentforeclosurereview.com.
WASHINGTON – U.S. Attorney General Eric Holder, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney General Tom Miller and Colorado Attorney General John W. Suthers announced today that the federal government and 49 state attorneys general have reached a landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses. The agreement provides substantial financial relief to homeowners and establishes significant new homeowner protections for the future.
The unprecedented joint agreement is the largest federal-state civil settlement ever obtained and is the result of extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country. The joint federal-state group entered into the agreement with the nation’s five largest mortgage servicers: Bank of America Corporation, JPMorgan Chase & Co., Wells Fargo & Company, Citigroup Inc., and Ally Financial Inc. (formerly GMAC).
“This agreement – the largest joint federal-state settlement ever obtained – is the result of unprecedented coordination among enforcement agencies throughout the government,” said Attorney General Holder. “It holds mortgage servicers accountable for abusive practices and requires them to commit more than $20 billion towards financial relief for consumers. As a result, struggling homeowners throughout the country will benefit from reduced principals and refinancing of their loans. The agreement also requires substantial changes in how servicers do business, which will ensure the abuses of the past are not repeated.”
“This historic settlement will provide immediate relief to homeowners – forcing banks to reduce the principal balance on many loans, refinance loans for underwater borrowers, and pay billions of dollars to states and consumers,” said HUD Secretary Donovan. “Banks must follow the laws. Any bank that hasn’t done so should be held accountable and should take prompt action to correct its mistakes. And it will not end with this settlement. One of the most important ways this settlement helps homeowners is that it forces the banks to clean up their acts and fix the problems uncovered during our investigations. And it does that by committing them to major reforms in how they service mortgage loans. These new customer service standards are in keeping with the Homeowners Bill of Rights recently announced by President Obama – a single, straightforward set of commonsense rules that families can count on.”
“This monitored agreement holds the banks accountable, it provides badly needed relief to homeowners, and it transforms the mortgage servicing industry so now homeowners will be protected and treated fairly,” said Iowa Attorney General Miller.
“This settlement has broad bipartisan support from the states because the attorneys general realize that the partnership with the federal agencies made it possible to achieve favorable terms and conditions that would have been difficult for the states or the federal government to achieve on their own,” said Colorado Attorney General Suthers.
The joint federal-state agreement requires servicers to implement comprehensive new mortgage loan servicing standards and to commit $25 billion to resolve violations of state and federal law. These violations include servicers’ use of “robo-signed” affidavits in foreclosure proceedings; deceptive practices in the offering of loan modifications; failures to offer non-foreclosure alternatives before foreclosing on borrowers with federally insured mortgages; and filing improper documentation in federal bankruptcy court.
Under the terms of the agreement, the servicers are required to collectively dedicate $20 billion toward various forms of financial relief to borrowers. At least $10 billion will go toward reducing the principal on loans for borrowers who, as of the date of the settlement, are either delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth. At least $3 billion will go toward refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth. Borrowers who meet basic criteria will be eligible for the refinancing, which will reduce interest rates for borrowers who are currently paying much higher rates or whose adjustable rate mortgages are due to soon rise to much higher rates. Up to $7 billion will go towards other forms of relief, including forbearance of principal for unemployed borrowers, anti-blight programs, short sales and transitional assistance, benefits for service members who are forced to sell their home at a loss as a result of a Permanent Change in Station order, and other programs. Because servicers will receive only partial credit for every dollar spent on some of the required activities, the settlement will provide direct benefits to borrowers in excess of $20 billion.
Mortgage servicers are required to fulfill these obligations within three years. To encourage servicers to provide relief quickly, there are incentives for relief provided within the first 12 months. Servicers must reach 75 percent of their targets within the first two years. Servicers that miss settlement targets and deadlines will be required to pay substantial additional cash amounts.
In addition to the $20 billion in financial relief for borrowers, the agreement requires the servicers to pay $5 billion in cash to the federal and state governments. $1.5 billion of this payment will be used to establish a Borrower Payment Fund to provide cash payments to borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008 and Dec. 31, 2011, and who meet other criteria. This program is separate from the restitution program currently being administered by federal banking regulators to compensate those who suffered direct financial harm as a result of wrongful servicer conduct. Borrowers will not release any claims in exchange for a payment. The remaining $3.5 billion of the $5 billion payment will go to state and federal governments to be used to repay public funds lost as a result of servicer misconduct and to fund housing counselors, legal aid and other similar public programs determined by the state attorneys general.
The $5 billion includes a $1 billion resolution of a separate investigation into fraudulent and wrongful conduct by Bank of America and various Countrywide entities related to the origination and underwriting of Federal Housing Administration (FHA)-insured mortgage loans, and systematic inflation of appraisal values concerning these loans, from Jan. 1, 2003 through April 30, 2009. Payment of $500 million of this $1 billion will be deferred to partially fund a loan modification program for Countrywide borrowers throughout the nation who are underwater on their mortgages. This investigation was conducted by the U.S. Attorney’s Office for the Eastern District of New York, with the Civil Division’s Commercial Litigation Branch of the Department of Justice, HUD and HUD-OIG. The settlement also resolves an investigation by the Eastern District of New York, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) and the Federal Housing Finance Agency-Office of the Inspector General (FHFA-OIG) into allegations that Bank of America defrauded the Home Affordable Modification Program.
The joint federal-state agreement requires the mortgage servicers to implement unprecedented changes in how they service mortgage loans, handle foreclosures, and ensure the accuracy of information provided in federal bankruptcy court. The agreement requires new servicing standards which will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create dozens of new consumer protections. The new standards provide for strict oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court.
The new servicing standards make foreclosure a last resort by requiring servicers to evaluate homeowners for other loss mitigation options first. In addition, banks will be restricted from foreclosing while the homeowner is being considered for a loan modification. The new standards also include procedures and timelines for reviewing loan modification applications and give homeowners the right to appeal denials. Servicers will also be required to create a single point of contact for borrowers seeking information about their loans and maintain adequate staff to handle calls.
The agreement will also provide enhanced protections for service members that go beyond those required by the Servicemembers Civil Relief Act (SCRA). In addition, the four servicers that had not previously resolved certain portions of potential SCRA liability have agreed to conduct a full review, overseen by the Justice Department’s Civil Rights Division, to determine whether any servicemembers were foreclosed on in violation of SCRA since Jan. 1, 2006. The servicers have also agreed to conduct a thorough review, overseen by the Civil Rights Division, to determine whether any service member, from Jan. 1, 2008, to the present, was charged interest in excess of 6% on their mortgage, after a valid request to lower the interest rate, in violation of the SCRA. Servicers will be required to make payments to any servicemember who was a victim of a wrongful foreclosure or who was wrongfully charged a higher interest rate. This compensation for servicemembers is in addition to the $25 billion settlement amount.
The agreement will be filed as a consent judgment in the U.S. District Court for the District of Columbia. Compliance with the agreement will be overseen by an independent monitor, Joseph A. Smith Jr. Smith has served as the North Carolina Commissioner of Banks since 2002. Smith is also the former Chairman of the Conference of State Banks Supervisors (CSBS). The monitor will oversee implementation of the servicing standards required by the agreement; impose penalties of up to $1 million per violation (or up to $5 million for certain repeat violations); and publish regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement.
The agreement resolves certain violations of civil law based on mortgage loan servicing activities. The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers. The agreement does not prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group. The United States also retains its full authority to recover losses and penalties caused to the federal government when a bank failed to satisfy underwriting standards on a government-insured or government-guaranteed loan. The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits. State attorneys general also preserved, among other things, all claims against the Mortgage Electronic Registration Systems (MERS), and all claims brought by borrowers.
Investigations were conducted by the U.S. Trustee Program of the Department of Justice, HUD-OIG, HUD’s FHA, state attorneys general offices and state banking regulators from throughout the country, the U.S. Attorney’s Office for the Eastern District of New York, the U.S. Attorney’s Office for the District of Colorado, the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina, the U.S. Attorney’s Office for the District of South Carolina, the U.S. Attorney’s Office for the Southern District of New York, SIGTARP and FHFA-OIG. The Department of Treasury, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Justice Department’s Civil Rights Division, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Department of Veterans Affairs and the U.S. Department of Agriculture made critical contributions.
For more information about the mortgage servicing settlement, go to www.NationalMortgageSettlement.com. To find your state attorney general’s website, go to www.NAAG.org and click on “The Attorneys General.”
The joint federal-state agreement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.
As readers may know by now, 49 of 50 states have agreed to join the so-called mortgage settlement, with Oklahoma the lone refusenik. Although the fine points are still being hammered out, various news outlets (New York Times, Financial Times, Wall Street Journal) have details, with Dave Dayen’s overview at Firedoglake the best thus far.
The Wall Street Journal is also reporting that the SEC is about to launch some securities litigation against major banks. Since the statue of limitations has already run out on securities filings more than five years old, this means they’ll clip the banks for some of the very last (and dreckiest) deals they shoved out the door before the subprime market gave up the ghost.
The various news services are touting this pact at the biggest multi-state settlement since the tobacco deal in 1998. While narrowly accurate, this deal is bush league by comparison even though the underlying abuses in both cases have had devastating consequences.
The tobacco agreement was pegged as being worth nearly $250 billion over the first 25 years. Adjust that for inflation, and the disparity is even bigger. That shows you the difference in outcomes between a case where the prosecutors have solid evidence backing their charges, versus one where everyone know a lot of bad stuff happened, but no one has come close to marshaling the evidence.
The mortgage settlement terms have not been released, but more of the details have been leaked: …
LOS ANGELES – Attorney General Kamala D. Harris today announced an historic commitment to California of up to $18 billion that will benefit hundreds of thousands of homeowners in the state hardest hit by the mortgage crisis.
“California families will finally see substantial relief after experiencing so much pain from the mortgage crisis,” said Attorney General Harris. “Hundreds of thousands of homeowners will directly benefit from this California commitment.”
“This outcome is the result of an insistence that California receive a fair deal commensurate with the harm done here. We insisted on homeowner relief for Californians and demanded enforceability so homeowners actually see a benefit that will allow them to stay in their homes, and preserved our ability to investigate banker crime and predatory lending,” continued Harris.
California secured the $18 billion agreement as part of a national multistate settlement to penalize robo-signing and other bank servicing and foreclosure misconduct. The agreement comes after California departed from the multistate negotiations last September when the estimated relief to California was $4 billion. Attorney General Harris insisted on more relief for the most distressed homeowners, meaningful enforcement, and the ability of California and other states to pursue investigations into misconduct.
California’s participation in the settlement also increased the amount of relief other states will receive by approximately $6 billion.
Attorney General Harris also obtained separate, enforceable guarantees to ensure that banks will be accountable for their commitments to California. As part of the separate California guarantee, banks must enact a minimum of $12 billion in principal reductions for California homeowners. Failure to achieve this minimum level of reductions will result in substantial cash payments of up to $800 million that the banks will have to pay to the state. Unlike the larger multistate agreement, which is enforceable in a federal court in Washington, D.C., this payment provision empowers the Attorney General to summon the banks to California state court.
California’s separate guarantee also creates important incentives to ensure that banks will reduce the principal mortgage balance of underwater homeowners in California’s hardest-hit counties and that the principal reductions in these communities will occur within the first year of the settlement.
To speed investigations and strengthen prosecutions of these mortgage cases, California will expand its Mortgage Fraud Strike Force, adding to the more than 42 members already working on the team. The state will continue its investigative alliance with Nevada, that allows the sharing of resources, information and strategies, and will look to collaborate with additional states focused on a law enforcement response to the wave of mortgage fraud.
The national multistate agreement and California commitment will provide substantial relief for thousands of Californians whose mortgages are owned by the five banks in the settlement, but thousands more will still need help as they struggle to stay in their homes.
“I will continue to fight for principal reductions for the approximately 60 percent of California homeowners whose loans are owned by Fannie Mae and Freddie Mac,” Attorney General Harris added.
Attorney General Harris will propose a comprehensive legislative agenda to protect homeowners in the mortgage market. This legislation will build on the three-year reforms agreed to as part of the California commitment, including a single point of contact for mortgage-holders and an end to the unfair and confusing system of dual-track foreclosures.
“This is an historic amount of relief for California homeowners, but it is one piece of a broader focus. We will continue our crackdown on mortgage fraud and quickly move to pass legislation that will simplify, reform and upgrade our broken mortgage system,” Harris added.
The financial benefits of this historic agreement extend to homeowners whose loans are owned or serviced by one of the five largest mortgage lenders. Benefits include: – More than $12 billion is guaranteed to reduce the principal on loans or offer short sales to approximately 250,000 California homeowners who are underwater on their loans and behind or almost behind in their payments. – $849 million is estimated to be dedicated to refinancing the loans of 28,000 homeowners who are current on their payments but underwater on their loans. – $279 million will be dedicated to offering restitution to approximately 140,000 California homeowners who were foreclosed upon between 2008 and December 31, 2011. – $1.1 billion is estimated to be distributed to homeowners for unemployed payment forbearance and transition assistance as well as to communities to repair the blight and devastation left by waves of foreclosures, targeted at 16,000 recent foreclosures. – $3.5 billion will be dedicated to relieving 32,000 homeowners of unpaid balances remaining when their homes are foreclosed. – $430 million in costs, fees and penalty payments.
County-specific payments are based on the number of homeowners and the depth of the foreclosure crisis. It is estimated that homeowners in the following counties will accrue the following level of benefits over the three-year life of the commitment.
– Los Angeles: $3.92 billion – Riverside: $1.59 billion – San Bernardino: $1.13 billion – Sacramento: $820 million – Stanislaus County: $368 million
Additional details on the settlement, including how homeowners can apply for relief, can be found at www.oag.ca.gov.
SCREWED! Banks win again with help from Obama administration.
After a year of fake tough talk on banks, Obama Administration and AGs to release banks from liability for foreclosure fraud in exchange for vague promises!
NYT-
More than two million Americans could benefit from at least $25 billion in relief from the nation’s biggest banks as part of a broad government settlement to be announced as early as Thursday, according to state and federal authorities. It is the latest effort by the government to halt the housing market’s downward slide.
Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure. The success could depend in part on how effectively the program is put into effect because earlier efforts by Washington to help troubled borrowers aided far fewer than had been expected.
UPDATE: New York Times is now reporting the Banksters have reached the $25 Billion Dollar Deal.
Investors have your wallets handy…you’ll be needing them to pay for part of the banks Massive Fraud!
HuffPO-
New York Attorney General Eric Schneiderman and California Attorney General Kamala Harris are joining the national mortgage servicing settlement, making a deal that includes all 50 states all but inevitable, according to a source who spoke Wednesday evening on condition of anonymity.
“It’s hard to see any state staying out of the deal if California is in,” said the source.
The settlement resolves allegations that five of the nation’s largest banks forged documents and wrongfully foreclosed on borrowers in what has come to be known as the “robo-signing” scandal. Schneiderman and Harris have been outspoken in urging the Obama administration to hold the nation’s biggest banks accountable for their role in the housing crisis and have resisted signing on to the settlement until now over concerns that it would go too easy on the banks and provide too little homeowner relief. The two states’ participation had widely been seen as necessary to a successful deal.
YOU ‘RE being lied to again. If the AG’s have the right (by law) to go after the banks in the future, after the settlement, then why are the Banks trying to get the NY AG to drop the current lawsuit against MERS? If this is the case… this is also made part of the settlement for the future claims. Crystal Clear there is something in this settlement that other AG’s are signing to that they may not fully understand.
The settlement would not release this so why the panic? You’re being lied to.
Throw their asses in jail, why is there any negotiating happening in the first place?
FDL-
New York Attorney General Eric Schneiderman abruptly cancelled a conference call yesterday 10 minutes before it was to begin. The subject was supposed to be the foreclosure fraud settlement, and there was idle speculation that Schneiderman would announce that he would join the settlement. This would spur other holdouts to join, presumably, and at the very least break the somewhat united front against the settlement. You’d probably be looking at a formal announcement within days. But instead, Schneiderman cancelled, postponing the call “indefinitely.”
It looks like the issue is the lawsuits against MERS and three banks that he filed on Friday. The banks want him to drop it.
One person familiar with the negotiations said several banks wanted Schneiderman to withdraw a suit he filed on Friday against prominent financial firms, saying they had acted deceptively by filing erroneous and fraudulent foreclosure documents through a popular electronic mortgage registry designed to allow firms to save time and money by bypassing local property recording requirements. The person spoke on the condition of anonymity because the talks were ongoing. It was unclear whether Schneiderman had intended on Tuesday to address the status of those lawsuits during the news conference.
Arizona, Michigan and Florida, three of the states hit hardest by the housing crisis, will join a nationwide settlement over foreclosure abuses, officials with direct knowledge say. They will join more than 40 other states in approving a deal that would benefit many Americans who lost their homes or can’t afford their mortgages.
The three states’ involvement buoys hopes that a full 50-state deal is imminent.
Formal announcements from Arizona and Florida could come within a week, according to the officials, who spoke on condition of anonymity because they weren’t authorized to discuss the settlement publicly.
Arizona Attorney General Tom Horne said he first wants to resolve a separate foreclosure-related lawsuit his state filed against Bank of America.
Florida officials say they are still in discussions. Attorney General Pam Bondi “remains engaged in the settlement discussions in order to ensure that Floridians receive their fair share in the agreement,” she said in a statement. Other officials said Florida intends to back the deal.
Michigan announced Tuesday it would join the settlement. Officials said the state would receive about $500 million in aid.
Michigan officials also said they would continue a criminal investigation into Docx, a unit of Lender Processing Services of Jacksonville, Fla. The company is accused of using fake signatures on phony foreclosure documents. Missouri filed criminal charges against the firm and its founder Friday, saying it falsified 68 notarized deeds on behalf of mortgage lenders.
A Farmington Hills law firm that represents mortgage giants Fannie Mae and Freddie Mac in foreclosure and eviction cases has contributed $200,000 to a super PAC supporting Republican Mitt Romney for president.
That super PAC, Restore Our Future, has run ads against Romney’s GOP rival Newt Gingrich, attacking his ties to Freddie Mac and accusing him of “cashing in” on the foreclosure crisis.
The Dec. 27 contribution, disclosed Tuesday in a Federal Election Commission filing, was written from the corporate account of Trott & Trott PC. A 2010 Supreme Court decision allows corporations and unions to spend unlimited amounts on independent campaigns to support or oppose federal candidates.
Managing partner David Trott is a member of Romney’s Michigan finance committee. He and his wife also contributed $7,500 to the Romney campaign, and his employees contributed more than $11,000 to Romney.
GMAC MORTGAGE, and MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Defendants-Appellees. _________________________________________/
By order of December 29, 2011, the proceedings in this case were automatically stayed by the filing of a petition in bankruptcy. On order of the Court, the bankruptcy stay having been lifted and the case having been reopened, the application for leave to appeal the August 25, 2011 judgment of the Court of Appeals is considered and, pursuant to MCR 7.302(H)(1), in lieu of granting leave to appeal, we VACATE the judgment of the Court of Appeals and we REMAND this case to the Court of Appeals for reconsideration in light of Residential Funding Co, LLC, f/k/a Residential Funding Corp v Saurman, 490 Mich ___ (decided November 16, 2011).
The Honorable Bill Schuette Attorney General of Michigan
Mr. Schuette –
I have the utmost respect for you and your office, and I wish to commend your hard work on the recent mortgage robo-signing crisis. The challenges we have faced in Michigan concerning property fraud have been unlike anything we have ever seen before, and you have been actively engaged in this fight with myself and the other Michigan Registers of Deeds.
As you know, the deadline for Michigan to sign on to the 50-state mortgage fraud settlement is February 3rd. I recognize that this is a difficult decision, and that there are many factors to consider.
I am writing to ask that you stand firm, and refuse to add Michigan to any settlement that would give criminal immunity to the defendants. Our ongoing investigations have demonstrated that the major banks in this settlement, and their hired document mills, were engaged in the practice of robo-signing. Hundreds of residents here in Ingham County, and thousands of residents across the state, were illegally foreclosed upon because of this practice.
These illegalities have stolen due process from our own citizens, and robbed them of precious time that could have been used to recover and resume their mortgages, or obtain a modification. A family who is facing a foreclosure is already vulnerable; this practice insured that they could not possibly reclaim their home.
We have even received information in recent days that shows LPS, a document mill included in the proposed settlement, specifically requested to have this criminal investigation converted to a civil lawsuit. It seems clear that they are aware of their vulnerability to these charges, and are attempting to save their company’s stock price by avoiding responsibility.
All I am asking is that we treat the banks in the same way we would treat our own citizens. If a person in Michigan were to commit fraud and forgery, and use these practices to take someone’s property, that person would go to jail. I respectfully request that we leave that same possibility open for the banks and corporations that have committed those same crimes here in our state.
Sincerely, Curtis Hertel Ingham County Register of Deeds
Simple solution for each and every state that was destroyed by using MERS alone.
Michigan Citizen-
If you believe the status quo media reports and some state officials, the city of Detroit has exhausted all of its options to erase its mounting budget deficit. The only solution, according to Gov. Rick Snyder and State Treasurer Andy Dillion, is imposing an emergency manager.
The city, according to some legal experts, has another possible course of action: Suing the banks to recoup revenue losses caused by fraudulent lending practices.
Since the onset of the nationwide home foreclosure crisis, several cities have challenged the banking industry in court. In most cases, the goal was to establish a direct link between bank-led home foreclosures and municipal budget deficits. The efforts have largely failed thus far.
Ingham County, Michigan Curtis Hertel Jr. is seeking re-election and he needs your vote. This is a great way to show your gratitude for all he’s done for you Michiganders.
S T A T E O F M I C H I G A N C O U R T O F A P P E A L S
EUIHYUNG KIM and IN SOOK KIM, Plaintiffs-Appellants,
v
JP MORGAN CHASE BANK, Defendant-Appellee.
EXCERPT:
Therefore, pursuant to the plain language of MCL 600.3204(3), defendant was required to record its mortgage interest before the sheriff’s sale. Because defendant failed to do so, it was not statutorily authorized to proceed with the sale. See MCL 600.3204(3) (“If the party foreclosing a mortgage by advertisement is not the original mortgagee, a record chain of title shall exist prior to the date of sale . . . .” [Emphasis added]); see also Davenport v HSBC Bank USA, 275 Mich App 344, 347-348; 739 NW2d 383 (2007) (“Because defendant lacked the statutory authority to foreclose, the foreclosure proceedings were void ab initio.”) Accordingly, the trial court erred by granting summary disposition for defendant and denying plaintiffs’ motion for summary disposition when they were entitled to set aside the sheriff’s deed. Given our resolution of this issue, it is unnecessary to address plaintiffs’ argument that the trial court erred by prematurely disposing of their cause of action without permitting discovery.
[ipaper docId=78488254 access_key=key-230vn08yym7yezdbawli height=600 width=600 /]
The irony is that CitiMortgage & GMAC are both shareholders of MERS…Not to mention Freddie Mac is too.
CITIMORTGAGE, INC., and FEDERAL HOME LOAN MORTGAGE CORPORATION, Plaintiffs-Appellants, v. MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., and GMAC MORTGAGE, L.L.C., Defendants-Appellees, and SHERYLL D. CATTON and GREGORY J. CATTON, Defendants.
No. 298004.
Court of Appeals of Michigan.
December 15, 2011, 9:00 a.m.
Before: MURPHY, C.J., and BECKERING and RONAYNE KRAUSE, JJ.PER CURIAM.
Plaintiffs appeal as of right from the trial court’s order denying plaintiffs’ motion for summary disposition and granting defendants’[1] motion for summary disposition. We reverse and remand for further proceedings.
The facts of this case are not in dispute. On September 6, 2000, Sheryll D. Catton and Gregory J. Catton (“the Cattons”) purchased property in Wayne County with a mortgage granted to ABN AMRO Mortgage Group, Inc. (“ABN AMRO”). On May 4, 2001, the Cattons refinanced their loan, discharging the original mortgage in favor of a new mortgage also granted to ABN AMRO. On July 11, 2002, the Cattons obtained a home equity loan from GMAC, granting GMAC a second mortgage on the property. On November 25, 2002, the Cattons refinanced their 2001 loan, discharging the 2001 ABN AMRO mortgage in favor of another mortgage granted to ABN AMRO. There is no dispute that ABN AMRO was unaware of the GMAC mortgage at the time it took the new mortgage although GMAC’s mortgage was recorded. On August 22, 2005, the Cattons filed for bankruptcy and their property was subsequently sold at a foreclosure sale to Federal Home Loan Mortgage Corporation who sued, along with ABN AMRO’s successor-in-interest Citimortgage, Inc., to quiet title.
The issue in this matter is whether, as between the two lien holders, which of the two mortgage liens is superior. CitiMortgage holds the refinanced mortgage lien, and defendant holds the second mortgage, which would have been the junior lien but for the subsequent refinancing. More specifically, the issue is whether CitiMortgage can place its lien in first priority over defendants’ lien through application of the doctrine of equitable subrogation. The trial court concluded that CitiMortgage cannot, and this appeal followed. We review motions for summary disposition and questions of law de novo. Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999); Chapdelaine v Sochocki, 247 Mich App 167, 169; 635 NW2d 339 (2001).
Under then-existing provisions of Michigan’s race-notice recording statute, MCL 565.25(1) and (4), a first-recorded mortgage has priority over a later-recorded mortgage, and equity—and therefore equitable subrogation—may be used by the courts contrary to the plain language of that statute only in the presence of “`”unusual circumstances”` such as fraud or mutual mistake.'” Ameriquest Mortgage v Alton, 273 Mich App 84, 93-94, 99-100; 731 NW2d 99 (2006), quoting Devillers v Auto Club Ins Ass’n, 473 Mich 562, 590; 702 NW2d 539 (2005). See also, Ameriquest Mortgage, 273 Mich App at 100 (MURPHY, J., concurring). Other “unusual circumstances” might include a “preexisting jumble of convoluted case law through which the plaintiff was forced to navigate” or some sort of misconduct by another party. Devillers, 473 Mich at 590 n 64, n 65. However, MCL 565.25(1) and (4) have been repealed by 2008 PA 357. Consequently, the bulk of Ameriquest Mortgage is no longer valid.
That being the case, we conclude that the case law on point in Michigan is consistent with the Restatement of Property (Mortgages), 3d, § 7.3 (hereafter “the Restatement”), which provides as follows:
(a) If a senior mortgage is released of record and, as part of the same transaction, is replaced with a new mortgage, the latter mortgage retains the same priority as its predecessor, except
(1) to the extent that any change in the terms of the mortgage or the obligation it secures is materially prejudicial to the holder of a junior interest in the real estate, or
(2) to the extent that one who is protected by the recording act acquires an interest in the real estate at a time that the senior mortgage is not of record.
(b) If a senior mortgage or the obligation it secures is modified by the parties, the mortgage as modified retains priority as against junior interests in the real estate, except to the extent that the modification is materially prejudicial to the holders of such interests and is not within the scope of a reservation of right to modify as provided in Subsection (c).
(c) If the mortgagor and mortgagee reserve the right in a mortgage to modify the mortgage or the obligation it secures, the mortgage as modified retains priority even if the modification is materially prejudicial to the holders of junior interests in the real estate, except as provided in Subsection (d).
(d) If a mortgage contains a reservation of the right to modify the mortgage or the obligation as described in Subsection (c), the mortgagor may issue a notice to the mortgagee terminating that right. Upon receipt of the notice by the mortgagee, the right to modify with retention of priority under Subsection (c) becomes ineffective against persons taking any subsequent interests in the mortgaged real estate, and any subsequent modifications are governed by Subsection (b). Upon receipt of the notice, the mortgagee must provide the mortgagor with a certificate in recordable form stating that the notice has been received.
Of particular note, Comment b to the Restatement provides that “[u]nder § 7.3(a) a senior mortgagee that discharges its mortgage of record and records a replacement mortgage does not lose its priority as against the holder of an intervening interest unless that holder suffers material prejudice.” The associated Reporter’s Note, voluminously citing to many cases from other jurisdictions, explains that “courts routinely adhere to the principle that a senior mortgagee who discharges its mortgage of record and takes and records a replacement mortgage, retains the predecessor’s seniority as against intervening lienors unless the mortgagee intended a subordination of its mortgage or `paramount equities’ exist.”
For the reasons we discuss infra, we conclude that the Restatement, limited to the situations described by the quoted commentary—specifically, cases in which the senior mortgagee discharges its mortgage of record and contemporaneously takes a replacement mortgage, such as often occurs in the context of refinancing—is consistent with Michigan precedent. Thus limited, because the Restatement reflects the present state of the law in Michigan, we hereby adopt it. We caution, however, that the lending mortgagee seeking subrogation and priority over an intervening interest relative to its newly recorded mortgage must be the same lender that held the original mortgage before the intervening interest arose; and furthermore, any application of equitable subrogation is subject to a careful examination of the equities of all parties and potential prejudice to the intervening lienholder.
It is a general rule that the cancellation of a mortgage on the record is not conclusive as to its discharge, or as to the payment of the indebtedness secured thereby. And where the holder of a senior mortgage discharges it of record, and contemporaneously therewith takes a new mortgage, he will not, in the absence of paramount equities, be held to have subordinated his security to an intervening lien unless the circumstances of the transaction indicate this to have been his intention, or such intention upon his part is shown by extrinsic evidence. [Citations omitted.]
This reflects “the well-settled rule that the acceptance by a mortgagee of a new mortgage and his cancellation of the old mortgage do not deprive the mortgagee of priority over intervening liens.” Washington Mut Bank v ShoreBank Corp, 267 Mich App 111, 126; 703 NW2d 486 (2005).
In Washington Mut Bank, this Court rejected an equitable subrogation argument made by the plaintiff bank, where that bank provided refinancing on real property that had earlier been encumbered by a first mortgage, which was paid off with the proceeds from the refinancing, and then encumbered by two intervening mortgages in favor of other banks prior to the refinancing. Importantly, and distinguishable from the facts here, the plaintiff bank that sought subrogation and made the refinancing loan was not the original lender-mortgagee.[2] After an exhaustive examination of the case law regarding equitable subrogation and citing the “well-settled rule” from Schanhite, the Court stated:
[I]n this case, we are not presented with a new mortgage being accepted by the holder of the old mortgage. That is, had the new mortgage been given to Option One Mortgage [original lender], and Option One was before us rather than plaintiff, Schanhite might provide the authority to revive the original mortgage and give the new mortgage the same priority as the one it replaced. . . .
. . .
[W]e are unaware of any authority regarding the application of the doctrine of equitable subrogation to support the general proposition that a new mortgage, granted as part of a generic refinancing transaction, can take the priority of the original mortgage, which is being paid off, giving it priority over intervening liens. . . . Such bolstering of priority may be applicable where the new mortgagee is the holder of the mortgage being paid off[.] [Washington Mut Bank, 267 Mich App at 127-128 (emphasis added); see also Van Dyk Mtg Corp v United States, 503 F Supp 2d 876 (WD Mich, 2007) (applying Washington Mut Bank and Schanhite in granting equitable subrogation under circumstances comparable to the case at bar).]
Washington Mut Bank does not permit us to extend application of the Restatement to cases in which the new mortgagee was not the holder of the original mortgage being paid off through refinancing, consequently, we cannot adopt the Restatement in its entirety. But it does fully support, along with Schanhite, applying the Restatement where, as here, the new mortgagee seeking priority and subrogation held the original mortgage, and we do so here.
We note also that the refinancing in Schanhite actually worked to the benefit of the second mortgagee, because “the property would have been lost to the tax man” otherwise, so restoring the original lien priority was the equitable outcome for all parties. See Washington Mut Bank, 267 Mich App 126-127. Our Supreme Court then clarified that “[t]he theory of equitable or conventional subrogation is that the junior lienor’s position is left unchanged by the conduct of the party seeking subrogation and that he is not wronged by any acts permitting subrogation.” Lentz v Stoflet, 280 Mich 446, 451; 273 NW 763 (1937). Consistent with the Restatement provision in the limited form in which we adopt it, a refinanced mortgage maintains the priority position of the original mortgage so long as any junior lien holder is not prejudiced as a consequence.
Finally, we find it necessary to address the “mere volunteer” rule, which provides that equitable subrogation cannot be extended to a party that is a mere volunteer. Ameriquest Mortgage, 273 Mich App at 94-95. Underlying the rejection of the plaintiff bank’s equitable subrogation argument in Washington Mut Bank was the Court’s conclusion that the plaintiff was a mere volunteer. Washington Mut Bank, 267 Mich App at 119-120. The Court observed that “the doctrine of equitable subrogation does not allow a new mortgagee to take the priority of the older mortgagee merely because the proceeds of the new mortgage were used to pay off the indebtedness secured by the old mortgage[, and] [i]t is clear to us that . . . plaintiff is a mere volunteer and, therefore, is not entitled to equitable subrogation.” Id. Importantly, Washington Mut Bank reflected that the “mere volunteer” rule has no bearing in the context of a case where the new mortgagee and the old mortgagee are one in the same, even in a standard refinancing transaction, otherwise the panel would not have suggested a different outcome had the plaintiff bank held the original mortgage. Indeed, the Schanhite Court did not indicate that the rule allowing qualifying mortgagees to retain priority could only be employed on a finding that a mortgagee was not a mere volunteer. And the Restatement contains no such restriction or limitation. We hold that the “mere volunteer” rule has no applicability where the new mortgagee was also the original mortgagee.
We conclude that equitable subrogation is available to place a new mortgage in the same priority as a discharged mortgage if the new mortgagee was the original mortgagee and the holders of any junior liens are not prejudiced as a consequence. We further conclude that the Restatement, in the limited form in which we have adopted it, sets forth a reasonable and proper framework for determining whether junior lienholders have been prejudiced and whether the equities ultimately favor equitable subrogation. Because the trial court is the forum best suited to evaluating any prejudice and the competing equities, including making any relevant factual determinations, we remand this matter to the trial court to do so.
Reversed and remanded to the trial court for further proceedings consistent with this opinion. We direct that no taxable costs shall be awarded to any party under MCR 7.219. We do not retain jurisdiction.
[1] Defendants, Sheryll D. Catton and Gregory J. Catton, defaulted in this case and are not part of this appeal. References herein to “defendants” are to defendants-appellants, Mortgage Electronic Registration Systems, Inc. (“MERS”), as nominee for GMAC Mortgage, L.L.C. (“GMAC”), and GMAC itself.
[2] The descriptor of “original mortgagee” is amenable to confusion and therefore requires clarification. By that, we mean not only the originating mortgagee, but also any bona fide successor in interest. Here, CitiMortgage was not the original mortgagee, nor was it the new mortgagee at the time of the refinancing transaction. However, ABN AMRO was the original and new mortgagee, and CitiMortgage is ABN AMRO’s successor in interest, so CitiMortgage stands in the shoes of ABN AMRO for purposes of the analysis.
I think we all can agree with this post… but those who benefit from real estate.
Where is Bill Hultman these days?
MLive-
A ruling this week by the Michigan Supreme Court put an end to some uncertainty in the real estate market, but it was a disappointment to local housing advocates.
The high court reversed an April state Court of Appeals decision that prevented the Mortgage Electronic Registration System, or MERS, from bringing foreclosures against Michigan homeowners.
The system was widely used by the lending industry to streamline the packaging and selling of mortgages as securities without recording the deeds at county offices. In that role, it also started countless foreclosure proceedings.
The appeals court ruled that MERS did not own legal title to the properties and could not be the foreclosing party. That decision called into question the validity of thousands of foreclosures across the state, wreaking havoc in the housing market. Closings were canceled and homeowners who had purchased foreclosed houses wondered whether they had clear title to the property.
Elected justice moves swiftly. The Michigan Supreme Court handed down its opinion in Residential Funding Co. v. Saurman on Wednesday, a couple of weeks after oral argument. They were in a rush to get the opinion out, it seems. Unfortunately, it’s a terrible opinion. The Michigan Supreme Court reversed the appellate court to hold that MERS has the power to conduct non-judicial foreclosures (foreclosure by advertisement) in Michigan.
To reach this conclusion, the Michigan Supreme Court had to conclude that MERS had an interest in the indebtedness–that is an interest in the note. MERS, however, expressly disclaims any interest in the note. So it took some acrobatics and legerdemain and outright tautology to get no to mean yes. Here’s how they did it:
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