Cecala of Inside Mortgage Finance said he wonders whether lenders are making big payments on properties with underlying title problems. Evan Berlin, managing partner of Berlin Patten, a real estate law firm in Sarasota, Florida, said representatives of a large bank told him the incentives are primarily given to borrowers when it doesn’t have the proper paperwork needed to win its foreclosure case. He declined to name the bank for publication.
Prashant Gopal-
Banks, accelerating efforts to move troubled mortgages off their books, are offering as much as $35,000 or more in cash to delinquent homeowners to sell their properties for less than they owe.
Lenders have routinely delayed or blocked such transactions, known as short sales, in which they accept less from a buyer than the seller’s outstanding loan. Now banks have decided the deals are faster and less costly than foreclosures, which have slowed in response to regulatory probes of abusive practices. Banks are nudging potential sellers by pre-approving deals, streamlining the closing process, forgoing their right to pursue unpaid debt and in some cases providing large cash incentives, said Bill Fricke, senior credit officer for Moody’s Investors Service in New York.
Losses for lenders are about 15 percent lower on the sales than on foreclosures, which can take years to complete while taxes and legal, maintenance and other costs accumulate, according to Moody’s. The deals accounted for 33 percent of financially distressed transactions in November, up from 24 percent a year earlier, said CoreLogic Inc., a Santa Ana, California-based real estate information company.
Karen Farley hadn’t made a mortgage payment in a year when she got what looked like a form letter from her lender.
“You could sell your home, owe nothing more on your mortgage and get $30,000,” JPMorgan Chase & Co. (JPM) said in the Aug. 17 letter obtained by Bloomberg News.
Arizona may become the first state to require lenders to prove they have the right to foreclose by providing a complete list of any previous owners of the mortgage, under a bill passed yesterday by its Senate.
The legislation, which is headed to the House after being approved 28-2 in the Republican-dominated Senate, would allow foreclosure sales to be voided if lenders that didn’t originate the loan can’t produce the full chain of title. Arizona permits nonjudicial foreclosures, meaning property can be seized from the homeowner without a court order.
Lawmakers in states including New York, Oregon and Virginia also have proposed legislation to address concerns among consumer advocates that lenders or mortgage servicers are using incomplete or false paperwork to repossess properties in default. The attorneys general of all 50 states are jointly investigating how the mortgage-servicing industry operates.
“If you foreclose on somebody you should have to tell them who owns the property,” Michele Reagan, who sponsored Senate Bill 1259, said in a telephone interview. “People have the right in this country to face their accusers.” The Republican lawmaker is in litigation with her mortgage servicer, which she said won’t identify the owner of the loan.
By Prashant Gopal
Feb. 18 (Bloomberg) — Merscorp Inc., operator of the electronic mortgage-registration system under criticism by consumer advocates amid a probe into lender foreclosure errors, replaced Bill Hultman as its corporate secretary.
General Counsel Sharon Horstkamp is taking over the job, Karmela Lejarde, a spokeswoman for the Reston,Virginia-based company, said in an e-mail today. Hultman remains a senior vice president and corporate division manager, she said.
Merscorp has made a series of changes as courts debate what role it has, if any, in home foreclosures. Chief Executive Officer and President R.K. Arnold, who hired Hultman in 1998, retired last month. The company also is examining reforms, including a proposed rule change on the company’s website Feb. 16 that would stop members from foreclosing in its name.
“They’re trying to clean up their house,” said Christopher L. Peterson, a law professor at the University of Utah in Salt Lake City who has written law-review articles critical of the company. “I’m not sure Hultman was the problem.
It seems to me the problem is the business model.”
By Prashant Gopal and Thom Weidlich – Feb 1, 2011 3:16 PM ET
A JPMorgan Chase & Co. branch in El Paso, Texas, may have furniture and computers seized by the sheriff unless the bank complies with a judge’s order to pay the legal bills of a single mother whose eviction case he dismissed.
The manager of the Chase branch was served on Jan. 26 with court papers that instructed the New York-based company to pay attorney Richard A. Roman’s $5,000 in fees, according to Detective Hector Lara, an El Paso County sheriff’s officer. The manager, Jose Gomez, told Lara that the branch’s gear is protected by the Federal Deposit Insurance Corp. and that he would contact the bank’s security staff and the Federal Bureau of Investigation, Lara said today in a telephone interview.
Lara said he’s waiting for an opinion from the county attorney on whether the bank’s property can be seized.
“They don’t have a problem putting my client out in the street,” Roman said. “But when somebody prevails against a bank, they pull every string in the book to avoid paying.”
MERS could be “harnessed by Congress and the industry to improve the mortgage finance system,” R.K. Arnold, its president and CEO, told a House subcommittee in November. Arnold retired this month.
By Prashant Gopal and Lorraine Woellert – Jan 27, 2011 12:01 AM ET
U.S. mortgage servicers face a new era of tighter oversight as regulators seek to cut the number of botched foreclosures and increase loan modifications for struggling borrowers.
The industry, which oversees $10.6 trillion in loans, has been overwhelmed by more than 3 million foreclosures since 2006. The housing-market collapse exposed failures — in the way servicers are paid, track loans and process property seizures — that threaten to stall a fledgling rebound in prices and sales.
“If we fail to act decisively now to deal with the foreclosure crisis, we risk triggering a double-dip in U.S. housing markets,” Sheila Bair, chairman of the Federal Deposit Insurance Corp., said in a Jan. 19 speech to mortgage-industry executives in Washington. “The problem is serious, and the need for action is urgent.”
Changes being studied include a new fee structure for servicers, independent reviews of rejected requests to ease loan terms and a fund to compensate victims of improper foreclosures, according to Bair and other federal and state regulators. Lawmakers have proposed reining in the privately run Merscorp Inc., even as the company says it could serve as a national mortgage registry.
Foreclosure Deals to Start With Big Lenders, Iowa Says
By Margaret Cronin Fisk and Prashant Gopal – Jan 3, 2011 6:08 PM ET
The 50 state attorneys general probing U.S. foreclosure practices will first settle with the five largest loan servicers, including Bank of America Corp. and JPMorgan Chase & Co., Iowa Attorney General Tom Miller said.
No settlements have been reached yet, Miller said in a telephone interview today. The other three are Citigroup Inc., Wells Fargo & Co. and Ally Financial Inc., said Miller, the leader of the 50-state investigation. The five have 59 percent of the market, Miller said.
“What we’re looking at is five separate agreements with the five largest servicers,” Miller said. “We’re still a ways away” from reaching agreements, he said. “We’re working very hard to figure out what should be in the settlement.”
All 50 U.S. states are investigating whether banks and loan servicers used false documents and signatures to justify hundreds of thousands of foreclosures. The probe, announced Oct. 13, came after JPMorgan and Ally Financial’s GMAC mortgage unit said they would stop repossessions in 23 states where courts supervise home seizures, and Bank of America, the largest U.S. lender, froze foreclosures nationwide.
By Prashant Gopal and Jody Shenn – Nov 30, 2010 12:00 AM ET
Testimony by a Bank of America Corp. employee in a New Jersey personal bankruptcy case may give more ammunition to homeowners and investors in their legal battles over defaulted mortgages.
Linda DeMartini, a team leader in the company’s mortgage- litigation management division, said during a U.S. Bankruptcy Court hearing in Camden last year that it was routine for the lender to keep mortgage promissory notes even after loans were bundled by the thousands into bonds and sold to investors, according to a transcript. Contracts for such securitizations usually require the documents to be transferred to the trustee for mortgage bondholders.
In the case, U.S. Bankruptcy Judge Judith H. Wizmur on Nov. 16 rejected a claim on the home of John T. Kemp, ruling his mortgage company, now owned by Bank of America, had failed to deliver the note to the trustee. That could leave the trustee with no standing to take the property, and raises the question of whether other foreclosures could similarly be blocked.
Following the decision, the bank disavowed the statements by DeMartini, whom it had flown in from California to testify. It was the policy of Countrywide Financial Corp., acquired by Bank of America in July 2008, to deliver notes as called for in its securitization contracts, according to Larry Platt, an attorney at K&L Gates LLP in Washington designated by the bank to answer questions about the case.
“This particular employee was mistaken in what she said,” Platt said in a telephone interview.
Attorney Analysis
Wizmur’s ruling is being scrutinized by lawyers for borrowers seeking to stall repossessions as a way to press lenders to modify their debt. Attorneys for homeowners have already won cases by calling into doubt the legitimacy of affidavits used to take back properties.
“If this is correct, many, many, many foreclosures already occurred in which this plaintiff didn’t have the note,” said Bruce Levitt, the South Orange, New Jersey, attorney representing Kemp. “This could affect thousands or hundreds of thousands of loans.”
By Jody Shenn and Prashant Gopal – Nov 16, 2010 11:14 AM ET
A trade group for companies that help package loans and leases into securities rejected claims that mortgage-bond trusts can’t prove ownership of debt they hold as Congress began hearings on the foreclosure crisis.
The standard practices of the industry result “if followed, in a valid and enforceable transfer of mortgage notes and the underlying mortgages,” Tom Deutsch, executive director of the New York-based American Securitization Forum, said in a study released today. Lawmakers in Washington ordered hearings on mortgage practices after loan servicers including Ally Financial Inc. and JPMorgan Chase & Co. halted foreclosure proceedings following revelations of so-called robo-signing.
The trade group focused on whether industry practices resulted in securitization trusts taking ownership of loans, though not whether all the paperwork needed for foreclosures is in order. Without taking ownership of mortgages within a set period after their creation, often 90 days, the trusts may be unable to later assemble the documents needed for foreclosures because of contractual requirements or tax rules.
“The law is somewhat unsettled on what actually must be done via a securitization to complete the transfers correctly,” visiting Harvard Law professor Katherine Porter told a Congressional Oversight Panel Oct. 27. Porter has said “there is disagreement on whether the transfer of the notes needed to have occurred individually,” or potentially with a specific endorsement to the new holder or a physical transfer.
EXCELLENT JOB! Now this is what I am talking about…no affidavits…it’s the “assignments”, the destroyed notes, the Break in Chain, the E-Signatures, no supervision!
By Prashant Gopal – Nov 15, 2010 12:00 AM ET
Bryan Bly is a pen-wielding “robo- signer” at Nationwide Title Clearing Inc., inking his name on an average 5,000 mortgage documents a day for companies such as Citigroup Inc. and JPMorgan Chase & Co.
Those are just the ones that cross his desk.
Nationwide Title employs a computer system that automatically inserts a copy of Bly’s signature on thousands of digital files that he never sees. The system even affixes an electronic notary seal.
“The problem with the way these documents are created isn’t because a computer is used,” said Gloria Einstein, a legal aid attorney in Green Cove Springs, Florida, who deposed Bly in a case in a which her client faces foreclosure by a unit of Deutsche Bank AG. “It’s because an enterprise has decided to use a computer to create a system where nobody is responsible for the information and the decisions.”
The rush to securitize more than $4 trillion of mortgages as U.S. home sales peaked in 2005 and 2006 inundated loan servicers and contractors like Palm Harbor, Florida-based Nationwide Title that help them handle paperwork. Lawsuits fighting some of the more than 4 million foreclosures since then have exposed sloppy recordkeeping and raised questions about the validity of documents used to seize properties.
Signatures Draw Scrutiny
Bly is just one of more than a dozen robo-signers deposed in the past two years by lawyers for borrowers seeking to block foreclosures. Spurred by descriptions in depositions of employees signing thousands of affidavits a week without checking their accuracy as legally required, the attorneys general in all 50 states last month opened an investigation into whether banks and loan servicers used faulty documents or improper practices to foreclose.
Nationwide Title, which has about 175 employees, provides document imaging, tracking, retrieval, recording and processing on bulk loan transfers for lenders, servicers and investors. It’s the largest third-party processor of mortgage assignments, handling more than 350,000 last year, Senior Vice President Jeremy Pomerantz said in a telephone interview. The company also prepares lien releases, which show that a mortgage has been paid off by the borrower.
Assignments, which are usually recorded with county land record departments, list the buyer and seller of a loan as it’s sold or packaged with other loans into a mortgage-backed security. Lawyers for homeowners are challenging the legitimacy of the documents, which are relied on by lenders to show they have the right to foreclose.
Batches of 30,000
(While closely held Nationwide Title in the past offered a package of foreclosure-specific services, it had just one client, Pomerantz said. The company doesn’t handle foreclosure affidavits — submitted by banks to assert ownership of a loan when they’ve lost the promissory note or to show that borrowers are in default — and often it doesn’t know when clients are requesting documents for defaulted loans, he said.)
Nationwide Title’s proprietary system isn’t entirely automated, said Erika Lance, senior vice president of administration. Employees receive requests from clients for lien releases and mortgage assignments, which are often sent in batches of as many as 30,000. They review the information and images of loan documents sent along with the request, and the information is keyed into the computer system.
The computer system fills in the electronic assignments in the format and wording each county requires, and places a signature and notary seal from a list of employees approved by each bank. Bly and other signers are given a title at the bank requesting the documents, such as “vice president” or “assistant secretary,” depending on what the individual counties require, Lance said.
By Dakin Campbell and Prashant Gopal – Oct 8, 2010 5:43 PM ET
Attorneys general in about 40 states may announce a joint investigation into foreclosures at the largest banks and mortgage firms, according to a person with direct knowledge of the matter.
State attorneys general led by Iowa’s Tom Miller are in talks that may lead to the announcement of a coordinated probe as soon as Oct. 12, said the person, who declined to be identified because a final agreement hasn’t been reached. The number of states may change because several are still deciding whether to join the investigation, the person said. New Mexico Attorney General Gary King said today in a statement that his state will join a multi-state effort.
Lawyers representing the banks are expecting a more widespread investigation, according to Patrick McManemin, a partner at Patton Boggs LLP, a Washington-based law firm that represents banks, loan servicers and financial institutions. Bank of America Corp., the biggest U.S. lender, today extended a freeze on foreclosures to all 50 states.
“We are aware of or involved in a large number of investigations that lead us to believe there are in the neighborhood of 40 state attorneys general who have initiated investigations or expressed an interest,” McManemin said in a telephone interview.
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