Helping Homeowners Harmed by Foreclosures: Ensuring Accountability and Transparency in Foreclosure Reviews
Written Testimony of Alys Cohen
National Consumer Law Center also on behalf of Community Legal Services of Philadelphia, Connecticut Fair Housing Center, Consumer Action, Consumers Union, Empire State Justice Center, Financial Protection Law Center, Housing and Economic Rights Advocates, Legal Aid Center of Southern Nevada, Inc., Michigan Foreclosure Task Force, National Association of Consumer Advocates, National Council of La Raza, National Community Reinvestment Coalition, National Fair Housing Alliance, National People’s Action, Neighborhood Economic Development Advocacy Project, North Carolina Justice Center
Before the United States Senate Subcommittee on Housing, Transportation, and Community Development of the United States Senate Committee on Banking, Housing, & Urban Affairs
Lets not act surprised in this as we always knew there was something cooking behind the scenes and not everyone agreed and probably disappointed with the approach Tom Miller from Iowa was heading.
WaPO-
As state attorneys general continue their months-long settlement negotiations with the nation’s largest banks over widespread problems in foreclosure practices, they have yet to resolve differences within their own group on key issues.
Even within the 14-member “executive committee” of attorneys general who are leading the 50-state coalition, some have very different visions of what exactly a settlement should look like.
[…]
A handful of crucial states, including California, Illinois and New York, have undertaken their own investigations into mortgage industry practices, subpoenaing information about business practices and seeking meetings with executives about such things as securitization to faulty court affidavits. Other officials, such as in Oklahoma, have threatened to pursue their own settlements with mortgage servicers.
The nation’s largest mortgage companies are operating on the assumption that they will have to pay as much as $20 billion to resolve claims of widespread foreclosure abuse, an amount four times what they had originally proposed, the top federal official overseeing the discussions told state officials Monday, according to people who participated in the conversation.
Associate U.S. Attorney General Tom Perrelli told a bipartisan group of state attorneys general during a conference call that he believes the banks have accepted the realization that a wide-ranging settlement to the months-long probes will cost them much more than the $5 billion offer they floated last month, according to officials with direct knowledge of the call. Perrelli said he’s basing his belief on his recent conversations with representatives of the five targeted firms: Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial.
NOTE: We’ll take the $17 Billion over the AG’s “settlement”!
If settlement happens, they SHOULD prohibit any of them from coming at you with a deficiency!
WSJ-
State attorneys general told the nation’s five largest banks on Tuesday they face a potential liability of at least $17 billion in civil lawsuits if a settlement isn’t reached to address improper foreclosure practices, according to people familiar with the matter.
The figure doesn’t cover additional billions of dollars in potential claims from federal agencies such as the Department of Housing and Urban Development and the Justice Department. State and federal officials haven’t proposed a specific comprehensive settlement figure, but Tuesday’s …
Warning: This is a long blog post. But if you follow mortgage servicing, I think you’ll find it worth reading. Despite lots and lots of media coverage of the servicing fraud settlement, nobody seems to understand the real story that’s going on. I think that this post will explain a lot.
Let’s start by recapping what we know. Back in March we started hearing media reports of a proposed penalty for servicers in the $20-$30B range. Then the American Banker published a 27-page term sheet from the AGs for servicing standards. Next, Huffington Post published a 7-page CFPB powerpoint presentation. Then came the draft C&D orders and then in April, the final C&D orders (which eliminated the ridiculous “single point of contact which need not be a single person” and replaced it with “single point of contact as hereinafter defined” and then failed—quite deliberately—to define it anywhere in the document).
Now there’s another round of activity and conflicting reporting. The American Banker reported that there was a new AG term sheet proposed and that principal reductions were off the table. That turns out to be incorrect, as Shahien Nasiripour reported in the Huffington Post. The new AG term sheet that the American Banker referenced deals only with servicing standards. The American Banker assumed that this mean that principal reductions were off the table because they weren’t referenced in the term sheet. In fact they are still very much in play. They’re just in a second, separate term sheet. So now there are two separate term sheets–one covering servicing standard and another covering monetary issues/principal reductions. (Recall that the original AG term sheet did not cover the monetary issues—that was clearly for a separate document.) We are also hearing news reports that the banks are offering to settle for $5B and won’t go above $10B.
For those of you that disagree, please read this post to understand why this makes perfect sense…
HuffPo-
The nation’s five largest mortgage firms may be forced to reduce loan balances for distressed homeowners as part of an agreement with state attorneys general and the Obama administration to settle claims of faulty mortgage practices, a top state official involved in the negotiations said Tuesday.
State attorneys general are descending on Washington again this week for negotiations with federal regulators and the nation’s largest mortgage servicers over the purpose of a multibillion-dollar fund aimed at helping troubled borrowers.
The idea behind the yet-to-be-created fund, the size of which remains in flux but could eclipse $20 billion, is to punish the servicers for their shoddy foreclosure practices, which came to light in the fall, and to put that money toward keeping struggling homeowners in their homes.
Take this home for example. It was originally sold for $289,000.
Prior to Final Judgment, property had two (2) assignments of mortgage for two entities same robo-signer for both via MERS.
At auction it was sold for a MAJOR discount at approx. 75% off. to Indymac via LPS Minnesota address in 2010. We know Indymac has been shut down way before this time.
Why couldn’t they work a deal like this when this person whom I personally know tried over and over to get a modification AT THE TIME?
They had a good job then and still have a good job today.
So why do they not want to work with the borrowers and reduce the principal to reflect today’s REAL and TRUE appraisal of the property?
Make sure you follow the transactions to understand what happened and why it makes no sense where this goes.
Now Here comes more funny business:
Still following?
Property was Quit Claimed/Transferred To Freddie Mac for $100.00 (prepared by David Stern) but consideration shows only $10.00.
Property then sold for $3900.00 more 13 days later $78,000
SAME day flipped for $150,000
Previous records are all gone [compare both images]
Federal banking regulators have not officially imposed their new rules for the top mortgage servicers, but criticism is already being heard. A wide coalition of consumer and housing groups is denouncing the legal agreements, which are likely to be published within a few days. ?
[…]
The problem, said Alys Cohen of the National Consumer Law Center, is the agreements “do not in any way require the servicers to stop avoidable foreclosures, and that is what we need.”
Regulators including the Office of the Comptroller of the Currency, Federal Reserve and Office of Thrift Supervision could announce the agreements with the banks and thrifts as early as next week, though a date wasn’t final, according to people familiar with the matter.
The regulators are likely to act ahead of state attorneys general, who are also in talks with the banks. Those discussions are moving at a slower pace amid disputes among several state officials.
Seriously, why aren’t they all working together? Lefty doesn’t know what the right is doing.
Fannie Mae and Freddie Mac aren’t going to be writing down loan balances any time soon unless someone else is willing to pay for it, the head of the firms’ federal regulator said on Thursday.
The Obama administrationpressured the firmslast fall to use a program that allows homeowners who owe more than their homes are worth to refinance into smaller government-backed loans. Under the program, Fannie and Freddie would have had to take a loss to get rid of the loan.
Here’s the banks’ counterproposal for a servicing fraud settlement. I can sum it up in two words: drop dead. Or two letters: F.U. This proposals is so pathetically thin that it’s not a good faith counterproposal. This document only deals with servicing standards–nothing in it whatsoever about penalties, modification quotas, etc. But even on servicing standards it is a bunch of empty promises to have internal controls and try harder.
The first point about this counterproposal is simply to note what’s absent from it:
(1) nothing about principal reductions
(2) nothing about second liens and conflicts of interest
(3) nothing about MERS (reserved for later)
(4) nothing about in-sourced vendor fees or force-placed insurance to affiliates. This makes the fees and force-place insurance sections pretty meaningless.
“Principal writedown for people who could pay their mortgages? Yeah, that’s off the table,” JPMorgan Chase (JPM, Fortune 500) CEO Jamie Dimon said when asked about the idea after an appearance before a U.S. Chamber of Commerce forum in Washington.
Read the excerpts below carefully… You’ll be screwed if you plan to wait on any reasonable settlement, just like “HAMP” left you waiting for your mod. Don’t expect miracles!
“We have a long way to go,” Iowa Attorney General Tom Miller, who is leading the effort from the states’ side, said after the afternoon session broke up.
[…]
Lengthy negotiations work to the banks’ advantage, critics say.
“The banks’ strategy is to run the clock,” a Georgetown University law professor, Adam Levitin, said. “The chances of a settlement that meaningfully reforms mortgage servicing and makes the banks pay an appropriate price for illegal conduct are rapidly slipping away.”
“I am incensed that the FBI has not filed one criminal case,” Rep. Marcy Kaptur (D-Ohio) said, referring to the lack of prosecutions against major banking executives. “And I’m very worried that the game that’s being played here is to run out the statute of limitations.”
#
Oh and AG’s make sure the banks get barred from Deficiency Judgments in your settlement!
The document, reviewed by The Wall Street Journal, is a response to a 27-page term sheet banks received earlier this month from state attorneys general that would require the servicers to consider reducing principal for troubled borrowers. The 15-page bank proposal, dubbed the Draft Alternative Uniform Servicing Standards, includes time lines for processing modifications, a third-party review of foreclosures and a single point of contact for financially troubled borrowers. It also outlines a so-called “borrower portal” that would allow customers to check the status of their loan modifications online.
But the document doesn’t include any discussion of principal reductions. Nor does it include a potential amount banks could pay for borrower relief or penalties. Government officials have discussed a settlement sum of more than $20 billion.
. Showing resistance for the first time against government pressure to write off tens of billions worth of mortgage debt, Bank of America executives said on Tuesday that the idea was unworkable and warned that it would be unfair to borrowers who had managed to stay current on their loans.
“There’s a core problem that if you start to help certain people and don’t help other people, it’s going to be very hard to explain the difference,” said Brian T. Moynihan, the chief executive of Bank of America. “Our duty is to have a fair modification process.”
Action Date: March 8, 2011 Location: West Palm Beach, FL
Despite the weaknesses of the settlement, it may not be worthless. Many states exclude banks from the groups that can be regulated under the state’s Unfair and Deceptive Trade Practices laws and there has been some significant argument that this exemption extends to servicers working on behalf of banks. So in that regard, the settlement is significant. Without any new legislation, the servicers agree, in effect, to be regulated by the Attorneys General – that is, they could be sued for violation of this agreement. Most significantly, the Attorneys General would not have to spend time and money to convince a court that certain conduct by the servicers is an unfair and deceptive act.
While other government agencies could have regulated mortgage servicers, they clearly failed to do so. Now the Attorneys General can act where other agencies have failed.
Nothing in the settlement ends the investigations by particular states of particular servicers and law firms. Those investigations and possible sanctions and relief for those harmed will likely continue. States that are serious about addressing past abuses will go forward with their investigations, sanctions and settlements.
What is missing from the settlement? It would be very useful to require employees of mortgage servicers to identify themselves as such on all documents. Identification as officers of MERS, banks or lenders should be prohibited.
Servicers have argued that their employees are allowed to represent themselves as MERS officers and bank officers because of corporate resolutions or powers of attorneys allowing this fiction. Some of these employees even use the address of the bank – and not their actual address – on Assignments, Releases and Affidavits. False titles and false addresses create confusion, difficulty and expense for homeowners in litigation who are trying to take a simple deposition of a document signer. Most judges give greater credibility to the sworn statement of a bank vice president than they would give to the sworn statement of an “authorized signer” for a mortgage servicing company. This is the very reason these titles were passed out to clerks and law office managers. Actual titles, actual employers and real addresses need to be used.
Who else needs to disclose their true employer? Again, while this seems like it should go without saying, lawyers working for banks and mortgage companies should not be allowed to represent that they are actual bank officers.
This practice has happened in tens of thousands of cases and already been condemned by many New York judges. Lawyers who hold themselves out to be bank vice presidents and MERS officers need to end this practice.
Servicers also need to stop acting as “Attorney-In-Fact” for banks, mortgage companies and even the FDIC. In many states, servicers do not meet the minimum qualifications to act as attorneys-in-fact and they need to end this practice as well.
The average citizen and the Attorneys General no doubt define “Information that is false and unsubstantiated” differently than most mortgage servicers.
Over 6 million mortgage assignments, affidavits and sworn statements have been filed in courts and country recorder’s offices with servicing company employees and lawyers signing using false titles as bank officers, mortgage company officers and MERS officers. The settlement should prohibit this widespread fundamental abuse.
Principal write down, forgiveness, whatever you want to call it, will be the big sticking point and the whatever billion dollar number will be too much and not enough at the same time.
I just have to throw out my own caution that if and when banks are forced to lower the amount of America’s mortgages, suddenly you are going to see a whole lot more Americans “unable” to pay back what they promised. Those of us who are paying what we owe will get nothing, and this will be the overwhelming, and everlasting lesson of this latest crisis in history.
I will disagree and say this… Although I do understand your frustrations Diane, I think the “overwhelming and everlasting lesson” will not be your ideas but instead the overwhelming result of millions left homeless who were victims of the greatest scam uncovered in US history. Lastly, crime did pay with be the everlasting lesson IMO.
Scuttlebutt has it that this has been floated just to gauge the political response.
It is nada bupkis zilch for most everybody. Those who are truly suffering now will get less benefit than a 50-year-old smoker got out of the state AG-administered tobacco settlement.
HAMP lingerers will be tempted to make e-written inquiries and will shortly find themselves suckered in – and missing a few rights to recourse they might otherwise have retained.
The woman-journalist you quote expresses – inarticulately – a passionate, powerful truth… Millions who are still paying on fraudulently originated, fraudulently securitized mortgages – are doing so for 2 simple reasons: there is no access to justice for them and they are not willing to settle for anything less than a reasonable settlement for damages done, negotiated in good faith. They will not be forced to choose strategic default just to get the conversation going.
Ultimately, they will pull Obama down and the US economy further into its Greater Depression.
WASHINGTON — The 27-page term sheet handed to the five largest mortgage servicers last week is a detailed, dense list of requirements that, if implemented as proposed, would fundamentally change the relationship between servicers, investors and borrowers.
WASHINGTON — Federal regulators issued a tough opening salvo in settlement talks with the largest servicers, presenting them with a 27-page term sheet that would force major changes to the industry and step up loan mitigation efforts.
CHARLOTTE, N.C./NEW YORK (Reuters) – Bank of America, Citigroup and Wells Fargo — three of the biggest banks in the United States — said they could face fines from a regulatory probe into the industry’s foreclosure practices.
The statements, made in regulatory filings on Friday, are the most direct admission yet from major banks that they could have to pay significant amounts of money to settle probes and lawsuits alleging that they improperly foreclosed on homes.
Bank of America Corp (BAC.N), the largest U.S. bank by assets, said the probe could lead to “material fines” and “significant” legal expenses in 2011.
Wells Fargo & Co (WFC.N), the largest U.S. mortgage lender, said it is likely to face fines or sanctions, such as a foreclosure moratorium or suspension, imposed by federal or state regulators. It said some government agency enforcement action was likely and could include civil money penalties.
Citigroup Inc (C.N) said it could pay fines or set up principal reduction programs.
The biggest U.S. mortgage lenders are being investigated by 50 state attorneys general and U.S. regulators for foreclosing on homes without having proper paperwork in place or without having properly reviewed paperwork before signing it.
The bad documentation threatens to slow down the foreclosure process and invalidate some repossessions.
By Brady Dennis
Washington Post Staff Writer
Thursday, February 24, 2011; 12:18 AM
State and federal officials, who have been negotiating with financial firms over how to address widespread abuses in foreclosure practices, are moving closer to a settlement that could force banks to reduce the principal on mortgages for some borrowers who owe more than their homes are worth.
An official familiar with discussions between the government and the financial industry said the settlement also could require that banks increase their efforts to modify mortgages for distressed borrowers and pay penalties that could be used as restitution for homeowners who have wrongfully faced foreclosure.
“State attorneys general are working closely with a number of federal agencies on a potential settlement,” Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller (D), who is leading a 50-state investigation of the foreclosure mess, said in an interview Wednesday. He added, “We haven’t finalized anything, and we’re still working on some very complicated issues.”
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