CBS “60 Minutes” airs mortgage foreclosure story – “absolute, intentional fraud!”

"The Next Housing Shock"

On Sunday, April 3, 2011, “60 Minutes” featured an investigative story on foreclosure fraud, “Mortgage paperwork mess: the next housing shock?” Click on the image at right  to watch the story.

I urge you to watch this segment very carefully. Even if you’re not at risk of foreclosure, legal title to your home may be blighted beyond repair.

60 Minutes reporter Scott Pelley “explains a bizarre aftershock of the U.S. financial collapse: An epidemic of forged and missing mortgage documents.”

Unfortunately, these “forged and missing” documents come as no shock to those of us who have known for a long time now that these documents DO NOT EXIST, AND HAVE NEVER EXISTED in the first place, hence the widespread fabrication and forgeries widely documented around the country.

It’s absolutely wrong to portray banks as being “unable to find” crucial mortgage documents. After watching the segment, contact your mortgage servicing company and find out whether your mortgage has been bundled and sold. Did you get a clear answer? Did you get a copy of your mortgage paperwork to back it up?

In a previous post, I listed the documents you will need to find out whether or not your bank is the actual holder of your mortgage:

1. A copy of your original Note
2. A copy of your Deed of Trust
3. A copy of any Substitution of Trustee relating to your property, if any.
4. A copy of any Assignments of Deed of Trust, if any.
5. A copy of any Notice of Default, if any, with any attachments.
6. A copy of any Notice of Trustee’s Sale, if any.
7. A copy of any Trustee’s Deed Upon Sale, if any.
8. Any letter or correspondence you have received from your bank or mortgage servicer relating to previous attempts at loan modification.

“Chapter M” for Mortgage Bankruptcy: A solution to the mortgage fraud crisis?

“Forgive me, I must start by pointing out that three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail and that’s wrong.”

For me, this quip from Charles Ferguson, director of “Inside Job,” which won for Best Documentary Film, was the best acceptance speech from the recent Academy Awards.

Bankers, predatory lenders, mortgage services, robo-signers have yet to be held accountable for the criminal practices they have wreaked on homeowners who were the victims of fraud during the mortgage meltdown.

Study after study and expert after expert has shown that the banking industry abandoned its own lending standards to ensure there were enough mortgages to fuel the insatiable securitization machine. They then turned the mortgage securities into CDO’s and CDO-squareds and credit default swaps, which multiplied the damage exponentially.

Banks knew most of these loans would default, but they sold them to pension funds (you and me) anyway, as AAA-rated investments. Homeowners were mere instrumentalities in the mortgage fraud, which have been perpetrated literally millions of times.

Think about these numbers: In normal times, banks foreclose on approximately 100,000 homes annually, but from January through September 2010, almost 2.7 million homeowners received foreclosure notices. September alone saw more than 100,000 bank repossessions. According to the Special Inspector General for the Troubled Asset Relief Program, foreclosure notices will have been sent to more than 3.5 million homes by year end 2010.

So, is there a solution to this mess? Well, while we’re still waiting for our illustrious state legislators to wake up to the national tragedy of the foreclosure crisis, and still waiting for our Attorneys General to prosecute these financial executives, Georgetown University law Professor Adam Levitin has proposed a solution called Chapter M for mortgage bankruptcy.

Many industry experts are calling Professor Levitin’s Chapter M as “the easiest and most efficient way to solve the crisis in the housing market.

The key point to Chapter M is that it would remove foreclosure actions from state courts to federal bankruptcy courts under standardized, streamline procedures.

Here’s how it would work:

• Homeowner must document the ability to pay, and the lender must document the title to the note and mortgage, but with validity of securitization transfers conclusively presumed.
• If the homeowner is willing and able to pay, then the homeowner keeps the house. A fresh appraisal is done by a court-appointed appraiser. If the homeowner re-defaults, the foreclosure process can speed up. It wouldn’t affect non-mortgage lenders. It is fast-tracked relative to traditional Chapter 13.
• The Lender may choose between an FHA short-refi with principal reduced to [90]% of LTV or a standardized loan modification with principal reduced to 100% LTV and loan restructured to 30-year fixed-rate, full amortization, market interest rate adjusted to ensure maximum [31]% DTI ratio), with 50% risk-weighting for modified loans.
• If the homeowner does not qualify, the lender gets same fast-tracked federal foreclosure and quiet title coming out of the foreclosure sale. If the lender cannot show title, then the homeowner gets quiet title to property. In all situations, the homeowner’s non-mortgage debts “ride-thru” the Chapter M bankruptcy, unaffected, but the homeowner could also file for a traditional Chapter 7 or 13 bankruptcy to address those debts.
• Is Chapter M a viable solution to the mortgage crisis? Yes! It has no cost to the federal government. It builds off existing infrastructure, and can be started immediately using existing bankruptcy courts and Chapter 7 panel trustees for sales.

We have to start cleaning up this mess. Now.

Temporary Restraining Orders & Preliminary Injunction can stop foreclosure

Click on image to watch

In last month’s segment of “Legal Forum” on KSCI-TV, I discussed two types of legal proceedings that are used to help homeowners in foreclosure. Temporary Restraining Orders and Preliminary Injunction. Here is the transcript of the interview:

TEMPORARY RESTRAINING ORDER (TRO) –
This is a legal proceeding that requires filing a lawsuit, then (usually) simultaneously filing an ex parte (emergency) application for a TRO to stop a foreclosure sale.

• In order to be successful, we must convince a judge that “irreparable harm” will result to our client if the foreclosure sale is not stopped.
• “Irreparable harm” is a legal concept that means damage sustained by a person that cannot be easily calculated.  An example would be the loss of a home, or any other real estate, which under the law is considered unique and not replaceable.
• So, if the court is convinced that we have strong enough evidence to grant a TRO, then a TRO would be granted for a period of up to 22 days.  All foreclosure and collection activity has to stop for this time period.
• Before that time period expires, there will be a second hearing to hear the arguments of both sides about whether the TRO will be extended beyond the initial period of up to 22 days, all the way up to trial, which could be about one year away.  A court order to extend the TRO pending trial is called a Preliminary Injunction.

PRELIMINARY INJUNCTION
To successfully obtain a preliminary injunction, we have to prove that our client is likely to win at trial.  In addition, the court balances the harm resulting to the homeowner if the injunction is not granted, versus the harm to the bank if the injunction is granted.

• A Preliminary Injunction means that the bank cannot foreclose on a homeowner until after all of the legal issues are fully decided after a full-blown court or jury trial, usually about one year after filing the case.
• This can be a very powerful weapon for the homeowner, and is a good incentive for banks to come to the table to make a meaningful settlement offer.  Tying the property up in court means that banks are unable to sell the property to recover their money.  It increases the severity of the bank’s losses on that particular property and makes a settlement more likely.

Got a question for Atty. Reyes that you’d like him to answer on the show?  

Email us your question: contactus@reyeslawgroup.com
Put “Legal Forum Question” in the subject line.

Kababayan L.A.-KSCI TV Channel 18
Weekdays at 4:30 pm

Court voids foreclosures when lenders, banks fail to prove ownership of mortgage

California homeowners facing foreclosure, or who may already have been foreclosed upon have been given a big dose of hope this week, thanks to the Massachusetts Supreme Judicial Court (“Foreclosure Case Deals Big Blow To Banks, Lenders”)

In a hearing of two consolidated cases, i.e., the U.S. Bank vs. Ibanez and Wells Fargo vs. LaRace, that state’s highest court invalidated the seizure of two homes after Wells Fargo & Co and US Bancorp failed to show they held the mortgages on these homes at the time they foreclosed.

The banks that made the loans to homeowners subsequently sold them, as part of a pool or bundle comprised of thousands of other mortgages, to other entities as part of the securitization process. However, in order to perfect ownership for the buyers of these pools, the notes and mortgages had to comply with strict and timely procedures. This court held that because those procedures weren’t followed, the buyers (investors) in those mortgages had no right to foreclose.  It is widely believed that those defective procedures in the securitization process are more pervasive than the banking industry would care to admit.

The ruling sent shock waves throughout the banking industry, as it may affect foreclosures nationwide, including those in California, where our attorney general along with AGs from all other states, is examining whether lenders are forcing people out of their homes without proper documentation.  There is a growing trend for courts to more closely examine claims of ownership and proper documentation by the banks, refusing to take the claims of mortgage lenders and servicers at face value.

I have no doubt that this case ruling will reverberate in all the other states, including California. Although this ruling is binding only in MA, the legal basis and reasoning is fundamentally sound and correct. In fact, my firm, REYES LAW GROUP, APLC, is handling more than a hundred cases using similar litigation strategies, and raising the same legal issues with respect to securitization, as those used in Massachusetts. I am looking forward to the day when the judiciary in California catches up to Massachusetts and the rest of the country.

In the meantime, here are the documents you will need to bring to your legal representative to see whether or not your bank is the actual holder of your mortgage:

1. A copy of your original Note
2. A copy of your Deed of Trust
3. A copy of any Substitution of Trustee relating to your property, if any.
4. A copy of any Assignments of Deed of Trust, if any.
5. A copy of any Notice of Default, if any, with any attachments.
6. A copy of any Notice of Trustee’s Sale, if any.
7. A copy of any Trustee’s Deed Upon Sale, if any.
8. Any letter or correspondence you have received from your bank or mortgage servicer relating to previous attempts at loan modification.

Foreclosure Fraud Crisis – How did we get here, and what can homeowners do to protect themselves?

Banking executives have admitted under oath to large-scale fabrication and falsification of documents necessary to foreclose on homeowners

In recent weeks, several banking executives have admitted under oath to large-scale fabrication and falsification of documents necessary to foreclose on homeowners.  This gave birth to the term “robo-signers,” because many bank executives admitted to signing up to 20,000 sworn affidavits a month (up to 1,000/day!) without determining whether the bank really has the right to foreclose.

The number of foreclosure cases that could be affected nationally are in the hundreds of thousands, perhaps in the millions.  In response to these revelations, Bank of America, Chase, GMAC and some of the largest mortgage servicers have enacted voluntary foreclosure moratoriums to investigate their own practices.

In response to these revelations, federal and state regulators have taken historic and unprecedented actions.  At this moment, Attorneys General of all 50 states are conducting a joint investigation of the practices of the mortgage servicing industry to determine whether state consumer protection laws have been broken.  The federal government has created a high-level investigatory agency called the Financial Fraud Enforcement Task Force to look into possible violations of law by the banking industry, the most common of which would be fraud and perjury, which are felonies in every US jurisdiction.

What should consumers do to protect themselves from their banks committing fraud in the foreclosure process?

First, they should obtain all the publicly recorded documents filed against their property at the local county recorder’s office.  This will allow us to look for signs of fraudulent documents that homeowners could use in court to challenge the bank’s alleged right to foreclose on their property.

In my office, we have electronic access to most county records that make these documents available online.  This allows us to easily check for the existence of these fraudulent documents.

Homeowners should be aware that not every lawyer has the required training, skill and experience in identifying these false documents and using them in the proper venue and in the proper manner.   Because of my litigation background, I know how to raise these issues in the proper venue.

California is a so-called non-judicial foreclosure state.  This means that a bank does not have to file a lawsuit in court to conduct a foreclosure sale.  This presents a problem for homeowners, because they don’t have the protection of the judicial system to bring these issues in front of a judge to determine whether the bank has acted legally.  That’s why my office takes an aggressive role in filing lawsuits to bring these documents and issues to the attention of a court, to obtain the maximum legal protection for our clients.

Too Big to Fail Banks are Too Big to Exist

I particularly like the idea of thousands of bankers in orange jumpsuits doing the perp-walk in front of TV cameras, like what happened after the S&L crisis.

James K. Galbraith, the author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too wrote an article last week called, “Obama’s Problem Simply Defined: It Was The Banks” which has since been picked up by numerous blogs and news sites, including Naked Capitalism and Huffington Post to name a few.

In the article, Galbraith wrote:

“The original sin of Obama’s presidency was to assign economic policy to a closed circle of bank-friendly economists and Bush carryovers. These men had no personal commitment to the goal of an early recovery, no stake in the Democratic Party, no interest in the larger success of Barack Obama. Their primary goal, instead, was and remains to protect their own past decisions and their own professional futures.”

So, instead of consumer minded people in Obama’s inner circle, we get Geithner, Summers and Bernanke.

Democrats, Republicans, Independents, Tea Partiers: One thing about which we can all agree is that the Too Big to Fail Banks are Too Big to Exist. If not for the hocus pocus magical accounting and suspension of “mark to market” accounting rules, they would all have liabilities which far exceed their assets.

Under Dodd-Frank, we now have resolution authority to shut down these banks, sell off their remaining assets, and remove their corrosive effects on the rest of the economy. This would also provide a way for RMBS investors to get the most ROI, reduce homeowners’ principal balances to provide meaningful incentives for all parties to prevent foreclosures, and get the rest of the economy flowing again.

Until that happens, confidence will never return to the market.

4 legal issues that may prevent a bank from foreclosing on your home

1. Filing of fraudulent, perjured or fabricated documents
   Loan servicer employees have testified to signing tens of thousands of foreclosure documents without proper verification or notarization. As a result, all 50 states have launched a joint investigation of documents handled by these “robo-signers,” forcing Bank of America to suspend foreclosure proceedings in all 50 states, and GMAC Mortgage and JPMorgan Chase to suspend foreclosure proceedings in 23 states
2. Absence of legal title to the note and mortgage
   Courts are starting to rule against mortgage holders who are foreclosing because it could not produce the documents proving that it had been assigned the rights in the mortgages when they were securitized. When banks and mortgage servicers securitized, packaged, sold, and resold mortgages, they created a system where it is often impossible to figure out who actually owns mortgage notes and therefore has the authority to foreclose on properties.
3. Wrongfully assessing improper fees & Force-placed insurance on a homeowner’s account:
   Mortgage servicers’ routinely engage in practices that speed homeowners into foreclosure, including wrongfully padding fees, such as late fees, broker-price opinions, inspection fees, attorney’s fees, and other fees. They also have been found to misapply payments, leading to the homeowner’s payments for principal and interest being improperly applied to the servicer’s fees, which in turn can improperly cause the loan to be considered to be in default. Forced-place insurance premiums are two to four times the cost of standard homeowners’ insurance, which in turn cause servicers to collect these premiums before applying the payments to principal and interest, leading to foreclosure on otherwise up-to-date loans
4. Failure to contact homeowner in good faith to explore loan modification prior to filing Notice of Default
   A notice of default must be provided to the borrower at least 30 days before the Notice of Sale is recorded in the county auditor’s office. In increasing cases, court records are showing that despite false or missing notices from lenders of the foreclosure sale, borrowers are being foreclosed upon.

Foreclosure fraud crisis is not just a “paperwork problem!”

On October 18, 2010, CNNMoney.com reported a story on the ongoing foreclosure crisis: “Housing mess: You can’t stay if you don’t pay.” Basically, the article warned that delinquent borrowers aren’t likely to avoid a foreclosure just because of paperwork problems.

“Paperwork problems?”

The media needs to educate itself about the legal issues, and stop churning industry propaganda. This is not a “paperwork problem.” This is an endemic and systemic fraud perpetrated by the servicing industry and their outsource providers.

Think logically: Why do you think it was necessary to fabricate assignments of mortgage? Because without these false documents, banks are unable to prove that they own the loan, because they don’t. Is your mortgage allegedly owned by a securitized trust?

The loans were never conveyed into the trusts that claim to own them, and the investors whose money was used to “buy” those mortgage pools are also victims.

The coming flood of loan buyback requests and lawsuits coming from those investors have already begun: First group of MBS investors take first step to suing Countrywide/BofA for $47 billion in bad loans.

The finance industry already knows this. Bank stocks are taking a beating, and soon many of the biggest banks will be insolvent from buybacks and write-downs.

Consult a competent attorney asap, as your mortgage may not be legally owned. By anyone!

Faulty Paperwork Prompts Deepening Foreclosure Problem

Yesterday’s PBS News Hour aired this report on the recent foreclosure fraud. An excellent segment which clearly explains the main issues in this housing foreclosure debacle!

Errors in foreclosure documents or deliberate fraud upon the courts? What the recent revelations in foreclosure crisis mean for homeowners

The recent investigations into foreclosure fraud could reveal the bigger underlying issue: ownership of about 65 million mortgages is in doubt. The entire title insurance industry may refuse to insure title to a property whose mortgage was previously securitized.

Mortgage servicers claim foreclosure documents are “errors.” But, more investigations are revealing that these are not “errors;” they are deliberate misrepresentations of facts under penalty of perjury.

The question the media is ignoring thus far, is WHY?  Why is it necessary to fabricate all of these documents?  It’s because the loans were never conveyed properly into the trusts, and it’s too late to do so now, meaning the trusts don’t own these loans.  The fraud on the part of the servicers is necessary to cover up a bigger problem, and could only have happened with the knowledge and participation of officers and directors of these banking entities.

1. Person signing affidavits has no personal knowledge of the accuracy or reliability of information they are swearing to.
2. Person signing affidavits is doing so at such a high volume (10,000 to 15,000 per month), that they could possibly know what they’re swearing to.
3. Person signing affidavits not signing in presence of notary.
4. Notarial acknowledgements not done in presence of signer.  No notarial book or other record is maintained.
5. Notarial stamp is used by multiple people in the office who are not notaries.
6. Intervening Assignments of Mortgage necessary to show change of ownership from one party to securitization transaction to another do not exist, so “document production companies” hired by the mortgage servicers just fabricate them.  See DocX document fabrication price list.
7. Entire collateral files, which is comprised of the original note, DOT, assignments, etc, and is everything needed by the lender to foreclose, are sometimes manufactured from whole cloth.  See DocX price list again.
8. Foreclosures are being done in the name of someone other than the true owner of the mortgage.  Assignments of mortgage are fabricated to support these cases, then the names of the true owners (plaintiffs) are substituted in after judgment of foreclosure is final.

Banks have attempted to remedy the aforementioned problems by having employees sign affidavits that they have personal knowledge that the trust was once in possession of the necessary documents.

Two problems have emerged with regards to these affidavits. First, several news stories have reported that the people signing these affidavits had no knowledge of the matters in question despite the fact that there were legally swearing that they did.

Second, the affidavits may be irrelevant because the issue is not that the documents were lost but they were never properly transferred at each step of the aforementioned securitization process.

JPMorgan Chase is expanding its review of foreclosure documents, according to a person close to the bank. The deception? They’re just looking into “foreclosure documents.”
What they’re not looking into:

1. Whether the chain of assignment that was promised every MBS buyer would be performed actually was, and whether all those “wet signature” notes were actually assigned over.  (Hint: We are increasingly discovering that they factually were not.)
2. Whether the quality standards promised for those loans in each and every offering prospectus (and/or pooling and servicing agreement) actually were met, or whether the notes stuffed in those trusts (if they were ever delivered at all) were used dog food.

Those are the real issues here.

1. You don’t produce made up and “substitute” documents in court if you have the real ones. This pretty-clearly establishes that they don’t have the real, original documents. You can’t produce what was never conveyed.
2. The quality standards were not met. We know this because it was testified to at FCIC hearings.  But again, it’s damn hard for a Trustee to audit that which he does not possess, which again, goes back to conveyance – and whether it ever occurred.

These two points are the real issue behind this scandal.