Respectfully submitted by Lawrence E. Rafferty (rafflaw) Weekend Contributor
Since the Great Recession officially started in December of 2007, millions of people have lost their homes to foreclosures. It turns out that many of those foreclosures may have been fraudulent or in violation of foreclosure laws. According to the Southern Essex County, Massachusetts Register of Deeds, John O’Brien, a forensic audit of his recording files suggests that at least 75% of the mortgage assignments were invalid.
“My registry is a crime scene as evidenced by this forensic examination. The Audit makes the finding that this was not only a MERS (Mortgage Electronic Registration Systems) problem, but a scheme also perpetuated by MERS shareholder banks such Bank of America, Wells Fargo, JP Morgan and others. I am stunned and appalled by the fact that America’s biggest banks have played fast and loose with people’s biggest asset – their homes. This is disgusting, and this is criminal.” Nation of Change
It has been almost 7 years since the financial markets failed and yet the foreclosure crisis continues. In some respects the crisis is unabated. Yes, the foreclosure numbers are now down from their historic highs, but many of the completed foreclosures included these questionable documents and tactics by the banks in question. Plus, the use of these tactics started even before the Great Recession hit. Is there a cost to the economy when Banks allegedly use these “robo-signings”?
According to Register O’Brien, “O’Brien suspects his county lost as much as $22 million in revenue since 1998, though the number is probably much higher.” Nation of Change
Mr. O’Brien’s experience in Essex County is just one county in one state. However, when the nation’s Attorneys General were poised to settle with various banks in 2012 over the nation-wide foreclosure fraud allegations, O’Brien voiced his concerns to the Massachusetts Attorney General.
“He also wrote a letter to Massachusetts Attorney General Martha Coakley before she signed the settlement. Here is an excerpt from that letter:
“I implore you not to agree to any settlement that would give criminal immunity to MERS and its member-banks. A settlement that includes this feature will not help the homeowners of MA and will permanently damage chains-of-title and property rights forever, with no hope of resolving the permanent damage that these institutions have caused to titles across the state.”’ Nation of Change
It probably should not surprise anyone that the Attorneys General did sign the settlement with the banks and they did not heed Mr. O’Brien’s warning. While the national settlements did provide some relief to homeowners, it has had limited impact on clearing up the title concerns voiced by Register O’Brien and arguably provided limited financial recoveries for the victims of the banks allegedly fraudulent activities.
As expected, no one at any of the banks who signed the Joint State-Federal National Mortgage Servicing Settlements were indicted and brought to justice, although one individual from a lender processing company did plead guilty in November, 2012 “to a felony charge of conspiracy to commit mail and wire fraud over the scheme.” New York Times
While the robo-signing debacle aided and abetted a massive fraud on homeowners nationwide, the financial penalties and agreed to changes in their policies amount to a slap on the wrist to an out of control banking industry. How many times do the Banksters get a “Do Over”?
Have you been a victim of foreclosure fraud or questionable tactics by foreclosing banks? Doesn’t justice demand more than fines and slaps on the wrist?
Additional Resources:
Joint State-Federal National Mortgage Servicing Settlements
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Ned Pondry
Ned Pondry
1 day ago
I think Ocwen’s use of Indian employees in their legal department is something that is not recognized by a lot of lawyers practicing in FL- or elsewhere in the US. Outsourcing has the connotation of some low skill position, like a call center representative. In fact, Ocwen has the majority of its in-house lawyers in India, each a graduate of a US law school and admitted to at least one state bar here. They can take CLE online, can be paid a third of what the market would pay an associate in the US and yet live very well on that in places like Mumbai. And the nearly 12 hour offset allows them to work on tasks and projects “overnight” with respect to the thin legal staff here in West Palm Beach. Irrespective of the issues raised in this article the exploitation of outsourcing for legal staff is something that lawyers in the US need to be aware of
http://realtime.blog.palmbeachpost.com/2014/11/24/massive-foreclosure-profits-led-company-to-ignore-own-mistakes-suit-alleges/ this suit alleges major profits from foreclosures. Unvetted. Of course they and their ‘attorneys’ would make more from foreclosures than mere servicing even with all the illegal fees boa has been known to pile on. They just kept ‘finding’ our payments they had lost even after the second foreclosure. Please note that most of our payments were made in oerson, mailed by our bank to them or for a high fee paid over their phone line with no human interaction still exorbitant. They ‘lost’ payments taken to their door and kept our online access blocked for no reason until it was too late to discover what they had done. We believe they even reversed payments in pursuit of this vendetta of foreclosures
Sharonsj top fraud lawyers in Florida were fired. This is a crime scene
They get the property they charge fees and their attorney appears o do the servicing and the money flows to him. In our case his fees were unearned another reason case one was dropped without it being mentioned by motion or letter. Then w no notice whatsoever they foreclosed again. Six days later we hot a letter from boa that they were referring us for foreclosure. Lmao but not funny. They are definitely being enriched by the fraud. As well, the auctions are what is causing ppm to be arrested. Collusion between banks their attorneys court personnel and others.
To wit… isn’t it interesting that all the DOJ fines are going to state retirement funds while those states silly them all happened to invest in bad mortgages and even more interesting that state employees who are conducting foreclosures are having their retirement plans fixed up involving fines levied for the illicit work tat some were knowingly complicit in???
Interesting turn of events like full circle
The intimidation also stems from state employees and in our case and others…. elected officials.
We have a normal loan for normal people. 30 yr fixed boa. We pit almost thirty percent down. When they foreclosed we were two payments ahead. When they mysteriously withdrew tat case without mentioning it to anyone a year later we are discovering the master commissioner was illegally auctioning homes before the process is even complete. The judge got his second dui, plus many other things. We already knew the docs were fraudulent because the arty has admitted fabricating them previously and we sent for the apostile of the ‘notary’. The mc was summarily separated from her job where another arty had advised us to pay nearly five grand we did not owe. There is way more to this but besides vendetta it is mortgage trolling. Ver valuable property w tons of equity. I’m too tired from driving to say much but they saved up all the payments we supposedly didn’t make and rushed them all through but did not apply them. They dumped them into the hole of a default they had fabricated. Every bit of both cases is a complete fabrication.
Wait until you take on the foreclosure experts at Butler & Hosch P.A. They are champions of using Wells Fargo robo-signed documents for foreclosures.
@Karen S
You are right that banks seldom make money off a foreclosure. The problem is that many/most of these loans have servicing agents. These people collect the money, and pay insurance and real estate taxes and send the balance to the mortgage holder. They also charge a fee for this.
The problem is, the servicing agents make a whole lot more fees handling a foreclosure as opposed to simply collecting and dispensing the money. That is why you see banks or mortgage holders or investors doing stupid foreclosures when they could perhaps collect 75% of their money by working with the debtor. They never see any offers that are made.
This is a conflict of interest, but who cares these days???
Here is one example:
http://stopforeclosurefraud.com/2014/11/20/loan-servicer-busted-for-backdating-but-foreclosure-victims-say-shenanigans-havent-stopped/
Squeeky Fromm
Girl Reporter
According to both the FBI and the Justice Department, 75% of the mortgages were fraudulent. There also was collusion between the mortgage companies, the banks, and the real estate appraisers. Banks knew people were lying on the mortgage applications or even lied on behalf of the home buyers to effect a sale. Sometimes banks lied to the home buyers about the interest rates while the paperwork actually said something different. Sometimes the paperwork had dummy cover pages that were ripped off after signature. Then when the banks and Wall St. repackaged the mortgages and sold them as new financial instruments, they lied to the buyers about the value. Almost nobody has gone to jail for any of this.
I have a lawyer friend who took a temp job with Wells Fargo vetting signed mortgages. Wells Fargo hired a bunch of lawyers and legal secretaries to read through mortgages and prepare them for foreclosure. People were encouraged NOT to find problems and errors; my friend was conscientious, pointed out problems, and was fired after two months. Some time afterwards, she discovered Wells Fargo had listed her as a Vice President!
It’s too bad Americans are too fat, lazy and stupid to hang some of these bankers from the nearest lamppost.
sharonsj – that would be the same FBI that didn’t believe the Mafia existed and sent a letter to MLK suggesting he commit suicide? That FBI is the one you got your figures from?
Here is a further link for California clarifying (sort of :-)) the IRS ruling.
https://www.ftb.ca.gov/aboutFTB/newsroom/Mortgage_Debt_Relief_Law.shtml
@ Karen
Generally debt forgiven or written of is considered taxable income to the borrower. So if I loan you 10K and then decide you don’t have to pay me back for the 5K left on the loan, you will have to pay taxes on the 5K that was forgiven. Since you are in receipt of the funds and haven’t paid them back it is now considered a taxable event.
However there was a Mortgage Forgiveness Debt Relief Act that was passed some time ago that changed that for your primary residence…….Not for rental or secondary home properties.
http://en.wikipedia.org/wiki/Mortgage_Forgiveness_Debt_Relief_Act_of_2007
If the law expires, forgiven mortgage debt will be taxable. The same applies to foreclosures and to loan modifications in which principal is reduced.
Once the lender writes off the debt, it will report the amount to the IRS. Homeowners should expect to receive Form 1099-C showing the canceled debt amount.
It was extended to January 1 , 2014. I’m not sure if it was extended or re-written again, since I am no longer in the financial advisory business and haven been for several years. I rather suspect that it has been extended, but I am not sure.
This is not new!!!! Mortgages are all ways the first to go, even in recessions. I lost an FHA home in the 1980 recession when mortgage laws were violated by the bank.
Banks typically do not make money on foreclosures, especially those bought during the bubble.
When someone has a loan of $500,000, and their house is only worth $300,000, how does the bank profit from a foreclosure? The foreclosure is just to reduce the loss as much as possible.
The part I can’t remember is if a homeowner forecloses on a house worth $500,000, but owes $300,00, does any cash in excess of the mortgage debt go to the bank, or the homeowner, after auction? If anyone knows the answer to this, please let me know. Thx.
Squeeky:
Thanks for the link. Below is a link to one of the embedded articles listed in your link. Below that is a link explaining what a mortgage endorsement is, because many might not know this aspect.
The loans in this article were not fraudulent against the borrower, in the sense that no one forged their signature. They actually did get their loans and failed to make the payments.
Here’s where the mess started. Banks were going like gangbusters, cranking out loans, and selling them to other banks, which freed up money for them to re-lend. Otherwise, all their money would shortly be tied up for 30 years.
When a bank sells a mortgage note to another bank, they have to sign it over. Like if you receive a check, and you sign it over to someone else to cash. That’s when they endorse it to make it payable to the other bank. BUT through a shocking QC failure, many banks were somehow missing or skipping this part. So the bank on the receiving end, who lawfully bought that mortgage, did not have an endorsed note. So they spent all this money on buying up the loan, but when that borrower failed to pay what he promised, there is essentially a paperwork loophole where they can’t collect because they don’t have the endorsement on the note that they bought.
And here’s where they messed up: When questioned in court, the selling banks apparently went back and DID endorse them.
I have a question for any banking attorneys that might be reading. Since the bank legitimately bought these notes, why can’t the selling banks endorse them as soon as it’s found out they had failed to do so? If I give a check made out to me to someone else to pay a debt to them, but I failed to endorse that check to them, why can’t I just do it as soon as my mistake is discovered?
Because, basically what we have here is that people got loans they either couldn’t afford, or their financial circumstances changed during this bad economy, and they didn’t make their house payments. But they DID borrow that money. Now the bank can’t take their house to recoup as much of the debt as possible, because they bought a note that wasn’t endorsed properly. So did these people just get a free house? Or do the banks now have inventories of homes they already foreclosed on, but now can’t sell forever because this clouds title?
http://fortune.com/2011/06/03/at-bank-of-america-more-incomplete-mortgage-docs-raise-more-questions/
http://www.nolo.com/legal-encyclopedia/whats-the-difference-between-mortgage-assignment-endorsement-transfer-the-note.html
Rafferty:
This is very serious. How exactly did the MERS system malfunction, and what were the banks doing to fraudulently foreclose?
Were people paying their mortgages on time, but they were foreclosed on anyway? Did someone fraudulently sign for them, stealing their identities, and getting cash out refis on their homes, which were foreclosed?
If it was fraud on this level, then I hope the major players get jail time.
One aspect that I know contributed was the proliferation of neg-am loans, a sure path to foreclosure. They were designed for investors, who would off-load the house before the principal payment hit. But people who couldn’t really afford their mortgages got them. There are 3 payment options, less than the interest, interest only, and a P&I payment. They would pay the lowest option, without fully understanding that this would cause their principal to go up every month. Then they got a nasty shock when that P&I payment hit, and the real estate market did not magically increase by 50% a year at unsustainable levels.
Then there was the whole homeownership-is-a-right thing that led to the government pressuring banks to make subprime loans, which directly correlate with foreclosure rates. They “mitigated” the risk by bundling these toxic time bomb loans destined to fail in with A paper loans, and sold them to unsuspecting buyers. They made stated income loans to sub prime applicants.
It was a horrid mess.
And if you were responsible, restricted yourself to a loan you could afford, and made your payments, you get no relief. Only those who over-indebted themselves could get their interest rates reduced.
-Paul Schulte We were fairly lucky during the wave of foreclosures…..our complex had maybe 15-20% (at the peak) of “non-paying” units. I know some HOAs had much higher percentages of non-paying owners.
While there may have been “liars’ loans involved in some of the cases of foreclosures I witnessed, the majority of those foreclosed seemed to simply walking away from property they bought at the grossly inflated prices from c.2004-2006. This was the peak of the Phoenix area bubble, and the temptation /opportunity to just walk away from a unit that declined about 50% in value was too good to pass up.
These “strategic foreclosures”, and the tactics used by some “squatters” to delay an inevitable foreclosure, helped to “feed” and magnify the deep plunge when the bubble burst. It also delayed the stabilization of prices/the recovery of the market.
I did witness a few cases where owners attempted to renegotiate payments in their mortgages to keep their residence, but the majority of foreclosures I saw where the “strategic” foreclosures”
They also come after you in other ways. They jam up your electricity and surge your home if they can. All utilities are apparently being bribed or profiting or perhaps individuals or groups of rogue employees. Much documentary evidence exists. The judges are the same small town. Original one was a… more later. We made our payments we have every receipt. We considered enlarging them and plastering the home with them. It’s all true. Details later. Today is driving.
They foreclose as vendetta. Yes they are foreclosing wrongfully and they are foreclosing on people who have made every payment timely. They DO manufacture documents and have admitted to same. David stern was the tip of the iceberg. Until you have had your home held over your head for years by a corrupt process with seeming participation by a judge. They completely imaginate the loan records themselves, changing the dates and applications of the payments and then revising them when they realize their claim disagrees with their lawsuit. All along the homeowner is spending every dime defending what are frivolous and malicious lawsuits in some cases. They purposefully misdeliver huge documents to your neighbors to paint you as a deadbeat. The intention is to drive people to despair. The court clerks are bribed to lie and hide documents and try any way to block the homeowner from defending their home. This is just a tiny synopsis of two illegal foreclosures against our propertynin 2013. Why TWO?? Get a new judge and that’s when it gets very interesting and even more conspiratorial in our case. They also threatened to arrest us for bringing our receipts and then made up things about us such as we had acted in a threatening manner. Quite the opposite is true. They were and are following, stalking and harassing us. But this is part that gets everyone. They came into our yard and ran over our dog. They recruit neighbors to participate. My ‘they’ is not vague, names are available. It’s a horrendous crime which has driven homeowners across america to suicide.
1 smith – you are going to have to name a case we can actually get to rather than make vague claims. Who is “they”? Name the judges.
Reblogged this on Citizens, not serfs.
As an HOA member who has served as a Board/Bored member at times, there are a few things I have witnessed, and would like to address. If I “get in over my head” with a “liars loan” , there is some degree if responsibility on my part for falsifying the loan application. And if the lender approved or encouraged these lies, there is culpability on the part of the lender.
There needs to be SOME DEGREE of balance in doing a post-mortem of the real 2008 real estate/financial collapse, and with all due respect, Mr. Rafflaw, you aren’t exactly the best source for even-handed, balanced analysis.
It will always be the sole responsibility of “The Big Bad Bankers”, in your columns.
Personally witnesses dozens of cases in Arizona where buyers paid inflated prices at the top of a speculative bubble, then simply walked away from the mortgage because of the “non-deficiency/anti-deficiciences laws in Arizona, the lender can not recover anything but the property itself.
A buy could be making $ 200, 000 a year, and fully capable of making the mortgage payment, but they are free to take a hike if they see that they’re property has is worth less that what they paid.
“Squatters” are an additial problem. I’m not familiar with all of the “dodges” available to those in default. But I can tell you that one neighbor, hopelessly in arrears, was somehow able to “squat” in his home for TWO FULL YEARS beyond the date he property was initially scheduled for forclosure. As a added bonus, he paid no HOA dues, so he was “carried” by the other HOA members, in addition to stiffing/stalling the inevitable foreclosure.
But I have this feeling that this side of the issue will never see the light of day in any of your columns, Mr. Rafflaw. All “liars loan”/foreclosures” all solely the fault of “The Big Bad Bankers”, preying on the innocent homeowners.
I would be stunned if you ever wrote a halfway balanced, objective review of the 2008 crash. I would be even more surprised if you ever addressed a question I have directly asked you several times, in response to your questions about ” nobody every going to jail” over white-collar crime.
So I will, once again, repeat the same question I have asked you before. Why is it that there were numerous criminal charges brought, and convictions involving lengthy jail sentences, in the wake of the S&LBust and the Dot.Com/Enron bust, but virtually none in the wake of the 2008 collapse? Thought I’d give it one more shot to see if you care to respond.
Tom Nash – Gilbert requires all home owners to belong to a HOA, so you have no choice. My HOA took a major financial hit during the recession. We had to cut services, etc. Use our reserves Although our particular development is highly desirable, we had several abandoned homes. Even now, we still have one out of 1700 units. The banks have been holding on to a ‘ghost inventory’ of homes they have kept off the market and are slowing putting back on as the prices go up. Getting better prices for their property.
As the properties have been sold the HOA has been able to get their fees as part of the sales price, so we are financially whole again.
The bottom line is that Bernie Madoff should have a lot more company.