AP Exclusive: Mortgage 'robo-signing' goes on

Major lawsuits or settlements with the States will finally end this.

Mortgage industry employees are still signing documents they haven't read and using fake signatures more than eight months after big banks and mortgage companies promised to stop the illegal practices that led to a nationwide halt of home foreclosures.

County officials in at least three states say they have received thousands of mortgage documents with questionable signatures since last fall, suggesting that the practices, known collectively as "robo-signing," remain widespread in the industry.

The documents have come from several companies that process mortgage paperwork, and have been filed on behalf of several major banks. One name, "Linda Green," was signed almost two dozen different ways.

Lenders say they are working with regulators to fix the problem but cannot explain why it has persisted.

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BofA ‘Significantly Hindered’ Foreclosure Review, U.S. Says

These bank practices during and after housing bubble are finally being investigated.  

I think the best way to reform this industry is to get the government out, except for regulatory management like FDIC, SEC (private), or even margin regulation.  Also, having clear underwriting standards.

The bank was slow in providing data and offered incomplete information, according to the U.S. Department of Housing and Urban Development inspector general’s office, which conducted the review.

“Our review was significantly hindered by Bank of America’s reluctance to allow us to interview employees or provide data and information in a timely manner,” William Nixon, an assistant regional inspector general for the agency, said in a sworn declaration.

The filing, dated June 1 and obtained yesterday by Bloomberg News, was submitted as an exhibit in a lawsuit by the state of Arizona against the Charlotte, North Carolina-based bank. Arizona, which is seeking to interview former Bank of America employees, accused the bank of misleading homeowners who were seeking mortgage modifications

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Squatter Nation: 5 years with no mortgage payment

You ask yourself why isn't the lend foreclosing on the house.

Charles and Jill Segal have not made a mortgage payment in nearly five years -- but they continue to live in their five-bedroom West Palm Beach, Fla. home.

Lynn, from St. Petersburg, Fla., has been living without paying for three years.

In Thousand Oaks, Calif., an actor has missed 30 payments, and still, he has not lost his home.

They're not alone.

Some 4.2 million mortgage borrowers are either seriously delinquent or have had their cases referred to lawyers to pursue foreclosure auctions, according to LPS Applied Analytics. Of those, two-thirds have made no payments at all for at least a year, and nearly one-third have gone more than two years.

These cases can go on and on. Nationwide, it takes an average of 565 days to foreclose on borrowers in default from their first missed payments to the final auction. In New York, the average is 800 days and in Florida, where the "robo-signing" issue is particularly combative, it's 807.

This long defaults will pressure on housing prices for the next several years.

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Keep Your Home California adds 12 mortgage servicers

I don't know too much about this program.  I also don't know how affective this program is.  There have been a lot of programs come and go.

are now 20 mortgage servicers that participate in the Keep Your Home California program, enacted in February.

The California Housing Finance Agency said Tuesday the number of servicers engaged in this program grew to 20 from eight four months ago. These 20 banks service about 80% of the mortgages held in California, the agency said.

"Increasing the number of participating servicers is critical because we need their partnership to assist families in California," said Claudia Cappio, executive director of CalHFA. "We are pleased that more servicers are joining this effort and encourage others to partner with us to aid families who would like to remain in their homes

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Judge awards house back to homeowner due to faulty foreclosure docs

This the meat quote from article, it's just chaos in the judicial system.

"This case should have never been filed," said Lando, who referred to the firm's work on the case as "shoddy" and "grossly incompetent." She called Ben-Ezra a "robot" who filed whatever the banks sent him, and held him in contempt of court. She then gave the homeowner the home - free and clear - and barred the lender from refiling the foreclosure.

I don't know if this ruling form May 6th was overturned by another judge or appealed by the lender.Here's more analysis.

Alan White, a law professor at Valparaiso University in Indiana, who has studied the foreclosure issue nationwide, said judges had few reasons to doubt banks in the beginning of the foreclosure avalanche.

"They had a lot of credibility," White said. "Now, when a bank says it owns a mortgage, judges are skeptical."

White said a smattering of "maverick" judges began poking holes in foreclosures years ago before the media and lawmakers seized on problems in the fall. The judicial momentum has built since then.

"The combined impact will clearly be to change practices and to reduce the amount of corner-cutting the banks and their lawyers are engaged in," White said. "It could mean foreclosures get slower. It could also encourage banks to pursue alternatives to foreclosure."

The professors agree it's difficult for judges to pick out problems in foreclosure cases that are undefended. Homeowner advocate is not their role.

I don't understand awarding house free and clear to homeowner that didn't pay their mortgage.  Yes, the bank needs to produce the docs, but people shouldn't be given free rides.

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Mortgage Servicers Resist But Cut Debts .

Look at some of this debt forgiveness.

Some loan servicers under investigation by state and federal officials already are slicing loan balances on a very narrow basis. In 2009 and 2010, Wells Fargo forgave a total of $3.8 billion in principal—or an average of $51,000 per loan—for roughly 73,000 borrowers whose mortgages are owned by the San Francisco bank.

Now the reality.

Officials at Bank of America and Wells Fargo said the two banks are comfortable reducing loan balances for certain borrowers, but oppose broad-based cuts. One reason: Some borrowers could stop making payments to get their debt reduced.

A recent study by Columbia University economists concluded that Countrywide's relative delinquency rate "increased substantially...during the months immediately after the public announcement" of the 2008 ­settlement.

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'Foreclosure Mill' Employees Got Gifts For Altering Documents, Witness Says

"As a perk of Samons' [sic.] job, Stern's office would routinely pay her personal mortgage, a car payment, her electric bills and her cell phone bill, according to Scott, who told investigators Stern also bought Samons [sic.] a new BMW sport utility vehicle every year and gave her and other employees jewelry. Additionally, Stern purchased employee David Vargas a house, a car and a cell phone, Scott claims in her statement."

According to Kelly Scott's statement, Cheryl Ramos's marathon document signing sessions took place in an office conference room and would leave her wearied. From Scott's deposition:

They would [be] stacked amongst each other, side by side, and Cheryl would come twice a day, in the morning and mid-afternoon, around two or three o'clock and she would sign all of them, every single one of them...

Cheryl would give certain paralegals rights to sign her name, because most of the time she was very tired exhausted from signing her name numerous times per day. You had to understand it was more than five hundred files that she's signing morning and afternoon.

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Countrywide's Angelo Mozilo settles lawsuit for $67.5 million

This is the first housing crisis, the sub-prime meltdown.

Mozilo and two other former executives of defunct mortgage firm Countrywide Financial Corp. make a deal to avoid trial on accusations of investor fraud and insider trading. Mozilo will pay $22.5 million in fines and turn over $45 million in ill-gotten gains to former shareholders who sued him.

And 

A criminal investigation of Mozilo remains open, people with knowledge of the probe said. With the SEC case settled, federal prosecutors will not see how the evidence against Mozilo plays out in a civil trial -- which could factor into their decision on whether to bring charges. Criminal charges carry a higher standard of proof.

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Key Robo-signer can't block investigation

This issue will probably be the next major housing story since the tax credit and will go well into 2011.  Again I can't even speculate on the impact on housing with this story.

The subpoena was sent to the law firm as part of a civil investigation by the AG, alleging the firm fabricated and manufactured documents to speed up foreclosures. A sworn statement from a former paralegal at the firm was publicly released last week. In it, the former employee alleged other employees at the law firm changed dates, forged signatures on documents, claimed homeowners were served with foreclosure lawsuits when they weren't, and overcharged for services.

In a one-page ruling, Palm Beach County Judge Eileen O'Connor denied the motion to quash without giving a reason for the denial.

The subpoena seeks the names of all current, former and contract employees, names of notaries who signed affidavits, and the names and addresses of all lending institutions the firm has represented, among other things. The subpoena also asks for documentation on several specific foreclosure cases.

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Obama resists call to halt foreclosures nationwide

Banks seized 102,134 homes in September, a record for any month, RealtyTrac reported Wednesday. California led the nation with 17,756, the Irvine company said.

Even so, top White House officials worry that imposing a national moratorium on foreclosures would backfire by driving down prices even more, delaying the real estate shakeout and potentially creating more foreclosures as additional homeowners find themselves underwater.

In addition,

In the absence of problems, the Federal Housing Finance Agency stressed that foreclosures on delinquent homeowners "should proceed without delay."

"Delays in foreclosures add cost and other burdens for communities, investors and taxpayers," said the agency, which regulates seized mortgage financing giants Fannie Mae and Freddie Mac.

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Banks shortchanged legal requirements on loans to save money

At JPMorgan Chase & Company, they were derided as “Burger King kids” — walk-in hires who were so inexperienced they barely knew what a mortgage was.

At Citigroup and GMAC, dotting the i’s and crossing the t’s on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage.

And at Litton Loan Servicing, an arm of Goldman Sachs, employees processed foreclosure documents so quickly that they barely had time to see what they were signing.

Banks can't complain it's a tight labor market, since some estimates on unemployment are  10.1% with the underemployment at 19% and didn't they get TARP money?

Some industry executives add that they’re committed to helping homeowners but concede they were slow to ramp up. “In hindsight, we were all slow to jump on the issue,” said Michael J. Heid, co-president of at Wells Fargo Home Mortgage. “When you think about what it costs to add 10,000 people, that is a substantial investment in time and money along with the computers, training and system changes involved.”

 And then you got Mr. Stern's improper outsourcing firm.

And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the “Burger King kids.” In many cases, the banks outsourced their foreclosure operations to law firms like that of David J. Stern, of Florida, which served clients like Citigroup, GMAC and others. Mr. Stern hired outsourcing firms in Guam and the Philippines to help.

The result was chaos, said Tammie Lou Kapusta, a former employee of Mr. Stern’s who was deposed by the Florida attorney general’s office last month. “The girls would come out on the floor not knowing what they were doing,” she said. “Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to the original documents

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Four-Point Policy Framework For Dealing with Possible Foreclosure Process Deficiencies

Wow, news is just coming all day about the foreclosure-gate.  I wonder will stop or even slow the lawsuits.  I don't believe this let's the servicer's off their legal obligation.

1.Verify Process

2.Remediate Actual Problems

3.Refer Suspicion of Fraudulent Activity

4.Avoid Delay

Read the statement

Where's the Note?: Zerohedge

Wondering if you are one of those suckers paying a mortgage in limbo, with all the payments due to some non-existent mortgage noteholder getting retained at the servicer banks? Well, if you can spare 3 minutes then "Where's the Note" is for you. The website, which is on the verge of a viral break out, has a simple message: "Whether you are facing foreclosure, have an underwater mortgage, or are just a concerned homeowner, it’s important that you contact your bank and demand to see the original note on your mortgage. It only takes a few minutes using our free online tool." Quick, simple and easy. And in a few days your mortgage bank will have no choice but to tell you if they do in fact have your original mortgage note. And if not - welcome to cost-free living, courtesy of MERS and millions of rushed and fraudulent mortgage note assignments. Yes, it will mean the end of the GSEs, but it will also mean the accelerated write downs on thousands of MBS tranches which will rapidly collapse into insolvency (there is only so much Mark to Unicorn can cover up) and eventually take the insolvent TBTFs banks with them.

Click on the link

A Primer On The Foreclosure Crisis

How did this thing get started?

Ever since the housing bubble burst, there have been signs that there are serious problems with foreclosure practices. In some cases, the financial institution claiming it owns the mortgage has not been able to produce the underlying loan documents. In 2007, a federal judge held that Deutsche Bank lacked standing to foreclose in 14 cases because it could not produce the documents proving that it had been assigned the rights in the mortgages when they were securitized.

This decision was followed by similar rulings in other states stopping foreclosure proceedings. Typically the judges would find that the banks that were servicing mortgages pooled into bonds weren't able to prove they owned the mortgages.

Then I skipped down to the very bottom.

What does this mean for the housing market and the economy?

Get ready to hear the phrase "pig through the python" a lot. For example, "We need to get the pig through the python very quickly so that the market can be free of uncertainty."

This is the favorite metaphor of bankers discussing the foreclosure crisis. The idea is that anything that slows down foreclosures will unsteady the housing market. There's a lot of truth to this. Buyers will hesitate to bid on foreclosure sales if they are not confident the foreclosure is legitimate. Other buyers may worry that the lack of foreclosure sales in an area is a false indicator of the health of the local housing market.

Banks concerned about the recovery values of their mortgage portfolios and higher capital requirements, may pull back lending even further than they already have. In short, this could be the beginning of the second leg of the credit crunch.

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All 50 state AGs to review foreclosures

Alabama Attorney General Troy King announced Wednesday he is joining the other 49 AG offices in a nationwide investigation into lenders that filed faulty foreclosure affidavits.

Earlier Wednesday morning, 49 state attorneys general offices and regulators announced a coalition to investigate lenders that filed faulty foreclosure affidavits. The only AG office missing from the list was Alabama.

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Robo-signers: Mortgage experience not necessary

This follows my previous post concerning the legal impact or possible impact of the "foreclosure-gate" or paper mill unfolding story.  I even speculate the impact of this issue on housing prices or mortgage rates.

In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn't define the word "affidavit." Others didn't know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers' accusations about document fraud.

How many of you paid processing fees to bank or document review fees.

The depositions paint a surreal picture of foreclosure experts who didn't understand even the most elementary aspects of the mortgage or foreclosure process -- even though they were entrusted as the records custodians of homeowners' loans. In one deposition taken in Houston, a foreclosure supervisor with Litton Loan couldn't define basic terms like promissory note, mortgagee, lien, receiver, jurisdiction, circuit court, plaintiff's assignor or defendant. She testified that she didn't know why a spouse might claim interest in a property, what the required conditions were for a bank to foreclose or who the holder of the mortgage note was. "I don't know the ins and outs of the loan, I just sign documents," she said at one point.

Again the impact of this serious issue?

Though some have chalked up the foreclosure debacle to an overblown case of paperwork bungling, the underlying legal issues are far more serious. Yes, swearing that you've reviewed documents you've never seen is a legal offense. But at the center of the foreclosure scandal looms something much larger: the question of who actually owns the loans and who has the right to foreclose upon them. The paperwork issues being raised by lawyers and attorneys generals have the potential to blight not just the titles of foreclosed properties but also those belonging to homeowners who have never missed a mortgage payment.

This is another must read

Foreclosure Fraud: It's Worse Than You Think

I didn't see this yesterday because it was in their legal briefings. I just posted the banks will probably figure this out.  However, after reading this I think not.

A source of mine pointed me to a recent conference call Citigroup (NYSE: c) had with investors/clients. It featured Adam Levitin, a Georgetown University Law professor who specializes in, among many other financial regulatory issues, mortgage finance. Levitin says the documentation problems involved in the mortgage mess have the potential "to cloud title on not just foreclosed mortgages but on performing mortgages."

The issues are securitization, modernization and a whole lot of cut corners. Real estate law requires real paper transfer of documents and titles, and a lot of the system went electronic without much regard to that persnickety rule. Mortgages and property titles are transferred several times in the process of a home purchase from originators to securitization sponsors to depositors to trusts. Trustees hold the note (which is the IOU on the mortgage), the mortgage (the security that says the house is collateral) and the assignment of the note and security instrument.

This one scenario.

The mortgage is still owed, but there's going to be a problem figuring out who actually holds the mortgage, and they would be the ones bringing the foreclosure. You have a trust that has been getting payments from borrowers for years that it has no right to receive. So you might see borrowers suing the trusts saying give me my money back, you're stealing my money. You're going to then have trusts that don't have any assets that have been issuing securities that say they're backed by a whole bunch of assets, and you're going to have investors suing the trustees for failing to inspect the collateral files, which the trustees say they're going to do, and you're going to have trustees suing the securitization sponsors for violating their representations and warrantees about what they were transferring.

 Look at this important quote at the end of article.

Quite the can of worms. Anyone who says that the banks will fix all this in a few months is seriously delusional.

This is a must read.

Foreclosure Halt Triggers Problems for Mortgage Investors

The industry will probably adapt faster than government regulation to fix this issue.  If the banks can't resell their mortgages then they are in trouble to raise capital for the next round of mortgages.

But if a foreclosure is delayed, the servicer must typically keep advancing payments that will go to all bondholders, including the junior debt holders, even though the home loan itself is producing no revenue stream.

The latest events has set up an odd circumstance where junior bondholders--typically at the bottom of the credit structure--could actually end up better off than they expected. Senior bondholders, typically at the top, could end up worse off, reports the WSJ.

Banks and experts are still weighing the potential costs.

Typically, mortgage servicers enter into contracts called pooling and servicing agreements with bondholders that spell out the servicers' obligations to manage the loans in the best interests of the investors.

These agreements provide that the servicers be reimbursed by funds in the trust for all costs related to litigation and extra processing of foreclosures, provided they follow standard industry practices.

Servicing companies hope the reviews will be quick.

But the problems could be magnified if the reviews uncover a lack of proper documentation or other substantive problems rather than simple procedural errors, according to the WSJ.

 

The furor over servicer practices is also likely to trigger additional legal challenges from borrowers facing foreclosure and more judicial scrutiny, which could further slow the process and increase foreclosure costs.

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States set to unveil joint probe into foreclosures

This process is speeding up.

The top law enforcement officials of states around the country are already weighing the outlines of a potential settlement with the industry, said Iowa Attorney General Tom Miller, who will lead the investigation. The inquiry will be announced Wednesday morning.

Miller said one idea being discussed is to create an independent monitor to review whether banks have fixed their problems

"We want the companies to put in a system such that this will not happen again," Miller said in an interview with The Associated Press. "We want to explore what other remedies might be available, in a way that makes homeowners and the general housing economy better off."

These services promised the easy of foreclosure without really testing the legal impact of their shortcuts in legal processing.

Attorneys general have taken the lead in responding to a nationwide scandal that's called into question the accuracy and legitimacy of documents used to force millions of people from their homes

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Ally Expands Foreclosure Review Process to All Fifty States

The threat of lawsuits is making the mortgage giants cautious, but it's not going to save your home in the long run if you don't pay your mortgage.  In fact, it might increase the cost of borrowing (mortgage rates) and push home prices even lower.

GMAC hasn’t found evidence of any improper foreclosures so far, Detroit-based Ally said today in a statement. Any foreclosure sales will get an additional review by a “specialized team” to ensure the rules have been followed, the company said. Ally didn’t name the firms it hired.

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