Time we all go Federal

LISTEN UP. ITS TIME TO STOP USING STATE COURTS WITH THIS MORTGAGE ABUSE FROM THE BIG BANKS AND PRIVATE HEDGE FUNDS. THESE CASES NEED TO HEAD TO FEDERAL COURTS, WHERE THE JUDGES KNOW THE LAW. THIS WILL ALSO STOP THE ABUSE OF STATE COURTS ILLEGALLY GIVING HOMES AWAY AND BANKS FROM ABUSING THE SYSTEMS.

Ruling may ease loan modification runaround for homeowners facing foreclosure

After falling behind on mortgage payments in 2008, Joyce McNair reached an agreement with Bank of America to modify her loan and made 14 payments under a trial payment plan, but now is threatened with foreclosure again. A recent court ruling may help homeowners like McNair hold lenders to such agreements. 

Joyce McNair thought she'd made a breakthrough when Bank of America agreed to try modifying her mortgage to help her avoid losing her Beaverton home in foreclosure.
After six months on a plan that would make her payments a little more affordable, the bank said, it would make the modification permanent. So McNair, whose own mortgage company had failed during the housing crash, made all six payments -- then eight more while waiting for paperwork to show up finalizing the arrangement.
Instead, she received notices that her loan had been transferred and that her new loan servicer would foreclose unless she paid $231,000 in back payments and fees by the following month.
Trial payments that go on endlessly or that squeeze a few thousand dollars more from the homeowner before the lender forecloses anyway were a common complaint among struggling homeowners trying to save their homes and get back on their feet during the recession with the help of the federal Home Affordable Modification Program, or HAMP. Consumer advocates and regulators say problems converting trial modifications continue today.
Banks have argued that the trial payment plans aren't a binding contract and that completing the trial was never intended to offer a guarantee about permanent modification.
A new federal court ruling upends that argument.
The 9th Circuit Court of Appeals in San Francisco ruled this month that lenders are required under HAMP to make a loan modification permanent upon completion of a set of trial payments. Consumer attorneys and advocates say the decision is a big win for homeowners in the 9th Circuit, which includes Oregon and Washington.

Far-reaching effects

The decision in Corvello v. Wells Fargo is binding for lower federal courts in 9th Circuit states. It's not binding for state courts, but consumer attorneys say it's likely to be taken into consideration by courts that had routinely rejected modification cases in the past. "Corvello is a very important decision and should put lenders in the 9th Circuit on notice that they can't play bait and switch with borrowers anymore," said Kelly Harpster, a foreclosure defense attorney in Lake Oswego.
In the case, plaintiffs Phillip Corvello and Karen and Jeffrey Lucia, whose two cases were consolidated before the appellate court, each said Wells Fargo offered them a trial-payment plan. They said they made the required payments but were never offered the permanent modifications they had been told would be forthcoming.
"It allowed banks to avoid their obligations to borrowers merely by choosing not to send a signed modification agreement, even though the borrowers made both accurate representations and the required payments," the court ruled.
The court called the idea that Wells Fargo could be allowed to keep the trial payments unfair and an "injustice" that would be averted by its ruling.

Bank's reaction

In a statement, Wells Fargo downplayed the significance of the decision: "The 9th Circuit did not rule on the merits of the underlying cases and found only that the District Court should consider the arguments put forth by the plaintiffs. Wells Fargo has strong defenses to those arguments and is prepared to present its case in the district court." The decision follows a similar ruling by the 7th Circuit Court of Appeals in Chicago.
According to government reports on HAMP, 88 percent of completed trial modifications are successfully converted to permanent modifications after an average of three or four months of trial payments.
For the rest, a lot can go wrong.
The Consumer Financial Protection Bureau, a federal agency created in 2011 to oversee the nation's largest banks and financial firms, said this month that its reviews of mortgage servicers have uncovered disorganized and missing files for foreclosure mitigation programs, including loan modifications.
And without naming specific institutions, it faulted lenders for sloppy handling of documents when mortgage servicing is transferred, including "lack of controls" regarding the handling of documents, including modification paperwork.

"Breach of contract"

When McNair's paperwork finally did arrive in March 2013, the documents had expired even before they were sent via FedEx. She contacted the bank and was assured new documents were on the way, she says, but those never arrived. Instead, she received a notice that her loan servicing had been transferred to Nationstar Mortgage's portfolio. Rather than picking up where Bank of America left off, the new servicer threatened foreclosure unless she paid off her default within a month.
Bank of America did not return phone calls seeking comment. Nationstar declined to comment specifically on McNair's loan.
"If there's a valid modification in place when (a loan) comes to us, then we would honor that," Nationstar spokesman John Hoffman said.
Whether the trial payment plan constitutes a contract has been a point of contention virtually since the HAMP program launched, but courts rarely sided with homeowners, said Terry Scannell, a Portland foreclosure defense attorney.
"Before, judges were chucking these cases out," Scannell said. "To get one to trial on any theory was a win."
Now, Scannell says, homeowners can bring a contract claim in federal court against mortgage servicers who fail to offer a modification once the homeowner has met the terms of a trial-payment plan.
"And the statute of limitations on a contract in Oregon is six years," Scannell said. "If this happened to them and they were foreclosed on, I think they've got a breach of contract claim."
McNair has retained an attorney and set aside the amount she'd be making in payments in the meantime.
And for the former mortgage professional, the lapses seem like double the betrayal.
"I did good mortgage loans. There was no greater joy than seeing people get into their new house," she said. "Right now I feel like I couldn't put someone in a loan in good conscience."
-- Elliot Njus

BANKS EDGE CLOSER TO THE ABYSS

I wish VT Judges had this knowledge , like the ones here and in NY.

For the second time in as many weeks a trial judge has ordered the pretender lender to execute a permanent modification based upon the borrowers total compliance with the provisions of the trial modification.This time Wells Fargo (Wachovia) was given the terms of the modification, told to put it in writing and file it. If they don't sanctions will apply just as they will be in the Florida Panhandle case we reported on last week.

Remember that before the trial modification begins the pretender lender is supposed to have done all the underwriting required to validate the loan, the value of the property, the income of the borrower etc. That is the responsibility of the lender under the Truth in Lending Act.

Of course we know that cases were instead picked at random with a cursory overview simply because there was no intention to ever give a permanent modification. Borrowers and their attorneys have known this for years. Government, always slow on the uptake, is starting to get restless as more and more Attorneys General are saying that the Banks are not complying with the intent or content of the agreement when the banks took TARP money.

The supreme irony of this case is that Wells Fargo didn't want the TARP money and was convinced to take it and accept the terms of HAMP because if only the banks that really need it took the money it was argued that this would start a run on the banks named that had to take TARP. The other ironic factoid here is that the whole issue of ownership of the loans blew up in the face of the government officers around the country that thought TARP was a good idea --- only to find out that the "toxic assets" (TARP - "Toxic Asset Relief Program") were not defaulting mortgages.

1. So instead of telling the banks they were liars and going after them the way Teddy Roosevelt did 100 years ago, they changed the definition of toxic assets to mean mortgage bonds.
2. This they thought would take care of it since the mortgage bonds were the evidence of "ownership" of the  "underlying" home loans.
3. Then the government found out that the mortgage bonds were not failing, they were merely the subject of a declaration from the Master Servicer (a necessary and indispensable party to all mortgage litigation, in my opinion) that the value of the bond had fallen ,thus triggering payment from insurers, counterparties on credit default swaps etc to pay up to 100 cents on the dollar for each of the bonds ---
4. which means the receivable account from the borrower had been either extinguished or reduced through third party payment.
5. But by cheating the investors out of the insurance money (something the investors are taking care of right now in the courts), they thought they could keep saying the loans were in default and the mortgage bond had been devalued and thus the payment of insurance was legally valid.
6. BUT the real truth is that the loans had never made into the asset pools that issued the mortgage bonds.
7. So the TARP definitions were changed again to "whatever" and the money kept flowing to the banks while they were rolling in money from all sides --- investors, insurers, CDS counterparts, sales of the note to multiple asset pools (REMICs) and then sales of the note to the Federal Reserve for 100 cents on the dollar.
8. This leaves the loan receivable account in many cases in an overpaid status if one applies generally accepted accounting principles and allocates the Federal, insurance and CDS money to the bonds and the "underlying" loans.
9. So the Banks took the position that since the money was not coming in to cover the loans (because the loans were not in the asset pool that issued the mortgage bond and therefore the mortgage bond was NO evidence of ownership of the loan) that therefore they could apply the money any way they wanted, and that is where the government left it, to the astonishment and dismay of the the rest of the world. that is when world economies went into a nose dive.

The whole purpose of the mega banks in in entering into trial modification was actually to create the impression that the mega banks were modifying loans. But to the rest of us, the trial modification was supposed to to be last hurdle before the disaster was finally over. Comply with the payment schedule, insurance, taxes, and everything else, and it automatically becomes your permanent modification.

Not so, according to Bank of America, Wells Fargo, Chase, Citi and their brothers in arms in the false scheme of securitization. According to them they could keep the money paid by the borrower to be approved for the trial modification, keep the money paid by the borrower to comply with the terms of the trial modification and then the banks could foreclose making up any excuse they wanted to deny the permanent modification. The sole straw upon which their theory rests is that they were only obligated to "consider" the modification; according to them they were NEVER required to make it such that the modification would become permanent unless the bank expressly said so, which in most cases it does not.

When you total it all up, the Banks received a minimum of $2.50 for each loan "out there" regardless of who owns it. Under the terms of the promissory note signed by the borrower, that means the account is paid in full and then some. If the investor has not stepped up to file a competing claim against the borrower's new claim for overpayment, then the entire overage should be paid to the borrower.

The Banks want to say, like they did to the government, that the trial modification is nothing despite the presence of an offer, acceptance and consideration. To my knowledge there are at least two judges in Florida who think that is a ridiculous argument and knowing how judges talk amongst themselves behind closed doors, I would expect more of these decisions. If the borrower applies for and is approved for trial modification and they comply with the trial provisions, a contract is formed.

The foreclosure defense attorney in Palm Beach County argued SIMPLE contract. And the Judge agreed. My thought is that if you are in a trial modification get ready to hire that attorney or some other one who gets it and can cover your geographical area. Once that last payment is made, and in most cases, the payment is continued long after the trial modification period is officially over, the Bank has no equitable or legal right to deny the permanent modification.

The only caveat here is whether the Judge was correct in stating the amount of principal due without hearing evidence on third party payments and ownership of the loan. WHY WOULD THE BANK WANT LESS MONEY IN FORECLOSURE RATHER THAN MORE MONEY IN A MODIFICATION? The answer is that out of the $2.50 they received for the loan, they would be required to refund $2.50 because the Bank was supposed to be an intermediary, not a principal in the transaction. So the balance quoted by the judge without evidence was quite probably wrong by a mile.

If there is any balance it is most likely a small fraction of the original principal due on the promissory note. And, as we have been saying for years, it is most likely NOT due to the party that is entering into the modification. This last point is troubling but "apparent authority" doctrines might cover the problem.

Every time a loan does NOT go into foreclosure, the Banks' representation of defaults and the value of the loan (in order to trigger insurance and other third party payments)  come under question and the prospect of disaster for the Bank rises, to wit:  refunding trillions of dollars in insurance and CDS money as well as money received from co-obligors on the bond (the finished product after the note was moved through the manufacturing process of a false securitization scheme).

Every time a loan is found NOT to have actually been purchased by the asset pool (REMIC, Trust etc.) because there was no money in the asset pool and that the investors merely have an equitable right to claim the note and mortgage under constructive trust or resulting trust theories, the validity of the mortgage encumbrance fades to black. There is no such thing as an equitable mortgage lien or an equitable lien of any sort. And there is plenty of good sense and many law review articles as well as case decisions that explain why that is true.

151729746-Posti-Final-Judgment-062513

PRACTICE HINT FOR ATTORNEYS: Whether you are litigating or negotiating, send a preservation letter to every possible party or witness that might be involved. That way when you ask for production, they can't say they destroyed or lost it without facing severe consequences. It might even stop the practice of the Banks trashing all documents periodically as has been disclosed in the whistle-blower affidavits from BOA and other banks.

Boa desperate again

WHY ARE THE BANKS FIGHTING TO GET AS LITTLE AS POSSIBLE FROM EACH "FAILED" LOAN?

A drama is playing out in the state of Massachusetts. Bank of America is pretending to be the lender or the authorized servicer or both. But it outsourced the task of dealing with borrowers seeking modification. The company that was used is Urban Lending Solutions (ULS).  A deposition was taken from a knowledgeable source from within ULS.  The attorney  taking the deposition was merely looking for evidence of a script prepared by Bank of America that ULS employees were to follow. Not only was the script uncovered but considerable other evidence suggested institutional policies at Bank of America that were in direct conflict with the requirements of law, and in direct violation of the settlements with the Department of Justice and the banking regulators.

The transcript of the deposition was sealed at the request of Bank of America, which the borrower did not interpose any objection. Now there are a lot of people who want to see that deposition and who want to take the deposition of the same witness and other witnesses at ULS who might reveal the real intent of Bank of America. The question which is sought to be answered is why the mega banks are fighting so hard to take less money in a foreclosure sale then they would get in a modification or even a short sale. The policy is obvious. Borrowers are lured into a hole that gets deeper and deeper so that foreclosure seems inevitable and indefensible. Even after a successful trial modification the banks are turning down the permanent modification, as though they had the power to do so.

Now a number of attorneys are preparing motions to the trial court in Massachusetts to unseal the transcript of the ULS employee. Bank of America is opposing these efforts on the grounds of "confidentiality" which from my perspective makes absolutely no sense. Why would Bank of America share confidential information or trade secrets with a vendor whose only purpose was to interfere with the modification process? My opinion is that the only information that Bank of America wishes to keep secret is that the instructions they gave to ULS clearly show that Bank of America was not interested in anything other than achieving a foreclosure sale in as many cases as possible.

In nearly all cases the modification of the loan more than doubles the prospect of proceeds from the loan and in some cases approaches 100%. Thus the full-court press from the megabanks to go to foreclosure is a mystery that will be solved. My sources from inside the industry together with my own analysis indicates that the reason is very simple. The banks took in money from investors, insurers, counterparties in credit default swaps, the Federal Reserve, the Department of the Treasury and other parties based on the representation of the banks that (A) the banks owned the mortgage bonds and therefore on the loans and (B) there was a loss resulting from widespread defaults on mortgages. Under the terms of the various contracts within the false chain of securitization and the Master servicer had sole discretion as to whether or not the value of the mortgage bonds and the asset pools had declined and had sole discretion as to the amount of the loss caused by the defaults.

As a general rule of thumb, the banks computed value of the collateral at around 25% and therefore received payment to compensate the banks for a 75% loss. They received the payment several times over and then sold the mortgage bonds to the Federal Reserve for 100% of the face value of the bonds. It can be fairly estimated that they received no less than 250% of the principal amount due on each of the loans contained within the asset pool that had issued each mortgage bond. While they had to create the appearance of objectivity by showing a number of the loans as performing, they intentionally overestimated the number of loans that were in default or were in the process of going into default.

Let us not forget that while nobody was looking the Federal Reserve has been "purchasing" the worthless mortgage bonds at the rate of $85 billion per month for a long time and doesn't appear to have any intention of stopping that flow of money to banks that have already received more than 100% of the principal due on the notes. And lest you be confused, the money the banks received should have gone to the investors and should never have been by the banks.

Since the banks received 250% of the principal amount due on the loan, and actual recovery from the borrower of 100% on the loan would leave the banks with a liability to all of the third parties that paid the banks. The refund liability would obviously be 150% of the principal amount due on the loan and the banks would be required to turn over the hundred percent recovery from the borrower to the investors adding to their liability.

But if the case goes through a foreclosure sale, the banks can take a comfortable position that the number of defaults and the depth of the loss was as great as they represented when they took payment from insurers and other third parties. The liability of 250% is completely eliminated. Thus while it might appear to be in the bank's interest to take a 60% recovery from the borrower instead of a 25% recovery from a foreclosure sale, the liability that would be created each time alone was modified or settled would dwarf the apparent savings to the pretender lender or actual creditor.

The mere fact that they went to great lengths to seal the transcript indicates how vulnerable they feel.

PRACTICE MEMO TO FORECLOSURE DEFENSE LAWYERS

As a condition precedent I would suggest that in all cases where we feel the deposition transcript would be helpful I think it would create more credibility if you issued a subpoena duces tecum directed at Urban to produce the witness whose deposition was sealed in the existing case and to bring those records that were requested or demanded at that deposition. One of the questions that needs to be answered is whether the witness witness is still working for Urban, whether the witness has "disappeared", and whether his testimony has changed --- thus we would need the other deposition to test credibility and perhaps get exhibits that BANA either didn't object to, which means they waived confidentiality. If they do not move to quash the subpoena then they might also be arguably waiving the confidentiality objection.

If they do object, you have two bites of the apple --- if they move to quash they must state the grounds other than than it will damage their chances in litigation. The trial court would then hear the objections and of course each if the cases that could benefit from unsealing the deposition results in a hearing, then several judges would hear the same objection. The likelihood is that the objection would attempt to bootstrap the order sealing the deposition as reason enough to quash the subpoena. That in turn puts pressure on the Massachusetts judge to release the transcript.

The more Motions filed the better. So I would suggest that we reach out through media to get as many people as possible with separate motions saying that sealing the deposition is causing a disruption in due process. Since Urban reached out on behalf of BANA --- an allegation that should be made in opposition test the motion to quash the subpoena in each case --- exactly what confidential information needs to be protected? Has the Massachusetts court heard a motion in liming preventing the use of the deposition at trial? If not, then the objection is waived since the Plaintiff will clearly use the deposition at trial, if there is one.

The other issue is that BOA can't simply allege confidentiality rather than strategy in litigation. They must state with particularity what could be possibly confidential. There is no attorney-client privilege, there is no attorney work product privilege.  At first Bank of America disclaimed any knowledge or relationship with ULS.  When it became obvious that the relationship existed and that ULS was using Bank of America letterhead to communicate with borrowers they finally admitted that the relationship existed and then went one step further by alleging confidentiality and trade secrets so that the contract and instructions between Bank of America and ULS would never see the light of day., For a company that BOA disclaimed any knowledge but who used BOA stationery they were clearly an agent of BANA. What exactly could Urban have other than information about modification and foreclosure? I would also notice or subpoena BANA to produce the person who signed the contract with Urban and to bring the contract with him or her. Who received instructions from BOA? Where are those instructions? Were they produced at the sealed deposition.

 If the Massachusetts court does not unseal the transcript, doesn't this give BOA an opportunity for a do-over where they fabricate documents that are different from those produced in the sealed deposition?

What were the instructions to Urban? What was the goal of the relationship between BOA and URban? Where are the scripts now that we're produced in the sealed deposition?

Were the instructions to Urban the same as the instructions to all vendors assisting in the foreclosure process? Why did BOA even need Urban if it had proof of payment, proof of loss,  proof of ownership of the loan? We want to know what scripts were used by Urban and whether the same scripts were distributed to other vendors whose behavior could be plausibly denied. Discovery is a process by which the party seeking it must only show that it might lead to the discovery of admissible evidence. THE POINT MUST BE MADE THAT THE DEFENSE FOR WHICH WE ARE LOOKING FOR SUPPORT AND CORROBORATION IS THAT THE POLICY AND PRACTICE OF BOA WAS TO MOVE PEOPLE INTO DEFAULT BY TELLING THEM TO STOP MAKING PAYMENTS. WE WANT TO SHOW THAT THEIR GOAL WAS FORECLOSURE NOT MODIFICATION CONTRARY TO THE REQUIREMENTS UNDER HAMP AND HARP AND THAT RATHER THAN PROCESS MODIFICATION OR SETTLEMENTS THE POLICY WAS TO DERAIL AS MANY AS POSSIBLE TO GET THE FORECLOSURE EVEN IF IT MEANT THAT THE INVESTORS WOULD GET LESS MONEY? Why?

The instruction was to use the promise or carrot of modification to trick the homeowner into (a) acknowledging BOA as the right party (b) stop making payments causing an apparent default and causing an escrow shortage (c) thus assuring the foreclosure sale despite the fact that BOA never acquired and (d) thus assuring that claims against them from investors (see dozens of law suits against BOA) and from insurers and counter parties on credit default swaps and payments from co-obligors based on the "default" that BOA fabricated --- payments that involved more than the loan itself in multiples of the supposed loan balance.

This is an important battle. Let's win it. There is strength in numbers. We might find the scripts were prepared by someone who used scripts from other banks and that the banks were in agreement that despite the obligations under HAMP and HARP and despite their ,rinses in the AG and OCC settlement, their goal is to foreclose at all costs because if the general pattern of conduct is to settle these loans and make them "performing" loans again it is highly probable that for each dollar of principal that gets taken of the table there is a liability or claim for $10. This would establish that the requirements of HAMP and HARP has resulted in negotiating with the fox while the fox is in the henhouse getting fat.