How Does Insurance Payee Match Up with Claims of Ownership of the Loan?

by Neil Garfield

There have been many admissions by government officials and even parties to the litigation over mortgage Foreclosures to the effect that at this point the ownership of most loans is in doubt. Even President Obama said it, reflecting the views and advice of the senior advisors at the White House. On appeal, recently in California, BOTH sides admitted they had no way of identifying the true creditor --- and that is why we have all this litigation, why we have gridlock on modifications and settlements. So what do we do?

One insurance expert I interviewed suggested that his industry might solve the problem, but I think his points raise more questions than answers. Nonetheless, to prove the question, and overcome certain presumptions that are legally applied, examining the insurance policies and the changes that occur in forced placed insurance might reveal the issues and even illuminate the potential solution.

Bank of America is an example of a bank that rushes to take any excuse to place insurance from their own carrier BalBOA, naming BOA as the loss payee on liability policies. The usual previous loss payee was someone else --- perhaps the originator or some alleged assignee. The procedure of forced placed insurance creates both additional income to the bank and skips over the question of who owns the loan. When the insurance is reinstated or shown to have never lapsed in the the first place, it often names BOA thus lending support to the bank's position that it is the owner of the loan.

Looking at the title insurance, who is the loss payee? Besides the owner's policy there is a rider for the mortgagee named in the mortgage. Of course that party may not be a mortgagee when the mortgage is examined carefully. But changes in loss payees under title insurance usually requires notice and consent of the owner of the property.

Thus the question could be asked in Discovery about who was responsible for tracking title insurance, liability insurance and PMI, why does the policy name a loss payee other than the bank claiming ownership and what efforts were made by the bank to correct the identity of the creditor?

The same thing applies to PMI. If the payee is somebody different than the Forecloser you will notice that none of the banks allege that this is a breach of the mortgage contract. Why not? I think it is because the insurer would demand more proof than what is offered in court as to ownership and that the bank would not be able to satisfy the insurer that it had an insurable interest in the property.

#AskObamaHousing

Well, so he answered some questions, but here's some more.
 #AskObamaHousing- President Obama, what is being done, about these private hedge funds, that suddenly come up with false paperwork that has been missing for years, with no assignments , no Allonge, nothing to show where they got them from and courts allowing this as proof , they own a note?

#AskObamaHousing -President Obama, Land records not recorded to show proof of ownership, and Judges FIXING them, this clearly shows Title Fraud, and leaves the homeowners in a situation of someone coming back to them, down the road creating more problems. The homeowners have a right to know who has their homes, and this is being denied by Judges across the country, and here in VT.

#AskObamaHousing -President Obama, What about Chase and the FDIC , allowing foreclosures of Washington Mutual and Long Beach Notes, that clearly were not there's to begin with? Example# Yes, we OWN both your  notes ( Chase explains) they send you all the paperwork, the note, the mortgage, HUD papers. Everything is now in order and for the first time in 5 years , someone actually shows they own the note and mortgage Started in Sept 2006- Its now Summer of 2011 . Yet, the Judge who never saw this paperwork, allows in Dec 2008, Deustsche Bank to intervene saying, we bought the note in Sept 2006, yet, no land records recorded, no papers to show proof, no Bill of Sale that directly showed ownership ( they will make some up in 2012) Than in 2010 sells the note , still not showing how they bought it, to Archbay Holdings LLC 2010B - and than they sign land records, ( which still clearly show on the town records Long Beach Mortgage owns its , and this is in 2010) Their is NOTHING  on the record that shows Deutsche Bank ever owned this note or was given to them by, Washington Mutual, Long Beach or Chase, Yet, the Judge allows Archbay to intervene.. still no proof of ownership. ( private Hedge fund that failed in 2012, and was taken over by York who funded it and removed all employees and CEO) Than after almost a year of Chase saying they owned it, they come back and say Oh, we made a mistake , were sorry,. we never owned the first note or had it in our possession! HUH? Yet, they sent all the papers and even CC the VT States Attorney and the OCC in 2011 , telling them as well they owned it. Suddenly, Archbay sells it to Roosevelt Mortgage and low and behold they have ALL the paperwork in 2013~The Judge sees it , and gives them my home! I have spent over 70,000.00 and I didn't get a federal bail out check, because I believed Chase! I am now selling my business to save my home, because all my savings , EVERYTHING is gone, because of of theft and loading the courts with paperwork to stall, for 7 years! Not to mention a Judge who just wanted this over , not allowing my lawyer or I to see how this note went from Long Beach to ending up in Roosevelts hands with all the documents that were never there before., or allowing me my rights to appeal. 
I was charged for insurance ( I had insurance) Its an outrageous sum.
I was charged 365.00 for a drive by appraisal ( he stated the house was worth 160,000.00- 165,000.00 when a honest appraiser came just a year and a half before and appraised it at 117,000.00. )
 OH, and I forgot to mention, how Chase in late 2012 stated after reviewing there records-AGAIN - nothing ever showed of a sale to Deutsche Bank only servicing transferred to Select Pro-Folio Services on Oct 2006, in which Washington Mutual remained as Master Servicer, which is how Chase had the original documents to begin with! Not to mention , how, even Select Pro-Folio Services lawyer never heard of Deutsche bank owning the note in OCT 2008. 
So whats your take on this question President Obama?  
 
 #AskObamaHousing -President Obama,Are you aware of the many frauds still happening in this country? My answer is NO. People are subject to this still , happening NOW, and its being done by Hedge Funds being funded by the BIG Banks to hide the fraud and are still taking peoples home! What is being done about this? I know , NOTHING!



 #AskObamaHousing -President Obama- How about you, come to these actual foreclosures, or with the Sheriffs and see for yourself the abuse actual homeowners you FORGOT, are enduring. Or how about you tell the children and the families, that nobody will work with you , because they want the homes because they can't rewrite these notes! How about YOU, take a stand for these people, like you promised during the re-election.

#AskObamaHousing -President Obama- I forgot to mention to you, I went looking for these people myself  and to try and find the truth of who owned my home in 2008, because I knew when Deutsche Bank stepped in, something was wrong, I thought I found it when Chase said after 5 months of looking , that they owned my home and, even told my lawyer they owned my note  and  would work with me to  fix the problems so I could pay for it, see I wasn't  trying to do anything but PAY for my home , that was over appraised by Long Beach appraisers, and nobody would let me.. Nobody wanted my money, just my home. 
I also forgot to mention that a week after Chase claimed they made a mistake , satisfied the second mortgage paid in full and stated it on the credit report and with town records as well . Not a dime was paid for it , but they wrote it like it was and did I forget to mention how Long Beach still has an open foreclosure on record for the first note that dates back to May 2006? So this ends my story.. but sir, there are millions more.  
It would be nice to have these questions answered - #AskObamaHousing

Obama Takes to Social Media to Address Housing Issues

Wed, 2013-08-07 18:07 — Robert Ottone

President Barack Obama, fresh off discussing the potential elimination of government-sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac, discussed his housing plan online, fielding questions from Vine, Twitter and other social media outlets using the hashtag #AskObamaHousing for a virtual roundtable discussion. Questions for the President began pouring in well before the designated start time and varied from topics, such as cities facing monumental foreclosures (like in Detroit), to what proposed initiatives have been outlined for those with already-existing portfolios. While the President was unable to field every question, he answered quite a few.
Calling the roundtable, A Better Bargain, the President, along with Zillow CEO Spencer Rascoff moderated the event. While some of his answers were fairly standard, the President tackled a few curveballs, notably indicating that he is still pushing for a government refinance program, with interest rates being so low.
Obama also praised those who wish to rent, which he describes as a “safe” alternative to purchasing a home. Not long after giving that response, Obama answered a question regarding Fannie Mae and Freddie Mac with "You can't have a situation in which the government is underwriting and guaranteeing all the mortgage lending,” adding, “The private market can step in and do a good job and government can be a backstop." This is, of course, alluding to the work that Sens. Tim Johnson (D-SD) and Michael Crapo (R-ID) have been doing in their efforts to outline the potential dissolving of the GSEs.
The President also indicated that change isn’t immediate and that new laws and regulation could take time. The concept of shocking the market with such an abrupt change isn’t something that anyone in the Obama White House is looking to do.
"This is something that would have to be phased in,” Obama said.
Obama also put an emphasis on the Consumer Finance Protection Bureau (CFPB) and the Bureau's push towards transparency. "The more knowledge consumers have the more empowered they are going to be,” Obama said.

Gotta love Bank of America -NOT

Bank of America Corp. opened a unit in India to review home-valuation reports as it seeks to rebuild share in U.S. mortgages at a lower cost, said four people with knowledge of the move.
Workers in the new Bangalore office follow checklists to determine if appraisals are complete, said the people, who requested anonymity because they weren’t authorized to comment. The firm also eliminated jobs of licensed U.S. workers in its LandSafe business, the appraisal division of the Charlotte, North Carolina-based company, which made $78.7 billion in loans last year, the people said.

Enlarge image

Bank of America Corp. has paid the most of any U.S. lender to put the housing mess behind it, spending more than $45 billion to resolve claims from shoddy loans and foreclosures after buying Countrywide for $2.5 billion in 2008. Photographer: Davis Turner/Bloomberg

“One of the biggest problems in the mortgage business is all the paperwork involved, and how do you engineer it to reduce the bottlenecks,” said Bert Ely, an independent banking consultant in Alexandria, Virginia. “With offshoring, the potential for problems is always there, but it’s hard to be critical for trying to minimize costs.”

Lenders around the world have vowed to boost revenue and curb spending to make up for sluggish loan growth and new regulations. Bank of America, which spent more than $45 billion to settle disputes tied to defective mortgages and foreclosures, is among the most aggressive cost-cutters with Chief Executive Officer Brian T. Moynihan planning to save $8 billion a year. The firm slipped from being the biggest U.S. mortgage lender in 2008 to fourth last year.
Other firms have added staff in lower-cost cities. Goldman Sachs Group Inc., the New York-based investment bank, saw headcount in places including Bangalore and Salt Lake City almost double since 2007 to 22 percent of employees, CEO Lloyd Blankfein said in November. Barclays Plc (BARC) said today it planned to move 4,000 more jobs overseas and to lower cost locations by 2015 to save as much as 250 million pounds ($381 million).

Staff Cuts

LandSafe has more than 2,000 associates in the U.S., according to the Plano, Texas-based firm’s website. In addition to appraisals tied to new home loans, it also conducts valuations on Bank of America’s portfolio of delinquent loans, of which the company had 667,000 on March 31. In February, the lender cut about 5 percent of LandSafe employees, saying they weren’t needed as overdue loans fell.
Licensed reviewers, who check the accuracy of appraisal valuations and can earn more than $100,000 a year, were among those who lost their jobs, the people said.
Bank of America’s program prevents paperwork errors from delaying loan applications, said Terry Francisco, a spokesman for the second-biggest lender by assets. The overseas completeness checks, begun in August, don’t replace in-depth reviews done by licensed U.S. staff, he said.

Overall Consideration

“The overall consideration isn’t necessarily cost, although cost can be an element,” Francisco said. “What we’re looking for is if there are patterns in certain areas where it looks like the reviews aren’t necessarily needed anymore.”
The U.S.-based reviewers, who typically had at least five years of experience as appraisers, are required to confirm accuracy by doing independent assessments that conform to industry standards, the people said. The checklists in India cover 17 items such as whether the appraiser remembered to sign the report and include photographs of rooms, according to a copy obtained by Bloomberg.
Relying more on checklists may increase the odds of defective reports going undetected, said Karen Mann, a Discovery Bay, California-based appraiser who testified for the Financial Crisis Inquiry Commission’s 2011 report. The FCIC examined the causes of the housing bubble and subsequent 2008 credit crunch.

Knowing Shortcuts

“Experienced, licensed appraisers know the shortcuts people take, so those reviewers can be invaluable,” Mann said. “With the checkboxes, they’re looking for things that don’t really have anything to do with values.”
LandSafe workers complained last year about the decline in review work and its impact on their pay and job security, said a person with direct knowledge of the internal discussions. In response, LandSafe executive Tracy Sanderson said management couldn’t increase the number of reviews because of the expense, the person said. Sanderson didn’t return calls seeking comment.
Bank of America was forced to pay the most of any U.S. lender to put the housing mess behind it after Moynihan’s processor Kenneth D. Lewis bought Countrywide Financial Corp. in 2008. The firm has finished paying the “lion’s share” of costs tied to faulty mortgages, Moynihan said in March.
Under Moynihan, 53, the firm pulled back as it struggled to fend off regulators and lawsuits. The company made $78.7 billion in home loans last year, or about 4 percent of the market, compared with $315 billion in 2008, when it had more than 20 percent, according to newsletter Inside Mortgage Finance.

Building Back

“We’ve been building that back up, and expect to be in the 5 percent area as we exit the second quarter,” Chief Financial Officer Bruce Thompson told analysts on June 11, adding that he expected market share would continue to rise. San Francisco-based Wells Fargo & Co. (WFC) is ranked first, creating almost 1 in 3 U.S. mortgages last year.
Lenders are under pressure to reduce costs because demand for refinancings, the biggest source of volume for the firms, is falling amid surging mortgage rates. The average rate for a 30-year fixed loan rose to 4.46 percent from 3.93 percent, the biggest one-week increase since 1987, McLean, Virginia-based Freddie Mac said yesterday in a statement.
Bank of America, which doesn’t disclose how many workers are outside the U.S., had 262,812 employees as of March 30, or 5.7 percent fewer than a year earlier. Its shares fell 1.2 percent at 4:15 p.m. in New York to $12.86 paring the gain in the past 12 months to 66 percent. The bank has plunged from a closing high of $54.90 in 2006.


PRICELESS THEY OUTSOURCE JOBS THEY TOOK FROM US. 

BOA, Deutsche Bank, Countrywide

FOR the last two weeks, a justice in New York State Supreme Court has heard testimony in one of the most pivotal cases of the financial crisis. The hearings will tell whether Bank of America can extinguish legal liability for more than a million Countrywide Financial loans by paying $8.5 billion in cash and agreeing to loan servicing improvements in a settlement struck with 22 investors in 2011.

But the case, being heard by Justice Barbara R. Kapnick, extends far beyond the impact of the settlement on Bank of America’s balance sheet. It is also laying bare an industry practice that has put investors in mortgage securities at a disadvantage and reduced their financial recoveries in the aftermath of the home loan mania.

The practice at issue involves trustee banks overseeing the vast and complex mortgage pools bought by pension funds, mutual funds and others. Trustees like Bank of New York Mellon were paid by investors to make sure that the servicers administering these mortgage deals, known as trusts, treated them properly. Trustees receive nominal fees — less than a penny on each dollar of assets — for the work.

But when mortgages soured, trustees declined to pursue available remedies for investors, such as pushing a servicer to buy back loans that did not meet quality standards promised when the securities were sold.

In other words, this case highlights a problem with trustees: they are a dog that could have barked but didn’t.

Before mortgage securities were undone by troubled loans, trustee inaction was not an issue. Trustees collected their fees at minimal effort and investors were satisfied.

But because trustees are hired by the big banks that package and sell the securities, their allegiances are divided. Sure, investors are paying the fees, but if a trustee wants to be hired by sellers of securities in the future, being combative on problematic loan pools may be unwise.

Trustee practices are under the microscope in Justice Kapnick’s courtroom because Bank of New York Mellon is the trustee overseeing all 530 Countrywide mortgage deals covered by the proposed $8.5 billion settlement. The trustee is supporting the deal between Bank of America and the 22 investors that include BlackRock, Pimco and the Federal Reserve Bank of New York. Losses by all investors in the securities are projected at $100 billion.

While lawyers for BlackRock and Pimco were negotiating this deal, other investors in the securities were not at the bargaining table. Nevertheless, they must abide by the settlement’s terms.

Some outside investors, including the American International Group, have objected, saying $8.5 billion is inadequate given the mountain of problem loans it covers. Lawyers for A.I.G. contend that Bank of New York put its interests ahead of other investors outside the settlement process. Had the trustee been more aggressive with Bank of America, the servicer administering the troubled securities, investors would have received more money in a settlement, A.I.G.’s lawyers say.

Bank of New York Mellon argues that the settlement is reasonable and that it has always acted in the best interests of all investors. 

But over the last two weeks, arguments and testimony have shed light on behind-the-scenes dealings during the settlement negotiations with Bank of America. Some of these details raise questions about the trustee’s assertiveness on behalf of all investors.

A crucial issue: the trustee didn’t request individual loan files from Bank of America to help determine how many mortgages had problems and, therefore, whether $8.5 billion was a reasonable recovery. A trustee has the right to request those files for investors who cannot get them on their own.

When loan files have been examined, recoveries have been far greater. Last year, for example, Deutsche Bank agreed to reimburse Assured Guaranty, a bond insurer, for 80 percent of losses on eight residential mortgage securities it had insured.

Asked about the basis for the $8.5 billion settlement, Kent Smith, a Pimco executive with experience in loan servicing, testified on June 7 that it came in part from an estimated percentage of problematic loans that was provided to the investors by Bank of America. But on cross-examination, he said the estimate was far lower than it would have been if Bank of New York Mellon had examined specific loan files.

The estimate, 36 percent, meant that just over one-third of the loans had violated underwriting representations and warranties made to investors. But a review of the loan files would have pushed the figure as high as 65 percent, he testified.

Additional testimony raised questions about fairness during the settlement talks. The 22 investors who struck the deal held at least 25 percent — a required threshold for taking action — in only 215 trusts, less than half the 530 covered by the settlement. No other investors had an advocate at the bargaining table. Asked who was representing investors outside the negotiating group, an in-house lawyer for Bank of New York Mellon said he did not know.

Then there’s an e-mail from Jason H. P. Kravitt, Bank of New York Mellon’s outside counsel, recounting how he told Bank of America that on one important point its and the trustee’s “self-interest” were aligned — neither wanted the Countrywide securities to go into default. If they did default, the trustee would have been forced to increase its oversight of Bank of America, adding to its costs. If the trustee did not sue the bank, investors could. 

Referring to a default, Mr. Kravitt said he told a Bank of America lawyer, “We don’t want it either, Chris.”

Asked about these matters, Kevin Heine, a Bank of New York Mellon spokesman, said, “We believe an $8.5 billion bird-in-the-hand settlement with significant servicing improvements is a far better result for all investors than the likely outcome following years of costly litigation.”

Trustees argue that they do not make enough money overseeing these loan pools to act on investors’ behalf. But this could be resolved if the Securities and Exchange Commission allowed or encouraged trustees to use trust assets to pay for loan reviews or litigation.

Justice Kapnick’s decision is not expected for months, and will affect only this settlement. But the revelations in her courtroom send a message to investors who might have expected trustees to protect their interests with more vigor. 

A note from livinglies

 by Neil Garfield

Editor's Comment: Finally the questions are spreading over the entire map of the false securitization of loans and the diversion of money, securities and and property from investors and homeowners. Read the article below, and see if you smell the stink rising from the financial sector. It is time for the government to come clean and tell us that they were defrauded by TARP, the bank bailouts, and the privileges extended to the major banks. They didn't save the financial sector they crowned it king over all the world.

Nowhere is that more evident than when you drill down on the so-called "trustees" of the so-called "trusts" that were "backed" by mortgage loans that didn't exist or that were already owned by someone else. The failure of trustees to exercise any power or control over securitization or to even ask a question about the mortgage bonds and the underlying loans was no accident. When the whistle blowers come out on this one it will clarify the situation. Deutsch, US Bank, Bank of New York accepted fees for the sole purpose of being named as trustees with the understanding that they would do nothing. They were happy to receive the fees and they knew their names were being used to create the illusion of authenticity when the bonds were "Sold" to investors.

One of the next big revelations is going to be how the money from investors was quickly spirited away from the trustee and directly into the pockets of the investment bankers who sold them. The Trustee didn't need a trust account because no money was paid to any "trust" on which it was named the trustee. Not having any money they obviously were not called upon to sign a check or issue a wire transfer from any account because there was no account. This was key to the PONZI scheme.

If the Trustees received money for the "trust" then they would be required under all kinds of laws and regulations to act like a trustee. With no assets in a named trustee they could hardly be required to do anything since it was an unfunded trust and everyone knows that an unfunded trust is no trust at all even if it exists on paper.

Of course if they had received the money as trustee, they would have wanted more money to act like a trustee. But that is just the tip of the iceberg. If they had received the money then they would have spent it on acquiring mortgages. And if they were acquiring mortgages as trustee they would have peeked under the hood to see if there was any loan there. to the extent that the loans were non-confirming loans for stable funds (heavily regulated pension funds) they would rejected many of the loans.

The real interesting pattern here is what would have happened if they did purchase the loans. Well then --- and follow this because your house depends upon it --- if they HAD purchased the loans for the "trust" there would have no need for MERS, no trading in the mortgages, and no trading on the mortgage bonds except that the insurance would have been paid to the investors like they thought it would.

If they HAD purchased the loans, then they would have a recorded interest, under the direction as trustees, for the REMIC trusts. And they would have had all original documents or proof that the original documents had been deposited somewhere that could be audited,  because they would not have purchased it without that. Show me the note never would have gotten off the ground or even occurred to anyone. But most importantly, they would clearly have mitigated damages by receipt of insurance and credit default swaps, payable to the trust and to the investment banker, which is what happened.

No, Reynaldo Reyes, it is not "Counter-intuitive." It was a lie from start to finish to cover up a PONZI scheme that failed like all PONZI schemes fail as soon as the "investors" stop buying the crap you are peddling. THAT is what happened in the financial crisis which would have been no crisis. Most of the loans would never have been approved for purchase by the trusts. Most of the defaults would have been real, most of the debts would have been real, and most importantly the note would be properly owned by the trust giving it an insurable interest and therefore the proceeds of insurance and credit default swaps would have been paid to investors leaving the number of defaults and foreclosures nearly zero.

And as we have seen in recent days, there would not have been a Bank of America driving as many foreclosures through the system as possible because the trustee would have entered into modification and mitigation agreements with borrowers. Oh wait, that might not have been necessary because the amount of money flooding the world would have been far less and the shadow banking system would be a tiny fraction of the size it is now --- last count it looks like something approaching or exceeding one quadrillion dollars --- or about 20 times all the real money in the world.

At some point the dam will break and the trustees will turn on the investment banks and those who are using the trustee's name in vain. The foreclosures will stop and the government will need to fess up tot he fact that it entered into tacit understandings with scoundrels. When you sleep with dogs you get fleas --- unless the dog is actually clean.