Jacksonville foreclosure court in national focus
Even Rolling Stone takes issue with city’s legal system.
Originally published in the Jacksonville Times.
By Roger Bull
The New York Times has come down for multiple visits and written multiple stories. The Wall Street Journal and NPR were here. CNN was filming Monday and Tuesday, and Rolling Stone’s lengthy article hits the newsstands today.
The subject: Florida’s foreclosure courts. Or more specifically, the foreclosure court in Jacksonville.
The foreclosure mess — from the originating loans to the bundling, selling and reselling of the loans to the questionable tactics used in the foreclosures themselves — has been major news across the country recently. But nowhere is the light of attention shining brighter than it seems to be in Northeast Florida.
“It’s really escalated the last three or four weeks,” said Mark Kessler, who is in the 4th Circuit foreclosure court almost daily representing lenders.
“I’m being interviewed constantly,” said James Kowalski, a Jacksonville lawyer who has been defending mortgage foreclosures for 10 years now.
According to a recent Wall Street Journal article, Kowalski started the type of defense that “has sown confusion and turmoil in the housing market.”
Kowalski laughed at that representation, but did concede it has been defense lawyers who have brought the spotlight here.
“It’s because of Jacksonville Area Legal Aid,” he said, “and no other reason.”
And that would be April Charney, a Legal Aid staff attorney who has become a national spokeswoman against what she considers abuses by the plaintiffs in foreclosure cases.
“The focus on Duval,” she said, “is because of the lawyers willing to step up. Me, Jim Kowalski, Chip Parker.”
Add to the list Senior Circuit Judge A.C. Soud, the retired judge in charge of the 4th Circuit’s foreclosure court. He is the central character in the Rolling Stone article. The headline — “Courts Helping Banks Screw Over Customers” — leaves no doubt about where it’s coming from.
Not about ‘saving the house’
Matt Taibbi, whose book on the financial crisis: “Griftopia: Bubble Machines, Vampire Squids, and the Long Con That Is Breaking America” came out last week, paints Soud as clueless and Kessler as worse.
“There’s a definite point of view,” Kessler said. “I guess they decide ‘We’ll make so-and-so to be the bad guy and rake him over the coals.’ What doesn’t seem to get brought out is that most of these mortgages are two and three years in default.”
Kowalski did make national news after a case in Maine where a GMAC employee admitted preparing 10,000 foreclosure files a month that no one had reviewed, despite documents swearing that they had been. That led to GMAC and other lenders freezing foreclosures in some states to investigate what’s now commonly called “robo-signing.”
But the judge in the Maine case pointed out that GMAC had promised not to do that anymore after Kowalski found evidence of robo-signing in a deposition he had taken several years earlier.
It’s all part of securitization, Kowalski said of the bundling of mortgages into packages that can be bought and sold.
“Everything that’s going on here in Florida,” Kowalski said, “has been going on for the better part of the decade. It’s embedded in the concept of securitization. The robo-signers, the mill law firms, problems with process serving, faking court documents.”
The process, he said, was created to maximize profits and those who don’t get the foreclosures done quickly enough don’t get more business.
“It’s not about saving the house,” he said.
Another reason the national attention on foreclosure is picking up, he said, is that the bundling of mortgages and the sales of those bundles to trusts was not done correctly, leaving ownership of the mortgages in doubt. Not only are homeowners losing their homes, investors stand to lose billions, he said.
“They’re saying ‘Wait a minute, we just realized that you sold us air.’”
Closed off from court
So as the media try to sort out the whole thing, they often find themselves in Florida, where the state began special foreclosure courts this summer. Staffed by retired judges, the so-called “rocket docket” is charged with clearing a backlog of foreclosure cases.
Soud has set a goal of resolving 25 cases an hour. Almost all, he said, are uncontested, and that allows them to move so quickly.
But Soud said he wasn’t sure why so much attention has been focused here.
“I’m speculating that when one story is out and the out-of-state media sees it,” he said. “I’ve had reporters start off with ‘We saw your name.’”
That’s why Kessler figures a CNN producer gave him a call when the network came to town this week after seeing his name in either a Times-Union story or the Rolling Stone, which is available online.
Taibbi, the Rolling Stone writer, was accompanied to Soud’s courtroom on the fifth floor of the courthouse by Charney, and his visit produced its own drama. The media are allowed in the chambers, Soud said, but only with clearance. The judge’s access policy has drawn sharp criticism.
Soud was particularly unhappy that Taibbi followed a woman who was defending herself out of the courtroom and into the hall to interview her.
So in an e-mail to Charney, Soud threatened her with contempt.
“When you came this morning you did not have authority to take anyone back to chambers without proper screening. This policy is in effect for security reasons,” Soud wrote.
“Please do not repeat such conduct in the future. Your unprofessional conduct and apparent authorization that the reporter could pursue a property owner immediately out of Chambers into the hallway for an interview, may very well be sited (sic) for possible contempt in the future.”
David Goldman, an attorney who handles foreclosure defense, said that the foreclosure court is the only one where access is that limited.
“They even keep our employees out,” he said. “Yesterday, we had a paralegal who was kept out until the case was called and the lawyer went out to get her.
“They’re courts,” he said. “And they should be open. Anyone should be able to get in and observe.”
As for the Rolling Stone article, Soud said he’d never read the magazine and doesn’t intend to.
It only took him a second to sign each foreclosure document.
That’s how good Tam Doan got at his job in Bank of America’s pre-sale foreclosure department in Southern California.
Of course, he didn’t have time to actually read the paperwork he was signing, he said, and in some cases, he didn’t even know what documents he was putting his pen to.
“I had no idea what I was signing,” said Doan. “Either you were in or you were out.”
The recent revelation that loan servicers had employees sign thousands of documents a month without verifying the information has thrown the foreclosure system into chaos. Judges are increasingly questioning whether the servicers have their paperwork in order.
Several of the largest servicers, including Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500), have halted foreclosures while they review their paperwork and processes. They want to ensure that the documents at the heart of the concerns — proof of the note, or debt — were signed properly.
Doan approached CNNMoney after the so-called robo-signing scandal came to light last month. After 18 months at Bank of America, he was terminated in early September for failing to follow policy, according to the servicer.
He said he was fired for how he calculated the value on homes destined for foreclosure sale.
If a property was missing a certification that the bank had done all it could to help the borrower, Doan said he would set the home’s value at 100% of the debt owed. The bank’s policy, however, was to set it at 85%, he said.
The foreclosure that started it all
Doan said he hoped the higher price would make it harder for the bank to sell the house at auction, and thus prompt Bank of America to work things out with the borrower.
He said he was also cited for not reporting to his bosses when an appraisal showed the foreclosure would result in a loss of more than $200,000.
Bank of America said Doan was involved only in an isolated part of the foreclosure process, and that his actions do not represent either its employees or the company’s overall operations. The servicer said it has many checks that catch errors, and if a mistake is found, it is corrected.
Foreclosure freeze: What does that mean?
“We’re not claiming perfection, nor can we,” said Dan Frahm, a bank spokesman. “We are committed to getting our process right and giving our customers confidence they are being treated fairly.”
Doan joined the servicer in late 2008, after spending 12 years in the securitization department at Countrywide Financial, which was acquired by Bank of America. His unit was responsible for getting delinquent loans ready for foreclosure sale.
He joined Countrywide as an intern, working an evening shift while studying marketing at California State University at Los Angeles. He loved the job and it paid well, so when a full-time position opened up, he jumped at it.
Unlike Countrywide, which he described as orderly, Doan said Bank of America’s foreclosure operations were chaotic and stressful. There weren’t enough people to do the job and they didn’t receive the training needed to do it properly.
“With the volume coming in, we were getting inundated,” he said, noting his workday often lasted from 7 a.m. to 8 p.m. “We were signing documents right and left.”
Of course, Doan could have spoken to his superiors about his concerns. But, he said he didn’t report his discomfort because he wanted to be seen as a team player. He feared he’d forfeit any chance of a promotion — and could even lose his job — if he complained.
Bank of America, however, said it has numerous avenues employees can pursue if they witnessed any problems with the foreclosure process.
Doan dealt with several types of documents and did varying levels of verification. He did not handle the paperwork involving the notes, he said.
On the brink of foreclosure
The paperwork he robo-signed most often were the notices to delinquent borrowers that the servicer was proceeding to foreclosure. By signing that document, he was affirming that the bank had reviewed the loan and it didn’t qualify for a modification. But, he said, the reality was he had no idea whether Bank of America had really tried to save the borrower’s home.
“We had no knowledge of whether the foreclosure could proceed or couldn’t, but regardless, we signed the documents to get these foreclosures out of the way,” he said, noting that he assumed another department had checked that the review was done.
In his final weeks on the job, a notary routinely left him stacks of 20-page files, each one with a tab indicating where he needed to sign or initial. He had no idea what those documents were.
He spent so many hours writing his name that his signature morphed into a series of four circles overlapping one another. He said that he and his co-workers joked that they got so used to the rapid-fire signatures that they started signing personal paperwork that way.
Doan, however, said he didn’t whip through every document placed before him.
One of his main tasks was checking the appraisal values and property conditions on homes going through the foreclosure process, as well as making sure there was no litigation that would block the sale. This he did do.
The servicer’s attorneys would also send him court documents he needed to review and sign. He often checked the simpler items, such as the unpaid balance or loan maturity date. But he said he didn’t have time to get into the more complex issues, such as checking the interest rate on certain adjustable rate mortgages.
Doan isn’t sure what his next step will be. He currently runs a cake-decorating company with his fiancé, while he figures out a new career path. He would consider returning to the mortgage industry since it had been so good to him, allowing him to buy a house, live comfortably and provide for his young daughter.
While Bank of America has accused him of trying to take advantage of the current media frenzy surrounding robo-signing, he said he is speaking out because the servicer wrongfully terminated him.
Now that he’s not in the thick of the foreclosure process, Doan said he has had time to reflect on what his actions meant. Each signature likely led to a borrower losing his or her home. While he got numb to that fact while he was on the job, he now feels guilty.
“I shudder to think how many foreclosure documents have my name on it,” he said.
Posted by George Beckus Esq
The Golik Law Firm
As even a casual glance will show you, we get many questions posted here. Not wishing our readers to think we are rude and ignoring them, let me explain why the stock answer to *any* legal question is, “Call an attorney. Today.”
The first good reason for our lack of response is simple. We are full time, practicing attorneys. Just last week, we finished a three-day attempted murder trial. (Our client was acquitted of 2nd degree attempted murder but convicted of the lesser included offense of aggravated battery, for anyone who is keeping score.) I also have literally dozens of foreclosure cases that demand my constant attention lest I blow it for my client, and I MUST give them priority.
The second reason is the really important one. If you rely on legal advice we give you based on incomplete or inaccurate information to your detriment, well, I’ll likely have to sell one of my organs to pay our future legal malpractice insurance rates. And that’s frankly in nobody’s best interest. Also, we don’t know where you are posting from. I’m admitted to the bar of the State of Florida and the United States District Court for the Middle District of Florida. I am wholly, completely, 100% absolutely prohibited from giving advice to someone in another state. I would be guilty of practicing law in that state without a license. I’ve dealt with speeding tickets in various and sundry states with no joy, I can’t imagine a charge like that would be any more fun.
So, dear readers, please understand why we HAVE to fall back on the cliched, hackneyed, but ONLY response we can give. Talk to an attorney. In your jurisdiction. Who has experience in the area of law you are seeking advice. Don’t trust the yellow pages or the internet? Every state’s bar association has lawyer referral lines. They’ll be happy to find you one of their people that can help.
In the meantime, please keep checking back here often. Our goal is to give you the information *here* that will answer your questions and prepare you to join battle with the lenders. You tell us how we’re doing.
Thank you, T.D. Golik
This was originally composed as an email to a friend in South Florida. It is submitted here for our readers to mull over.
You asked me to briefly sketch for you the possibility of class-action remedies for homewoners in foreclosure cases. For that, I’m going to have to go into a history of what has happened so far. Sorry if you already know most of this stuff, but I just can’t assume it. Let’s start by dealing with the most common scenario I face.
Mortgages during the refi boom, bundled together and sold as mortgage-backed securities were red-hot on Wall Street. There was a rush to bundle mortgages into investment trusts (such as Argent Securities Series 2006-2, which I see alot) and sell them to investors. Here’s the problem. SEC and IRS pass-through tax regulations, as well as the pooling and servicing agreements for these trusts that have to be filed with the SEC, all require that the trust corpus (the notes and mortgages) be transferred to the trust within limited periods of time, usually 90-120 days. This was far beyond the realm of possibility. Some experts have theorized that as many as 50% of original notes and mortgages were actually destroyed in order to prevent proof that they were not properly transferred.
Scenario one. Now, we have banks such as Deutsche Bank, and US Bank NA, as trustees for the investment trusts, suing to foreclose on these mortgages. In virtually every case, there is no assignment of the mortgage in anybody’s favor, and frequently the notes filed in the case contain no endorsement. A year later, when they begin summary judgment, original notes comes forward, properly endorsed. Because the endorsements are not dated, the assignments are usually better evidence of fraud. They are always prepared by the foreclosure firms, and are almost always signed by employees of Nationwide Title Clearinghouse in St. Pete, as officers of the original mortgage company. Beyond that, the motions for summary judgment always contain an affidavit of some employee of the trustee who claims to have examined all the documents, verified the amounts due, etc. In my experience, all of these signatures are as phony as three-dollar bills. But as you well know, proving it is difficult, expensive, and most judges just don’t care, they won’t hold up a foreclosure just so you can conduct a deposition, frequently of someone out of town. So the trustees foreclose, and people lose their homes. Many of these, of course, are subsequently sold at foreclosure auctions by innocent purchasers for value.
To the best of my understanding, these are clear violationsof the Fair Debt Collections Practices Act, in that they have used legal process to enforce and collect a debt they had no right to collect. However, in scenario number one, we run into an enormous series of problems. First of all, the misdeeds need to be uncovered. Not too much trouble there, at least here in Florida the AG is investigating all of these companies and foreclosure chop-shops. It will all come out. So what? What next? Who do you hold liable? Who is ultimately responsible? Deutsche Bank, for one example, is acting in the capacity of trustee. The real liable parties of violating the FDCPA are technically the owners (or better, purported owners) of the debts. Of course, companies like Deutshce Bank would be liable for any intentional wrongdoing on their own part that exceeded their authority as trustees. But they, of course, are going to point the finger at the attorneys. Bottom line, a blinding melee of lawsuits (which will include homeowners, innocent purchasers for value, and of course the men, women, and retirement funds that own these trusts!) which in all probability while paralyze our federal court system and likely denude the entire pacific northwest of trees to print all the paper, with no clear liability or ability to collect in the end. This will make the Agent Orange and tobacco lawsuits look like small claims actions, and likely will not be resolved prior to 2105.
Scenario number two. A bank, 95% of the time Wells Fargo in my experience, bought the mortgages from Fly-By-Night Lenders, Inc., and are now seeking to foreclose. Wells Fargo very rarely has the assignments, and the companies that sold them the mortgage no longer legally exist. Wells Fargo has no doubt obtained summary judgment on thousands of homes without ever having or showing a valid assignment of the mortgage. But you can bet that all the documents they filed with the court claimed at the very least, “they now had the right to enforce and collect this debt” which is essentially the same thing. This scenario is the same as before. Affidavits are filed attesting to the vailidty of the debt and Wells Fargo’s right to collect, signed by people that sit at a desk and sign hundreds of these papers a day because they are valid employees of Wells Fargo, and those affidavits are the ONLY mortgage documents they have ever seen, or for that matter, cared about. It is this factory signature practice that has led to the national moratorium on foreclosure by many banks, but we’ll get to this in scenario three. Here, we have a different ballgame. No shadowy, unseen investors and complicated securities issues. A bank that bought loans, foreclosed on properties, and sold them to people who had no idea Wells Fargo had no right to foreclose in the first place. Here liability is clear (so long as the federal judge hearing the case agrees that making fraudulent representations to a state court is a FDCPA violation!), damages are astronomical, and aggrieved parties abound. 90% of Florida homeowners never asnwered the complaint, and just walked away, *assuming* the bank that sued them had the right to. Now, here, the good attorney in you should say, well, they slept on their rights, they lose. While true on a state level where the time limit for filing a motion for relief from judgment based on fraud has long come and gone, the statute of limitations to file for a FDCPA violation has not. The import of all this should be sinking in clearly by now.
Lastly, scenario three. The original lender, or its legitimate successors and assigns, sues to foreclose. Same as before, some trained chimp sits sitting affidavits all day long without reviewinga damned thing. Bottom line, fraud on the court. Remember, in Florida you cannot foreclose just with a mortgage and note. You have to prove “all conditions precedent” i.e., default, acceleration, etc. This done by affidavit. That are turning up more and more to be sworn statements containing very false allegations. (Not just failure to review pleadings and files, but even complience with notification conditions of mortgages.) The upshot of this is exactly the same as scenario two. Thousands of improperly lost homes, purchasers for value, the whole enchilada. These banks are furiously at work right now trying to figure out just how hard the hit is going to be. Obviously we’re talking billions. Whether ther US banking and financial institutions can stand this battering is anyone’s guess. It’s a bigger mess with far greater ramifications than the simple margin buying that torpedoed the stock market on Black Thursday. But one thing is for certain. If these banks survive they are going to be selling their rubber bands to pay out on all these claims.
One last thing. Second mortgage holders. The conventional wisdom was that all the second mortgage holders (typically smaller banks like Region) in this mess were just SOL. The houses had depreciated so badly that there wasn’t anywhere near enough to satisfy the first mortgages, let alone the seconds. But, if the first mortgages get tossed as invalid, now the second mortgage holders jump line to primary lien holders! “Curiouser and curiouser, said Alice…”
In summation, this should give you a very good idea of the enormity of the situation and show you where the successful class actions should (and will!) be filed by the saavy attorneys and firms that don’t want to get left behind in the potential killing of the century.
Wells Fargo & Co. does not plan to halt foreclosures despite an employee’s testimony that she signed up to 500 foreclosure documents daily without reading them.
The employee of the San Francisco-based bank said in a deposition taken last March that she signed between 300 and 500 foreclosure documents per day, verifying only her name and title.
Such practices have been called into question by attorneys general in 50 states. They have accused mortgage companies of violating state laws.
Wells has not halted foreclosures and says it has discovered no problems in the legal documents used to process them. The company said earlier in the week that it would review pending foreclosures for potential defects.
“Our records show that Wells Fargo’s foreclosure affidavits are accurate,” said company spokeswoman Vickee Adams. When the company finds employees that don’t follow procedure, it takes “corrective action.” She declined to comment on whether the Fort Mill, S.C.-based employee, Xee Moua, still works for Wells.
The deposition of the Wells Fargo employee, obtained by the Associated Press, was reported earlier by the Financial Times. It’s the second piece of testimony that suggests Wells engaged in similar practices that have led other banks to halt foreclosures.
In another deposition taken in May, a Wells employee named Herman John Kennerty said he verified only the dates on up to 150 foreclosure documents he signed daily and relied on co-workers to ensure that other information in the documents was correct.
Other companies including Ally Financial Inc.’s GMAC Mortgage unit, Bank of America Corp. and JPMorgan Chase & Co. have halted tens of thousands of foreclosures after similar practices became public.
The growing questions about foreclosure documents could cause thousands of homeowners to contest foreclosures that are in the works or completed. But analysts say most homeowners facing foreclosure are still likely to lose their homes.
Shares of major banks fell Thursday as investors worried about the cost of mounting problems that could cost big banks billions. Shares of Wells fell 4.2 percent to close at $24.72, while shares of Bank of America fell 5.2 percent and shares of Citigroup Inc. fell 4.5 percent.
Investors fear that banks will pay dearly for mishandling foreclosure paperwork. JPMorgan said Wednesday that it set aside $1.3 billion in the third quarter to cover legal expenses, including for the foreclosure problem.
In a conference call after its earnings announcement, JPMorgan CEO Jamie Dimon said the final price tag will depend on how soon banks can return to a normal foreclosure schedule.
The company also said would extend its review of its foreclosure cases to 41 states – doubling the number of its cases under review to 115,000. JPMorgan had previously said it was halting foreclosures in the 23 states where foreclosures must be approved by a judge
Posted by George Beckus Esq
The Golik Law Firm
Troy Taliancich said he applied for a mortgage modification via the Obama administration’s Making Home Affordable program in January after falling behind on his payments by one month.
Getting help was a snap: He called up Bank of America and explained that he’d lost income from his business as a computer technician. The bank told him he could immediately begin making much lower payments on his condo in New Orleans, per MHA’s signature Home Affordable Modification Program. He sent an application, which contained tax returns, pay stubs and a hardship letter and was told to expect an official confirmation in 10 days.
“I had purchased my home with a 5 year ARM in early 2005 and was forced to evacuate to Texas for 3 months in August of that year due to Katrina,” wrote Taliancich, 32, in his hardship letter. “Knowing my 5 year ARM was about to reset, I had started my own business with an SBA Loan and was personally liable for the debt….I refinanced to a fixed rate, however it was $300 more a month than the previous amount. This payment was fine when business was good, but in 2008 the nationwide economic meltdown trickled down to me and my business took yet another downturn.”
A HAMP modification typically reduces a borrower’s monthly payments by $500, to 31 percent of the borrowers’ monthly income, mostly through interest-rate cuts and extending the term of the loan. An initial trial period is supposed to last for three months; if a homeowner makes all three of his reduced payments, then the modification is supposed to become “permanent” for the next five years.
Instead of confirmation, Taliacinch received mixed signals. One day the bank would tell him everything was OK, and then the next day he’d receive a foreclosure threat in the mail. “What they were saying on the phone wasn’t what I was getting via correspondence,” he told HuffPost. “Who knows what they’re really doing behind the scenes.”
On Sept. 30, a local law firm sent Taliancich an unfriendly letter telling him they’d been hired by the bank to start foreclosure. Taliancich is hoping to clear things up with Bank of America this week, but he has no idea what’s going to happen.
Mortgage servicer screw-ups are at the heart of a foreclosure fraud scandal that has forced the nation’s largest banks — including Bank of America — to temporarily halt foreclosures across the country. Sen. Al Franken (D-Minn.) has said that revelations about paperwork fraud demonstrate the need to help homeowners who apply for HAMP, a program designed to give servicers incentives to modify mortgages that hasn’t quite lived up to expectations.
Taliancich first worried he might lose his home when he hadn’t received anything official after he made the reduced payments for a few months. He started recording all of his phone calls with the bank in April and shared his recordings and other documents with HuffPost. Every time he called the bank he spoke to a different person, and almost every person said a different thing about what would happen.
On April 15, when Taliancich called the bank to make his monthly payment, he explained to the man on the line that he was told in January to start monthly payments of $691.60. Since then, he said, he has received “various vague letters saying, ‘Thank you for sending us information,'” but no letter with official confirmation about the trial plan.
The bank confirmed that Taliancich has been making his payments. “Those payments will be monitored,” the man said, before adding that the official trial period wouldn’t actually start until Taliancich received an official letter. “Once you complete that trial payment which is mentioned on that letter you will receive further modification paperwork. At this moment in time the letter has not been sent out to you since the review process has not been completed yet.”
“It will be sent to you in a short amount of time,” the man said. “In the meantime you can surely continue making payments. It’s always good to keep making payments on the account.”
Taliancich asked why he’s received other correspondence from the bank “that make it seem like you guys have no idea what’s going on.”
“We definitely are aware of what is going on with your modification request,” the man said. “We are the ones who are working on it.”
The man reassured his concerned customer that he was absolutely doing the right thing by making the reduced payments and that he should continue to do so. But, he added, “We haven’t reached the stage yet where your payments are monitored for a specific period of time.”
Taliancich asked how long it would take to reach that stage.
“It would be incorrect on my part to give you a time frame.”
When he called to make his monthly payment the following month, the woman on the line immediately noticed trouble: “It looks like you’re due for four payments of $4,300,” she said, “with a default acceleration letter that expires May 31.”
Taliancich explained that he had finally received his trial paperwork and had sent it the previous week. He has a May 13 FedEx delivery confirmation. “They should have gotten it already,” he told the woman.
She checked the system and didn’t see the new paperwork, but she did see that he had been making reduced payments and seemed to understand the situation. She was very sympathetic. Talianchich asked, “Do you know if the process speeds up when the paperwork officially comes in and gets sent back?”
“I can’t tell you when this is gonna come to a culmination, and the main reason I’m telling you that is because it took you so long to get the paperwork,” she said, in a soothing tone of voice. “And in the meantime since you started in January, they changed how they handled the process… and you’re getting further and further behind doing this. I totally understand that. The only thing I can tell you is just keep making these trial payments until you receive something telling you to do something different — is all I can tell you to do at this point. You’re doing the right thing keeping on doing what you’re doing, but I can’t tell you when you’re going to get an answer on this thing.
“I hope everything goes well for you,” she said. “Just wait this thing out.”
Paperwork mistakes are the hallmark of every frustrating HAMP story. In June, Bank of America officials even acknowledged the poor service on a conference call with reporters. “We certainly know that as we rolled out the modification process we have not handled our customers to the standards Bank of America is accustomed to,” said Jack Schakett, a credit loss mitigation executive. “We continue to train and retrain to try to improve our process and we’ve done a lot of things to try to make sure we don’t lose documents anymore.”
House Speaker Nancy Pelosi and other California Democrats provided a list of constituents’ problems with servicers, many of which included HAMP horror stories, in a recent letter asking the Justice Department to investigate a growing foreclosure fraud scandal that has temporarily halted foreclosures across the country. One of the constituents’ stories had a start similar to Taliancich’s: “Constituent was told by BOA in July 2009 that he qualified for a HAMP modification and to expect a package in 10 days.”
Probably the most frustrating and confusing thing to HAMP applicants is that while servicers are not allowed to foreclose on somebody who’s in the application process, they are allowed to move forward with almost every other part of the foreclosure process. Treasury has put out additional guidance that forbids servicers from setting a foreclosure sale date for HAMP applicants unless they’ve already been determined to be ineligible for HAMP or have failed to make payments during the trial period.
If there is a foreclosure process happening at the same time as a modification, “the servicer must provide the borrower with a written notification that explains, in clear language, the concurrent modification and foreclosure processes and that states that even though certain foreclosure activities may continue, the home will not be sold at a foreclosure sale while the borrower is being considered for HAMP.” Taliancich never received a written notification, but he was told on the phone to make payments and not worry about foreclosure. He started to worry anyway, however, as acceleration notices piled up.
Through June and July, Taliancich said he made his monthly payments and was told his modification request was still under review. On Aug. 13, Taliancich still hadn’t heard anything about the trial. “I need to know if there’s anything needed from me or if I’m still in the queue or what,” he said when he called to make his monthly payment.
“It doesn’t look like they need any additional information but they are proceeding on with the reviewing of the modification,” said the woman who took his call. She reviewed some of the details of his request, then told him there would be a $20 “processing charge” tacked on to the monthly payment. He protested, but after consulting with her supervisor, she said there was nothing she could do.
He hung up without making the payment, waited a few minutes, then called back. A different woman answered and said, “Looks like this account is overdue for five payments, total amount due $5,884.74.”
Taliancich explained that he’d been in the modification process since the beginning of the year. “I have no idea where I’m at because nobody can give me details,” he said, adding that the person he’d just spoken to told him the bank had all the material it needed and had sent his modification request to an underwriter.
“I fall further and further behind because, on the one hand people say it’s OK to pay the $691.60 amount I was given January 15th, and then on the other hand I get the conflicting information of a number of letters of intent to accelerate. I’ve gotten about three or four of them. They keep getting pushed back,” he said, in a calm but stressed voice. “I was only a payment behind when I first called. I could overcome one payment amount if I had known, but now here we are in August, seven months later and I keep thinking it’s going to work out and then I get the same answer every time I call to make that smaller payment amount. And I’m just starting to get frustrated because nobody can give me details.”
“Call us like every two weeks to follow up on your status on that,” the woman said. “Sometimes it takes a while. I’ve seen people [who’ve] been working on a loan modification for over 12 months.”
She said there would be no processing fee.
When Taliancich called to make his payment in September, the call taker said, “The account shows to be in foreclosure status. There’s no sell date assigned on the account at this time. How can I help you today?”
This news was upsetting. Taliancich said he didn’t understand.
“Since January 15th, I’ve been making payments of $691.60 as part of the Making Homes Affordable application process,” he said, speaking slowly, sounding determined but bored of repeating himself. “I understand these things run side by side but it seems that the foreclosure issue, even though my account is supposed to be flagged, seems to be running faster than this program application. Given the fact that I was only one month behind when I started, it doesn’t seem fair to be digging this deeper and deeper hole with the trial payment amount.”
The call-taker said his HAMP application was missing an income tax form for 2009. Taliancich said he’d only been told to send tax returns for 2007 and 2008, but he’d filed for an extension for 2009, which the IRS granted. He had a receipt. “I can send that at any point,” he said. He asked how seriously he should take the foreclosure threats he’d been getting in the mail.
“It’s very serious,” the woman said. “Your home is in full foreclosure at this point. A sale date could be assigned at any time.”
Taliancich protested. “This isn’t fair because it’s setting me up for a fall.”
“Anytime you’re delinquent on a payment, you have to worry about it,” the woman said. “In making the smaller payment amount, you’re not meeting your original full obligation for the mortgage, so that difference is becoming past due. Any time an account is past due, you are putting yourself in a position that the collection efforts could escalate on the account.”
The woman added that legal fees had been added to the account after the bank referred the case to attorneys on Aug. 27.
“My birthday,” Taliancich said (his birthday is actually on the 26th). He laughed. When the woman told him what he would have to do to get started with a loan reinstatement, he asked if he should bother to make his $691.60 reduced monthly payment.
“At this point, all payments would be returned to you,” she said. “When you’re in foreclosure, payments are no longer being accepted.”
When he asked how he’d stay eligible for HAMP if he didn’t pay, the woman said, “Once you’re in foreclosure you can no longer make payments. You’re still going through review.”
“They can just sit on their thumbs and not do the review process in a timely fashion, and let me get foreclosed on? Is that what the government intended to happen?”
The woman said that wasn’t the intent of the program. She eventually transferred him to another bank employee with whom he could arrange to send the missing tax form. That woman had a totally different understanding of the situation.
“Actually, we don’t need any information from you,” she said. Taliancich said he would fax the tax filing extension stuff immediately “just to cover all my bases.”
One day later, he called back for another update. The call-taker — a different person, as always — told him the account had been assigned to another underwriter. “You will continue to make those trial payments because they are monitoring them,” the woman said. A few minutes later, after Taliancich asked if he could go ahead and make his trial payment, she said, “There’s a code on here that we cannot accept the payment.”
She transferred him to another employee who had a more detailed explanation of what was happening: “Regarding your trial payments, in the beginning, when we first rolled out the Making Home Affordable, what we were doing is that the homeowner’s income met the 31 percent criteria… we allowed them to make the trial payments because we figured some payment is better than no payment at all,” she explained. “Right now, at this point, the government changed the process a little bit.”
On Jan. 28, the Treasury Department released a “supplemental directive” requiring borrowers to verify their income for HAMP eligibility with tax forms and evidence of income as of June 1. (Taliancich had submitted tax forms and pay stubs with his hardship affidavit in January; when he re-applied in May, he used a formal HAMP application form and resubmitted the tax forms and pay stubs along with a utility bill.)
“We changed the procedure and you are one of the homeowners that fell into the middle of when the process changed. Now because there was too many homeowners going through their trial, [the] process has changed. You’re not offered a trial period until you’re actually approved for the modification. So that means if and when you get trial documents, you know 100 percent you’re actually eligible for the modification. The last eligibility factor is making the three-to-four month eligibility period.”
She told him not to send any more payments, but to set the money aside in case the modification comes through. She said the foreclosure proceedings were inevitable because the reduced payments put him into default.
“I was constantly reassured every time I would make that smaller payment amount that I was doing the right thing,” Taliancich said, adding that he’d been under the impression he was in an actual trial period. “I’m worried about the fact that it seems to be violating this foreclosure clause in the government program.”
“You were not in any formal trial period. You were advised to make 31 percent of your monthly gross payment,” the woman said. “Unfortunately, with the new process that was rolled over in the middle of you being in this review, unfortunately, it did start your review over again. That’s why you got the package sent out in May. We had to follow the government’s guidelines on this new process. All we can do is follow their procedures, and unfortunately you were one of the homeowners that got caught in the middle.”
Bank of America did not respond to requests for comment on this story. The bank generally does not comment on individual customers. Fifty percent of the bank’s HAMP trial modifications have gone on for six months or longer.
Taliancich said he sent a cashier’s check his last monthly payment. His most recent conversation with the bank happened on Wednesday, when an employee said a VP had taken interest in his case. The woman who called him said they would get back to him this week. He has no idea what’s going to happen.
The program is falling so far short of its goal to “enable as many as three to four million homeowners to modify the terms of their mortgages to avoid foreclosure” that Treasury officials now say that’s not the goal. Housing industry analysts have credited HAMP with slowing the pace of foreclosures and preventing them from deluging the housing market.
But now that members of Congress are demanding a nationwide moratorium on foreclosures — and some banks, including Bank of America, have temporarily halted their foreclosure proceedings — the Obama administration says foreclosure is a requirement of a healthy economy.
“A national moratorium would be very damaging to exactly the kind of people we’re trying to protect,” said Treasury Secretary Tim Geithner on Wednesday, “because the consequence of that would be in neighborhoods that have been most affected by the foreclosure crisis, where you see lots of houses on the block empty, unoccupied, what it means is those communities will be living longer with houses unoccupied, with more pressure on their house price with the people still in their houses.”
Said Taliancich, “The whole process was a contradictory one.”
Posted by George Beckus Esq
The Golik Law Firm
JPMorgan Chase, the second-largest U.S. bank by assets, reported a 23 percent increase in profit Wednesday, thanks to a significant drop in provisions set aside to cover losses on home mortgages and credit cards.
But the joy that comes from $4.4 billion in earnings and from beating Wall Street’s expectations could be short-lived as the New York-based lender faces mounting investigations and likely lawsuits over its admitted sloppiness in handling home foreclosures. As many as 40 state attorneys general are set to announce a joint investigation today into big banks’ foreclosure practices. Expected losses industry-wide could reach into the tens of billions, if not more.
The megabank, which kicked off earnings season for large financial firms, decreased its provisions for losses by more than $5 billion compared to the same period last year, allowing the firm to book its increased profit despite a $3 billion drop in revenue. Analysts and investors are poring over JPMorgan’s earnings report to gauge the coming announcements by lenders like Bank of America, Citigroup and Wells Fargo.
Compared to the third quarter of 2009, the firm reported higher earnings in its credit card and retail lending divisions as fewer borrowers fell behind on their payments, a reflection of a stabilizing economy and the fact that risky borrowers have largely had their credit lines cut or been shut out completely. But the firm reported lower earnings from its investment banking division and from its own trades of various securities as a volatile market and depressed yields on assets took its toll. Overall revenue dropped 11 percent to $23.8 billion compared to last year.
JPMorgan set aside less money for employee pay and bonuses, decreasing the quarterly total by nine percent to $6.7 billion relative to last year. Through nine months it has set aside $21.6 billion, or about one percent less than last year’s amount. The amount is also lower relative to total revenue, the firm’s records show.
In a likely sign of things to come, the bank set aside an additional $1 billion to cover higher estimated demands to buy back the soured loans it pushed onto investors and government-owned mortgage giants Fannie Mae and Freddie Mac. It now has $3 billion to cover such requests, which typically come after the party that acquired the mortgage found some kind of defect in the loan documents.
The additional money to cover these demands comes on the heels of the lender being forced to buy back some $1.5 billion in bad mortgages in the quarter ending Sept. 30, a 215 percent increase from the same period last year and a doubling of the amount it was forced to eat in just the three-month period ending in June. Fannie and Freddie, backed by an aggressive government regulator, has been trying to get big banks to buy back the defective home mortgages they were sold or asked to guarantee.
However, those demands could pale in comparison to the losses JPMorgan could be forced to swallow if its reported careless handling of foreclosures escalates into a larger crisis. The firm admitted that it has identified situations where employees or contractors didn’t follow the law when processing foreclosures. JPMorgan is reviewing about 115,000 mortgages that are in the foreclosure process, it said.
An increase in the time it takes to process a foreclosure will only delay the housing — and overall economic — recovery. Already, it takes about 448 days on average for a delinquent borrower to fall into foreclosure, the firm said. In Florida it’s 678 days; in New York it’s 792, or more than two years, according to JPMorgan Chase.
Housing analysts say the process, already gummed up because of the flood of foreclosures and the inadequate staffing and preparation by mortgage services, will likely only get worse as homeowners and investors in mortgage-linked securities initiate litigation to recoup losses from potentially wrongful evictions and soured investments
Posted by George Beckus Esq
The Golik Law Firm