Florida Foreclosure Lawyer

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.

Different documents
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
904-448-5335

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
904-448-5335

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.”

“Right.”

“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
904-448-5335

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
904-448-5335

Regulators from all 50 states are launching a coordinated investigation into possibly “deceptive” and “unfair” foreclosure practices that may have illegally evicted families from their homes.

A bipartisan group of state attorneys general from 49 states and financial regulators from 39 states will work together to comb through foreclosure filings and documents from mortgage servicers to see if any state laws have been broken in the rush by services to kick borrowers out of their homes without following various state and local laws.

Homeowners, homeowner advocates and various state officials have complained that mortgage servicers have failed to follow basic procedures, like reviewing documents, properly signing them and other tasks long followed prior to the mortgage securitization boom that took off this decade.

Some of the nation’s largest servicers have already declared temporary moratoriums on foreclosure proceedings in order to check on their own processes. Bank of America stopped all of their foreclosures, as did Ally Financial. Other servicers imposed temporary stoppages in the 23 states that require foreclosures to go through a court of law.

“At a time when we need to be doing everything that we can to avoid preventable foreclosures and keep families in their homes, it is incredibly irresponsible that some servicers are not doing the bare minimum of following existing laws and properly verifying foreclosure documents,” Richard H. Neiman, New York’s top bank regulator and a member of the Congressional Oversight Panel, a federal bailout watchdog, said in a statement Wednesday. Neiman is requiring that more than 20 mortgage servicers registered to do business in New York conduct internal reviews of their foreclosure practices and suspend foreclosure actions until that review is completed.

“In recent days, it has become apparent that a number of mortgage loan servicers have submitted affidavits or other foreclosure documents that appear to have procedural defects,” the Conference of State Bank Supervisors said in a statement. “In addition, many affidavits may have been signed without a notary public being present.

“The multistate working group believes such practices may constitute a deceptive and unfair practice in violation of state laws, and this group has already begun to work directly with mortgage loan servicers to determine whether any such violations have occurred,” the Washington-based coalition of state bank regulators said.

Attorneys general from 49 states said in a joint statement that “the facts uncovered in our review will dictate the scope of our inquiry.”

If they find systemic abuse — which many experts say is a given in the current market due to the lack of investment by servicers and their desire to service mortgages on the cheap — that inquiry may broaden to include an examination of even loan-level documents. Such a time-consuming investigation will likely lead to significant costs being borne by the nation’s largest servicers, which also happen to be the nation’s largest banks.

Bank of America, Wells Fargo, JPMorgan Chase, and Citigroup together service more than $6 trillion in home mortgages, or about 60 percent of the entire $10.6 trillion residential mortgage market, according to figures as of June 30 from the Federal Reserve and MortgageStats.com. Ally, a firm majority-owned by taxpayers and formerly known as GMAC, services about $400 billion in home mortgages, data show.

JPMorgan admitted Wednesday that it has identified situations where employees or contractors didn’t follow the law when processing foreclosures. The nation’s second-biggest bank by assets said it is reviewing about 115,000 mortgages that are in the foreclosure process, it said. However, like other firms, the bank maintains that “underlying foreclosure decisions were justified by the facts and circumstances.”

State officials aren’t so sure.

“This announcement illustrates states’ ability to coordinate our efforts to protect consumers,” said John Ryan, executive vice president at CSBS. “The foreclosure process in the various states is designed to ensure a basic level of due diligence and accountability occurs before taking an action that has dramatic implications for homeowners and communities.

“Our priority is to ascertain if violations of state law occurred, to re-establish confidence in the integrity of the foreclosure process, and take appropriate action to protect the rights of consumers and homeowners affected.”

In an Oct. 4 letter to U.S. Attorney General Eric Holder, Federal Reserve Chairman Ben Bernanke and Acting Comptroller of the Currency John Walsh, House Speaker Nancy Pelosi (D-Calif.) and her fellow California Democrats in the House wrote that recent reports of unwarranted foreclosures “only amplify our concerns that systemic problems exist in the ways many financial institutions have dealt with homeowners who are seeking to avoid foreclosures.”

Foreclosures are a matter of state law. If state investigators find the problems to be systemic, the nation’s largest banks could face a crisis rivaling that of September 2008 when the financial system was rocked by the failure of Lehman Brothers, the government takeover of Fannie Mae and Freddie Mac and the forced marriage of Bank of America and Merrill Lynch, some analysts say.

Posted by George Beckus Esq
The Golik Law Firm
904-448-5335

For several years foreclosure defense attorneys have been telling anyone who would listen that the entire foreclosure process is flawed because you have to own a mortgage note before there can be a foreclose — and several courts have found that the affidavits used in foreclosures do not prove ownership.

Go back to 2007. Federal judge Christopher Boyko of the U.S. District Court in Ohio — a 2005 appointee of George W. Bush — was asked to foreclose on 14 homeowners.

In a lot of courts the borrowers and their families would instantly be on the street but Judge Boyko said before there could be a foreclosure the lenders would first have to show that they owned the delinquent loans and therefore had the right to appear in court.

The problem was that public records showed the loans were owned by the local banks that originated the mortgages, not the big banks before the court. So, to foreclose, the big banks would first have to show ownership of the notes. How? By providing evidence of ownership such as a sworn affidavit.

Judge Boyko looked at the affidavits and made this ruling:

“The Court’s Amended General Order No. 2006-16 requires Plaintiff to submit an affidavit along with the Complaint, which identifies Plaintiff either as the original mortgage holder, or as an assignee, trustee or successor-in-interest. Once again, the affidavits submitted in all these cases recite the averment that Plaintiff is the owner of the Note and Mortgage, without any mention of an assignment or trust or successor interest. Consequently, the very filings and submissions of the Plaintiff create a conflict. In every instance, then, Plaintiff has not satisfied its burden of demonstrating standing at the time of the filing of the Complaint.”

Boyko 2007 Foreclosure Decision — Deutsche Bank Nat’l Trust Co. v. Steele, 2008 WL 111227

Why The Ownership Mess Matters

The Boyko decision arose because lenders wanted to have a way to quickly transfer loan ownership. This is necessary if you’re going to electronically buy and sell mortgage-backed securities, essentially bonds secured with thousands of mortgages.

Before the computer era lenders would have to go down to the courthouse each time a mortgage was sold. The sale would be recorded in the public records and a new owner would be named. If the borrower defaulted the owner of the loan — the party who had the right to go to court and foreclose — was clear.

However, with the creation of mortgage-backed securities Wall Street needed a way to avoid the pesky and costly recordation system so it came up with MERS — the Mortgage Electronic Registration System.

In general the MERS concept works like this: When a loan is originated and sold on Wall Street MERS would become the nominal owner. Loan ownership can then be transferred within MERS and without having to change the public record with every loan sale.

Not only was the MERS system a big time saver, it also saved lenders a bunch of money:

“Lenders save at least $25 for every new loan they register on the MERS System ,” said Carson Mullen, Executive Vice President of the MERS Customer Division. “Since the beginning, MERS has saved the mortgage industry over $1 billion in unnecessary costs.”

Other States

Challenges to the nominee system of ownership have now emerged in a number of states including Nevada, Missouri and Kansas.

According to the Kansas Supreme Court, “MERS did not demonstrate, in fact, did not attempt to demonstrate, that it possessed any tangible interest in the mortgage beyond a nominal designation as the mortgagor. It lent no money and received no payments from the borrower. It suffered no direct, ascertainable monetary loss as a consequence of the litigation. Having suffered no injury, it does not qualify for protection under the Due Process Clause of either the United States or the Kansas Constitutions.”

“There is no evidence in the record or the pleadings,” said the Missouri Court of Appeals, “that MERS held the promissory note or that BNC (the lender) gave MERS the authority to transfer the promissory note. MERS could not transfer the promissory note; therefore the language in the assignment of the deed of trust purporting to transfer the promissory note is ineffective.” (Parenthesis mine)

What Next

If more courts agree that mortgage ownership cannot be proven then vast numbers of foreclosures can’t occur until the actual loan owners go to court. At the same time, if loan ownership is unclear then what’s the real market value of mortgages now on lender books or securities backed by bundles of mortgages? And what if a thorough audit shows mistakes such as the ownership of one mortgage by several lenders or mortgage-backed securities?

We may soon find ourselves in a financial environment where foreclosures are stalled, mortgage ownership is unclear, asset values are uncertain and the foreclosure problems of the past few years will be minor and minimal when compared with issues which lie ahead. In the meantime, massive new employment opportunities will open up in such fields as foreclosure defense law and mortgage ownership auditing.

Posted By George Beckus Esq
The Golik Law Firm
904-448-5335

UPDATE: The White House announced Thursday afternoon that President Obama would not sign a bill that some consumer advocates worried would make it more difficult for homeowners to fight fraudulent foreclosures.

The White House noted that the bill was designed to ease restrictions on interstate commerce. “While we share this goal, we believe it is necessary to have further deliberations about the intended and unintended impact of this bill on consumer protections, including those for mortgages, before this bill can be finalized.”

Sen. Patrick Leahy (D-Vt.), chairman of the Judiciary Committee, moved the legislation through the Senate without debate on Sept. 27.

“Senator Leahy understands the President’s decision not to sign the Interstate Recognition of Notarizations Act, and he supports that decision,” said a Leahy spokeswoman in a statement. “When Congress passed the legislation, no concerns or objections had been expressed. Now that concerns have been raised, Congress should reexamine whether this bill might have an unintended impact on foreclosures in the future. We certainly do not believe that is what Representative Aderholt and the other cosponsors of the legislation intended.”

* * *
EARLIER:
The White House is taking a careful look at legislation recently passed by Congress with little notice that would require courts to recognize notarizations from out-of-state, which some consumer advocates say would make it more difficult to fight bogus foreclosures by banks.

“There were a series of meeting on that this morning here,” said White House spokesman Robert Gibbs, who added the White House would have a more definitive statement later on Thursday. “It is something that, as you said, there has been a lot of news on, the processing of documentation, the resulting impact on foreclosures, and that is being evaluated….In general, there is concern, ultimately, about the situation.”

Max Gardner, a foreclosure defense attorney, said the timing of the bill was suspicious, considering fraudulent notarization of bogus foreclosure affidavits is at the heart of a scandal that has prompted the nation’s largest banks to pause foreclosures in 23 states.

The timing is just a little curious to me that all of a sudden you can’t get anything through the Senate at all and then all a sudden on a voice vote,” Gardner said. “This was first introduced in the House in 2007.”

The legislation, titled the “Interstate Recognition of Notarizations Act,” would “require any Federal or State court to recognize any notarization made by a notary public licensed by a State other than the State where the court is located when such notarization occurs in or affects interstate commerce.” The bill would also require courts to recognize electronic notarizations.

“The thing that concerns me about the bill is that the provisions in it that allow for digital notarization by electronic means,” said Gardner, “which implies that anyone with the appropriate software could notarize a digital document or image of a document, which would allow someone to notarize a document without seeing someone execute the document or doing the things a notary is supposed to do. In my mind that would lead a broad exception for more fraudulent practices.”

Ira Rheingold, director of the National Association of Consumer Advocates, told HuffPost he wasn’t sure he agreed the bill was so problematic. “Just because you get a lawful notarization of a bunch of lies doesn’t change your ability to challenge an affidavit as a bunch of lies.”

The legislation passed the Senate without debate on Sept. 27 following a “unanimous consent” request from Sen. Robert Casey (D-Pa.). Casey’s office told HuffPost that the senator made the request on party leadership’s behalf. “He had nothing to do with the bill himself,” a spokesman said.

Reuters reported that, with the help of Sen. Jeff Sessions (R-Ala.), “Judiciary Committee Chairman Patrick Leahy pressed to have the bill rushed through the special procedure, after Leahy ‘constituents’ called him and pressed for passage.” Previous versions of the bill have died in the Judiciary Committee after being passed by the House.

Ohio Secretary of State Jennifer Brunner, who has blogged about notarization problems, told HuffPost she also considered the timing of the legislation suspicious, coming in the midst of a series of announcements by banks that foreclosure procedures are under review. “It’s almost like H.R. 3808 was a trap door.”

The bill’s sponsor in the House, Rep. Robert Aderholt (R-Ala.), was surprised by the speedy passage of the bill and the intensely negative reaction it’s gotten. “There is absolutely no connection whatsoever between Congressman Aderholt’s legislation and the recent foreclosure documentation problem,” said a spokesman in an email to HuffPost. “Congressman Aderholt has been pushing this bill since April of 2005 when he first introduced it in Congress. Obviously, there was no controversy regarding foreclosure documents at that time.

“The Interstate Recognition of Notarizations Act will improve interstate commerce by requiring that lawfully notarized documents be recognized across state lines. The law, once enacted, will strengthen consumer protections by requiring identification of notaries by means of seal and in rendering electronic documents tamper resistant

Posted by George Beckus Esq
The Golik Law Firm
904-448-5335

UPDATE: Senate Majority Leader Harry Reid (D-Nev.) supports Bank of America’s decision to halt foreclosures across the nation, according to a release. “I thank Bank of America for doing the right thing,” he said in a statement, calling on other lenders to follow the bank’s lead and expand their foreclosure moratoriums.

Bank of America will stop foreclosures in all 50 U.S. states, CNBC and the Wall Street Journal report.

Last week the bank, the country’s biggest by assets, announced it was halting foreclosures in the 23 states where foreclosures are processed in court, saying it needed to review foreclosure documents for potential errors. Now, the bank has extended that moratorium to all 50 states as it has decided to stop sales of foreclosed properties, blocking a major step in the foreclosure process.

The decision comes as a foreclosure crisis threatens the nation’s housing market and larger economy. Reports of foreclosure processors approving documents without properly reviewing them and bank agents changing locks on the doors of houses that aren’t even in foreclosure — while the residents are inside — pile ambiguity and scandal on the foreclosure system. Delays in the process further cripple the weak housing market.

Already, foreclosure ambiguities have begun to stall sales of foreclosed properties. The New York Times describes the case of a woman who was about to move into a house when Fannie Mae declared the property’s foreclosure might not have been valid, and she was told to wait. While owners of foreclosed homes may be glad to see these proceedings halted, buyers of those homes — and the larger housing market — are suffering.

Analyst Christopher Whalen predicts the country has slogged only a quarter of the way through the massive foreclosure process, which he said could incite a crisis that would touch every corner of the U.S. economy.

In the years leading up to the housing crash, investors hungered for risky mortgages that banks would bundle and re-package into securities. This arcane market drove banks to initiate more and riskier mortgages at break-neck speeds. Consultant Janet Tavakoli has said the massive amounts of shoddy paperwork that accompanied this process are now being exposed, wreaking havoc on the banks and on the economy.

Posted by George Beckus Esq
The Golik Law Firm
904-448-5335

A coalition of as many as 40 state attorneys general is expected Wednesday to announce an investigation into the mortgage-servicing industry, an effort some of them hope will pressure financial institutions to rewrite large numbers of troubled loans.

The move comes amid recent allegations that mortgage-servicers, which include units of major banks such as Bank of America Corp., submitted fraudulent documents in thousands of foreclosure proceedings nationwide.

The banks say the document problems are technical—largely the result of papers approved by so-called robo-signers with little review—and don’t reflect substantive problems with foreclosures. Still, they have drawn criticism from consumer advocates and state and federal lawmakers.

“I think the mortgage-servicing firms need to understand that they face real exposure now, and they would be well advised to take this very seriously, to clean this up by doing loan workouts to keep people in their homes, which up till now they’ve just paid lip-service to,” said Ohio Attorney General Richard Cordray.

Some in Congress have called for a moratorium on all foreclosures until the documentation issue is resolved, though senior Administration officials Monday again declined to endorse that idea. Servicers that have lied to courts by filing incorrect paperwork “need to suffer the consequences for their irresponsible actions,” said Shaun Donovan, the Secretary of the U.S. Department of Housing and Urban Development. But “where we have not found problems with particular servicers…we do have some risk of going too far.”

The attorneys’ general immediate aim is to determine the scale of the document problems and correct them. But several of them have said that the investigation could force the lenders and servicers to agree to mass loan modifications or principal forgiveness schemes. Other possibilities include financial penalties or changes in mortgage servicing practices.

Lenders and servicers have largely resisted reducing principal on mortgages, instead focusing on interest-rate reductions or term extensions. Banks say they are worried about lawsuits from investors, some of whom could lose money in a principal write down.

Former New Jersey attorney general Peter Harvey, now a trial lawyer in New York, said that a settlement with state attorneys general would likely “to give the banks some cover” to make changes that might otherwise result in lawsuits by investors in mortgage-backed securities.

The mortgage servicers had little to say in response to an impending multi-state probe. “We will work with the attorneys general to address the concerns they have expressed,” said Dan Frahm, a spokesman for Bank of America.

“We look forward to cooperating with the attorneys general,” said a spokesman for J.P. Morgan Chase & Co., which has suspended foreclosure sales and evictions in 23 states in response to questions about it use of robo-signers. A spokesman for Citigroup said the company, has “no reason to believe our employees have not been following” proper procedures in processing foreclosures. A spokeswoman for GMAC Home Mortgage Inc, a unit of Ally Financial, Inc, said it continued to review its loan documents.

The number of servicing companies that will be included in the probe hasn’t been determined.

Iowa attorney general Thomas Miller, who is leading the effort, said his office might take cues from an investigation brought by Massachusetts attorney general Martha Coakley. She successfully pressured Bank of America Corp. in March to reduce mortgage-loan balances by as much as 30% for thousands of borrowers, using the threat of a lawsuit to get a settlement, though documentation problems were not at issue then.

The primary weapon the states could wield would be their respective laws against unfair and deceptive acts and practices, said Prentiss Cox, a professor of law at the University of Minnesota and former Assistant Attorney General in Minnesota.

Those laws are easier to apply, however, when a lender misleads a borrower than in pursuing problems with foreclosures related to documentation, he said. Individual attorneys general could also bring actions under states’ various foreclosure laws.

Illinois Attorney General Lisa Madigan said she was preparing to introduce legislation meant to tighten foreclosure laws and prevent document errors in the future. She also is pushing federal representatives to resurrect a bill that would allow bankruptcy judges to “cram down,” or cut, a troubled homeowner’s mortgage debt.

“The immediate goal is to stop fraudulent foreclosure and to require that the lenders and servicers are following the law. But that’s the bare minimum. That’s what they have to do to follow the law,” she said.

Nearly a dozen attorneys general nationwide, including Ms. Coakley and Mr. Miller, have called on lenders and servicers to suspend foreclosures until document irregularities are studied and corrected.

Top lawyers from multiple states have gone after mortgage lenders before. In 2008, Bank of America Corp. settled charges brought by 15 attorneys related to accusations of predatory lending in its Countrywide Financial Corp. unit, granting loan modifications worth $8.4 billion to thousands of homeowners.

Mr. Cordray, of Ohio, last week became the first attorney general to sue a mortgage servicer, when he filed suit against GMAC Mortgage LLC. The suit also named as a defendant GMAC employee Jeffrey Stephan, an alleged “robo-signer,” who said that he signed off on thousands of court documents related to foreclosures without reading them first.

GMAC announced that it was suspending foreclosures in the 23 U.S. states where judges are required to sign off on them after news of Mr. Stephan’s activities surfaced. J.P. Morgan Chase & Co.’s Chase Home Mortgage unit suspended judicial foreclosures soon after, and Bank of America followed suit. On Friday, Bank of America widened its foreclosure freeze to all 50 states.

Some attorney generals would like to look beyond the narrow issues raised by the robo-signing. The issue “I’m most engaged in right now is the big servicers who are initiating foreclosures while the borrower is in the modification process,” said Arizona Attorney General Terry Goddard

Posted By George Beckus Esq
The Golik Law Firm
904-448-5335

After losing one of her part-time jobs in the fall, Indiana law student Melissa Stuart applied for a mortgage modification in hopes of reducing her monthly payment. Her servicer, GMAC, deemed her eligible and put her in a trial modification under the Obama administration’s Home Affordable Modification Program. She said her monthly payment shrank to $874 from $1,108 — a huge relief.

“I would have had to live off my credit card,” said Stuart, 28. “Two-hundred bucks doesn’t sound like a lot but I had a premium increase on my health insurance… I went from $180 to $219.”

To keep people in their homes, HAMP gives servicers cash incentives to modify mortgage terms. Borrowers who meet eligibility requirements are put in trial modifications that typically last three months (Stuart’s was for four), and if they make their payments the modification is supposed to become permanent. But GMAC called Stuart with bad news in February.

“I assumed I would be getting a call or some kind of notice of my permanent modification — but it was GMAC collections. ‘You owe us $4,000. When can you pay?’ I explained to them I was in the Making Home Affordable Program. They said, ‘No, you were kicked out of that program in January.’”

A couple weeks later, Stuart received notice that if she didn’t pay outstanding charges and fees within 30 days, the foreclosure process would begin.

“I had a panic attack for like 30 minutes,” she said. “I pride myself on being really responsible… I was hyperventilating and just, ‘Oh shit, what am I going to do? Now it’s getting serious. This is beyond my control.’”

Servicers participating in HAMP are allowed to move forward with the foreclosure process (but not to foreclose) while a borrower is in a trial modification, a cause of much confusion to homeowners. Under HAMP, servicers generally report homeowners in trial mods as delinquent for credit-reporting purposes.

“There are confused borrowers all over the country,” said Julia Gordon, senior policy counsel for the Center for Responsible Lending. “On the one hand they think they’re in the middle of getting a HAMP mod, and then they get this notice… Basically you get these legalese things saying, ‘We’re setting up foreclosure.’”

“It really demonstrates that the servicing industry really needs serious regulation,” said Gordon.

Stuart had extra cause for concern because she’d been told that she had been kicked out of HAMP. That seems to have happened because she set her automatic payments too early — instead of on the first day of the month, Stuart set her bank account to make the payment automatically on the 25th of the previous month. She was concerned that GMAC wouldn’t accept the money on Jan. 1, New Year’s Day.

It was intuitive to Stuart, but GMAC, apparently, didn’t appreciate the early payment. Stuart said that whenever she called GMAC for an explanation, she was told that payments had to be made on the first of the month, no sooner.

In addition to calling GMAC, Stuart said she reached out to one of her senators, to the special investigator for the TARP bailout program and to Fannie Mae. Everyone replied to say something along the lines of they were “looking into the matter.”

Finally, on Wednesday, Stuart received word from GMAC that she would be given a permanent modification after all. Never mind about that foreclosure.

In a statement to HuffPost, GMAC said it has modified its servicing practices to avoid the type of problem that Stuart had: “GMAC updated the trial agreement to reflect that trial payments must be paid on the due date or within five days thereafter. This revised language is included in all trial agreements offered by GMAC as of December 16, 2009.”

Also, GMAC said it has “implemented technology in January 2010 to identify HAMP-eligible accounts subject to these certain investor guidelines. The enhancements better ensure that any trial payment made early will not be applied before the specified due date.”

“GMAC is committed to preserving homeownership wherever possible, and we believe that we have reached an agreeable solution for Ms. Stuart.”

Stuart is glad GMAC said she could have a permanent modification, but she’s waiting to see the paperwork. She heard about the decision in a voicemail from a GMAC executive, which she shared with HuffPost:

“I had gotten a request through our corporate communications office to take a look at your file,” said the executive. “We have been able to get approval to go ahead and use the trial modification you have already completed as your evidence to commit to repayment of the mortgage. We are going to move this loan now into the permanent modification phase.”

“I’m no different from one of a million different homeowners,” said Stuart. “It’s very frustrating when you have to go to these lengths just to get something resolved.”