Mortgage Settlement - Banks Get "Free Pass"

As the details of the Mortgage Settlement Agreement, the deal between 49 of 50 states and the U.S. on one side, and BanK of America, Wells Fargo, CitiBank, Ally Financial, and JP Morgan/Chase on the other, become analyzed, it a HUGE win for the Banks. The not only received a "Get Out Of Jail Free" card but are now assured that there will no jail and the cost will not hurt profits.

Quoting from the March 13, 2012 American Banker's article about the agreement

"The settlement includes releases from certain federal claims, including errors related to servicing conduct; origination; and errors specifically related to servicing loans for borrowers in bankruptcy

The claim "fully and finally" releases the company and any affiliated entities, from any civil or administrative claims and any civil or administrative penalties -- including punitive or exemplary damages--for:

Servicing claims under the: Financial Institutions Reform, Recovery, and Enforcement Act; False Claims Act; the Racketeer Influenced and Corrupt Organizations Act; the Real Estate Settlement Procedures Act; Fair Credit Reporting Act; Fair Debt Collection Practices Act; Truth in Lending Act; Interstate Land Sales Full Disclosure Act and certain sections of the Gramm-Leach-Bliley Act. Origination claims under RESPA, TILA, Fair Credit Reporting Act; and Interstate Land Sales Full Disclosure Act, and certain claims made under FIRREA.

The Consumer Financial Protection Bureau agreed to release servicers from any claims related to servicing or origination conduct that took place prior to July 21, 2011, when the bureau became an independent agency. But the agency reserved the right to obtain information related to conduct" (emphasis by this writer)

Perhaps the biggest issue for DEBTORS in the long term will be that Servicers and Lenders etc are released from any liability from servicing errors during a Bankruptcy. This is a huge WIN for the mortgage industry. Most servicers cannot keep track of payments for money owed before a bankruptcy and payments made AFTER the bankruptcy was filed. Pre and Post-petition debt transaction history is generally a nightmare. Even Gordion would not have a sword capable of solving his problem.

As with all such programs we will have to wait for the regulations. The settlement is one thing - the details of administration is another.

Author's Copyright by Richard I. Isacoff, Esq., March 2012

rii@isacofflaw.com

www.isacofflaw.com

Bigger & Fewer: "Banks" Rule

There is a new mosaic, or one that was just not recognized, developing in the Economy, and somewhat specifically in the mortgage area. Banks, systematically getting bigger and bigger, and fewer and fewer, are dictating the rules.

The Big 4 (or 4 1/2) BANKS have made it clear through their elected, and properly paid for members of Congress (politely referred to as "Lobbying"), that they do not want Elizabeth Warren to head the Consumer Financial Protection Board (CFPB) but in case she gets there (during a recess appointment), they want to emasculate (no offense Prof/Dr/Atty Warren) the agency first. The argument or rationalization: No agency should have the authority to enforce existing regulations that affect consumers or pass new regulations to fix really bad problems that hurt the economy as a whole. Even Hemp has more supporters than HAMP!

The same interests have been keeping Congress itself where it is possible, from passing enacting legislation that would force mortgage modifications and punish those who knowingly created, hyped and sold securities that they themselves bet against (hedges). These "Security Instruments", known as Mortgage Backed Securities and more generally categorized as Collateralized Debt Obligations were the mainstay of Lehman Brothers' (remember them?) profits; oh, and don't forget about Goldman Sachs! The play was that if enough mortgages were written, there would be enough good ones to overcome the bad ones: Quantity always wins but only if you are the creator/seller! As Phil McGraw, PhD, better known as "Dr. Phil" says "Well, how's that workin' for you now?" NOT SO WELL DOC!!!!

Wells Fargo is in Court in Tennessee and Maryland trying to avoid being convicted of "Reverse Redlining", the pernicious practice that promised lower income and less educated/sophisticated borrowers, usually minorities, the AMERICAN DREAM - Home Ownership but lied and cheated to make the sale. "Mrs. Jones, the payments will only be $300 per month - for the first month then the rate will equal the 6 month rate of the percentage, the denominator of which is 100 and the numerator is 10 plus no greater than 7% nor any less than 7%,. and, Mrs. Jones, that rate will be in place until the first change date after which the loan will float to the regular level for this type of loan".

"Don't worry Mrs Jones, we at "Fast Talking Mortgage" would never steer you wrong. Just check our rating at the BBB. Here is the telephone number 1-800-waitforever; and if you have any problem with the loan, one of our Loan Specialty Team (for borrowers who complain), will assist you - that telephone number is 1-877-waitforever". If it wasn't so real and so devastating, that kind of "pitch" would make a great Saturday Night Live spoof. People struggling to pay rent are told they can own a home; and then they end up on the street.

The Banks have uniformly maintained that the laws do not apply to them - state vs federal - and even if they do, the banks didn't make the loans, they are just the Trustee or manager or they sold the loan and had just acted as an intermediary, owning the loan for mere seconds. What's worse is that they have all of the money in the world (well not really but more than any Plaintiff does) and are willing to spend ten (10) times the amount needed to fix the problem in order to justify their actions.

In all seriousness, what can be more despicable than convincing low income struggling families that they can buy a home of their own, when the game is just to make a sale of a mortgage and not care whether it's affordable. In fact, most of these loans were granted where the Loan Originator knew the loan would adjust to a point where the borrower would not be able to make the payments. Once again, no one cared. No entity was "on the risk". No bank or mortgage company would lose $0.05, because the loans were sold into a pool - securitized with 2,500 other loans. Again, the thought was that quantity made up for quality and if not, so what! No one loses, except the homeowners and, as we have seen, the Economy.

Add to the mortgage mess - we have the "Interchange Rate" debate. Regulators (formerly called "Revenooers") are trying to force the price charged for each "swipe"/use of a credit or debit card down from an average of $0.44 to $0.12, at least for the big 4 1/2. That is a huge drop in Bank revenue but also a huge drop in what merchants, and therefore consumers, pay for use of the debit card. Folding money looks better every day. Maybe we should all buy stock in Crane & Co., the company that makes the paper for U.S. money.

Group 4 1/2 are fighting the change mightily as they stand to lose $hundreds of millions if the change takes place.

We can then move to the issues about whether a Bank,the kind where you can go and open a checking or savings account, should be allowed to directly make loans and Securitize pools of Loans themselves, avoiding the middleman. In 1974 we had 14,000 banks in the country. By 2017 the count is expected to be 2,500. If you realize that this represents 50 banks for each state, they "Hometown Bank" is dead. Even now, in a city like Pittsfield, MA which has a population of 40,000+/-, a merger of TWO (2) Savings Banks is taking place (thank you FDIC) - the rub is between them they have nearly 50% of the deposits in the entire County. The next largest entity is a Federal Credit Union.

Bigger isn't better, it's just bigger. And, bigger means more power - a greater ability to force laws on or off the books through trade organizations and their lobbyists. Is big bad? Not conceptually; but in practice?. As of Friday 5/06/2011, the ABA (American Bankers Ass'n) seemed to have changed its position regarding Elizabeth Warren and will support the nomination. The CEOs of Group 4 1/2 must be furious. Congress, especially the GOP side, is forcing a "recess appointment" .

There is no easy, or even difficult, answer to this issue. The consolidation of the Financial Services Industry is moving faster and faster. The was a time, not so long ago, when Banks and Insurance companies and Stock Brokerages all had to be separate. Now we have one stop financial shopping. Convenient, maybe. Dangerous - ABSOLUTELY

Author's Copyright by Richard I Isacoff, Esq, May, 2011

rii@isacofflaw.com
http://www.isacofflaw.com

Record 2.9 million Foreclosures; Investors Want Money

There were two "complimentary" articles yesterday - one in American Banker, entitled "MBS Trustees Push JPMorgan Chase for Access to Loan Files", the other from RealtyTrac's Agent Advocate newsletter announcing, "Record 2.9 million U.S. Properties Receive Foreclosure Filings in 2010...". It seems that the Trustees of the Mortgage-Backed Securities ("MBS") are demanding loan files from servicers, looking for bad underwriting, false documents, missing documents, but most importantly trying to force the MBS servicers/originators to "repurchase" or "buy-back" bad loans in the varying securitization pools that comprise the MBS.

It is all too common at this time to see a mortgage loan owned by "Deutsche Bank as Trustee for the ABC Mortgage Funding Trust Series 2005-34", with the loan serviced by some other company, like Saxon, or OCWEN, or AHMSI (America Home Mortgage Sevicing Inc), or JPMorgan Chase or....

What does this mean? Maybe the right to get a loan modification!!! The details are a bit confusing, but bear with me please.

Jeff Horwitz in his article in the American Banker states "They've (the Trustees) been called "braindead", "negligent", and "otiose"" (this rather obscure word simply means ineffective, worthless, or superfluous). He goes on however to state that it might be the Trustees which have the ability to force Servicers to repurchase the bad loans.

In an unusual legal twist, because of Washington Mutual Bank's ("WAMU") insolvency and momentary receivership (federal control during paper signing), Deutsche Bank as the Trustee, assumed the responsibilities of the Servicer, WAMU, which had breached the 30o+ page contract, detailing who does what and how much everyone is paid. The agreement is called the "Pooling and Servicing Agreement" or "PSA". In another case, Wells Fargo has sued EMC Mortgage, another servicer, for failing to turnover documents.

For homeowners, with a mortgage from WAMU or where they serviced a loan which was part of an MBS, this may give them a party to sue to get a loan modification. In short, the Making Home Affordable Program and HAMP do not give mortgagors/homeowners a right to sue. Now however, with Deutsche Bank taking the dual role of Trustee and Servicer and getting all of the responsibilities that goes along with both positions, it is quite possible that Courts will recognize the borrowers right to sue under what is called a "Third-Party Beneficiary" theory.

This theory states that if two parties make a contract to benefit a third party, that third party has a right to sue to enforce the contract, even though the third party did not sign the contract. Here, while HAMP may not give that status to homeowners, it does allow the parties to sue each other. When one of the parties to the contract takes on multiple roles, the protections that each party has may disappear. Basically, you cannot indemnify yourself or get insurance for your own actions.

Perhaps, even more direct would be the right to sue Deutsche Bank, in its capacity as Trustee and Servicer, under the premise that it now, due to its servicing role and assumption of liabilities, has a duty to the borrower, that it is acting for the Investors and the Borrowers.

The other article, from RealtyTrac which tracks foreclosures throughout the country, discusses the record number of foreclosures; 2.9 million!! Many of these foreclosure filings could have been avoided if modifications were granted. Remember, individual homeowners have not had a right to sue to enforce the HAMP modification program, and HSBC/Household/Beneficial does not participate at all. Just think about the situation if 15% of the 2.9 million foreclosures were modified loans instead - that would have been 435,000 non-foreclosures (almost 2 months worth of filings).

Hopefully, the information above is understandable and of use. Please contact us if you have questions -e-mail is best.

Author's Copyright by Richard I. Isacoff, Esq, February 2011

rii@isacofflaw.com

http://www.isacofflaw.com/

Good News/Bad News - Is There a Difference?

Foreclosures are up 23% from the end of the 3rd quarter last year. Foreclosures are up 5% from the end of the second quarter this year. If the numbers continue, this year will have more foreclosures than any before. THAT'S THE GOOD NEWS!

With all of the money given (loaned) to banks, and with the likes of JPMorgan Chase having a profit for the last quarter of $3,600,000,000 ($3.6 Billion), having doubled the amount of money it has planned on for loan losses, you might think that there would be money for you to borrow to refinance your house (after all your credit is good ), or borrow for your business. WRONG - THINK AGAIN! Banks are bracing for the next wave of losses; commercial real estate mortgage backed securities failing because the loans that make up the securities are defaulting. Additionally, because of the financial crisis we are still in, the "normal" way of making loans will not work.

In the April 13th posting (and several others), the whole issue of securitization was explained. The basics: agree to buy a large number of mortgages so that the value, on paper, of what the security maker controls is huge, like $1 Billion. Rather than holding the loans in any Bank, and risking borrowers not paying the mortgage regularly, sell the loans in a package (pool) to investors on Wall Street; investors like mutual funds, individuals, pensions, and of course the Federal Government. So now the $1 Billion portfolio is owned by thousands of people, plans etc. The security eliminates the risk of loss for all of the banks involved in making the loans, because no bank owns one of the actual mortgages - not one. Investors, not lenders/banks, each own a small portion of the pool. Again, they own a security, that acts like a corporate bond, but not a mortgage.

Because of the recent losses and the enormous rise in foreclosures, no one wants to buy these mortgage-backed securities ("MBS"). If no one will buy them, then they will not be created, because the creator does not want to get stuck with a long-term investment (pooled mortgages). If they are not being created, the banks will not lend; even to good borrowers. THIS IS THE BAD NEWS.

There will be no real recovery until credit is available again. The government's mortgage lenders FannieMae and FreddieMac, FHA, have new and very strict guidelines. If you have a blemish on your credit report, NO LOAN.

Businesses use borrowed money all of the time to keep operations running, to buy new equipment, and to expand. If banks won't lend to them, the business shrinks and dies. More jobs are lost, and not just at that business. if people lose work, then they cannot spend money and other businesses fail. That is the cycle we are in for unemployment. And more unemployment means more defaults on mortgage payments, and that means more foreclosures.

The new Bank regulations that will require banks to keep more money set aside for bad loans, and the fact that only the Federal Government will buy the existing MBS and not new ones, means that Banks will not make loans, except to the very best customers. The noose gets tighter and tighter. The recent run-up of the stock market is not a reflection of consumers’ and "Main Street" types’ (us) confidence. The profits are being made by traders, Wall Street professionals, and companies like JPMorgan Chase.

So, the very kinds of investments, the MBS or pools of mortgages, that allowed the housing boon, has led us to the housing boom - it’s imploded. Breaking the cycle we are in will take time; actually a great deal of it

Making Homes Affordable? It's Not Working!!

In a report released by the "Making Homes Affordable Program", only 9% of those mortgages eligible (estimated) for a modification are in the process. Essentially the lenders, mortgage companies, loan servicers, ARE NOT doing their jobs.

The information through the end of July shows that of an estimated 2.7 million mortgages, all of which are 60 days+ delinquent, only 235,247 (actual) have been offered a modification or are in the process of obtaining one. This does not necessarily mean a change in all terms, but could be nothing more than the lender allowing 3 payments to be moved to the end of the loan term, but as a modification.

The lenders doing the best job are 1. Saxon 2. Aurora (small number of loans) 3. GMAC 4. JP Morgan Chase -all having in process 20% or more of the estimated eligible loans. CitiBank has 15% being worked on. BUT American Home Mortgage Servicing Inc (AHMSI) has done 0%, Wilshire 1%, Wachovia 2%, Select Portfolio 3%, Bank of America 4%, OCWEN 5%, and Wells Fargo and Citizens 6% each.

Who's fault is it - primarily the lenders/servicers. They never got ready for the program and they prefer to try to wait out the bad times, thinking, it seems, that suddenly the housing and finance markets will turn positive.

IT IS CRITICAL TO NOTE that once a borrower has submitted the necessary paperwork for a MHA Loan Modification, and has passed the initial screening (see below) FORECLOSURE PROCESS MUST STOP! - 1. home is your primary residence 2. currently employed or have other regular income 3. default caused by a hardship or there has been a drop in income or increase in expenses 4. your mortgage payment including principal interest, taxes and insurance is more than 31% of your monthly GROSS income, and 4. your loan was current at the start of 2009, you qualify for the full analysis. (Go to http://makinghomeaffordable.gov/modification_eligibility.html

If you meet the basics and have filed for a modification, and you then get a letter stating that the foreclosure process will continue during the evaluation, send a certified return receipt requested letter to the address to which you sent the documents, and state that the law requires them to STOP foreclosure proceedings.

If you are having a problem, call a qualified Bankruptcy attorney in your area (you can find one at www.nacba.org), or, contact your local Bar Association for a referral to an attorney working to stop foreclosures. In Massachusetts for example, you can contact the Massachusetts Fair Housing Center, or any of the local housing authorities for a referral.

The program is a reasonable one. I am having excellent results for my clients, but it requires a great deal of patience. As always, contact my office if you have a problem finding help.

Author's Copyright by Richard I. Isacoff, Esq, August, 2009

rii@isacofflaw.com

http://www.isacofflaw.com/

Foreclosures Skyrocket - Help Doesn't

(NOTE: For reasons that are obvious to most of us, the majority of the financial information published, in print or by broadcast, has been about the economy in general, the mortgage crisis and the "fix" to it, the looming credit card disaster, or the stock market's on-going saga. Consequently, nearly all of the postings to deal with these issues. Other legal matters have not been forgotten)

We have all heard about the various federal plans to help homeowners keep their homes. Unfortunately, nearly all of the programs have had little impact to date, which has left borrowers who are in trouble at the mercy of the lenders/mortgage companies or the manager of the mortgage backed security ("MBS") that really owns the mortgage.

According to an article in the New York Times, published on May 14th, 55,000 homeowners have signed for assistance with one of the federal mortgage-relief programs. At first glance that may seem like a good response. Put into perspective though, in April there were 342,000 foreclosures. The point? The programs are not working. (see the chart from the New York Times above)

The Senate, without any support for the Senate Bill 61 from the White House to pass it, voted down legislation that would have made the mortgage lenders and the MBS managers pay attention and try to fix this country's biggest economic problem. The Bill would have given Bankruptcy judges the power to modify loans that were deemed unfair and predatory in nature. Lenders would have had to compromise or face the Courts. The Banking lobby killed it.

As long as the housing market continues to slide, and as long as foreclosures continue to climb, we will not see a major recovery in the general economy. One might argue that it is the 650,000 lost jobs last month that is the root cause of the recession (5,000,000+ jobs lost in the past 8 months). BUT, the crisis started when the mortgage market collapsed, loans that people could not afford adjusted, and the MBS that were being held nationally and internationally became worthless overnight. The MBS and CMBS (Commercial Mortgage Backed Securities), both of which are derivatives, represented trillions of dollars - yet the downfall of one "Bank", Lehman Brothers, began the chain reaction that has brought us to our knees.

There is little that can be done on the national political level, except for writing our elected representatives and asking that work for their constituents instead of the lobbyists. However, there are other steps that can be taken to help stricken borrowers.

The New York Federal Reserve Bank and the New York City Bar Assn. have set up a program to train lawyers to help victims of predatory lending practices, or the economy as it relates to home mortgages. The courses, offered at no cost to the participants provided each takes at least one pro bono (no fee based on the homeowners financial hardship) case in the next 12 months, will give the attorneys the knowledge to review all phases of the loan transaction to determine if the Lender/Broker/Originator took advantage of the Borrower, or if the Servicer is now committing violations of the Federal or State rules regarding collections, notices, foreclosure procedures, etc.

In Massachusetts, The Boston Bar Association has run similar type training, although not as comprehensive, as has The Mass Fair Housing Association in conjunction with the Hampden County Bar Assn ( western Mass) Foreclosure Task Force. Further, attorneys with experience in the field are handling those cases which come to them either on a pro bono basis, or if the borrower can pay, for a fee based on the ability to pay. The idea here is to do as much as we can to save houses.

At any given time, I have 5-8 predatory lending/hardship cases in process. The results are good so far, but each case takes a great deal of time, mainly on the telephone, on hold (listening to bad music). Each Lender and Servicer has different procedures that have to be followed; that is easy once you know what they are. The biggest issue is speaking to someone, on behalf of my client(s), who can make a decision or at least refer me to someone else who can do so. When I am doing a training course, I caution attorneys to just try to get their client(s) back to the place that the client really bargained for, and to have the attorney's fees paid by the Lender; not to try to get a big judgement against the Lender etc. The goal is to stop foreclosures and keep homes.

For example, I have a couple who Borrowed from Wells Fargo through a Broker, Direct Finance, whose representative (originator) promised a $1,200 per month payment, matching the existing loan. My clients were getting cash out of the closing to payoff credit card and medical debt. The closing where my clients actually signed all of the paperwork was a farce. The attorney that actually was the settlement agent (closing attorney - all of whom represent the Lender technically) was filling in for the Lender because the attorney that was supposed to do the work had a conflict in his schedule. The closing lasted 15-20 minutes. There was no way that the attorney could explain all of the documents and the terms of the loan to the borrowers in that time. In fact, the borrowers, my clients now, were just given paper after paper to sign - the attorney had another appointment.

When my clients finally received documents with the actual figures on them, the payment was $1,900 per month PLUS taxes and insurance, for a total of $2,200. This was $1,000 above what had been promised. My clients had been told that the rate would drop from the 7.75% they had, to 5.75 % which would make up the difference for the "cash out" portion of the refinance. Further, the Originator cannot be found - by me, the Broker, or the Lender. However he did the same thing, working for a different broker, to a couple to which he was referred by my clients. This indicates that there was a pattern and practice of fraud and deceit, at least by the originator and quite possibly by the Broker.

My sole job in the matter above is to make a deal so my clients can keep their home. We are not asking for punitive damages, or compensation for the stress, anxiety and "conscious suffering" my clients have been enduring since receiving a foreclosure notice. e simply want was my clients thought they were "buying", and my fees which a nominal in the context of the loan itself and the Lender's attorneys' fees.

If you are facing a foreclosure and the reason is not simply that you haven't paid the mortgage company, but could have, but is because of irregularities in the lending process or what you believe were problems, contact your State or local bar association for a referral to an attorney who is handling these type of cases. If you cannot find an attorney, feel free to contact us at the email address below, and we will try to get you a referral to competent counsel

Author's Copyright by Richard I. Isacoff, Esq., May 2009

rii@isacofflaw.com

http://www.isacofflaw.com/