Skip to comments.Foreclosure Fraud: It's Worse Than You Think
Posted on 10/12/2010 3:45:12 PM PDT by TigerLikesRooster
Foreclosure Fraud: It's Worse Than You Think
Posted By: Diana Olick | CNBC Real Estate Reporter CNBC.com
| 12 Oct 2010 | 01:14 PM ET
There has been plenty of pontificating over the ramifications of foreclosure freezes on troubled borrowers, foreclosure buyers and the larger housing market, not to mention lawsuits, investor losses and bank write downs. There has been precious little talk of what the real legal issues are behind the robosigning scandal. Yes, you can't/shouldn't sign documents you never read, but that's just the tip of the iceberg. The real issue is ownership of these loans and who has the right to foreclose. By the way, despite various comments from the Obama administration, foreclosures are governed by state law. There is no real federal jurisdiction.
A source of mine pointed me to a recent conference call Citigroup had with investors/clients. It featured Adam Levitin, a Georgetown University Law professor who specializes in, among many other financial regulatory issues, mortgage finance. Levitin says the documentation problems involved in the mortgage mess have the potential "to cloud title on not just foreclosed mortgages but on performing mortgages."
The issues are securitization, modernization and a whole lot of cut corners. Real estate law requires real paper transfer of documents and titles, and a lot of the system went electronic without much regard to that persnickety rule. Mortgages and property titles are transferred several times in the process of a home purchase from originators to securitization sponsors to depositors to trusts. Trustees hold the note (which is the IOU on the mortgage), the mortgage (the security that says the house is collateral) and the assignment of the note and security instrument.
(Excerpt) Read more at cnbc.com ...
So..........banks are required to read documents but Congress is not?
It must be bad, if the ABCDEFetc. networkd are discussing it.
Things are going down the toilet at warp speed, November can’t get here soon enough.
Please also cover this case from a few years ago. This issue was out there a long time ago, but very few listened or took heed:
A landmark ruling in a recent Kansas Supreme Court case may have given millions of distressed homeowners the legal wedge they need to avoid foreclosure.
In Landmark National Bank v. Kesler, 2009 Kan. LEXIS 834, the Kansas Supreme Court held that a nominee company called MERS has no right or standing to bring an action for foreclosure. MERS is an acronym for Mortgage Electronic Registration Systems, a private company that registers mortgages electronically and tracks changes in ownership.
The significance of the holding is that if MERS has no standing to foreclose, then nobody has standing to foreclose on 60 million mortgages. That is the number of American mortgages currently reported to be held by MERS. Over half of all new U.S. residential mortgage loans are registered with MERS and recorded in its name. Holdings of the Kansas Supreme Court are not binding on the rest of the country, but they are dicta of which other courts take note; and the reasoning behind the decision is sound.
Eliminating the Straw Man Shielding Lenders and Investors from Liability
The development of electronic mortgages managed by MERS went hand in hand with the securitization of mortgage loans chopping them into pieces and selling them off to investors. In the heyday of mortgage securitizations, before investors got wise to their risks, lenders would slice up loans, bundle them into financial products called collateralized debt obligations (CDOs), ostensibly insure them against default by wrapping them in derivatives called credit default swaps, and sell them to pension funds, municipal funds, foreign investment funds, and so forth. There were many secured parties, and the pieces kept changing hands; but MERS supposedly kept track of all these changes electronically.
Lets add to he mix of “shortcuts” that MANY of the trusts were never created , the wall street banks just created accounting reports as if the trusts existed.. when you combine that with the fact that trusts are state regulated and in most cases must be registered and pay yearly registration fees (none of which was done) ,, you add another Mt. Everest sized hurdle for the banks (pretending to be the investors) must overcome.
You beat me to it.
The government can pass unread or not understood legislation. They will be held accountable in less than a month.
Private individuals and even local government are not so luckly. We're held accountable immediately.
OH... and lets add in that REMIC requirements were ignored meaning even on the performing assetts the tax exemptions for passthrough interest instruments (reits , mbs’s ) aren’t applicable and all these Wall Street banks owe back taxes on 100% of all the cash flow forwarded to the real investors. (plus penalties , plus intesest).
When all is said and done it will turn out that even if you actually paid off your mortgage, you don’t really own your house. The Government does.
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America's pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles.
the solution is to say the deffective mortgage is no longer attached to the real property and is an unsecured claim. thus there is no lien to cloud the title.
Legally you are 100% correct ... I don’t know if we have the gonads to throw the “too big to fail” banks onto the rocks ... as they deserve.
But you can bet the government will find some way to prevent those homeowners from getting a free home at the expense of the financial system.
Actually, they hire a speed-reader to mock our system.
“Things are going down the toilet at warp speed, November cant get here soon enough.”
Sorry, Charlie, a Republican Congress (assuming such a thing comes about) is not going to have a quick fix for this problem.
It would be nice to see comments from a former General Counsel of a large title company. Exactly what are title companies likely to require before insuring title to properties that have passed through foreclosure?
Deficiencies in recorded chains of title can be fixed with curative paperwork if everyone in the chain of title will execute the required documents (at least that’s true in Texas). If previous owners of mortgages no longer exist or if their managers cannot determine for certain that they previously owned the mortgages (and so refuse to sign anything), then you gotta problemo Cochise. Otherwise, rack ‘em up and play pool.
There could be 10's of thousands of people guilty of FRAUD...if not a million or more.
Million of folks who are now paying mortgages may find they don't have clear title.
Gosh. Like 70% of all mortgages are held by Fannie & Freddie. That would be what,at least a trillion in losses for we,the people,to eat? I’d prefer a solution that wouldn’t involve me and mine owing another 30k apiece.
“Gosh. Like 70% of all mortgages are held by Fannie & Freddie.”
Yes, Wiggen, and it’s going to get worse. Example...I made a cash offer on a Fannie repoed condo the other day. They took a lower offer, because the applicant was a minority with no references. And they financed it. They’re digging us back into the same hole and will keep doing it as long as we keep handing out the money to bail them out. Fannie gives MILLIONS every year to groups like Maldef, LaRaza, Rainbow Push coalition and finances a BUNCH of politicians..on the left and right. All with OUR money.
You can also bond around a lien. Not big liens but small ones such as a lien filed by an unpaid plumber.
99% of the rancor is over technicalities.
I have yet to read where any substantial number of these foreclosures came about when the buyers were not in fact in serious default on their mortgage, over extended periods of time.
So, lets all jump up and down with populist angst against the evil banks, and allow some technicalities to force them to NOT foreclosure on people grossly in default and even though “saving them” now, forestalling the foreclosure now, will not improve their ability to prevent the foreclosure in the end.
Forestalling the inevitable over technicalities, when, in general we need the true bottom of the housing market to be arrived at sooner, not later. The longer the inevitable is forestalled, the longer before a healthy housing market can contribute to recovery.
You get a foreclosure notice.You know that you've made the payments,as set out in the original loan documents,as required...to the address you've been given.You have the original loan documents...you have all the various notices and statements you've been sent...and you have the canceled checks.
You take these documents to the courtroom...the judge examines them...and the foreclosure petition is denied.And rightfully so.
But if you *haven't* been keeping up with the payments or have violated some other important part of the agreement then you're out! Period.And if the entity that's foreclosing might not have the authority,or "standing",to do so then let the entity that does take *them* to court.
You don't pay your mortgage....you're out.OUT!
Even if the Document Fairy comes by in the night, waves her magic wand, and cures all the document problems, the housing market is not going to recover until the oversupply of houses built in the last five years works its way back to equilibrium and enough decent-paying jobs are created for people to have the income necessary to support a house.
That’s years away, at best.
I think that is the point. “They” want us to pay for the banks mistakes.
My mortgage is “supposed” to be with Fannie, but the chain of title that they claim my mortgage with is bogus. BofA, which I never had a loan with, “assigned” it to Fannie! So, you and everybody else can pay for my mortgage, if we ever default. Lucky for you, my hubby is employed. We are doing OK. BUT, how many other loans has this happened too JUST TO SAVE THE BANKS!!!
I have been reading so many articles on this I am no longer sure where I saw this, maybe MarketTicker, or in a thread here at FR, but the main point of the comment was ALL OF THIS IS TO SAVE THE BANKS.
In fact, I was just at ZeroHedge, and there is a thread there that you can “send” a letter to the banks about your mortgage. Guess who is one of the supporters? SEIU!!!!
This will pass you thought the SEIU’s link( action. org) http://www.zerohedge.com/article/here-your-chance-check-if-you-are-victim-mortgage-fraud
But, I saw another site that was much more “real” than SEIU’s bogus site: http://www.consumerwarningnetwork.com/2009/03/05/how-to-use-produce-the-note-in-non-judicial-foreclosure-states
The second link is real help for people.
NOW, SEIU is trying to whip people up. But to what end?
The solution is so simple it is staring you in the face and you don't even see it. Just have the taxpayers bail out the financial system. Then everyone wins! Right?
Thats why bankers get bonuses I guess
RULE OF LAW .... anarchy .... pick one.
That’s the most depressing thing I’ve read in a very long time...*SIGH*
We really are screwed. It seems that we’re just waiting to see how bad it really is!
Come November, I hope our new Congress will be filled with the spirit to bring all of these outrageous scandals and The On-going Rape of the American People to light...
Fascinating. Thanks to all posters. (I’ve been following this story mostly at zerohedge)
BTW, record bonuses for the financial industry this year.
Right now it works for me....... their chickens are coming home to roost......
It appears that MERS is an electronic county courthouse for the entire country, supposedly. Sans filing fee.
Can the county courthouse foreclose on a delinquent borrower? Hardly. It is just a data center.
I read the
TWO FACES: DEMYSTIFYING THE MORTGAGE ELECTRONIC REGISTRATION SYSTEMS LAND TITLE THEORY (pdf) One click download, fascinating. Thanx for the source.
I have hard and unpleasant news for those who think that a GOP congress would do something about this:
The GOP leadership is completely in the pockets of the banks. The GOP leadership is either gullible enough, or stupid enough, to believe (at face value) everything the banks say.
Yea, like fraudulent affidavits, notary fraud, failure to produce evidence of right to foreclose.... you know, little technicalities.
BTW... just in case you persist in thinking that these are mere paperwork errors: In most states, filing a fraudulent affidavit is at the very least a gross misdemeanor and for a lawyer it is a felony. In states like Nevada, where I’m most familiar with the law, it is a Class D felony (1 to 3 years) first offense.
A substantial number (as in 10’s of thousands) of these foreclosure proceedings are based upon fraudulent documents. Then there is notary fraud, process service fraud, and we haven’t talked yet about the issues of failures to record conveyance in many states.
A judicial action of foreclosure based upon fraud can be vacated upon appeal. The case law is pretty clear on this one. Get a court to do your bidding based upon fraudulent information... and the courts don’t like looking like your patsies. First they undo what you conned them into doing, then they make you pay for the other guy’s lawyer. Then they start talking about whether or not they bring a case against you for fraud.
The best course the banks have is to stop submitting fraudulent documents, produce REAL documents so they can foreclose and have it stick. Because the fastest, best way to award a house “free and clear” of all future claims is to perpetrate a fraud upon the court by submitting fraudulent affidavits, have the case vacated upon appeal, and then the judge will probably toss in that the bankers have to pay the legal fees of the deadbeats.
Even if the deadbeat(s) don’t appeal, a foreclosure based upon phony docs will likely not have a quiet title. It will cost future buyers of the property a tidy bit in legal fees to clean up the docs and get the title quieted.
The paperwork needs to be cleaned up to make foreclosures successful and the properties ready for sale when it is all done.
TWO FACES: DEMYSTIFYING THE MORTGAGE ELECTRONIC REGISTRATION SYSTEMS LAND TITLE THEORY (pdf)
One click download, fascinating.
It is simply their just reward for the complexity and hardwork involved in dealing with the intricacies of $700B in TARP money and a record number of federal reserve ledger entries required to ensure that the banking system did not collapse.
CNBC had a representative of MERS on today. He was making excuses about some states finding MERS with standing to sue.
I say those judges should have their licenses pulled.
BTW the banks would still have the unsecured debt and make take all actions to collect on that.
Ok, then, it’s just, things are going down the toilet at warp speed.
What NO ONE has shown is that in all the foreclosures in this current fiasco, were ANY in fact “fraudulent” because the buyers were NOT in fact in egregious default on their mortgage? From everything I have read so far, that answer is NO. So, was their paperwork errors? Yes. BUT, the financial grounds for foreclosure seem to be there in these cases. So, at the end of the day, at most, ALL the same foreclosures WILL BE refiled with all their I's dotted and t's crossed and NOTHING about the financial particulars - the heart of the issue in foreclosure, will have changed; other than the time wasted to get these houses back on the market.
People spouting your line - ie, “don’t know of any such cases” - it is because you’ve all been wandering around, deliberately ignorant. You haven’t seen the cases because you don’t want to pay attention.
So pay attention.
I’ll give you just two cases of foreclosure on paid-off properties.
In the first case, we have a man who bought a house that had previously been foreclosed. He paid CASH. Got that? There was NO mortgage on the property. He paid CASH.
Yet, guess what he gets? Foreclosed and the property sold.
Second case of foreclosure on a paid-off house, out of Arizona:
Here’s their legal complaint:
As you can see, BofA can’t find their ass with either or both hands. They have no clue what their doing with that property. Part of BofA wants to foreclose, the other part wants to assist. Neither can seem to get the clue that BofA has no interest in the property, nor any claim.
Next case: Another Florida case, this time a house going into foreclosure. The deadbeat is fighting it in court, as is their right. During this contest in court, the judge discovers that there is a second foreclosure claim being put forward in another court in Florida. Same bank, different law firm, same amount, different court.
Foreclosure claim #1:
Foreclosure claim #2:
Both of these are for the same lender, but they’re being brought by different law firms for said lender (JP Morgan).
If the timeframes were slightly different, and one foreclosure succeeded and the property was sold while the other foreclosure action hung fire, you’d get a repeat of the case where a guy paid cash and then gets a foreclosure notice.
So-called “conservatives” who keep harping on the deadbeat, here’s a bit of advice:
Try and think just a little further than the possibility of someone getting a free house. Y’all have your veins standing up on your necks, thinking about the possibility of some deadbeat getting away with a free house by legal connivance. Get over yourselves. That’s the LEAST of our problems right now.
Think about the consequences of hundreds of thousands of compromised titles, or buyers buying property without title insurance as the title insurers back away from this mess. Old Republic has already refused to write new policies on foreclosures by GMAC/Ally as of two weeks ago.
THAT is the biggest issue I see going forward. That’s an example of what happens when the paperwork has been so completely bungled that the banks cannot issue a quiet title on a property. If there is a real possibility of non-quiet title, investors back the hell away from foreclosed properties in a hurry. All it takes is a legal dispute over the claims to the property, or some lender comes forward with a claim of an unpaid debt attached to the property, and an investor can go into the tank hiring lawyers to get this crap straightened out.
The reason why the banks are doing this is because they’re trying to save their own skins. They know they didn’t property assign the paperwork on properties. They know (quietly, amongst themselves) that they’ve in effect turned a whole bunch of asset-backed securities into unsecured debt... and as soon as the lawyers representing the buyers of said now-unsecured debt get traction, the banks are going to have to take back truckloads of that compromised debt. This will sink their books. They can’t afford to take back that paper. And there’s some very powerful forces out there on the other end of this now-unsecured paper: Fannie/Freddie (ie, Uncle Sam) and the Federal Reserve.
If the Fed decides that there’s losses in the $1.2 Trillion of residential mortgage backed securities that are now on the Fed’s balance sheet that are the result of shoddy paperwork, do we think that the Fed is going to put up with it?
If the Fed wants, they can bring forces to bear on an offending bank that Uncle Sugar can only dream of. The Fed will get their way.
Hence the pell-mell rush to ram these foreclosures through.
Well, too bad, so sad, the jig is now up. The turds are hitting the turbine blades, and the result isn’t pretty.
don’t forget the statute of limitations.
if no action is taken then the property can be claime via adverse possession and/or unforclosable because of shorter time to sue on the promissory note. (but only the proper party plaintiff)
You will get no argument from me about that.
My point is that while anecdotal examples of a few instances where the “paper work questions” have wrongfully, in financial terms, attempted to foreclose on properties, I continue to see no evidence, in their numbers, that they DO constitute the exception, not the VAST majority; that I do expect will - the majority, at the end of the day, prove to be fully justified, on financial terms and their paperwork issues cleared up.
Due diligence by the regulators and the industry WILL clear up the paperwork issues, and when all is said and done the VAST MAJORITY of these houses that are now in question due to the paperwork issues, will either still, or again, been in foreclosure.
Clearing up the paperwork is not, to me, the bigger problem (BECAUSE IT IS SOLVABLE), which is instead, the time, the delays in settling all these foreclosures, to get to the bottom of the fall-out of the burst housing-bubble sooner rather than later.
The biggest problem they have isn’t the foreclosure. The deadbeats can be foreclosed upon today, tomorrow or next week. Most of them ain’t gonna start paying anytime soon, so they’ll keep.
The issue of what the investors in the crap paper are finding out is the most serious issue, followed by the frauds committed upon the courts. The investors are going to discover that they’ve been scammed, and not a little bit, and the put-backs will start. The banks don’t have the money to survive a large number of put-backs.
Who is going to demand these put-backs? FHA, Fannie/Freddie, pension funds, other banks. In other words, people with money. How big is the issue?
It ain’t a few isolated cases:
That’s just BofA.
Then there’s the fraud issue. The numbers of fraudulent affidavits is not small. JP Morgan is reviewing over 110,000 foreclosure affidavits. We’re talking 10’s of thousands of fraudulent affidavits that will have to be withdrawn, and then, if the courts and AG’s decide to do so, they’ll go back and examine foreclosures already done based on fraudulent affidavits. A judicial decision of foreclosure can be vacated upon appeal if the appellant has evidence that the judge was making a decision based upon a fraudulent affidavit. There’s plenty of fraudulent affidavits around. This means that people who are buying previously foreclosed properties might have titles that need remediation to quiet them. That will cost investors in foreclosed properties some money.
That the majority of these cases involve a person who has defaulted on the loan isn’t in doubt. But that’s the small issue now. That’s simple, straightforward and easy to fix: produce the correct documentation, with true affidavits and proceed with a foreclosure. You can’t foreclose with a fraudulent affidavit and expect it to stick when appealed.
The missing paperwork may not be that easy to fix, however. The banks have, in some cases, destroyed the paper that they need to foreclose. Deliberately. They wanted only one “copy” of a mortgage in their system, so they made an electronic copy in MERS and destroyed the original(s).
Trouble is, in some states they needed those original documents. That’s what the state law requires. Should they have read the state law before creating MERS? Of course. DId they? From what I’m seeing, they obviously didn’t. And to top this off, now many county clerks are realizing they’ve been gypped out of a ton of recording fees by MERS (and this avoidance of recording on physical paper and the required fees was sold as one of MERS’ benefits)... and guess what most counties in the US would like right now? More money. I’m guessing that some county clerks and recorders start to go after banks to do physical recording and pay the fees. They should.
JP Morgan was one of the founders, if you will, of MERS. They’ve let it slip that they’ve ceased to use it - because it simply leads to more problems.
As to the RMBS securities: There are types of securities into which residential mortgages are put that you cannot clear up these types of paperwork mistakes (or more likely, outright omissions) easily. eg, REMICs.
What most people here are just not “getting” is that this is a two or three-sided problem. There are deadbeat homeowners... that’s seems to be the only part that too many conservatives want to understand.
One legal precedent cited multiple times in,
is that the title and note CANNOT be separated in property transactions.
This principle has been upheld by the Supreme Court of the United States.
Simply put, if they are separated and the borrower defaults, the note holder cannot foreclose because he is not the title holder.
The title holder cannot foreclose because he has no damages.