Tag: MERS

Subverting the rule of law? How dare I? Well the 4th amendment, due process, kill lists, and the NDAA also speak to my title. Yes, they speak to it despite those that decided politicians were more important than the principles they pretended to have in 2004 now outed as hypocrites mostly. However, that being said, I’m talking about subverting the rule of law in a different way but equally as damaging on the economic front.

After all, it was at the SOTU merely just a year ago that President Obama assured us that something was going to be done about the Wall St. perpetrators of our mortgage and foreclosure crisis. This was a crisis in which they defrauded consumers with sub-prime NINJA loans pumping up the housing bubble and then dumping the private debt overhang onto the economy destroying over 10 trillion in housing wealth. This left consumers with massive loads of private debt and everyone else jobless like this recovery.

This White House’s DOJ has made a complete mockery of the concept of Justice in and of itself. That illusion of Justice is perpetuated to this day and normal people are devastated because of it. Let President Obama know you are not amused. I have.

Cross posted at our new beta site Voices on the Square and The Stars Hollow Gazette

Yes, another crash is coming. I can’t predict precisely when as that would be a fool’s errand, but much closer than you think. It will probably be after our President is reelected and will care very little what you or I think once he and his treasury push for criminal TBTF banks to bailed out once again. Doctor Doom: the nickname for economist Nouriel Roubini: one of the relatively few outside the mainstream(part of the Got It Right (pdf) project) who predicted the last crash thinks 2013 is a perfect storm for another one which will be even worse and it makes sense.

Despite on theoretical fiscal policy limits with regard to the US, Roubini is absolutely right on the political deadlock with the coming crisis. We wasted our last crisis and that’s something Conservatives have not done whether we’re talking about the stagflation crisis of the 70s or 9/11. There won’t be as many political options this time to prop up the underlying economy in 2013 because Democrats have failed to change the Senate rules because most of them secretly like the way things work or don’t work in Washington. Sadly, if Republicans take over both houses again, they will change the Senate rules as they threatening to do in 2005 and 2006.

Anyway some might still want to scoff at Roubini’s prediction, but that will come back to bite them in the ass. Not even Roubini can predict the exact moment it will happen, but if one knows anything about the history of financial crashes, since the 80s when the 1933 banking reforms passed by FDR started slowly being dismantled, they started happening once again in a 5-7 year time-frame(and even closer than that if you count global stock crashes which count now more than ever since our markets turned dark with OTC derivatives and Information Asymmetry all around); some worse than others as the 2008 bust was on par with 1929 but you get the idea.

• Black Monday (1987)
• Black Wednesday (1992)
• Asian financial crisis (1997)
• Mini-crash (1997)
• Dot-com bubble(2000)
• Economic effects arising from the September 11 attacks (2001)
• Stock market downturn of (2002)
• United States bear market of (2007)
• Global financial crisis (2008)
• European sovereign-debt crisis (2010)

Cross posted in Orange and at Voices on the Square

Yes, this is true. It’s not a popular saying, but I’m not here to make everyone feel good for 2012 electioneering while people are suffering to feel a sense of belonging among the Washington elite prognosticating over poll numbers instead of real issues. As we have this debate over 4 percentage points in the tax code, the overall omission of most Americans suffering from the fallout of the housing bubble is insulting.

That’s right. This debate ignores the big elephant in the room; the millions of people underwater defrauded into mortgage debt and other private debt chaining them to their deflating assets with no sufficient income prospects added up and compounded in a usurious fashion sucking demand out of the economy. For those that do not “got theirs jack” and can’t afford cable news to cheer along with this partisan war syndrome dynamic, this actually matters.

It matters because as I have chronicled here, here, here, and here, the Foreclosure Fraud Settlement was an insult to the millions injured from the fallout of this bubble once NY AG was bought off to prop it up with stilts. Banks were given credit for the HAMP mods in addition to being propped up by the other failed HARP program. Basically those that defended that settlement or any of these programs anymore have to admit now they knew nothing.

For want or need of a nice election tune, many are tuning in to this election while too many are tuning out these debilitating economic problems because the absolute failure to deal with them at all. I partially understand, it is daunting and demoralizing, but whether one wants to tune in to these problems or not, the song remains the same.

It’s the song of the decade and it goes well beyond this election.  

New York State Attorney General Eric Schneiderman filed suit today in New York State Supreme Court in Brooklyn charging them with deceptive and fraudulent practices that harmed homeowners and undermined the judicial foreclosure process. From Mr. Schneiderman’s office:

NEW YORK – Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as “MERS certifying officers,” have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.

The lawsuit further asserts that the MERS System has effectively eliminated homeowners’ and the public’s ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database – which is plagued with inaccuracies and errors – over which MERS and its financial institution members exercise sole control. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law,” said Attorney General Schneiderman. “Our action demonstrates that there is one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced vigorously. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York’s homeowners.” [..]

The lawsuit specifically charges that the defendants have engaged in the following fraudulent and deceptive practices:

   

MERS has filed over 13,000 foreclosure actions against New York homeowners listing itself as the plaintiff, but in many instances, MERS lacked the legal authority to foreclose and did not own or hold the promissory note, despite saying otherwise in court submissions.

   

MERS certifying officers, including employees and agents of JPMorgan Chase, Bank of America, and Wells Fargo, have repeatedly executed and submitted in court legal documents purporting to assign the mortgage and/or note to the foreclosing party. These documents contain numerous defects, including affirmative misrepresentations of fact, which render them false, deceptive, and/or invalid. These assignments were often automatically generated and “robosigned” by individuals who did not review the underlying property ownership records, confirm the documents’ accuracy, or even read the documents. These false and defective assignments often masked gaps in the chain of title and the foreclosing party’s inability to establish its authority to foreclose, and as a result have misled homeowners and the courts.

   

MERS’ indiscriminate use of non-employee “certifying officers” to execute vital legal documents has confused, misled, and deceived homeowners and the courts and made it difficult to ascertain whether a party actually has the right to foreclose. MERS certifying officers have regularly executed and submitted in court mortgage assignments and other legal documents on behalf of MERS without disclosing that they are not MERS employees, but instead are employed by other entities, such as the mortgage servicer filing the case or its counsel. The signature line just indicates that the individual is an “Assistant Secretary,” “Vice President,” or other officer of MERS. Indeed, these documents often purport to assign the mortgage to the certifying officer’s own employer. Moreover, as a result of the defendants’ failure to track the designation of certifying officers and the scope of their authority to act, individuals have executed legal documents on behalf of MERS, such as mortgage assignments and loan modifications, when they were either not designated as a MERS certifying officer at the time or were not authorized to execute documents on behalf of MERS with respect to the subject loan.

   

MERS and its members have deceived and misled borrowers about the importance and ramifications of MERS’ role with respect to their loan by providing inadequate disclosures.

   

The MERS System is riddled with inaccuracies which make it difficult to verify the chain of title for a loan or the current note-holder, and creates confusion among stakeholders who rely on the information. In addition, as a result of these inaccuracies, MERS has filed mortgage satisfactions against the wrong property.

The lawsuit seeks a declaration that the alleged practices violate the law, as well as injunctive relief, damages for harmed homeowners, and civil penalties. The lawsuit also seeks a court order requiring defendants to take all actions necessary to cure any title defects and clear any improper liens resulting from their fraudulent and deceptive acts and practices.

Schneiderman has still not signed onto the Federal agreement and the final terms of that agreement are still pretty vague as no one has actually seen the final document but they have been given until February 6 to sign on to it.  Precisely how this suit, or the one file this week by Illinois AG against Nationwide, will effect or be effected by that agreement is anyone’s guess. But there is a lot of speculation. Happy Friday news dump  

The CBS News program, “60 Minutes” aired a Mortgage paperwork mess: the next housing shock? segment on foreclosure fraud which, as most economists agree, is the biggest threat to the US economy. Scott Pelley looks for the answer and a at the possible solutions to the question of “who owns your mortgage”:

It’s bizarre but, it turns out, Wall Street cut corners when it created those mortgage-backed investments that triggered the financial collapse. Now that banks want to evict people, they’re unwinding these exotic investments to find, that often, the legal documents behind the mortgages aren’t there. Caught in a jam of their own making, some companies appear to be resorting to forgery and phony paperwork to throw people – down on their luck – out of their homes.

Sheila Bair, Chairperson of the FDIC, says she will call for a clean-up super fund

   Banks so poorly handled documentation on millions of mortgages that many today cannot prove that they own the homes they want to foreclose on. The resulting rash of lawsuits from people seeking to save their homes has one of the government’s top banking regulators worried that the torrent of litigation will delay the real estate market’s recovery.

   Federal Deposit Insurance Corporation Chair Sheila Bair tells Scott Pelley banks should be forced to contribute billions to a clean-up fund that will help stressed homeowners stay in their homes and stave off lawsuits – there are 30,000 already – that threaten the economic rebound […]

   Like last year, banks are expected to foreclose on a million mortgages this year, a scenario that could generate more lawsuits over mismanaged paperwork. “I think that this litigation could easily get out of control,” says Bair. “…We’re already feeling like we’re falling behind it,” She thinks a large clean-up pool funded by the banks that would pay homeowners to accept a bank’s ownership claim without a lawsuit is necessary. “I would assume it would be billions [that the fund would need],” Bair tells Pelley.

But as, David Dayen points out, this “super fund” would not stop any claims in state courts on behalf of homeowners, federal regulators don’t have the authority to do that.

And the more banks resist it, the more liable they will become. In an important case this week, a judge in Alabama dismissed a foreclosure because the bank failed to comply with the pooling and servicing agreement for transferring mortgages to the trust. This would be a stunning ruling if applied broadly, though whether or not it will stand as precedent across other states remains to be seen; it’s far too early in the process to determine that. But we know that banks simply did not convey mortgages to trusts properly as a general rule. Foreclosure fraud can be seen as a coverup for that original sin. And if state courts are starting to make rulings based on that sin, banks will be stuck and unable to pursue foreclosures on tens of millions of loans.

The ruling in favor of the borrower endorses an argument we have made since last year on this blog, that the pooling and servicing agreement stipulated a specific set of transfers be undertaken to convey the borrower note (the IOU) to the securitization trust within a specified time frame. New York trust law was chosen to govern the trusts precisely because it is unforgiving; any act not specifically stipulated by the governing documents is deemed to be a “void act” and has no legal force. So if a the parties to a securitization failed to convey a note to the trust within the stipulated timetable, retroactive fixes don’t work. In this case, the note had been endorsed by the originator, Encore, but not by the later parties in the securitization chain as required in the pooling and servicing agreement.

Yves Smith at naked capitalism, has a problem with what Bair said:

One aspect that is distressing is that per her remarks in this clip, Sheila Bair does not appear to understand or worse, understands but is not willing to admit the seriousness of the chain of title issues. Often, the banks botched the transfer process in such a fundamental manner that retroactive fixes are not possible. This isn’t a matter of “if the banks spend enough time, they can prove the trust they are acting for owns the note” as Bair contends. It’s that in many cases the note didn’t get to the trust as stipulated, and the trust doesn’t have the ability under New York law, which governs virtually all of these trusts, to accept it now. A party earlier in the securitization chain is typically the owner, but no one wants that party to foreclose, since it would confirm the failure to handle the assignment of the note properly.

I’m not so sure that this Congress would be amenable to another multi-billion dollar bail out but this is a better proposal that the one that would strip homeowners of their right to due process.

(all emphasis is mine)

You can get away with defrauding people of possibly trillions of dollars but don’t do it if you’re a borrower or undocumented immigrant working on the banker’s estate.

The Department of Justice: Indicting Immigrants, Ignoring Wall Street Crooks

by Richard (RJ) Escow

If you’re a banker who bought your estate with the millions you made from mortgage fraud, relax. The Justice Department isn’t looking for you. But if you’re an illegal immigrant who’s working on that banker’s estate, look out. The Department of Justice is ignoring your boss and devoting most of its resources to catching you.

And the Justice Department’s “mortgage fraud” unit doesn’t prosecute bankers. It protects them.

Joe Nocera of the New York Times contrasts the legal treatment that was given to one high-flying borrower with that received by Angelo Mozilo, CEO of the fraudulent lender Countrywide. But if stories like this one are bad, the numbers are even worse.  

If you also take a qualitative look at some of the federal government’s other well-publicized mortgage fraud efforts, like its “Stop Fraud” website, the picture becomes pretty stunning — if not downright infuriating.

Mortgage Brokers Go Free While Mortgage Customer Goes to Jail

by David Dayen

Joe Nocera’s story over the weekend about a man thrown in jail for signing his name on a liar loan is a textbook example of the two-tiered system of justice in this country. On the one hand you have the banks, who systematically committed fraud on millions of loans, and for their trouble received hundreds of billions in bailout money and access to cheap money. On the other hand you have a customer, who gets taken to jail for his one loan transgression. Never mind that for many millions of customers, they didn’t even know they were lying on their loans; shady mortgage brokers falsified their records, forged their signatures and altered the terms and conditions repeatedly during the run-up of the housing bubble. And that’s possibly true of Charlie Engle as well, as Nocera illustrates.

As for the loans themselves, on one of them Mr. Engle claimed an income of $15,000 a month. As it turns out, his total income in 2005, according to his accountant, was $180,000, which amounts to … hmmm …$15,000 a month, though of course Mr. Engle didn’t have the kind of job that generated monthly income. (In addition to real estate speculation, Mr. Engle gave motivational speeches and earned around $50,000 a year as a producer on the hit show “Extreme Makeover: Home Edition.”)

   The monthly income listed on the second loan was $32,500, an obviously absurd amount, especially since the loan itself was for only $300,000. It was a refinance of a property Mr. Engle already owned, allowing him to pull out $80,000 of the $215,000 in equity he had in the property.

   Mr. Engle claims that he never saw that $32,500 claim and never signed the papers. Indeed, a handwriting analysis conducted by the government raised the distinct possibility that Mr. Engle’s signature and his initials in several places in the mortgage documents had been forged. As it happens, Mr. Engle’s broker for that loan, John J. Hellman, recently pleaded guilty to mortgage fraud for playing fast and loose with a number of mortgage applications. Mr. Hellman testified in court that Mr. Engle had signed the mortgage application. Early this week, Mr. Hellman received a reduced sentence of 10 months, less than half of Mr. Engle’s sentence, in no small part because of his willingness to testify against Mr. Engle.

The specifics of the case are quite disturbing – the IRS man with an axe to grind, the confused jury – but the general impression is perhaps worse. A loan is a contract between two people. When that loan is fraudulent, to the extent that the fraud is willingly entered into by both parties, they should in any reasonable world share the blame. But not only did Engle suffer disproportionately by losing all his equity when the bubble popped, he lost his personal freedom in a crime that his mortgage lender was all too happy to facilitate and may have even perpetrated.

This is the Obama administration Justice Department at work. Meanwhile the banksters are now trying to keep this all out of court:

Are Banks Scheming to Gut the Role of the Courts in Foreclosures?

by Yves Smith

I may be overreacting but given the sorry behavior of banks throughout the crisis and its aftermath, better to be vigilant than sorry.

The Wall Street Journal provided a very sketchy summary of the counterproposal that the banks will put on the table in the foreclosure fraud settlements this week:

   The 15-page bank proposal, dubbed the Draft Alternative Uniform Servicing Standards, includes time lines for processing modifications, a third-party review of foreclosures and a single point of contact for financially troubled borrowers. It also outlines a so-called “borrower portal” that would allow customers to check the status of their loan modifications online.

   But the document doesn’t include any discussion of principal reductions. Nor does it include a potential amount banks could pay for borrower relief or penalties.

This seems innocuous, right?

Think twice. It depends on what they mean by “third party review of foreclosures”. I strongly suspect that the intent is to pull as many contested foreclosures as possible out of the court process, particularly those that involve chain of title issues, since enough adverse rulings have the potential to blow up the entire mortgage industrial complex.

Yup, getting away with fraud unless you’ve already lost your shirt or you have no papers and work for a banker. You rock, Mr. Rule of Law.