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American Homeowners Outraged Over 50 Settlement Foreclosure Abuse Settlement

American Homeowners Outraged Over 50 Settlement Foreclosure Abuse Settlement

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Foreclosure Fraud Settlement Docs Finally Released

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Piggybankblog Posted 03/12/12

Cross linked story with firedoglake.com

The foreclosure fraud settlement has been filed in federal court in Washington. The Justice Department has provided the relevant documents, over a month after the settlement was announced. So now we can finally begin to assess the settlement and what it will mean for housing policy.

It’s going to take a while. The documents are long and the rules dense. I don’t expect to get a handle on it for the next several days. But we can make some quick points.

First of all, as we’ve been documenting, these are larger releases from liability than at first contemplated. It’s not just a “robo-signing” settlement. Among the elements released in the settlement include foreclosure fraud, numerous instances of varied servicer abuse, violations of the Servicemembers Civil Relief Act, whistleblower claims of fraud in HAMP, origination errors, false documentation in court, violations of the False Claims Act, appraisal fraud at Countrywide, fair lending violations, underwriting inaccuracies on FHA loans, and more. Here’s just one list from the complaint of servicing abuses found by the government:

a. failing to timely and accurately apply payments made by borrowers and failing to maintain accurate account statements; b. charging excessive or improper fees for default-related services; c. failing to properly oversee third party vendors involved in servicing activities on behalf of the Banks; d. imposing force-placed insurance without properly notifying the borrowers and when borrowers already had adequate coverage; e. providing borrowers false or misleading information in response to borrower complaints; and f. failing to maintain appropriate staffing, training, and quality control systems.

This is one portion of what is being released in the settlement. And here’s another list on loan modification noncompliance (which in the case of FHA and other loans, is mandatory):

a. failing to perform proper loan modification underwriting; b. failing to gather or losing loan modification application documentation and other paper work; c. failing to provide adequate staffing to implement programs; d. failing to adequately train staff responsible for loan modifications; e. failing to establish adequate processes for loan modifications; f. allowing borrowers to stay in trial modifications for excessive time periods; g. wrongfully denying modification applications; h. failing to respond to borrower inquiries; i. providing false or misleading information to consumers while referring loans to foreclosure during the loan modification application process; j. providing false or misleading information to consumers while initiating foreclosures where the borrower was in good faith actively pursuing a loss mitigation alternative offered by the Bank; k. providing false or misleading information to consumers while scheduling and conducting foreclosure sales during the loan application process and during trial loan modification periods; l. misrepresenting to borrowers that loss mitigation programs would provide relief from the initiation of foreclosure or further foreclosure efforts; m. failing to provide accurate and timely information to borrowers who are in need of, and eligible for, loss mitigation services, including loan modifications; n. falsely advising borrowers that they must be at least 60 days delinquent in loan payments to qualify for a loan modification; o. miscalculating borrowers’ eligibility for loan modification programs and improperly denying loan modification relief to eligible borrowers; p. misleading borrowers by representing that loan modification applications will be handled promptly when Banks regularly fail to act on loan modifications in a timely manner; q. failing to properly process borrowers’ applications for loan modifications, including failing to account for documents submitted by borrowers and failing to respond to borrowers’ reasonable requests for information and assistance; r. failing to assign adequate staff resources with sufficient training to handle the demand from distressed borrowers; and s. misleading borrowers by providing false or deceptive reasons for denial of loan modifications.

You might ask why any industry with this kind of performance record would be allowed to stay in business. It would be a good question.

The broad outlines of the settlement are familiar. It will cost five major banks – Bank of America, Wells Fargo, Citi, JPMorgan Chase and Ally Financial (previously GMAC Mortgage) – $25 billion to resolve claims. Only it will not actually cost that much. Only $5 billion comes in hard dollars to the federal government and the states ($1.5 billion of that will go toward those $2,000 checks for foreclosure victims). The other $20 billion is divvied up, with $3 billion for refinancings, and $17 billion for a variety of other measures, including principal reduction. But we have learned that $1.7 billion of that, or 10%, could go toward waiving deficiency judgments that banks were unlikely to pursue anyway. Another 5% could go toward moving assistance for foreclosure victims. And Bank of America could wriggle out of as much as $850 million by engaging in deeper principal reductions for a smaller universe of borrowers. Plus, servicers get a 25% credit for principal reductions in the first year, to push near-term relief. But of course, this reduces the total cost to the banks even further.

Similar sleight of hand can be seen throughout the document. The press release claims that “The court documents filed today also provide detailed new servicing standards that the mortgage servicers will be required to implement. These standards will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections.” This neglects the fact that the servicing standards will only stay in place for the 3 1/2 years of the settlement, and that the Consumer Financial Protection Bureau has authority to enact servicing standards themselves, without the need for the settlement to do so.

Further, there’s this nugget from the opening page on the “consumer relief requirements”:

Servicer shall not, in the ordinary course, require a borrower to waive or release legal claims and defenses as a condition of approval for loss mitigation activities under these Consumer Relief Requirements. However, nothing herein shall preclude Servicer from requiring a waiver or release of legal claims and defenses with respect to a Consumer Relief activity offered in connection with the resolution of a contested claim, when the borrower would not otherwise have received as favorable terms or when the borrower receives additional consideration.

Wow. In other words, servicers can force borrowers to sign away their due process rights for accepting principal reductions associated with the settlement.

As expected, the monitoring elements of the settlement include a quarterly self-report by the banks, after which an independent monitor can scrutinize the reports. So the banks are essentially policing themselves here, while the monitor has to wait several months to review their work and see if they are not according themselves properly. This is an invitation to abuse.

I will definitely have more when I find time to dig into the documents further.

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$25 BILLION MORTGAGE SERVICING AGREEMENT FILED IN FEDERAL COURT

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Piggybankblog posted on 03/12/12

Piggybankblog posted picture

Cross linked story with 4closurefraud.org

WASHINGTON – The Justice Department, the Department of Housing and Urban Development (HUD) and 49 state attorneys general announced today the filing of their landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses.

The federal government and state attorneys general filed in U.S. District Court in the District of Columbia proposed consent judgments with Bank of America Corporation, J.P. Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc., to resolve violations of state and federal law.

The unprecedented joint agreement is the largest federal-state civil settlement ever obtained and is the result of extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country.

The consent judgments provide the details of the servicers’ financial obligations under the agreement, which include payments to foreclosed borrowers and more than $20 billion in consumer relief; new standards the servicers will be required to implement regarding mortgage loan servicing and foreclosure practices; and the oversight and enforcement authorities of the independent settlement monitor, Joseph A. Smith Jr.

The consent judgments require the servicers to collectively dedicate $20 billion toward various forms of financial relief to homeowners, including: reducing the principal on loans for borrowers who are delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth; refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth; forbearance of principal for unemployed borrowers; anti-blight provisions; short sales; transitional assistance; and benefits for service members.

The consent judgments’ consumer relief requirements include varying amounts of partial credit the servicers will receive for every dollar spent on the required relief activities. Because servicers will receive only partial credit for many of the relief activities, the agreement will result in benefits to borrowers in excess of $20 billion. The servicers are required to complete 75 percent of their consumer relief obligations within two years and 100 percent within three years.

In addition to the $20 billion in financial relief for borrowers, the consent judgments require the servicers to pay $5 billion in cash to the federal and state governments. Approximately $1.5 billion of this payment will be used to establish a Borrower Payment Fund to provide cash payments to borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008, and Dec. 31, 2011, and who meet other criteria.

The court documents filed today also provide detailed new servicing standards that the mortgage servicers will be required to implement. These standards will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections. The new standards provide for strict oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court. The new servicing standards make foreclosure a last resort by requiring servicers to evaluate homeowners for other loss mitigation options first. Servicers will be restricted from foreclosing while the homeowner is being considered for a loan modification. The new standards also include procedures and timelines for reviewing loan modification applications and give homeowners the right to appeal denials. Servicers will also be required to create a single point of contact for borrowers seeking information about their loans and maintain adequate staff to handle calls.

The consent judgments provide enhanced protections for service members that go beyond those required by the Servicemembers Civil Relief Act (SCRA). In addition, the servicers have agreed to conduct a full review, overseen by the Justice Department’s Civil Rights Division, to determine whether any service members were foreclosed or improperly charged interest in excess of 6 percent on their mortgage in violation of SCRA.

The oversight and enforcement authorities of the settlement’s independent monitor are detailed in the court documents filed today. The monitor will oversee implementation of the servicing standards and consumer relief activities required by the agreement and publish regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement. The consent judgments require servicers to remediate any harm to borrowers that are identified in quarterly reviews overseen by the monitor and, in some instances, conduct full look-backs to identify any additional borrowers who may have been harmed. If a servicer violates the requirements of the consent judgment it will be subject to penalties of up to $1 million per violation or up to $5 million for certain repeat violations.

The consent judgments filed today resolve certain violations of civil law based on mortgage loan servicing activities. The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers. The agreement does not prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group. In the servicing agreement, the United States also retains its full authority to recover losses and penalties caused to the federal government when a bank failed to satisfy underwriting standards on a government-insured or government-guaranteed loan; the United States also resolved certain Federal Housing Administration (FHA) origination claims with Bank of America as part of this filing and with Citibank in a separate matter. The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits. State attorneys general also preserved, among other things, all claims against the Mortgage Electronic Registration Systems (MERS), and all claims brought by borrowers.

Investigations were conducted by the U.S. Trustee Program of the Department of Justice, HUD-OIG, HUD’s FHA, state attorneys general offices and state banking regulators from throughout the country, the U.S. Attorney’s Office for the Eastern District of New York, the U.S. Attorney’s Office for the District of Colorado, the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina, the U.S. Attorney’s Office for the District of South Carolina, the U.S. Attorney’s Office for the Southern District of New York, the Special Inspector General for the Troubled Asset Relief Program and the Federal Housing Finance Agency-Office of the Inspector General. The Department of the Treasury, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Justice Department’s Civil Rights Division, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Department of Veterans Affairs and the U.S. Department of Agriculture made critical contributions.

For more information about the mortgage servicing settlement, go to www.NationalMortgageSettlement.com. To find your state attorney general’s website, go to www.NAAG.org and click on “The Attorneys General.”

The joint federal-state agreement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit: www.stopfraud.gov.

SOURCE: DOJ

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AFTER THE SETTLEMENT SETTLES

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Written by Piggybankblogger

Sherry Hernandez

Legend has it the Europeans purchased Manhattan for $24 worth of beads and mirrors almost 400 years ago. On Thursday, the United States Attorney Generals sold out the American people for $26 billion dollars to the banks that have defrauded our American dream. The terms of the settlement has not yet been officially released. The terms need to be signed off by a judge and the results might not be in effect for over a year. What this means to the homebuyers is that the banks will escalate their foreclosures while they still can. Most of us will not see any relief for quite some time, and others have already lost their homes and future revenue. The banks that brought on this massive fraud are getting by with a slap on the wrist. $26 billion dollars is a paltry sum for causing the American people over $700 billion in underwater debt.

The estimated $10-$20 billion in the deal for principal reduction would reduce only about 2% of the $700 billion in equity destroyed during the financial crisis. And the banks themselves will only pay $5 billion out of their own pocket. By far the lion’s share of the cost will be borne by investors and taxpayers, who had no part in the robo-signing scandal.

Once again, the banks will be in charge of fulfilling the settlement themselves.

What does that mean to a family of six or more who has already lost their home? They will get a check for anywhere from $1,500 to $2,000, sometime down the road, maybe a year to five years from now…maybe. Meanwhile, their credit has been ruined and they must find a place to rent that will take a family with four or more children. I hear that there are more places available now that the banks own most of the property, but for the most part 4 or 5 bedroom rentals are a rare find. And with the credit of aforementioned family being destroyed, it is not likely that they can rush out a purchase a more affordable home. They will still have the option of bringing on a civil suit against the lending institute, if they have any funds left with which to pay a lawyer.

In an article dated February 15th, 2012 in the New York Times, Gretchen Morgenstern, reports about an audit in San Francisco, California that has found broad irregularities in foreclosures.

In a significant number of cases — 85 percent — documents recording the transfer of a defaulted property to a new trustee were not filed properly or on time, the report found. And in 45 percent of the foreclosures, properties were sold at auction to entities improperly claiming to be the beneficiary of the deeds of trust. In other words, the report said, “a ‘stranger’ to the deed of trust,” gained ownership of the property; as a result, the sale may be invalid, it said.

The report went onto say that 340 of the 400 mortgages investigated had irregularities.

Although massive wrongdoing has been documented by various agencies throughout our government, the officials paid to protect the public interests still have yet to charge the executives who have thrust our country into this financial crisis.

In an article posted by the Washington Blog on December 14th, 2011, it was reported that fraud done by the big banks, more than anything done by the little guy caused the financial crisis.

The FBI estimates that 80 percent of all mortgage fraud involves collaboration or collusion by industry insiders.

William K. Black – professor of economics and law, brings us current to where we are today: History demonstrates that if the control frauds get away with their frauds they will strike again.

For those readers who doubt this is true, in an article released as recently as February 20, 2012, just days after the announcement of a settlement: Two AllianceBernstein LP mortgage specialists say they have hit on the next great investment for institutional investors: securities based on a pool of residential Freddie Mac and Fannie Mae mortgages that could blossom into a $250 billion to $500 billion institutional market. Investors could fund the mortgage investment from their real estate or fixed-income allocations. They said in the paper that the safest mortgages would be included in the securities that would be fully guaranteed by the government.

By allowing the banks to use their political power to gimmick the accounting rules to permit them to hide their massive losses on liar’s loans we have made it far harder to take effective administrative, civil, and criminal sanctions against the elite frauds that caused the Great Recession. Hiding the losses cripples economic recovery and public integrity, and leaves a broad based opening to repeat the fraud.

The FBI has written that any discussion of the crisis that ignores the role of mortgage fraud is “irresponsible.” But instead of prosecuting fraud, the government just continues to cover it up.

The problem with this upcoming settlement is that it lets the banks off too easily for their fraud. No criminal charges are being brought against the executives that initiated this crisis and the taxpayer is still carrying the burden.

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Some still say this settlement is better than nothing…for those of you who still think so…I hear that you can buy our country for a

  1. http://www.creditslips.org/creditslips/2012/02/the-servicing-settlement-banks-1-public-0.html – Adam Levitin, Credit Slips, 02-09-12
  2. http://www.nytimes.com/2012/02/16/business/california-audit-finds-broad-irregularities-in-foreclosures.htmlCalifornia Audit Finds Broad Irregularities in Foreclosures – NYTimes.com
  3. http://www.ritholtz.com/blog/2011/12/fbi-estimates-80-of-mortgage-fraud-involved-industry-insiders/ – The Big Picture » FBI Estimates 80% of Mortgage Fraud Involved Industry Insiders
  4. http://www.pionline.com/article/20120220/PRINTSUB/302209895 – New pooled mortgage strategy touted for institutional investors – Pensions & Investments
  5. http://www.washingtonsblog.com/2011/08/real-reason-sec-has-been-shredding.html

Her name is Sherry Hernandez AND SHE IS FIGHTING BACK!

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