Mortgage Loan Compliance | Homeowners Who Fight Foreclosure Stay Longer

Nationwide, the average time it takes to process a foreclosure - from the first missed payment to the final foreclosure auction - has climbed to 674 days from 253 days just four years ago, according to LPS Applied Analytics. It takes much longer in states like Florida, where the process averages 1,027 days, nearly 3 years. In D.C., foreclosure averages 1,053 days and delinquent borrowers in New York often stay in their homes for an average of 906 days.

Delinquent borrowers who face foreclosure are learning that they can stay in their homes for years, as long as they're willing to put up a fight. Among the strategies: Challenging the bank's actions, waiting to file paperwork right up until the deadline, requesting the lender dig up original paperwork or, in some extreme cases, declaring bankruptcy.

Many of these homeowners are staying in their homes based on a technicality. There is rarely any dispute over whether or not they have stopped paying their mortgage, said David Dunn, a partner at law firm Hogan Lovells in New York, who represents banks and other financial institutions in foreclosure cases.

"In my experience, they never say, 'I'm not delinquent' or 'I want to pay my bill but I'm confused over who to send it to,' or 'oh my God, you mean I didn't pay my mortgage?' They're not in technical default. They're in default because they're not paying," he said.

Ironically enough, the banks have given delinquent borrowers some of the ammunition they need to delay the foreclosure process. When the Robo-Signing scandals revealed that bank employees signed paperwork attesting to facts they had no personal knowledge of. Now, borrowers are routinely challenging that paperwork.

Sometimes just asking the bank to produce the paperwork that shows it is the legal holder of the mortgage note can stall a repossession, said attorney Robert Brown. Since mortgages are often transferred electronically through MERS, the official paperwork often gets misplaced.

In some of the more extreme cases, borrowers will file for bankruptcy in order to block a foreclosure. In these instances, courts order creditors to cease their collection activities immediately. Home auctions can be postponed as the bankruptcy plays out, which can take months.

David Berenbaum of the National Community Reinvestment Coalition (NCRC), a community activism group, disputes any contention that owners are gaming the system for free rent and hurting the housing market. "Most people do everything in their power to maintain these homes," he said. "They take in relatives, get second jobs and even rent out rooms." What really needs to be done, he said, is for lenders to work harder to find solutions that allow delinquent borrowers who can afford to make reasonable mortgage payments to keep their homes.

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Mortgage Loan Compliance | CA Attorney General Sues Mortgage Giants

The California Attorney General Kamala Harris has filed a lawsuit against Fannie Mae and Freddie Mac over mortgage and foreclosure problems. The suit comes after Fannie and Freddie's regulator, the Federal Housing Finance Agency, blocked Harris's inquiry into the mortgages and foreclosed properties the Government Sponsored Entities (GSE’s) own in California.

In the lawsuits she filed Harris says that Fannie and Freddie hold extensive information that is critical to her investigation. She notes that between 2007 and June 2011 over 768,000 homes have been foreclosed in California and says those foreclosed homes caused numerous problems in her state including criminal activity like prostitution and drug trafficking.

Fannie and Freddie play and central role in the mortgage and foreclosure issues in California, she says in her suit. As a result, Harris requested answers to questions she says are critical to protecting the health, safety and welfare of the state's residents.

But instead of complying, Harris says in her complaint, Fannie and Freddie have failed and refused to provide any information her office requested.

In September Harris pulled her state of out a nationwide foreclosure probe of some of the nation’s biggest banks over their shady foreclosure practices. That investigation was assembled by the country’s attorneys generals nearly a year ago to look into fraudulent foreclosure practices by banks. Harris backed out of the settlement because “the the nation’s five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered.”

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Mortgage Loan Compliance | Mass AG Gets Serious and Sues Five Lenders

The Massachusetts Attorney General, Martha Coakley, has filed a lawsuit against five large U.S. banks accusing them of deceptive foreclosure practices, a signal of ebbing confidence that a multi-state agreement can be worked out.

The Massachusetts lawsuit, filed in state court in Boston, accuses Bank of America Corp, JPMorgan Chase & Co Inc, Citigroup Inc, Wells Fargo & Co and GMAC of deceptive foreclosure practices, such as using robo-signers and false documents.

For more than a year, state and federal officials have been negotiating a deal in which banks would pay billions of dollars in fines - to go toward housing relief - in exchange for legal protection against future suits.

"Our suit alleges that the banks have charted a destructive path by cutting corners and rushing to foreclose on homeowners without following the rule of law," Coakley said in a statement.

The attorney general in Iowa, Tom Miller, who is leading the negotiations for the states, said in a statement they hope to reach a settlement "soon." He also said Coakley had indicated she is still open to joining the settlement.

"We're optimistic that we'll settle on terms that will be in the interests of Massachusetts," Miller said.

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Mortgage Loan Compliance | OCC Consent Order Update

The Office of Comptroller of the Currency (OCC) has reported on the actions taken by 12 servicers to comply with consent order issued in April to correct deficient and unsafe or unsound foreclosure processes and actions taken related to the independent foreclosure review announced by OCC, the Federal Reserve, and the Office of Thrift Supervision earlier this month. The twelve servicers covered by the OCC and OTC's portion of the action are Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank, Wells Fargo, Aurora Bank, FSB; EverBank (and the thrift holding company, EverBank Financial Corp.); OneWest Bank, FSB (and its holding company IMB HoldCo LLC); and Sovereign Bank.

Tuesday's report, Interim Status Report: Foreclosure-Related Consent Orders identifies the independent consultants retained by the servicers to conduct file reviews (under the direction of OCC) for borrowers requesting redress. According to the report, work is underway on actions to comply with the consent orders with efforts to correct deficiencies in foreclosure processes management oversight, and internal audit the most advanced. An integrated claims processor has begun mailing letters to borrowers who were in any stage of foreclosure between January 1, 2009 and December 31, 2010 to inform them of the process for requesting reviews of their cases if they believe they suffered financial injury through servicer misfeasance. Outreach will also be made to borrowers using such methods as mass media advertising in national publication such as People, and TV guide, online marketing, social media marketing, media news coverage, and outreach to community groups.

In addition to the reviews of borrow claims, a "look-back" review will be undertaken, sampling to identify files for a review which is intended to further identify servicer deficiencies, errors, or misrepresentations that may have caused financial injury. This review will look at such information as whether the foreclosing party had properly documented ownership or was otherwise a proper party to the action; whether a foreclosure may have taken place while a modification was underway, or whether fees were improperly charged. Results of the sampling may lead to more in depth reviews.

Under the consent order servicers were required to submit plans for correcting deficiencies in a number of servicing areas, address their use of MERS, manage third parties, and correct other operational difficulties. Those plans have been submitted at various times over the last few months. Plans to correct servicing deficiencies include such measures ensuring that loss mitigation staff routinely communicate with staff processing foreclosures; that deadlines for responding to communication from borrowers and for making loan modifications requests be met; that there is a reliable single point of contact for each borrower and that be identified in writing; and that staff is trained adequately to handle delinquencies, loss mitigation and loan modifications. Other factors included in the plan include procedures and controls to ensure that a loan is protected from "dual tracking", i.e., that a loan approved for modification is pulled from foreclosure proceedings; and that payments are promptly and properly credited;

Plans addressing oversight of third-party service establish processes for appropriate due diligence in evaluating the qualifications of potential third-party service providers before entering into new contractual arrangements, provide for regular, periodic reviews of third-party service providers and assessment of their performance based on qualitative standards for competence, completeness, and legal compliance rather than standards based solely on the volume of foreclosures processed or the speed of processing. Additionally, the plans provide for the secure custody and accuracy of records transferred to these third parties during the foreclosure process.

Other plans ensure appropriate oversight and controls of servicer activities with respect to MERS and compliance with MERSCORP's membership rules, terms, and conditions These plans include enhancing controls and standardizing processes for executing mortgage assignments by MERS certifying officers, improving processes for controlling data quality, and establishing periodic-in some cases daily-reconciliations of key reports and data to ensure compliance with MERS requirements and prompt resolution of discrepancies.

Other plans address improving the management information systems that support servicing and foreclosure processing, assessing risks posed by servicer operations, and setting up compliance committees responsible for the development and implementation of compliance programs, action plans, policies and procedures, and strengthened operating processes to correct the deficiencies cited by the enforcement actions

While much of the work to correct identified weaknesses in policies, operating procedures, control functions and audit processes will be substantially complete in the first part of 2012, other longer term initiatives will continue through the balance of 2012. Actions and progress vary by servicer. OCC examiners continue to provide ongoing oversight of activities to ensure compliance with the consent orders.

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Mortgage Loan Compliance | Foreclosure Activity On The Rise

One in every 563 homes received a foreclosure related filing last month but the distribution of these filings was enormous. In Nevada, which, for the 58th straight month, leads the nation in foreclosure activity, one in every 180 housing units was affected; in Mississippi one in 4,007, Vermont one in 12,570, and in the District of Columbia one in 25,921.

While Nevada still leads the nation in foreclosure activity there was a 34 percent decrease in activity from the previous month, driven by a 75 percent drop in new default notices. This was probably the result of a new law that requires lenders to sign an affidavit with key information about the foreclosure and record it in public records.

Other states with a high level of activity were California with one in every 243 housing units receiving a notice, a 17 percent monthly increase; Arizona with one in every 259 units involved and an 18 percent monthly increase, and Florida with a spike in both default notices and scheduled options that bounced it back up to a 12 month high and to fourth place from sixth in September. One in 268 housing units was the subject of a filing.

• Notice of Default (NOD) and Lis Pendens (LIS). This is the first legal notification from a lender that the borrower on a mortgage loan has defaulted under the terms of their mortgage and the lender intends to foreclose unless the loan is brought current.



• Auction - Notice of Trustee Sale and Notice of Foreclosure Sale (NTS and NFS): if the borrower does not catch up on their payments the lender will file a notice of sale (the lender intends to sell the property). This notice is published in local paper and contains information pertaining to the date, time and subject property address.



• Real Estate Owned or REO properties: "REO" stands for "real estate owned" and typically refers to the inventory of real estate that banks and mortgage companies have foreclosed on and subsequently purchased through the foreclosure auction if there was no offer higher than the minimum bid.



"The October foreclosure numbers continue to show strong signs that foreclosure activity is coming out of the rain delay we've been in for the past year as lenders corrected foreclosure paperwork and processing problems," said James Saccacio, chief executive officer of RealtyTrac. "However, recent state court rulings and new state laws keep changing the rules of the foreclosure game on the fly, creating more uncertainty in the housing market and threatening to prolong the road to a robust real estate recovery."

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Mortgage Loan Compliance | Bankruptcy Options You May Not Know You Had

A bankruptcy can immediately stop any action against your home, but it can be more than just a lifeline. Bankruptcy (federal) Court also allows you to challenge standing or sue the lender for violating your rights as well. The following are some of the typical types of cases that may get filed in a Bankruptcy Adversary Proceeding. These are just a few grounds to consider when filing bankruptcy:

(1) Rescind your Loan under Truth in Lending Law (TILA). Ex. you rescind your loan prior to filing bankruptcy, and then list property as unsecured on your schedules and then filing the adversary proceeding.

(2) Fair Credit reporting Act (FCRA) credit reporting violations;

(3) Violations of Fair Debt Collections Practices Act (FDCPA);

(4) Violations of State Unfair and Deceptive Business Practices Statute (Like pre-filing mortgage rescue scams);

(5) Pursuing violations stemming from filing false and fraudulent proof of claim (ex. creditor has no proof of secured status yet asserts they are a secured creditor using false affidavits);

(6) Filing lawsuit for violation of RESPA (ex. QWR violations seeking attorney fees and actual damages, or damages for unauthorized fees charged);

(7) Lawsuit challenging the extent, validity, or priority of alleged liens (proving your “creditor” is not a legitimate creditor, or is not secured creditor).

In many cases, you may have grounds to assert legal challenges that could either lead to settlement, or to an award of actual damages, costs, attorney fees, and other damages. Please keep in mind you mortgage is a legally binding contract. You should always consult a Attorney when dealing with legal matters.

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Mortgage Loan Compliance | AG Sues MERS For Deceptive Practices, Will You?

On October 28, 2011 Delaware Attorney General Beau Biden sued the MERS (Mortgage Electronic Registration System). The suit charges that the parent corporation MERSCORP and MERS have repeatedly violated the state's Deceptive Trade Practices Act.

MERS was created for the purpose of reducing recording costs and the inefficiencies of transferring ownership of residential mortgages among mortgage brokers, lenders, Fannie Mae and Freddie Mac, the secondary market system and investors. The concept was to record the initial loan documents in the name of MERS and retain that record even as paper documents were passed along from originator to subsequent holders of the debt.

AG Biden's suit charges that MERS "engaged and continues to engage in deceptive trade practices that sow confusion among homeowners, investors, and other stakeholders in the mortgage finance system, seriously damaging the integrity of the land records that are central to Delaware's real property system and leading to improper foreclosure practices."

Listed below were three broad categories of the deception outlined:

• MERS, through its private mortgage registry knowingly obscures important information or provides inaccurate information to borrowers. The opacity of the registration database makes it difficult for consumers to know of or challenge inaccuracies in the MERS System which harms borrowers when MERS forecloses on borrowers in its own name, thus impairing a borrower's ability to raise defenses and hampering the ability to seek out the owner of the loan to pursue relief.

• MERS often acts as an agent without authority from its proper principal and is often unaware of the proper identity of that principal. Where the name of the owner of the mortgage loan recorded in the MERS system is not accurate, MERS often takes action on behalf of the purported owner without authority.

• MERS is effectively a "front" organization that has created a systemically important mortgage registry which does not properly oversee or enforce its own rules on participating members. Rather than maintaining an adequate staff, it works through a network of over 20,000 deputized non-employee corporate officers who act without meaningful oversight. It is this network that was behind the robo-signing of foreclosure documents.

Over the years loan documents became separated from the loans themselves and as more banks consolidated, big mortgage companies began to fail, and foreclosures ramped up, more and more loan transfers were not properly recorded on the MERS system and documents were actually lost. This has led, not only to improper foreclosure procedures but even instances where properties were foreclosed where there was no outstanding mortgage. MERS is currently the repository for about 65 million mortgages.

Biden is reported as saying that “American has historically had a robust recordation system where people could walk into the proper registry and "see, read, and touch" documents revealing who had a security interest in property.

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Mortgage Loan Compliance | Is The HARP Program Dead From Start

Today 11 million people, basically one in four homeowners with a mortgage owe more than their home is worth. These "underwater" borrowers have virtually no shot at refinancing.

The Obama administration is hoping at least 1 million of these borrowers will take advantage of its refinancing program under more lenient rules unveiled Monday. Homeowners who are current on their payments will be eligible to refinance no matter how much their home's value has dropped.

Still, it's unclear how many borrowers will benefit. Lenders will remain under no obligation to refinance a mortgage they hold.

The Federal Housing Finance Agency announced that it is making a series of changes to the Home Affordable Refinance Program (HARP). The changes are intended to allow even more underwater homeowners refinance under HARP. The biggest change is the elimination of the 125% Loan To Value ceiling on HARP loans. This means that theoretically, a borrower can refinance no matter how far they are underwater.

Some of the proposed changes include:

• Eliminating certain risk-based fees for borrowers who refinance into shorter-term mortgages and lowering fees for other borrowers;

• Removing the current 125 percent LTV ceiling for fixed-rate mortgages backed by Fannie Mae and Freddie Mac;

• Waiving certain representations and warranties that lenders commit to in making loans owned or guaranteed by Fannie Mae and Freddie Mac;

• Eliminating the need for a new property appraisal where there is a reliable AVM

• (automated valuation model) estimate provided by the Enterprises; and

• Extending the end date for HARP until Dec. 31, 2013 for loans originally sold to the Enterprises on or before May 31, 2009.

Only those who have a job and are current on their Freddie Mac- or Fannie Mae-owned mortgages are eligible for the new program. Those who have already refinanced with HARP are not eligible.

Edward Demarco, the Acting Director of the FHFA commented:

"We know that there are many homeowners who are eligible to refinance under HARP and those are the borrowers we want to reach. Building on the industry's experience with HARP over the last two years, we have identified several changes that will make the program accessible to more borrowers with mortgages owned or guaranteed by the Enterprises. Our goal in pursuing these changes is to create refinancing opportunities for these borrowers, while reducing risk for Fannie Mae and Freddie Mac and bringing a measure of stability to housing markets".

Fannie Mae and Freddie Mac will issue guidance on the HARP updates to lenders and servicers by November 15, 2011. At that time we should have additional clarity on the eligibility requirements for the new version of HARP. It is possible that these changes could take effect as soon as December 2011.

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Mortgage Loan Compliance | The Failure of Private Mortgage Insurance

Insurance regulators in Arizona have seized the main subsidiary of private mortgage insurer PMI Group Inc., which will begin paying claims at just 50 percent.

A statement on PMI's website says a court order, signed by an Arizona Superior Court judge on Thursday, gives Arizona's Department of Insurance full possession and control of the subsidiary. Beginning Monday, PMI says claims will be paid at just 50 percent, in lieu of a moratorium on claim payments. Meanwhile, PMI said it will "continue to support our customers' ongoing policy servicing needs, and loss mitigation programs."

The seizure follows heavy losses at PMI since the housing market bubble burst. Two months ago, state regulators ordered the Arizona-based subsidiary, PMI Mortgage Insurance Co., to stop selling new policies after it came under scrutiny because it didn't have enough money on hand to meet the requirements of regulations in that state.

Private mortgage insurance protects lenders from losses if a homeowner defaults and the lender doesn't recoup costs through foreclosure. The insurance costs the borrower a monthly fee, typically a set percentage of the total mortgage loan. Like other mortgage insurers, PMI has been able to sell profitable policies in recent years, but the gains from those sales hasn't outpaced losses from policies sold before the housing market collapsed. As flagging home prices have strapped borrowers, the company has had to pay more claims.

PMI's CEO, L. Stephen Smith, told analysts in early August that that company has seen a sharp rise in the number of previously denied claims that banks appealed and were able to get reinstated by producing better documents to back up them up.

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Mortgage Loan Compliance | OCC Requires Review of 4.5M Foreclosures

The Office of the Comptroller of the Currency (OCC) is calling for independent reviews of almost 4.5 million loans.

According to the OCC, Bank Foreclosure Examiners will review the self-assessments, corrective actions, and any determinations of financial harm and related remediation in the next quarterly review or examination of the bank.

This applies to such major banks as Bank of America, JPMorgan Chase, Citigroup, Ally Financial, among others, and could affect as many as 4.5 million loans that faced foreclosure action.

As the leading provider of Residential Audits, Mortgage Loan Compliance delivers a solid foundation of information that discovers the errors and legal violations in your loan.

Many Homeowners, Housing Counseling Agency, Mediators, Bankruptcy and Litigation Attorneys have used our audits as defenses to foreclosure and statutory damages that can greatly exceed the value of the loan. At Mortgage Loan Compliance we specialize and strictly focus on loan and title compliance.

Get The Facts, Audit Your Loan, Sue Your Lender and Protect Your Rights!

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Mortgage Loan Compliance | New Rule – Banks Benefit To Client

The Federal Deposit Insurance Corp. backed a draft rule barring banks from trading for their own profit instead of their clients on a 3-0 vote. The ban on so-called proprietary trading was required under the financial overhaul law.

For years, banks had bet on risky investments with their own money. But when those bets go bad and banks fail, taxpayers could be forced to bail them out. That's what happened during the 2008 financial crisis.

The Federal Reserve has also approved a draft of the so-called Volcker Rule, named after former Fed Chairman Paul Volcker. The Securities and Exchange Commission must still vote on it, and then the public has until January 13 to comment. The rule is expected to take effect next year after a final vote by all three regulators.

Under the draft, banks must hold investments for more than 60 days. Regulators determined that was enough time to limit speculative trading.

The banking industry said Tuesday the rule is too complex to work and will put U.S. financial firms at a competitive disadvantage to those in other countries.

"How can banks comply with a rule that complicated, and how can regulators effectively administer it in a way that doesn't make it harder for banks to serve their customers and further weaken the broader economy?" Frank Keating, head of the American Bankers Association, said in a statement.

The rule also would limit banks' investments in hedge funds and private equity funds, which are lightly regulated investment pools. Banks wouldn't be allowed to own more than 3 percent of such a fund. In addition, a bank's investments in such a fund couldn't exceed 3 percent of its capital.

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Mortgage Loan Compliance | “Robo-Signing” Since 2003 or Sooner

Fannie and its sister company, Freddie Mac, own or guarantee about half of U.S. mortgages. That equals nearly 31 million loans worth more than $5 trillion. And they account for nearly all new mortgages. According to a new government watchdog report Fannie Mae knew about allegations of improper foreclosure practices by law firms in 2003 but did not act to stop them.

Similar allegations are now the subject of a probe by state attorneys general into how lenders and law firms ignored proper procedures to handle a crush of foreclosure paperwork.

An unnamed shareholder warned Fannie Mae of alleged foreclosure abuses in 2003, the inspector general for the agency that regulates Fannie says in a report being released Tuesday.

Fannie Mae responded by hiring a law firm to investigate the claims in 2005. The law firm reported in 2006 that it had found foreclosure attorneys in Florida "routinely filing false pleadings and affidavits."

Fannie officials said they told a government official about the law firm's findings in 2006. That unnamed official, who now works for Fannie's regulator, the Federal Housing Finance Agency, said he couldn't recall the conversation, the report says.

Fannie began using a network of attorneys in 1997 to help handle foreclosures, evictions and bankruptcies. In 2008, the network grew to 140 law firms. And the number of foreclosures in Fannie's portfolio reached historic highs. Foreclosures more than doubled from 2007 to 2008. They grew 50 percent in 2009.

In June 2010, FHFA officials went to Florida to study the foreclosure crisis. They found that the mortgage industry was overwhelmed by foreclosures; that the average foreclosure processing time had grown from 150 days to more than 400 days; that lenders were beset by flawed documentation; and that law firms weren't devoting enough time to cases.

The worst practices, known collectively as "robo-signing," led some lenders to suspend foreclosures last fall. And it led to an ongoing investigation by all 50 state attorneys general.

Several states, including California, Delaware and New York, oppose a proposed settlement with the lenders. They complain that the lenders would receive unfair immunity from civil litigation under the deal.


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Mortgage Loan Compliance | “Ill-Housed” – New Foreclosure Proposals

A recently proposed alternative that might help address the foreclosure backlog while helping delinquent borrowers would allow homes in foreclosure to be sold to private investors; the current occupants, while losing title to the properties, would remain in the homes as tenants.

Since investigations into the foreclosure process have found many irregularities the number of homes in this foreclosure glut has grown to truly astonishing proportions. A June 2011 report from Lender Processing Services, which incorporates data on more than 52 million home loans, shows that more than 4 million loans are in some stage of foreclosure or either 90+ days (seriously) delinquent. Loans in foreclosure are on average 587 days delinquent, and 35% of these borrowers have not made a payment in two or more years.

The new foreclosure proposal program would require cooperation between private investors, servicers, realtors, and rental managers. This approach would lean heavily on local resources, particularly with both administering the property sales and managing the homes as rental properties.

The government's role should be limited to setting up the parameters of the programs, including incentives for all parties (including the homeowners/renters) to participate. In this light, policy makers would be left with the unattractive alternative of either ignoring the foreclosure back-log which remains a huge drag on home prices and consumer confidence or passively watching a surge in home repossessions that leave millions of families, in FDR's words, "ill-housed."

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Mortgage Loan Compliance | Is The U.S. Govt Going To Sue Your Lender

The New York Times reported on Thursday that the agency that oversees mortgage markets is preparing to file suit against more than a dozen big banks, accusing them of misrepresenting the quality of mortgages they packaged and sold during the housing bubble.

The Federal Housing Finance Agency, which oversees mortgage giants Fannie Mae and Freddie Mac, is expected to file suit against Bank of America, JPMorgan Chase, Goldman Sachs and Deutsche Bank, among other banks, the Times reported, citing three unidentified individuals briefed on the matter.

The suits stem from subpoenas the finance agency issued to banks last year. They could be filed as early as Friday, the Times said, but if not filed Friday it said the suits would come on Tuesday.

The government will argue the banks, which pooled the mortgages and sold them as securities to investors, failed to perform due diligence required under securities law and missed evidence that borrowers' incomes were falsified or inflated, the Times reported.
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Mortgage Loan Compliance | The Emperor’s New Investor – BofA and Buffet

Bank of America’s stock had plunged 52 percent in the past year on concerns over the bank's mortgage problems and worries that it would have to sell large amounts of stock to shore up its balance sheet. Warren Buffett's Berkshire Hathaway announced today that it would invest $5 billion in Bank of America Corp., giving a much-needed vote of confidence in the struggling bank.

Much of BofA's problem stems from the 2008 purchase of Countrywide Financial Corp., then the largest U.S. mortgage lender. Bank of America has been under heavy pressure from investors for selling them securities based on bad mortgages that later lost value.

Bank of America has paid a total of $12.7 billion earlier this year to settle claims that it sold investors faulty mortgage investments. Investors have become worried that the bank would have to pay out even more to settle future claims.

Investors' confidence in the bank took another blow this month as its mortgage headaches got even worse. On Aug. 8, American International Group Inc. sued Bank of America for more than $10 billion, saying the bank deceived AIG by selling it overvalued mortgage-backed securities.

Berkshire also holds investments in several other banks. One of Berkshire's biggest stock investments is a 16 percent stake in Wells Fargo. Buffet also holds stakes in US Bancorp, M&T Bank Corp. and the Bank of New York Mellon Co.

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Mortgage Loan Compliance | FDIC Sued For $10 Billion In Bad Loans

Washington Mutual Bank was seized by the Office of Thrift Supervision in September 2008 in the biggest bank failure in U.S. history. The FDIC was then appointed receiver and immediately sold the bank to JPMorgan Chase & Co for $1.9 billion.

Now a federal judge has ruled that the Federal Deposit Insurance Corp must face a $10 billion lawsuit tied to the failure of Washington Mutual Bank. The judge refused the FDIC’s request to dismiss the lawsuit files by Deutsche Bank National Trust Co over bad mortgages that were securitized by Washington Mutual.

The Deutsche Bank unit filed its lawsuit in 2009 arguing that loans that were pooled into mortgage bonds did not meet the underwriting standards that had been promised by WaMu, causing investors to lose billions of dollars.

A Senate committee report this year said WaMu’s mortgage securitization was “polluting the financial system” with bad home loans and partly to blame for the 2008 financial crisis.

The FDIC argued it should be dismissed from the lawsuit and Deutsche Bank should bring its claims against JPMorgan, which assumed WaMu’s liabilities as well as assets.
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Mortgage Loan Compliance | Insurer Sues Goldman Sachs For Bad Loans

Monday in New York State Supreme Court a subsidiary of Allstate Insurance Co. sued Goldman Sachs Group Inc., saying that Goldman's characterizations of the investments were "revealed to the public by the numerous governmental investigations into Goldman's role in the market's collapse."

Allstate Corp. is suing Goldman claiming the broker fraudulently sold it more than $123 million in mortgage-backed securities in 2006 and 2007, before the housing market collapse sent the investments' value plunging.

The insurer claims in a lawsuit filed in New York that the documents Goldman provided at the time "contained untrue statements and omitted material facts" about the mortgages underlying the investments.

"Goldman knew these types of securities were, to use Goldman's own words,”junk,” “dogs,” “crap” and “lemons,” according to the complaint.

The lawsuit alleges Goldman violated state laws against fraud and negligent misrepresentation, and it seeks unspecified damages from Goldman and certain affiliates.
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Mortgage Loan Compliance | NCUA Sues Goldman Sachs For Bad Loans

Buyers of mortgage-backed securities, mostly banks, pension funds and other big investors, made money from the investments if the underlying debt was paid off. But as homeowners started falling behind on their mortgages and defaulted in droves in 2007, the securities failed and their buyers lost billions.

Today the National Credit Union Administration (NCUA) sued Goldman Sachs & Co. for more than $491 million in damages over losses incurred by two failed credit unions that purchased mortgage-backed securities underwritten by the investment bank.

The complaint filed in U.S. District Court in Los Angeles is the latest lawsuit brought by the federal regulatory agency against a major bank as it seeks to recover billions in losses related to risky mortgage-backed securities that brought down credit unions in recent years.

In the complaint, which also names as defendants several issuers of mortgage-backed securities, regulators claim that the documents used in offering the securities contained untrue statements or omissions as to how risky the investments were.

U.S. Central Federal Credit Union in Lenexa, Kan., and Western Corporate Federal Credit Union in San Dimas, Calif., purchased the mortgage-backed securities, believing the risk of loss was minimal because virtually all of the securities had a triple-A rating. However, these loans represented a substantial risk of losses, the NCUA claims. And when the investments' market value plummeted, the two largest U.S. credit unions failed.

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Mortgage Loan Compliance | AIG Sues BofA For $10 Billion In Bad Loans

American International Group Inc. has said Bank of America and two companies that were later purchased up by the bank, Countrywide and Merrill Lynch, sold the insurance company $28 billion in securities backed by home mortgages between 2005 and 2007, at the height of the housing boom.

AIG said Monday it sued Bank of America Corp. for more than $10 billion, saying the bank cheated it by selling residential mortgage-backed securities that were overvalued. It said it looked at more than 260,000 of the underlying mortgages, and found that the bank's "stated metrics" for 40 percent of the securities were false.

Bank of America denied the allegations, saying AIG "recklessly" chased investments with high returns, and was big and sophisticated enough to know the risks.
Banks have been hit by a series of suits over misrepresentations of mortgage-based securities.

In one case, a borrower said she had been the owner of a construction business for 25 years, which would have made her 10 years old when she took ownership, AIG said.

Bank of America spokesman Lawrence Grayson said the blame lies with AIG.

"AIG recklessly chased high yields and profits throughout the mortgage and structured finance markets. It is the very definition of an informed, seasoned investor, with losses solely attributable to its own excesses and errors," Grayson said.

AIG spokesman Mark Herr shot back: "It is disappointing but unsurprising that Bank of America continues to attempt to blame others for its own misconduct. Investors, no matter how sophisticated, were entitled to rely on its numerous written representations about the securities it sold."

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Mortgage Loan Compliance | FHFA Sues Lender After Forensic Audit

On July 27, 2011, in U.S. District court for the Southern District of New York, the Federal Housing Finance Agency (FHFA) brought suit against UBS Americas Inc., several of its subsidiaries, and four former executive officers charging violations of securities laws in the sale of private label residential mortgage-backed securities (MBS) to government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae. FHFA sued as conservator of the GSEs and seeks a jury trial in an attempt to recover losses and damages on behalf of the GSEs that occurred as a result of their investment in the UBS securities.

A forensic audit of 966 randomly selected loans from two of the pools at issue found that approximately 78 percent were not underwritten in conformance with guidelines. The underwriting guidelines that were violated were those designed to assess the likelihood that loans would be repaid. The forensic review revealed the following types of breaches:

1. Failure to test the reasonableness of the borrowers' stated income relative to their line of work, leading to material misrepresentation of income. The forensic review found multiple instances in which income appeared unreasonable yet there was no indication the originator attempted to confirm that income.

2. Failure to investigate multiple submissions from the same borrower of applications showing increasing stated incomes. In each instance the stated income on the original application did not meet underwriting guidelines, but subsequent applications at higher income levels did. Forensic review confirmed that the later applications misrepresented that income and that underwriters did not investigate the discrepancies.

3. Failure to confirm the intended owner occupancy of the property despite indications that the property was intended as an investment. In some cases the loans were underwritten as owner-occupied properties even though the borrower stated they intended the property to be as second home or investment. Additionally, the Prospectus Supplements materially understated the proportions of the loans that were not owner occupied.

4. Failure to properly calculate the borrower's outstanding debt, resulting in a debt-to-income (DTI) ratio that exceeded underwriting guidelines. When properly calculated, 32 percent of the 996 loans in the random sample for forensic review contained DTI ratios that exceeded applicable guidelines.

5. Failure to investigate credit report information that indicated potential misrepresentation of borrower debt. The forensic review revealed numerous instances where multiple credit inquiries on borrower credit reports should have put underwriters on notice for potential misrepresentations of debt obligations, but underwriters did not investigate.


The lawsuit alleges that the underwriters of the underlying mortgages systematically disregarded their respective underwriting guidelines in order to increase production and profits and that the Defendants failed to conduct adequate due diligence on the mortgage loan files and mortgaged properties prior to or during the securitization process. A number of banks and mortgage companies originated the loans in question including Fremont Mortgage, Wells Fargo Bank, Countrywide Home Loans, IndyMac, and Provident Funding Associates.

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Mortgage Loan Compliance | Lehman Brothers Alleged Fraud: Sufficient

Former Lehman Brothers Holdings Inc executives, directors, auditors and underwriters on Wednesday lost their bid to dismiss an investor lawsuit seeking to hold them responsible for losses tied to the investment bank's collapse.

In a 106-page ruling, U.S. District Judge Lewis Kaplan in Manhattan said the plaintiffs, which includes individuals, pension funds, and companies, sufficiently alleged that Lehman materially misled them about its accounting and their ability to manage risk before filing bankruptcy on September 15, 2008.

Kaplan said "it is entirely plausible" that the "misleading picture" Lehman portrayed about its financial conditions inflated its stock price, and resulted in investor losses.

The complaint "adequately alleges misstatements and omissions that overstated Lehman's financial strength, misstated and understated the extent to which it was leveraged, misstated its risk management practices, and understated its exposure to Alt-A and commercial real estate assets," Kaplan wrote.

The investors had bought some of the more than $31 billion of equity and debt that Lehman had issued under a 2006 shelf registration statement and subsequent filings. Among the defendants who failed to win dismissal are former Lehman Chief Executive Richard Fuld, and former auditor Ernst & Young.

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Mortgage Loan Compliance | Robo-Cops Want Answers on Robo-Signing

On Monday the Associated Press reported that county officials in Massachusetts, North Carolina and Michigan said they have received thousands of mortgage documents with questionable signatures since last fall. Questionable signatures or forged signatures and false affidavits, also called robo-signing, led to a temporary halt to foreclosures earlier this year. Even though banks and foreclosure processers promised to stop the practice it is still a widespread problem.

Lawmakers and enforcement agencies called for hearings and further investigation today after learning that the illegal practices are continuing. County officials who are responsible for keeping land records, including property deeds, say that they have received thousands of robo-signed documents filed in their offices since October.

"Wall Street and some in Washington want us to believe that robo-signing is a thing of the past," said Sen. Sherrod Brown, D-Ohio. "But the same risky practices that put our economy on the brink of collapse continue to infect the housing market." Sen. Brown, Chair of the Financial Institutions and Consumer Protection Subcommittee, said the subcommittee will hold a hearing on the robo-signing issue.

Rep. Maxine Waters, D-Calif., a senior member of the House Committee on Financial Services said the lenders who continue the practice "need to be investigated and prosecuted." She told The Associated Press that she believed regulators should step in and that the absence of stronger regulation is "the reason why the system broke down in the first place." She said the county officials' findings show lenders will not stop practices like robo-signing on their own.

"They have complete disregard for the damage they have already caused and have no intention of changing their ways," said Waters, who also called for more hearings on the issue.

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Mortgage Loan Compliance | FHA’s Temporary Borrower Bail-Out

In 2010, approximately 17,000 homeowners received a government-supported delay on their mortgage payments. About 3,500 borrowers with FHA-insured loans fall behind on their mortgages each month due to unemployment, officials said, and another 10,000 unemployed homeowners have taken advantage of a three-month delay in mortgage payments in the past year.

Starting August 1, 2011 the Federal Housing Administration will extend the period for unemployed homeowners to miss mortgage payments to a full year from three or four months. This will stall the foreclosure process from beginning and will allow qualified homeowners to go without making a monthly payment for 12 months.

The extended grace period only applies to FHA-backed loans, which are usually given to low- and middle-income borrowers and represent about 14 percent of all active mortgages and roughly 25 percent of new mortgages. The grace period also applies to homeowners in the government's Home Affordable Modification Program.

Housing and Urban Development Secretary Shaun Donovan said the change will likely only help "tens of thousands" of homeowners.

Donovan said administration officials hope private lenders and government-controlled mortgage companies Fannie Mae and Freddie Mac, which back 90 percent of all new mortgages, will adopt a similar policy.

New rules already going into effect on October 1, 2011 for mortgage giants allow for long-term forbearance when a home has been destroyed or if the homeowner or a dependent has a long-term disability or illness.

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Mortgage Loan Compliance | Failed Modifications Turn Into Lawsuits

Bank of America is among a growing number of banks with legal complaints accusing them of disregarding what should be binding agreements to reduce the monthly mortgage payments of troubled borrowers।

Many of these suits involve permanent modifications through the U।S. Treasury-administered Home Affordable Modification Program, which offers incentives to loan servicers who extend modifications, as well as so-called proprietary modifications, which banks offer independently of the government guidelines.

In the most recent HAMP report The U।S. Treasury said that 70 percent of the trial modifications initiated since June 1, 2010 under the program's guidelines have been made permanent, up from 42 percent for trials started before that date.

Both government officials and mortgage lenders have been touting statistics showing an increase in the number of modifications being extended। The Big Four, as well as Hope Now, mortgage servicers and others have reported that up to 1.8 million loans were modified in 2010, up from 1.2 million modifications in 2009.

However earlier this month, U।S. Treasury officials announced it was withholding incentives from Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. for incorrectly determining that borrowers were ineligible for HAMP modifications, a claim that the banks denied.

But even as troubled borrowers increasingly manage to wrangle modification deals from reluctant banks, they're finding that problems persist long after the ink dries on their new loan contracts।

The Connecticut Fair Housing Center looked at hundreds of mortgage modifications granted in recent years to clients of partner organizations in several different states and found that nearly a 25 percent were having problems with inaccurate balance statements, erroneous default notices and other issues।

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Mortgage Loan Compliance | TB&W Chairman Gets Sentenced To 30 Years

Federal authorities say the case against the former chairman of Florida-based Taylor Bean & Whitaker, Lee B। Farkas, is one of the largest prosecutions arising from the nation's financial crisis. The fraud put thousands of employees out of work and contributed to the collapse of Colonial Bank, which authorities described as the sixth-largest bank collapse in U.S. history.

"He deserves to be punished severely in light of the enormity of his crimes। The losses from this case are, in fact, off the charts," federal prosecutor Patrick Stokes said in urging a judge to send Farkas, 58, to prison for the rest of his life. "He has destroyed lives and institutions."

Farkas, who denied any wrongdoing when he testified at his trial, was convicted in of all 14 counts, including securities fraud and conspiracy। On Thursday, he acknowledged taking risks and making errors in judgment to keep his company afloat.

"When faced with the prospect of Taylor Bean & Whitaker sinking, I had to take risks," said Farkas, who was taken into custody following the verdict and appeared in court Thursday in a green prison jumpsuit। "I let Taylor Bean & Whitaker get out of control by letting it grow too fast."

U।S. District Judge Leonie Brinkema told Farkas she detected no remorse as she sentenced him to twice the 15-year sentence requested by his attorneys.

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Mortgage Loan Compliance | JPMorgan Chase Settles SEC’s Civil Suit

The Securities and Exchange Commission announced Tuesday that JPMorgan Chase & Co. has agreed to pay $153.6 million to settle civil fraud charges that it misled buyers of complex mortgage investments just before the housing market collapsed.

As part of the settlement, investors who were harmed will receive all of their money back, the SEC said. JPMorgan also agreed to improve the way it reviews and approves mortgage securities transactions.

In its announcement, the SEC said it was one of the most significant legal actions targeting Wall Street's role in the 2008 financial crisis. It comes a year after Goldman Sachs & Co. paid $550 million to settle similar charges.

The bank neither admitted nor denied wrongdoing under the settlement.

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Mortgage Loan Compliance | NCUA Sue RBS and JPMorgan

The National Credit Union Administration is accusing the securities divisions of Royal Bank of Scotland PLC and JPMorgan Chase & Co. for misrepresenting how risky of the securities were when they sold them to the corporate credit unions, which failed in 2009 and 2010.

Federal regulators on Monday sued JPMorgan and RBS in a bid to recover about $840 million in losses on securities tied to high-risk mortgages that were purchased by five wholesale credit unions that failed in the financial crisis. In the lawsuits, filed in federal court in Kansas, the agency is seeking $278 million from JPMorgan Securities LLC and $565 million from RBS Securities Inc.

The NCUA has been negotiating with several Wall Street banks in an effort to reach settlements over the sales of risky mortgage securities, which the banks packaged and sold to investors at the height of the housing boom. The regulators could file suits against five to 10 other banks in the coming weeks if "reasonable" settlements aren't reached, putting the total amount of damages sought in the billions of dollars, the NCUA said.

"Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions," NCUA Chairman Deborah Matz said in a statement.

The agency says the failure of five institutions (U.S. Central, Western Corporate, Southwest Corporate, Members United Corporate and Constitution Corporate) resulted from those losses. It seized the five credit unions, putting them into conservatorship and later liquidating them.

Corporate credit unions provide financing and investment services to the much larger population of retail credit unions. Several of the 28 corporate credit unions in the U.S. sustained steep losses from the depressed value of the mortgage-backed securities they held.
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Mortgage Loan Compliance | Hurry Up And Wait – Fixing Foreclosure

On Monday Federal Regulators said that Department of Justice asked that they give the banks and financial firms another 30 days to coordinate with state and federal agencies.

This past April the US government ordered 16 mortgage lenders and servicers to reimburse homeowners who were incorrectly foreclosed upon. The lenders and servicers were also given 45 days hire auditors to show how many homeowners could have avoided foreclosure in 2009 and 2010. They would then be required to submit plans that show how they intend to fix their practices.

Regulators are now giving the nation's largest mortgage lenders an extra month to show how they plan to address problems with their foreclosure practices.

The Big Four - Citibank, Bank of America, JPMorgan Chase and Wells Fargo were among the lenders cited in the report.

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Mortgage Loan Compliance | No Foreclosure Relief - Big 3 Blamed

The Obama administration is blaming the three largest U।S. mortgage lenders for the failures of its foreclosure-prevention program. The Treasury Department says Wells Fargo, Bank of America and JPMorgan Chase & Co. have failed to help enough people permanently lower their mortgage payments so they can stay in their homes.

Just one-third of the 1।4 million people who applied for mortgage modification have had their payments lowered permanently. More than half who applied have fallen out of the program entirely.

Based on those lenders' lackluster success for the first three months of 2011, the government has removed financial incentives it had given them। They amounted to up to $1,000 per permanent loan modification.

The Obama administration says these Lenders have done little to help people at risk of losing their homes।

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Mortgage Loan Compliance | Hawaii Foreclosure Law – New Da’ Kine

Earlier last month Governor Neil Abercrombie signed Senate Bill 651, which amends the Hawaii Revised Statutes Chapter 487, Section 667 as of May 5, 2011. The primary or general purpose of this bill was to create guidelines for foreclosing mortgagees, to establish a mediation special fund and require lenders or banks to engage in mediation with borrowers for sixty days, in order to attempt a voluntary resolution of the breach of the mortgage agreement.

See Highlights below:


AUCTIONS:

An owner-occupant may elect to participate in the mortgage foreclosure dispute resolution program. “Dispute Resolution” means a facilitated negotiation between a mortgagor and mortgagee for the purpose of reaching an agreement for mortgage loan modification or other agreement in an attempt to avoid foreclosure or to mitigate damages if foreclosure is unavoidable. If an owner-occupant participates in the program, the department shall open a dispute resolution case. This case opening operates as a stay (suspension) of (non-judicial) foreclosure proceedings and may be filed or recorded at land court or bureau of conveyances.

Public sales following power of sale foreclosures must be held on grounds or at a facility under the administration of the State. Also, public sales of mortgaged properties located in Maui, must be held in Maui County. There have been previous cases where public sales for Maui mortgaged properties were held on Oahu, for example.

There is a provision where if an owner owes back Homeowner’s Association dues and would like to cure the default (following the proper steps), the Association shall allow 60 days for the owner to cure default and cannot reject a “reasonable” payment plan.


JUDGMENTS:

It has been previously assumed that in the case of a nonjudicial foreclosure, the foreclosing lender could not pursue a deficiency judgment against the mortgagor however this Hawaii law finally makes it official by prohibiting it, unless the debt is secured by other collateral or as otherwise provided by law. For example, there have been some cases where a lender has not pursued a judgment for the deficiency but has filed a judgment against the mortgagor for breach of contract. In the case of a judicial foreclosure, all remedies available to a lender may be asserted including the right to seek a deficiency judgment. Under certain circumstances, an owner-occupant of a residential property that is subject to nonjudicial foreclosure may convert the action to a judicial foreclosure. We’re not sure why this was included in the bill or why an owner would choose to convert to judicial from nonjudicial unless it is merely a tactic to buy more time prior to sale/auction.


DELIVERY OF DEED/TRANSFER OF TITLE:

The law prohibits a foreclosing mortgagee to engage in delaying the delivery of the recorded, conformed copy of the conveyance document to a bona fide purchaser who purchases in good faith for more than forty-five days after the completion of the public sale. This has been creating problems for mortgagors in cases where there is a Homeowner’s Association. A public sale would be conducted, the bank “gets the property back” and title would not be transferred for months. Banks were not paying Association dues post-auction and the Homeowner’s Association would attempt to collect dues from whoever is “on title” which in many cases was still the prior owner.


SHORT SALES AND LOAN MODIFICATIONS:

The new law also prohibits:

- A foreclosing mortgagee to engage in completing nonjudicial foreclosure proceedings during short sale escrows with a bona fide purchaser if the short sale offer is at least five per cent greater than the public sale price; provided that escrow is opened within ten days and closed within forty-five days of the public sale; and provided further that a bona fide short sale purchaser shall have priority over any other purchaser;

- Completing nonjudicial foreclosure proceedings during bona fide loan modification negotiations with the mortgagor and;

-Completing nonjudicial foreclosure proceedings against a mortgagor who has been accepted or is being evaluated for consideration for entry into a federal loan modification program before obtaining a certificate or other documentation confirming that the mortgagor is no longer eligible or an active participant of that federal program.


MORATORIUM ON NONJUDICIAL FORECLOSURES

This is a big one so we’re putting the section below in its entirety (per summary):
{SECTION 40. There shall be a moratorium on all new nonjudicial foreclosure actions under part I of chapter 667, Hawaii Revised Statutes, for property located in this State to begin on the effective date of this Act and to end on July 1, 2012. No foreclosure by power of sale pursuant to section 667 5, Hawaii Revised Statutes, shall be initiated and the registrar of the bureau of conveyances shall not record an affidavit or notice of sale pursuant to section 667-5, Hawaii Revised Statutes, for a power of sale foreclosure under section 667-5, Hawaii Revised Statutes, initiated during the moratorium period established by this Act.}

There is still some question as to what is considered a “new” foreclosure so you should consult an attorney to be sure but it may be where the mortgagee has not yet issued a Notice of Default (NOD) and Intention to Foreclose prior to the signing of this bill. If you or someone you know has had a property in foreclosure prior to the signing of this bill (May 5, 2011), this may not be considered a new foreclosure and may proceed to sale at public auction as previously scheduled. Per part I of chapter 677, Hawaii Revised Statutes, you may wish to confirm whether this moratorium applies solely to owner-occupied properties.

Please keep in mind that this is a very limited synopsis of what is included in the bill and new law and we have just highlighted a few items which may be applicable to your community and important to be aware of.

A 58 page Summary of the Senate Bill 651 is available at – http://www.capitol.hawaii.gov/session2011/bills/SB651_CD1_.htm

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Mortgage Loan Compliance | US Govt. $160 Billion Dollar Pet Project

Since our housing bubble burst, the U.S. government has spent more than $160 billion of taxpayers’ money to shore up the mangled finances of the two federal mortgage giants - Fannie Mae and Freddie Mac. The Obama administration has said it plans to wind down the influence of Fannie and Freddie to trim the government's role in the housing market, and Congress has invited several housing market experts to offer opinions on the best ways to limit government involvement.

Anthony Sanders, professor of real estate finance at George Mason University presented seven proposals to the House subcommittee to facilitate the transition, including requiring Fannie and Freddie to dispose of assets not critical to their mission and capping bailout funds to the distressed duo at $200 billion.

The United States doesn't need government-sponsored enterprises such as Fannie Mae and Freddie Mac to sustain the housing market. At least that's what Sanders told the House Subcommittee on Capital Markets and Government Sponsored Enterprises last week.

“Because government-sponsored enterprises (GSEs) back more than 90 percent of all home loans today, they have crowded out private sector lending and distorted the housing-finance landscape”, he says. "Fannie and Freddie will not be missed, nor will their absence make a difference to the housing market or the economy, particularly if taxpayers are no longer on the hook for further losses," Sanders testified.

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Mortgage Loan Compliance | U.S. Sues Deutsche Bank - Fraud

Deutsche Bank is accused of failing to adequately scrutinize potential borrowers, then lying to U.S. government officials about its lapses of due diligence. The Justice Department yesterday filed suit against Deutsche Bank for hundreds of millions of dollars, alleging that the banking giant unfairly stuck taxpayers with the tab for bad home loans it issued.

Deutsche Bank called the charges "unreasonable and unfair," and said it planned to defend against the lawsuit "vigorously."

According to U.S. Attorney Preet Bharara, the bank "ignored every type of red flag and breached every duty of due diligence before underwriting thousands of federally insured mortgages." Bharara also said, "while the homes the defendants issued loans for may have been built on solid ground, the defendants' lending practices were built on quicksand. Ultimately, prudence was trumped by profit, and good faith took a back seat to good fees."

At issue, as the New York Times explains, is Deutsche Bank's relationship with the Federal Housing Authority, an agency of the Department of Housing and Urban Development (HUD) that guarantees mortgages made to borrowers who don't qualify for loans from the major government-sponsored clearinghouses for home loans, Fannie Mae and Freddie Mac.

According to the complaint, MortgageIT, a unit of Deutsche Bank, issued more than 39,000 such loans between 1999 and 2009, worth more than $5 billion. Because the loans had won government backing, the bank was then able to turn around and sell them to investors--in the same fashion that other Wall Street forms were repackaging home loans as investment securities.

But in order to win the crucial cachet of an FHA-guaranteed mortgage, MortgageIT and Deutsche Bank had to file yearly certifications, affirming that the loans met HUD's standards. And federal prosecutors now allege that when the bank filed those documents, it "repeatedly lied to H.U.D. to obtain and maintain MortgageIT's Direct Endorsement Lender status." In part, the federal indictment alleges, the bank did not actually monitor the default rate of the securitized loans, even though it claimed to be doing so.

By this year, around a third of MortgageIT's FHA-backed loans had defaulted, the government claims--and says that the resulting cost to taxpayers will be a around $1 billion.

Note - Deutsche Bank didn't buy MortgageIT until the start of 2007. However, the lawsuit involves activities at MortgageIT that occurred both before and after the DeutshceBank purchase.

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Mortgage Loan Compliance | A “Foreclosure Mess” or Just Fraud

News outlets are all buzzing with stories of robo-signers, produce the note, lost paperwork and more. Yahoo News wrote a article about a story that CBS’s 60 Minutes did this past Sunday exposing some of the players in this “foreclosure mess”, but no one is saying what has really happened – Fraud. To see the Yahoo article and 60 Minute Video goto http://news.yahoo.com/s/yblog_thelookout/20110404/bs_yblog_thelookout/the-foreclosure-mess-isnt-going-away

While all of this is great and awareness of mortgage compliance issues are growing, there still seems to be a veil that no one is looking through. In our abbreviated, texted crazed world it seems all too commonplace for everyone to give the truth a tagline or header instead of calling a spade, a spade - OMG.

If someone (Wall Street) lies to investors about the security that they are funding that is called fraud.

If someone (Lenders/Mortgage Brokers) tells borrowers’ they are buying a home or mortgage without explaining all the cost, fees, and risks involved that is fraud.

And if anyone presents forged or faked documents to the homeowner, investor, bank/lender, and especially the courts – well let us just call it like it is - Fraud.

Even though everyone knows that these are fraudulent acts it seems that no one can say the word fraud. Probes by all 50 State Attorneys General and other government agencies into banks' “foreclosure practices” carry the risk of fines and other major costs – LOL.

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Mortgage Loan Compliance | Risky Practices Haunting Big Banks

Probes by state attorneys general and other government agencies into banks' foreclosure practices carry the risk of fines and other major costs, according to regulatory filings from three of the country's biggest banks.

Revelations that major U.S. banks rammed through hundreds of foreclosures daily without giving many borrowers a fair shot at keeping their homes triggered investigations from all 50 states' attorneys general and from state and federal regulators. They also sparked pressure from lawmakers and class-action lawsuits.

Bank of America Corp., Citigroup Inc. and Wells Fargo & Co. called out possible financial repercussions in annual filings with the Securities and Exchange Commission last Friday. None of them provided any details on how much was at risk.

"Those investigations and any irregularities that might be found in our foreclosure processes, along with any remedial steps taken in response to governmental investigations or to our own internal assessment, could have a material adverse effect on our financial condition and results of operations," Bank of America said.

The Charlotte, N.C.-based bank said it is dedicating significant resources to comply with investigations, and warned that the probes could result in "material fines, penalties" and expose the company to new lawsuits and more legal costs.

"Our costs increased in the fourth quarter of 2010 and we expect that additional costs incurred in connection with our foreclosure process assessment will continue into 2011 due to the additional resources necessary to perform the foreclosure process assessment, to revise affidavit filings and to implement other operational changes," Bank of America said in the filing.

New York-based Citigroup said investigations and scrutiny of its own foreclosure processes have "resulted in, and may continue to result in, the diversion of management's attention and increased expense, and could result in fines, penalties, other equitable remedies, such as principal reduction programs, and significant legal, negative reputational and other costs."

Wells Fargo also said it is being investigated by several government agencies for its foreclosure practices.

"It is likely that one or more of the government agencies will initiate some type of enforcement action against Wells Fargo, which may include civil money penalties," the company said in its filing. "Wells Fargo continues to provide information requested by the various agencies."

The bank also said several lawsuits have been filed against it, claiming that Wells Fargo submitted fraudulent affidavits or other documents to foreclose on homes.

"Specifically, plaintiffs allege that Wells Fargo signers did not have personal knowledge of the facts alleged in the documents and did not verify the information in the documents ultimately filed with courts to foreclose," the San Francisco-based bank said in the filing.

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Mortgage Loan Compliance | Ex-IndyMac Exec’s Charged with Fraud

IndyMac Bancorp's bankruptcy filing was one of the largest on record. The collapse and seizure by the government of IndyMac Bank, with about $30.2 billion in assets, was one of the biggest bank failures in U.S. history. It also was the costliest failure in the current wave for the federal deposit insurance fund, with an estimated loss of $12.7 billion.

Federal regulators filed civil fraud charges Friday against three former executives of the parent of IndyMac Bank, accusing them of misleading investors about the mortgage lender's finances before it collapsed in July 2008.

The Securities and Exchange Commission announced the charges against Michael Perry, former chief executive of Pasadena, Calif.-based IndyMac Bancorp, and former chief financial officers, Scott Keys and Blair Abernathy.

Abernathy agreed to settle, paying a $100,000 fine and $26,592 in restitution plus interest. In addition, Abernathy will be barred from practicing as an accountant for any public company for two years; after that time he can apply to be reinstated. He neither admitted nor denied wrongdoing but did agree to refrain from future violations of the securities laws.

Perry and Keys, through their lawyers, disputed the charges pending against them and said they will contest them in court.

The SEC said the three executives took part in filing false and misleading public reports about the financial stability of IndyMac Bank and the holding company, which filed for bankruptcy protection after the bank failed.

Perry, Keys and Abernathy regularly received reports in 2007 and 2008 about the deteriorating finances but failed to ensure adequate disclosure of the condition to investors even as IndyMac Bancorp sold millions of dollars in new stock, the SEC alleged.

"These corporate executives made false and misleading disclosures about IndyMac at a time when the company's financial condition was rapidly deteriorating," Lorin Reisner, deputy director of the SEC's enforcement division, said in a statement.

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Mortgage Loan Compliance | 47 Year Low For New Housing

Home Builders are struggling to compete in markets saturated with foreclosures. High unemployment and uncertainty over home prices have kept many potential buyers from making purchases. Buyers purchased the fewest number of new homes in 2010 since records dating back 47 years.

Poor sales of new homes mean fewer jobs in the construction industry, which normally pushes economic recoveries. On average, a new home built creates the equivalent of three jobs for a year and generates about $90,000 in taxes, according to the National Associated of Home Builders.

Sales for all of 2010 totaled 321,000, a drop of 14.4 percent from the 375,000 homes sold in 2009, the Commerce Department said Wednesday. It was the fifth consecutive year that sales have declined after hitting record highs for the five previous years when the housing market was booming.

Economists expect prices will keep falling through the first six months of 2011. However, they say it could be years before sales rise to a healthy rate of 600,000 units a year.

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Mortgage Loan Compliance | Mass. High Court Rules Against Banks

The Massachusetts Supreme Judicial Court affirmed a lower court judge's ruling against U.S. Bancorp and Wells Fargo invalidating two mortgage foreclosure sales because the banks, in their capacity as trustees for mortgage securities, did not prove that they actually owned the mortgages at the time of foreclosure.

The decision, which highlights the failure of financial firms to adhere to the rules that govern mortgage-backed securities, is likely to lead more borrowers to sue bank servicers and trustees for wrongful foreclosures. It's unclear what the ruling means for people who were forced from their homes after defaulting on their loans or for those who purchased houses in foreclosure sales.

U.S. Bancorp and Wells Fargo, who were not the original mortgagees in the case, did not show that they held the mortgages at the time of foreclosure. As a result, the court found, the banks did not demonstrate that the foreclosure sales were valid.

The banks argued that the securitization documents they submitted were sufficient to prove they owned the mortgages before the publication of the notices of sale and the foreclosure sales.

Wells Fargo said in a statement Friday that as trustee of a securitized pool of loans, it expected those servicing the loans to abide by all applicable state laws, including those governing foreclosure sales.

U.S. Bancorp issued a statement saying that “as a trustee of the securitization trust that it has no responsibility for the terms of the underlying mortgage, foreclosure procedure, the conduct of the servicer, the process by which the mortgage is transferred to the trust, or the sufficiency of the mortgage documentation."

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Mortgage Loan Compliance® | The Forensic Loan Audit Company

Get The Facts, Audit Your Loan, and Protect Your Rights!

Call Today 1-866-966-6615 or Visit www.ml-compliance.com