Automatic Loan Mods?

Just Like The Lottery

Believe it or not, one bank has actually started offering automatic loan mods. No more reams of paperwork delving into intimate financial records of borrowers [treated more like beggars], no more waiting for six months, eight months and even more than a year to get an answer from the haughty banks. Finally, one bank, JP Morgan Chase, is automatically writing loan mod contracts for its underwater borrowers.

Chase Bank

Yes, it’s true. Some Chase customers are getting loans mods, offering rate reductions, principal reductions or both–all without having to file the onerous paperwork. In one case cited by CNN Money, Chase surprised a Darrington, Wash. couple, who had tried, without success, to effect a loan mod with the very same bank, with a loan mod reducing their interest rate from 6.5% to 2.8% for five years and then a fixed 3.19% for the remaining 18 years of their loan, saving them $229 a month. For this couple, still suffering with job loss as well as an underwater house, it was just like winning the lottery.

Why Would Chase Offer Automatic Loan Mods?

Bank Trick

Why would Chase be doing this? Is this a trick?

It’s not a trick. In fact, in accordance with the $25-billion mortgage settlement agreed to a few months ago by 49 out of 50 attorneys general, discussed in a previous post, Chase’s share of the payout burden is $4.2 billion.  Because banks get “extra credit” for acting quickly and making their mods during the first year, Chase  bit the bullet and decided to go ahead and make loan mod offers to thousands of underwater borrowers. In the past, contacting all these homeowners has proven difficult if not impossible. Many homeowners are so inundated with financial woes they no longer read their mail or answer the phone. Many underwater homeowners move out, anticipating a foreclosure.

Borrowers who receive the loan mod offers must, of course, sign the new contracts which typically would run for 5 years and then, most important, start making the new payments which are usually hundreds of dollars less than the previous amounts. Between March and June 2012, Chase claims that it has completed 3,086 loan mods,  $359 million’s  worth.

But, Isn’t The Housing Crisis Over By Now?

To understand how deep-seated this problem is despite the good news we’ve been hearing about home prices rising,  look at what Chase, just one of the five major banks involved, says it still has to do: another 11,500 loan mods. I say, “Bravo,” to Chase for undertaking to honor the settlement. It is too bad, though, that the banks had to be forced by litigation to treat their borrowers like human beings. Makes you wonder what else we could get the banks to cough up if the federal government would just hold their feet to the fire just a teensy, weensy bit?

Foreclosure Past or Future? Here’s Help

stop foreclosure fraud

Federal Bank Regulators Wake Up

By now, most of us have heard about the shenanigans of Big Banks around foreclosures–robo-signing, sloppy record-keeping, fradulent foreclosures of all kinds.  Federal regulators, 4 years into this, appear to have finally woken up.  This week, regulators required 14 mortgage servicers to mail out 4.3 million letters to possible victims of wrongful foreclosure practices. It’s about time.

What’s In The Letters?

These letters will invite the borrowers to submit their cases for a free review by independent consultants that are funded by the lenders but vetted by regulators. In other words, the banks must pay for the reviews and the salaries of the reviewers, but all are under the scrutiny of the regulators.  If it is determined that borrowers were harmed financially by negligent or fraudulent foreclosure proceedings, then banks must compensate the borrowers.

The regulators under the Comptroller of the Currency have apparently determined that wrongdoing did take place. That’s why these letters are going out.  These regulations are also enforced by the Federal Reserve which, as you may remember, coughed up the TARP payments to these same Big Banks, BofA, Chase, Citi and Wells Fargo as well as a host of smaller banks.

foreclosure-fraud-cartoon

What Are Some Tricky  Bank Practices?

Banks have seemingly engaged in many activities ranging from merely negligent to downright nefarious in order to foreclose on non-paying borrowers or, even in some cases, on people who actually were paying or who even owned their homes outright. That’s right. The massive money and power of these Big Banks allowed them to foreclose on people who had no mortgages at all in a few isolated cases.  Most of these misdeeds have come to light in the so-called judicial states where each foreclosure must go before a judge and where borrowers can contest the action if they so choose.  California, by the way, is a non-judicial state where foreclosure proceedings do not involve the courts or judges.

Some judges and attorneys in these judicial states have noticed peculiar signatures, for instance, with the same signatory appearing multiple times on legal documents but clearly in different handwriting. Multiple personality disorder? It appears not–robo-signing was the name of that game. And, it is fraud. This is what some banks were doing when they couldn’t locate the original paperwork. Our system of real estate has demanded that the original paperwork be present to back any claim to foreclose for over 200 years. But, banks had instituted their own electronic system, called MERS, which made it easier to change the ownership of mortgages but more difficult to maintain the paperwork. Solution? Make it up…just do anything to kick those people out of their houses.

What Are Regulators Offering As Compensation?

Well, that’s the rub, isn’t it? The whole Wall Street fiasco has been marked by absent or weak regulators. Already more than 10 million homes have been foreclosed upon and regulators are just now making any noises about calling the banks to account. So far, the regulators have not established any guidelines for compensating borrowers found to have been  fraudulently deprived of their homes, though compensation of some sort is promised.

Plus, banks may want to be “held harmless” against further lawsuits if they pay even token compensation. Will the regulators agree to that?  Given the terrible track record of these regulators, there is every reason to suspect the real purpose of these letters rather than aiding consumers aims really to calm the situation for the servicers who are now facing massive potential litigation.   If it seems paranoid to suspect federal regulators of favoring the banks over consumers, call me guilty because I do suspect that very thing.

How Do Borrowers Sign Up?

Borrowers who want to learn more about the federal claims process can visit IndependentForeclosureReview.com or call (888) 952-9105.

Borrowers must request reviews by April 30, and the foreclosures must have been on primary residences to be eligible.

Kamala Harris Comes Through: CA Out Of Big Banks Deal!

kamala harris, attorney general of california

Kamala Harris Is My Hero, Too

This is terrific news: Kamala Harris, California’s Attorney General, has heard the people of this state, suffering under the worst mortgage and real estate crisis since the Great Depression. She has opted out of the proposed settlement of the 50 states Attorneys General with the Big Banks. That settlement, rumored to be about $25 billion, is really small potatoes and would have been a disastrous conclusion of their investigation.  $25 billion would barely settle the monetary issues for California alone, not to mention the other 49 states. In addition, the banks are seeking to limit all their legal liability in return for the meager settlement. Despite the support of the Obama administration,hoping to end financial uncertainty with this settlement, Harris has decided that California will pursue a separate investigation and, if possible, make a separate settlement with the Big Banks.

Other States Are Reluctant To Sign

Harris follows in the footsteps of Eric Schneiderman of New York who has launched a wide-ranging investigation of the activities of the Big Banks which include Bank of America, Chase, Wells Fargo, Citigroup and Ally Financial.  Other states have also signaled their displeasure with the proposed deal which, if rumors are correct, allots a huge windfall to the Big Banks and a meager settlement to the states. Besides New  York and California, Delaware Massachusetts, Kentucky and Minnesota, along with our hard-hit neighbor, Nevada have all signaled intense dislike of the proposed deal.

California, already one of the worst foreclosure states in the nation, recently made headlines again when foreclosures jumped 55% in one month as BofA, a prime supplier of SoCal mortgages during the “bubble years” via Countrywide, prepared to “dump” more seized homes on an already-bloated real estate market. Stockton, CA is especially at risk for there, it is estimated, 1 in every 7 homes could be foreclosed in the near future. Likewise,  Nevada’s Las Vegas is suffering from an especially difficult and long-lasting crisis  as estimates say that 75% of Las Vegas homes are underwater and could potentially be foreclosed.

Fraudulent Mortgage Practices

As indicated in a previous post, some of the most notorious fraudulent practices of the Big Banks, such as robo-signing, continue despite their public exposure. Since California is a non-judicial state, meaning foreclosures do not have to be approved by a judge or, indeed, by anyone, fraudulent foreclosures are harder to spot. Judicial states, in general, are the ones which have brought such practices to light. Given the huge number of foreclosures in California, though, it stands to reason that large numbers of these were not legitimate.  Victims of such practices should have the help of the state’s top lawyer, the attorney general, to help them seek redress. Except in rare cases, it is prohibitively expensive for individuals to launch suits against Big Banks. That should not give the Big Banks carte blanche to commit wholesale fraud against California mortgagees.

What Does This Mean For Distressed Homeowners?

The most likely scenario now with both New York and California posing uncomfortable questions to the Big Banks while launching probing investigations into mortgage abuse is that the 50-state deal will collapse. The Big Banks will have to live with  uncertainty. Will they be brought to the bar for their crimes? How much will it cost them? Will heads roll? And the Big Question for Big Banks: will profits suffer? will stock prices dive? Few have much sympathy left for the banks, so, aside from Timothy Geitner and Henry Paulson, few will really care.

big banks bailout cartoon

The outcome for the distressed and already-foreclosed-upon homeowner, though is a different story. With multiple ongoing investigations, quick relief in the form of monetary settlements is not in the cards.  It is really, though, to everyone’s advantage to dig deeper into this morass of abuse. If the fraud is papered over, then, equally obviously, it will happen again. If the banks made trillions by fraud and nobody cares to demonstrate the modus operandi, then they will continue to  behave in the same way. Showing the crime and punishing the criminal:  That is the basis of our judicial system and it is a vital necessity in this case.

Some of the more flagrant practices are already known, publicized, and yet continuing. Big Banks could regulate themselves in order to regain public confidence. This is, apparently, what was expected of them after the 2008 bailout which seems to have been offered with no strings whatsoever.  Did they regulate themselves?  For those imprisoned in Siberian ice caves for the past 4 years, the Big Banks went right back to business as usual. Congress needs to regulate our messed-up financial sector. The sooner, the better if we are ever to get out of this nightmare.

Banks Are Still Cheating!

After all the hullaballoo last fall over the “robo-signing” scandal, you would think that banks had learned their lesson. You wouldn’t expect to see a big bank still forging documents so it could foreclose, would you? You would be wrong.  GMAC, one of the biggest of the big mortgage lenders/servicers, was recently caught-again!-doing that very thing.

Here’s what happened. The bank wanted to foreclose on a property in New York and, as often happens in these days of mortgage-backed securities, tranches and what have you,  did not have the requisite documents. Usually in a case like this, the bank goes to the original lender and asks permission to recreate the original documents. Even that sounds pretty murky. We consumers are required to have documentation for everything or–too bad for you–no dice. In this case for GMAC, though, it was even worse because the original lender, notorious subprime mortgage-maker Ameriquest, had gone out of business in 2007.

So, GMAC, not to be deterred, started seeking ways to craft the documents anyway. The problem, as stated by its own “Document Execution Team” head, Jeffrey Stephan, was that the bank did not have signing authority.  Several months passed and no solution appeared to help GMAC out of this legal “snag.”  Then, suddenly, GMAC had an answer. It filed a document with New York City authorities  stating  the delinquent Ameriquest loan had been assigned to it “effective” August 2005. The document was dated July 7, 2010, three years after Ameriquest had ceased to exist and was signed by Stephan, who was identified as a “Limited Signing Officer” for Ameriquest Mortgage Company. Soon after, GMAC filed for foreclosure.

Was it legal? No way was this little trick legal as it did not have signing authority from the defunct Ameriquest. In fact, it’s own paperwork giving itself authority was dated in 2010. Oops!

Guess what, GMAC? In New York it’s a felony to file paperwork “with intent to deceive”.  Already we know that GMAC was at the forefront of the fradulent “robo-signers” and, apparently, has not taken its lesson to heart because, according to ProPublica which discovered this particular case, this is just one of hundreds, if not thousands of similar work-ups arranged by GMAC so it can proceed to foreclosure, regulations and laws be damned.

Snagged in the act, so to speak, GMAC has not yet been able to foreclose on this home where the owner still resides. And, since apparently no one did much homework at the time of the demise of these sub-prime lenders, this will continue to plague not only GMAC, but also other mortgage servicers in their quest to foreclose.

How inconvenient it is that real estate laws exist! How much better if these silly little laws could be just wiped off the books and the banks allowed to do as they wish-foreclose without proper documentation.

That is the root of the cries for “less regulation”, “free market capitalism,” no “job-killing rules” and the like.   GMAC is not alone in its tricky interpretation of foreclosure laws.  Many banks have filed thousands of false foreclosures, knowing full well that few homeowners will contest them in court.  In fact, fewer than 4% of foreclosures are contested, though the stakes are very high for homeowners.   Recently, in Vermont a judge threw out a pending foreclosure from GMAC, based on a flawed signature emanating from the aforementioned Stephan who has admitted to signing up to 400 foreclosure notices a day, precipitating the foreclosure scandal.

California Mortgage Litigation: Show Me The Deed

Return of the Robo-Signers

As indicated in the previous post, foreclosures in judicial states, which all have to be approved by a judge, are starting to run into rough waters as homeowners, frustrated beyond belief at the lack of help from the banks, are increasingly turning to litigation.

One sign of trouble was the “robo-signing” disclosures which began in Florida and quickly spread to a temporary nationwide moratorium on foreclosures.  Concerned banks did a quick self-investigation, and, not surprisingly, hastily determined  that while  a few “robo-signers” had fraudulently approved foreclosures,  that all others were good to go. Foreclosures then resumed.

But, wait.  Just last week, Ally Financial suspended 250 foreclosures in Maryland because they had been processed by a robo-signer who had been rubber-stamping as many as 10,000 mortgages per month. Even though Ally expects to eventually refile the foreclosures, the legal challenges will slow the process — which could conceivably give some homeowners the chance to avoid foreclosure.

Show Me The Deed: Real Estate Law Is Still The Law


Not so fast, big banks. Traditional real estate law, which as far as I know is still the law of the land, requires that banks have to to produce physical deeds to show that they own the properties they are seizing.  Electronic blips need not apply. If the recent Massachusetts Supreme Court ruling, insisting the banks produce the physical deeds, spreads nationwide, banks are in for a rough ride. Because most mortgages over the past decade were sold to multiple owners on the global marketplace, it is no longer clear who is the rightful owner of the loan. How inconvenient that some judges turn out to be sticklers for the actual law!

“The vast majority of these loans have been diced and sliced and sold to multiple owners in investment tranches, which are likely to be owned by people who don’t even live in this country, so if courts rule that the banks have to get the real owners’ signatures to foreclose, the banks are stuck,” said one industry commentator. “That becomes very surreal, since you’re talking about millions of loans where you don’t know who the owner is.”

Surreal for the banks, that is, but highly convenient for the millions of upside down homeowners now stuck in mortgage hell and foreclosure limbo.

Jerry Brown’s Win For California v. Wells Fargo

Because California does not require the same judicial review as other states, courts here have typically rubber-stamped foreclosures. But the wide-ranging questions about the foreclosure process are having an effect even here.

Last month, Jerry Brown — in one of his final acts as attorney general before becoming the state governor — inked a settlement with Wells Fargo to provide $2 billion in loan modifications to homeowners who were struggling to pay off adjustable-rate loans, as well as $32 million in restitution to borrowers who have already lost their homes.

“Customers were offered adjustable-rate loans with payments that mushroomed to amounts that ultimately thousands of borrowers could not afford,” Brown said. “Recognizing the harm caused by these loans, Wells Fargo accepted responsibility and entered into this settlement with my office.”

So far, foreclosures in California, which do not need a judge’s approval, are proceeding apace. It is extremely encouraging, though, that in the judicial states the law is starting to be applied. The faster that spreads the better for all of us. The California judiciary and the legal profession in general are eagerly eying developments. Beleaguered homeowners, too, until now dependent mainly upon the banks’ good will to avoid foreclosure, may finally have found in our long-established law the very tools they need to keep their homes.