Foreclosure Fraud - Fighting Foreclosure Fraud by Sharing the Knowledge


Wednesday, November 9, 2011

Why BofA Decided Against a Countrywide Bankruptcy For Now.

News - Bank Of America does not File Bankruptcy, Yet

By Deal Journal
Yes, we’ve heard you, Mike Mayo. But it seems a bankruptcy filing for Bank of America’s troubled Countrywide unit was measured, weighed and then voted down by the BofA board.

Deal Journal colleague Dan Fitzpatrick has exclusive details today about Bank of America’s consideration of a bankruptcy filing for Countrywide. Some investors and analysts, including the Credit Agricole Securities analyst (and author) Mayo, have said a bankruptcy filing could ring-fence BofA from the giant pile of soured mortgages Countrywide issued over the years. The same ring-fencing motivation is partly responsible for Ally Financial’s plan to potentially put its own residential-mortgage unit into bankruptcy. Countrywide, however, is significantly bigger and messier than Ally’s ResCap.

Here is what Fitzpatrick wrote in today’s story about the bankruptcy debate inside Bank of America:

“Chief Executive Brian Moynihan presented a potential Countrywide bankruptcy to directors in late June as an alternative to reaching an $8.5 billion settlement with a group of investors who had lost money on Countrywide mortgage bonds, said people familiar with the situation.

The bank laid some groundwork for a possible Countrywide bankruptcy filing when it purchased the mortgage company in mid-2008, designating Countrywide as a subsidiary with its own employees, board and officers, accounting systems and bank accounts.

But Mr. Moynihan recommended the board take the settlement instead. He was particularly concerned with how a Countrywide default might affect other subsidiaries, such as the firm’s Merrill Lynch securities unit, said people familiar with the discussions.

The fear was Merrill’s counterparties might demand guarantees that the bank would stand behind Merrill’s bonds. Another consideration: Some attorneys argue that even with the structural precautions in place, Bank of America could yet find itself liable for Countrywide’s debts following a bankruptcy filing, because of how assets were later transferred between the two firms.”

During two investor sessions in August and September, Moynihan was asked point-blank about the possibility of a Countrywide bankruptcy. Each time, he punted.

“We’ve thought of every possibility,” Moynihan said in the August conference call. In the same session, Moynihan also admitted he doesn’t have fond feelings about the 2008 Countrywide takeover, which was championed by his predecessor, Ken Lewis.

“Obviously there aren’t many days when I get up and think positively about the Countrywide transaction,” Moynihan said.

Friday, March 25, 2011

Another Great Breakdown

Another great breakdown:

uppity serf

“The US Government, in order to save the banks, used tax breaks to encourage corporations to send high paying jobs to other countries, willfully destroying Americans' ability to pay their mortgages, thereby allowing the banks to confiscate home to put on their balance sheets, to recapitalize the banks and keep them solvent.

It is just that simple. The government took your jobs so the banks could take your homes, to pay for the losses when the fraud collapsed.”

Now remember this every time you hear one of these two-faced politicians sermonizing about how much the government loves you, we are in recovery, and they’re going to take care of you. We need to counter their lies every time we hear them, and not let them get away with talking to us like we are naive idiots.

Friday, March 18, 2011

Mortgage Lenders Seeking Court Permission To Destroy 22,100 Boxes Of Original Loan Documents

Mortgage Lenders Seeking Court Permission To Destroy 22,100 Boxes Of Original Loan Documents

Submitted by Tyler Durden on 01/24/2011 15:03 -0400

M3 Reuters

The solution to the ongoing fraudclosure fiasco is so simply and yet so brilliant (in a way that benefits the banks naturally) is so brilliant, that it has to date evaded most... but not all. The solution: just shred it all. That is what insolvent mortgage lenders Mortgage Lenders Network USA and American Home Mortgage are pushing hard to get permission from their respectively bankruptcy judges in their chapter 7 liquidation cases. Says Reuters: "Federal bankruptcy judges in Delaware are due to hold separate hearings Monday on requests by two defunct subprime mortgage lenders to destroy thousands of boxes of original loan documents. The requests, by trustees liquidating Mortgage Lenders Network USA and American Home Mortgage, come despite intense concerns that paperwork critical to foreclosures and securitized investments may be lost." With servicer banks increasingly unable and unwilling to provide the original lender docs (since they don't have access to them) to parties curious in seeing if there is a legal case to continue paying their mortgage, what better solution than to have the banks retort that the original document was sadly destroyed in a court-appointed shredding. In that way all the fraud canaries are killed with one stone, and the party responsible is none other than some bankruptcy judge who had given the go ahead for the wholesale destruction. And since we are not talking peanuts, in the case of MLN it comes to 18,000 boxes of records, while in the AHOM case it is just over 4,000 boxes, we wonder just how many other originators have gotten a comparable idea from the banks, and are currently busy shredding every last detail of an original mortgage note. Good luck trying to convince anyone that the bank is not in possession of a mortgage that was "purposefully" destroyed as part of a company's liquidation proceedings. Soon to follow: the burning of all books and the banning of all websites that dare to claim this is nothing but pure, grade-A criminal destruction of evidence.

More from Reuters on this stunning development:

In the Mortgage Lenders case, the U.S. Attorney in Delaware has formally objected to the requested destruction because loss of the records "threatens to impair federal law enforcement efforts."

The former subprime lender shut down in February 2007. In a January 6, 2010, motion, Neil Luria, the liquidating trustee, asked Bankruptcy Judge Peter J. Walsh for permission to destroy nearly 18,000 boxes of records now warehoused by document storage company Iron Mountain Inc.

In the American Home Mortgage case, the liquidating trustee, Steven Sass, has asked Bankruptcy Judge Christopher Sontchi to approve destruction of 4,100 boxes of loan documents stored in a dank parking garage beneath the company's former headquarters in Melville, Long Island.

AHM had been one of the biggest originators of subprime loans until it abruptly collapsed and closed in August 2007. The boxes are the last still held by AHM. Sass stated that the local fire marshal wants the documents removed as a fire hazard, and he said the cost of moving them would be prohibitive.

The reason cited for this scandalous request: warehousing costs:

Luria stated that destruction is necessary to eliminate $16,000 per month in storage costs as he disposes of the last assets of the bankrupt company.

This is akin to the Fed terminated the reporting of the M3 due to the exorbitant costs associated with keeping track of a few data series...

And, not surprisingly, we find that some have already been going through with document shreeding for a long time already:

In accordance with a 2009 court order, the bankrupt company earlier had destroyed the contents of thousands of other boxes after banks and other loan servicers had been given a chance to request and pick up particular files.

Gee, we wonder why the banks opted out of picking up files confirming they are not the proper servicer on thousands of mortgages.

And in conclusion:

In court documents, Sass stated that most of the records AHM still has in storage relate to mortgages issued more than eight years ago. He also said that employees had searched the files and pulled out all vital original records, such as promissory notes, and had handed them over to the appropriate mortgage servicers, and that most of the documents had been electronically imaged and retained in a database.

But people involved in winding down AHM's affairs say that neither the contents of the boxes or the database have been audited, and that it's possible the boxes still contain crucial documents such a promissory notes. Investors must have the original promissory notes, not copies, to be able to foreclose.

The take home message: should the bankruptcy court side with the liquidation trustees, Neil Luria and Steven Sass, who without a doubt have had extended discussions with the current batch of TBTFs which will be hung out to dry if the fraudclosure issue is further prosecuted, then it is safe to say that any claim that America has a fair and impartial judicial system can follow the last hopes of Emanuel's mayoral campaign dream right out of the window.

Monday, March 14, 2011

Interesting Loss Sharing

Is your home already packaged and loan paid out by FDIC?

What is loss sharing?

Loss sharing is a feature that the Federal Deposit Insurance Corporation (FDIC) first introduced into selected purchase and assumption transactions in 1991. Under loss sharing, the FDIC absorbs a portion of the loss on a specified pool of assets which maximizes asset recoveries and minimizes FDIC losses through least-cost approaches. Loss sharing also reduces the FDIC’s immediate cash needs, is operationally simpler and more seamless to failed bank customers and moves assets quickly into the private sector.

Does loss sharing put the taxpayer on the hook for additional losses down the road?

When the FDIC calculates the estimated cost of a failure, it takes into account all expected losses on the assets covered in loss share agreements (LSAs). These current market assumptions are built into the cost of failure at resolution. Thus, the cost of all expected future payments are recognized at the time of bank failure and no losses are deferred. Any loss sharing payments are made from receivership funds from the specific failed bank or thrift or, if those are insufficient, from the FDIC's Deposit Insurance Fund (DIF). The DIF is funded by assessments paid by insured banks and thrifts. It is not taxpayer funded.

How does loss sharing work?

The FDIC uses two forms of loss sharing. The first form is for commercial assets and the second for residential mortgages.

For commercial assets, the LSAs typically cover an eight-year period with the first five years for losses and recoveries and the final three years for recoveries only. The FDIC will reimburse 80 percent of losses incurred by the acquirer on covered assets up to a stated threshold amount (generally the FDIC's dollar estimate of the total projected losses on loss share assets), with the acquiring bank absorbing 20 percent.

For single-family mortgages, the LSAs tend to run ten years and have the same 80/20 split as the commercial assets. The FDIC provides coverage on some second lien loans for four basic single-family mortgage loss events: modification, short sale, foreclosure, and charge-off. Loss coverage is also provided for loan sales but such sales require prior approval by the FDIC. Recoveries on loans which experience loss events are split evenly between the acquirer and the FDIC.

Since the inception of LSAs, the basis for sharing losses with an acquirer has undergone some change. Until March 26, 2010, the FDIC shared losses with an acquirer on an 80/20 basis until the losses exceeded an established threshold defined in the LSA, after which the basis for sharing losses shifted to a 95/5 basis. Sharing losses on a 95/5 basis was eliminated for all LSAs executed after March 26, 2010.

Does the FDIC receive any benefits if the acquiring bank makes money on the covered assets?

Yes. If asset losses are lower than anticipated, then the FDIC receives the majority of the benefit. The acquirer will reimburse the FDIC for the difference at 80 percent.

What types of losses on the assets are covered and when does the FDIC reimburse the buyer for those losses?

The FDIC covers credit losses as well as certain types of expenses associated with troubled assets (such as advances for taxes and insurance, sales expenses, and foreclosure costs). The FDIC does not cover losses associated with changes in interest rates.

For single-family loans, the acquirer is paid when the loan is modified or the real estate or loan is sold. For commercial loans, the acquirer is paid when the assets are written down according to established regulatory guidelines or when the assets are sold.

How do you know that the FDIC is getting the best deal with loss sharing?

When the FDIC is preparing the sale of a failing bank or thrift, the FDIC reaches out to numerous potential bidders to bid for the customer deposits and the failing bank's assets. The sale relies on a competitive bidding process. In addition, the FDIC uses financial advisors to estimate asset values.

After the bids are received, the FDIC selects the least costly option. To facilitate that analysis, the FDIC dictates the terms and conditions of a loss sharing arrangement and the assets to be covered when potential acquirers bid on a failing bank. This allows the FDIC to more quickly analyze and compare each of the bids to determine which is the least costly to the DIF. The terms and conditions also enable the FDIC to monitor the LSAs effectively.

Isn't loss sharing more costly? If not, then how does it save money? Aren't you still selling the assets?

Loss sharing saves the FDIC's insurance fund money. In today's markets, asset prices are low, and the prices frequently include steep liquidity and risk discounts. These agreements enable the FDIC to sell the assets today, but without requiring that the FDIC accept today's low prices. Instead, the FDIC sells to acquirers in a way that aligns their incentives with the FDIC and reduces the liquidity and risk discounts. The acquirers have the capacity and incentive to service the assets effectively and minimize losses.

How big is the loss share program? How much money has the FDIC saved?

Through September 2010, the FDIC has entered into 200 loss sharing agreements, with $159.2 billion in assets under loss sharing. The estimated savings exceed $38.5 billion, compared to an outright cash sale of those assets.

Why don't you use loss sharing for all failures?

LSAs are one way the FDIC can resolve the assets of a failed bank, and may not be the best alternative for every troubled bank. For each resolution, the FDIC analyzes all available alternatives and accepts the least costly bid. Sometimes the results indicate that the loss share bids are more costly or the FDIC may not receive a loss share bid.

What type of oversight does the FDIC have over the LSAs?

The FDIC periodically conducts on-site reviews of records of covered losses and overall compliance with the LSA. It also requires acquiring banks to provide quarterly reports to ensure compliance with the program and to monitor the performance of the assets. Lastly, the FDIC must approve the bulk sale of any covered assets, and the loss share coverage is not transferable to the new owner.

For LSAs that cover single-family loans, must the acquiring bank honor the FDIC's loan modification program?

The FDIC requires that acquirers modify loans using the Home Affordable Modification Program (HAMP) if they are approved HAMP servicers. If the acquirer is not a HAMP approved servicer, the acquirer, as part of its LSA, may be required to modify loans using the FDIC's standard modification program for failed bank single-family, owner-occupied, loans. Both programs adjust the current loan terms to achieve an affordable payment by first reducing the loan interest rate, then extending the loan term, and, where necessary, offering forbearance of principal. The goal is to provide an affordable monthly payment based on a debt to income ratio for housing equivalent to 31 percent of the borrower's gross monthly income (including taxes and insurance payments).

The acquirer can propose an alternative loan modification program that will achieve the goals of providing affordable payments consistent with cost effectiveness. If the FDIC concurs, then the acquirer can adopt the alternative program.

Where can I get additional information about the history and use of loss sharing?

In 1998, the FDIC published the book "Managing the Crisis" detailing the FDIC and RTC experience from 1980 through 1994. Chapter 7 is devoted to loss sharing and can be accessed at:

Friday, February 18, 2011

Foreclosure freeze hits large firms

Foreclosure freeze hits large firms

Smaller firms less affected by new attorney affirmation

By Matt Volke

Posted: 5:16 am Mon, December 20, 2010

Gerald W. Dibble

Anyone who checks the paper regularly for foreclosure notices can spot that there aren’t many as of late.

Some of the larger firms handling the bulk of foreclosures have come to a grinding halt after recent changes in law require attorneys to verify all documents. Larger firms were accused of robo-signing documents and letting details fall through the cracks.

Smaller firms, though, say they haven’t had nearly the same issues with slowed work because they were already taking the steps necessary to verify foreclosure documents.

“It’s not going to affect any law firm that has contact directly with the mortgagee. They will have the ability to get that data efficiently and properly,” said attorney Gerald Dibble, of Dibble & Miller PC, who handles foreclosures. “The firms that are doing the vast majority of these foreclosures have mechanized it to such a degree that the lawyer doesn’t really have his own knowledge of the case. We don’t have that here. We deal with the mortgagee and we get what we need.”

All 50 U.S. state attorneys general are investigating whether banks, loan servicers and law firms properly prepared documents to justify hundreds of thousands of foreclosures. The probe came after JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC mortgage unit said they would stop repossessions in 23 states where courts supervise home seizures and Bank of America Corp. froze foreclosures nationwide.

The New York State Unified Court System in the fall announced that attorneys filing foreclosure forms will be required to verify their accuracy.

The new ruling by Chief Judge Jonathan Lippman and all of the presiding justices of the Appellate Division, came on the heels of accusations that lienholders cut corners by allowing foreclosure and other mortgage-related documents to be “robo-signed” as homes were seized nationwide, skipping important verification steps along the way. The accusations typically are being made against massive law firms in large markets that dealt with the largest banks.

“A lawyer has the right to rely upon the client and not doubt that they’re telling him something improper,” Dibble said. “If we suspect, on a reasonable basis, that something in the affidavit wasn’t proper … we have a duty to look into it.

“This mortgage fiasco is horrible for the bar,” he added. “We’re trusted. We’re officers of the court. That whole situation causes me great concern that our profession is going to get a black eye over this.”

The new affirmation requirement means Rochester-area attorneys who don’t take on huge case loads will have to jump through an extra hoop during the process.

John DiCaro of Shapiro, DiCaro & Barak LLP said any new step in the process will require firms to adapt, which takes time.

“There’s a requirement we file those affirmations,” DiCaro said. “We’ve been reviewing the requirement to make sure we can comply with it going forward, and obviously we will. I think it’s obvious any new requirement like this will add time because it’s an additional step in the process.”

Almost 80,000 residential foreclosures are pending on New York court dockets, all of which will require plaintiffs’ counsel to submit affirmation of documents during one of the three stages of a case.

For new cases, the affirmation must accompany the request for judicial intervention. In pending cases, the affirmation must be submitted with either the proposed order of reference or the proposed judgment of foreclosure.

In cases where the foreclosure judgment has been entered but the property has not yet been sold at auction, the affirmation must be submitted to the referee and a copy filed with the court five business days before the scheduled auction.

New York attorneys already have an obligation to ensure the documents they present to the court are valid, but Chief Judge Lippman said having them sign something affirming that all papers underwent a proper review will hold them accountable as never before.

Attorney Peter Scribner said he’s been following the issues stemming from the court order.

“There are two takes on this,” Scribner said. “Take number one says that all this is really a lot of fuss about not much. At the end of the day, mortgage banks will get their paperwork in order. They’re not going to walk away from all this money.

“Take two is this is a very serious case of fraud and even racketeering within the industry and that a huge number of foreclosures could get voided,” Scribner said. “I find it hard to imagine that courts will strike a critical blow at the mortgage industry. It could be big. Catastrophic. I think we’re at the beginning of quite a number of serious developments.”