I think you published the first part two days ago. This is his second piece on the subject.
More on Why the PIMCO, BlackRock, Freddie, NY Fed Letter to Countrywide on Putbacks Is Way Overhyped
I still laying odds on the perp walk.
rktbrkr Says:
October 21st, 2010 at 5:02 pm
How could Donovan say foreclosure problems weren’t systemic and then admit to Jim Lehrer that they didn’t know the extent of the problems yet? Not very truthy.
I really have a hard time seeing how the mortgage issue will be a big deal in non-judicial foreclosure states.
In judicial foreclosure states the homeowner has to actively defend themselves unless the courts start becoming activist.
Both require en-masse participatation by the homeowners in bringing or responding to a lawsuit AND for the servicers processes to be so messed up they can’t ever produce the note.
I can see it happening in the margins, but not en-masse. And thus it will be a relative non-event as far as keeping people who aren’t paying their mortgages in their homes. It will be an event played out over a very long time between bondholders, servicers and originators and it will cost billions over many years. But in the end it’s sort of a “meh” event in my view. The processes will be fixed and some additional losses not currently reserved for will be taken, spread out over time.
I do see a change watching RE listings in my local area, in the last few days I can tell a lot of short sales that had been stalled have been noted that they are getting responses from the bank. So at least over the short term the banks are shifting resources into that department.
Why should I waste my beautiful mind on something like this? It will all be taken care of after the election in the Homeland Property Title Rectification and Forward Looking Respect for Law Act of 2010.
Mark E Hoffer Says:
October 21st, 2010 at 5:57 pm
the utter (f******) Bilge that passes for the MSM is enough to give one Zebra Mussels..
These guys are not much better than the others in the limelight.
Mark E Hoffer Says:
October 21st, 2010 at 6:04 pm
Roger,
no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …
suspiciously similar to http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=the+passing+of+the+Federal+Reserve+Act+of+1913
“DENMARK, Maine (NEWS CENTER) — An attorney from Portland is getting national attention after uncovering the faulty methods banks were using to review foreclosure documents.
Thomas Cox volunteers at Pine Tree Legal, giving free legal advice to people facing foreclosure. While reviewing Nicole Bradbury of Denmark’s foreclosure documents, he realized they were signed by someone with the title “limited signing officer,” meaning the person’s only job was to sign the papers. Cox arranged a deposition with the signer, and he admitted to signing hundreds of foreclosure documents without ever reading them. Now the nation’s attorneys general are investigating. Banks have responded, saying that the problems are technical, and the facts in all of these cases are true. Cox says that answer is unacceptable.
“The message that the industry’s putting out that these are just technical mistakes are a real red herring to the fact that they grossly abused the American judicial system by presenting many, many thousands of false affidavits to courts all over the country that judges believed to be true and entered judgements, taking away homes based upon them” Cox told NEWS CENTER.
Cox says Nicole Bradbury is still living in her house. GMAC filed a motion to dismiss her foreclosure to fix the problems and start the process over again. An attorney representing GMAC and Fannie Mae, the mortgage company that owns Bradbury’s loan, declined to comment because the foreclosure case is still pending.”
mote Says:
October 21st, 2010 at 6:30 pm
From “A question of property rights,” excerpted quotefest follows.
Objects in the rear view mirror:
Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”
Nothing but Blue Skies:
Joseph Mason, a finance professor at Louisiana State University, said concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.
Houston, we have a problem:
Some analysts are not sure that banks can proceed so freely. Katherine Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.
Tax man’s whatif:
Robert Willens, a tax expert, said documentation issues had created potentially severe tax problems for investors in mortgage securities and “there is enough of a question here that the courts might well have to resolve the issue.”
Now investors who bought mortgage trusts – investment vehicles composed of mortgages – are wondering if the loans inside them were recorded properly. If not, the tax advantages of the trusts could be wiped out, leaving mortgage securities investors with significant tax bills.
Guantanamo Bay revisited:
Lenders and their representatives have sought to minimize the significance of robo-signing and, while acknowledging legal lapses in how they documented loans, have argued that foreclosures should proceed anyway. After all, the lenders say, the homeowners owe the money.
But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.”
” Regulator Says Fannie, Freddie Cost at Mercy of Economy.. To be filed under Duh! ”
I keep coming back to this droll of a subject for your wit BR. Your youthful character is evident in your exuberance and cultural relevance. If your a Dad, I bet your a good one and know your children well, if not you will be.
Swarm The Banks Says:
October 21st, 2010 at 7:03 pm
Forcing people to fall behind on their mortgages before being eligible for HAMP, even though this triggers parallel foreclosure and hastens the loss of the property is beyond a smoking gun, it’s a stinking gun because it’s been going on for a year and a half now.
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
“Let’s hope there’s a better explanation than “we have created [our biggest banks], and we’re sort of past that point, and I think that in some sense, the genie’s out of the bottle.”
ACS Says:
October 21st, 2010 at 7:05 pm
Every time a bank is shut down, a law school should be shut as well.
Vilgrad Says:
October 21st, 2010 at 7:52 pm
Gonzalo Lira, who’s post was stolen by David Kotok as his own. Real lowlife move.
Barry, what became of Parts 3-5 in the series “Forclosure Fraud for Dummies”?
dss Says:
October 21st, 2010 at 8:32 pm
@ACS,
Great observation.
Ltdata Says:
October 21st, 2010 at 8:59 pm
File this under Law of unintended results: Quite frankly, even if a megabank, etc. does not know their exposure – their auditor WILL find some way to sample the mess, quantify it for the financials, and bill, bill, bill. If they thought shoddy was cheap, wait til they get the audit bill.
Roger Bigod Says:
October 21st, 2010 at 9:30 pm
Mark E Hoffer
“no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …”
Oh, yes. Afterward, the Preznit will get that serious, stern look and point the finger at the GOP for killing the option of public, non-electronic property records. Especially since he fought for the option it so fiercely. At least there will be a special approproation to help the county clerk’s offices pay for shredding and burning all the backward-looking paper records.
The Curmudgeon Says:
October 21st, 2010 at 9:47 pm
“But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.” ”
~The good associate professor of law is surely aware that liberty interests enjoy far greater protections under the constititution than do property interests. Due process for the denial of property interests (think Kelo, e.g.) is far less stringent than due process for the denial of liberty interests (think Miranda and its progeny). I doubt anyone will seriously attempt to formulate an exclusionary rule for mortgage foreclosures, where the failure to submit a properly attested affidavit means the mortgage company is barred from admitting into evidence the promissory note. But that’s the reasonable view. And these are markedly unreasonable times. So, who knows?
franklin411 Says:
October 21st, 2010 at 9:52 pm
This is what happens to bad little Democrats who actually propose making Wall Street pay for the mess it created:
Wealthy financier is mysterious funder of ads attacking DeFazio
Robert Mercer, the co-CEO of one of the world’s largest hedge funds, is the mysterious donor who has been paying for $300,000 of attack ads aimed at Rep. Peter DeFazio, D-Ore.
Not a big deal? it is already a big deal and I suspect (because NOBODY knows for sure) it may get a great deal bigger. Remember when Ben Stein told us on national TV that the sub-prime mortgae “event” would blow over?
S Brennan Says:
October 21st, 2010 at 10:16 pm
Off topic, but food for thought…read it through, the punches get thrown at the end.
I’ve been reading a lot of the blogging on the foreclosure mess. Every time I think I understand it fully something else comes up that makes me wonder if I do. Some of the reports make it sound like the whole idea of of MBS tranches is inherently illegal. Let me explain.
Take this excerpt from http://www.huffingtonpost.com/ellen-brown/foreclosuregate_b_752788.html
“The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default.”
So this sound to me like there would be no legal way to do tranches. Or at least no way to do it without breaking the chain of title or violating tax laws. The note must be in legal limbo until you know what tranche it goes in. And assigning it to the trust after the default will always be against REMIC tax rules.
Am I understanding this POV correctly? Was there some legal way these tranches could have been done?
VennData Says:
October 21st, 2010 at 10:53 pm
I wonder what the GOP media machine, Fox news and the World-Wide Chamber of Commerce would say if instead of a moratorium on foreclosures …
…say they had a moratorium on… uh… I dunno… say on oil drilling or something. I wonder if they would be so blasé about that? It would be interesting to know. Anyone have any idea?
The Curmudgeon Says:
October 21st, 2010 at 11:02 pm
I thought all hedge fund managers were dem’s?!? didn’t they line Obama’s pockets in 2008? What, they’re just whores like the rest of ‘em, licking their finger and pointing it in the air to see which way the political wind is blowing?
GeorgeBurnsWasRight Says:
October 21st, 2010 at 11:06 pm
There was a report on NPR today of yet another part of the foreclosure mess. In Florida they have something called the “Rocket Docket”, courts that handle 200 foreclosures a day. The judges admit they don’t have time to either look at the documents or listen to arguments. So you can imagine the level of “justice” being dispensed.
call me ahab Says:
October 21st, 2010 at 11:16 pm
GeorgeBurns-
and we care why? the people that aren’t paying should stay? what’s your point exactly (as if anyone cares)
VennData-
one trick pony with nothing to say (over and over and over again)-
Strange that those of the opinion that this situation will have a limited and manageable but perhaps costly resolution, seem to completely discount the criminality of what has taken place. Is the idea that this industry is immune from prosecution a given? If it is, we’re more screwed than I thought, and y’all know how screwed I think we are.
i was just reading farmera1′s reference to the baseline scenario’s treatment (great blog) of the this subject…
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
While I would join many other investors in the n/a mbs mkt in celebration if a significant amount of loans out of these deals were put back to the issuers, the reality is that the big originators/issuers/banks have the upper hand here. They will drag this fight out on a loan by loan basis. I don’t care how big you are (ny fed, pimco, blackrock, etc.), the diligence expense is prohibitive. You have to understand how time intensive a project like this would be.
BofA seems like it is in serious trouble, and they will probably settle for some huge amount of money, but the idea of fighting them loan by loan is not remotely feasible. What gets missed in this discussion is that money managers, hedge funds, insurance companies, etc should have done more diligence at before purchasing said security. While the big IBs certainly ran with market, buyers had access to the loan tapes. They had the prospectus. And they got greedy and it all fell apart. It’s a disgrace that that the big $mm are not on media trial right next to the head of GS. The “buy” side is just as much to blame as the big IBs. But that wont happen. Such is life.
Effective Demand Says:
October 22nd, 2010 at 12:22 am
Been going around looking at the RE investor boards, none of the trustee sale buyers are having trouble getting title insurance…
27 Responses to “Stern Foreclosure Factory: $260 Million in 2009 Revenues”
wunsacon Says:
October 21st, 2010 at 10:34 am
I suspect Shakespeare’s Henry VI said it best.
http://www.spectacle.org/797/finkel.html
NoKidding Says:
October 21st, 2010 at 10:36 am
“The goal here was not to pursue prosecute foreclosures on behalf of a banking client; rather it was to crank out the assembly line factory to grab 100s of millions of dollars, legally or illegally, consequences be damned.”
Intuition tells me your assessment is correct, but nothing in the quoted bit of that story did.
We’re in a foreclosure boom and there’s work involved. Somebody has to do it.
wunsacon Says:
October 21st, 2010 at 10:36 am
Er, “Dick The Butcher”…
Mannwich Says:
October 21st, 2010 at 10:38 am
Oh, it’s 100%. In the grand scheme of things, he’s such a minor player and the perfect fall guy for Eric Holder.
rktbrkr Says:
October 21st, 2010 at 10:42 am
There’s never just 1 rat, there were a handful of FL lawfirms like this, Stern was just the biggest rat. So does the florida court system throw out all the work done by Stern and similar firms? A couple hundred thousand do-overs?
In New York, attorneys already have an obligation to ensure that the documents they present to the court are valid, but New York Chief Judge Jonathan Lippman said having them sign something affirming that all papers got a proper review will hold them accountable like never before.
“We want to make sure that everyone is focusing like a laser on these particular types of proceedings,” he said. “It puts them on notice. That’s what this is all about. We all have to make doubly sure that we are doing what we should be doing in the first place.”
The rule requiring a signed affirmation applies to both new cases and the 78,000 foreclosure actions already under way in New York courts.
Lawyers handling pending foreclosure actions will probably need to go back to their clients and verify that all proper steps were followed, Lippman said. The form created by the court requires the lawyers to give the name of the bank employee who affirmed that the records were accurate and the date the conversation took place.
The president of the New York State Bar Association, Stephen Younger, issued a statement praising the new rule. “The chief judge has taken swift steps to address a nationwide problem in foreclosure actions,” he said.
BennyProfane Says:
October 21st, 2010 at 10:49 am
I might even bet you that he doesn’t see any type of prosecution at all – maybe a nice, 5-10% deal, a la Mozilo, that the company can write off somehow offshore.
rktbrkr Says:
October 21st, 2010 at 10:50 am
Start the music, it’s time for Musical Chairs!
BofA Sues FDIC Over Taylor Bean Mortgage Losses
Bank of America, the largest U.S. bank, has sued the Federal Deposit Insurance Corp over $1.75 billion of investor losses mainly from the 2009 collapses of a large regional bank and large mortgage lender.
The lawsuit concerns the FDIC’s role as receiver for the main banking unit of Alabama’s Colonial BancGroup, and the implosion of Taylor, Bean & Whitaker Mortgage, where federal prosecutors say a multi-billion dollar mortgage fraud took place. Bank of America is trustee for notes issued by Taylor Bean’s Ocala Funding unit.
SnIp
RiskAverseAlert Says:
October 21st, 2010 at 10:59 am
I’ll take the under. This thing is so bad the President hasn’t even the clout to convince the Sheriff of his own Cook County that the recent voluntary foreclosure moratorium was the result of mere “technicalities.”
Sechel Says:
October 21st, 2010 at 11:20 am
David Stern knew what he was doing(to a point). He appointed four of the seven directors. It’s made clear that shareholders should find it difficult if not impossible to take disciplinary action against him, not withstanding any fiduciary obligations they may have in this respect.
AHodge Says:
October 21st, 2010 at 11:40 am
no shortables no options
i see it down abt 6% today
JerseyCynic Says:
October 21st, 2010 at 11:48 am
it’s perfect Mannwich
I’m always most cynical when individual assholes are singled out to cover for industry wide corruption.
OH good!! now we don’t have to dig deeper and run the whole lot of f%$kers out of town!
what happens when the next shit storm hits ? — student loan debt has now surpassed credit card debt
I wonder how many of our big bailed out banks set up their own back door foreclosure mills YEARS ago when they were setting the stage for this round in the boom/bust cycle of real estate
Several top executives of Florida’s largest foreclosure processing company resigned and its chairman was replaced Tuesday, amid a national controversy over questionable foreclosure filings and investigations into possible wrongdoing by lenders, loan servicers and law firms.
Plantation, Fla.-based DJSP Enterprises has been impacted by the temporary suspension of foreclosure filings by some of the nation’s largest lenders and some industry insiders are questioning the future of the business.
The company announced Tuesday that Chairman David Stern would step down, take the new title of president and remain the CEO. Stephen Bernstein will take over as chairman.
DL Says:
October 21st, 2010 at 12:10 pm
I just want to know why the company is incorporated in the Virgin Islands.
JerseyCynic Says:
October 21st, 2010 at 12:43 pm
oh what a fabulous story!!!
….In a nod to his foreclosure work, according to the acquaintance, Mr. Stern mused about possibly naming the larger yacht Su Casa Es Mi Casa — “Your House Is My House.” But his wife and others cautioned against it, according to this acquaintance, and Mr. Stern named the boat “Misunderstood.” Mr. Stern denies that he considered the “Su Casa Es Mi Casa” name.
I see Mr. Wallace at the ethical spectacle has the same fears as I do about the impending student loan bailout
http://www.spectacle.org/1010/rags.html
“Banks which lend these amounts of money for education are engaging in many cases in exactly the behavior of banks which loaned absurd amounts of money for real estate purchases by people who would never be able to repay it unless a miracle occurred. Such lending is doubly irresponsible, putting the bank at risk and ultimately forcing bail-outs with public money, but also encouraging individuals to engage in risky behavior. The spectacle of young people starting their adult lives as much as a quarter million dollars underwater is very disturbing. The role of government in sponsoring, encouraging and guaranteeing student loans also needs to be re-examined. A government role which made sense when people were graduating with $20,000 in debt looks entirely different when the number is ten times as much.”
wally Says:
October 21st, 2010 at 12:54 pm
Since these guys – and there are a lot of them recently – end up keeping most of their gains they are business heroes in this country.
Unsympathetic Says:
October 21st, 2010 at 1:10 pm
Barry, he will not be spending any time in jail.
He will, however, buy late-night TV infomercial time describing how you can get rich quick using his tried and true techniques.
b_thunder Says:
October 21st, 2010 at 2:14 pm
My odds on David Stern’s future:
5% – he’ll pay at most 10% of his gains as a fine, and will lose law license for at most 3 years w/out admitting anything
25% – he’ll become a billionaire suing evil banks on behalf of foreclosed homeowners
20% – he’ll become a billionaire AND in 4 years will be elected the Governor of Florida
60% – he will be the next CFTC judge
willid3 Says:
October 21st, 2010 at 3:17 pm
Yves smith has this take
t take a fair degree of skill to pen a journalistic story that hews to the appearance of objectivity yet is out to sell a point of view.
The lead article in the Journal tonight, “Niche Lawyers Spawned Housing Fracas” telegraphs its bias in its headline: the foreclosure crisis is merely the creation of two bit lawyers who by implication don’t know what they are doing, and are pumping trivial issues up for their own enrichment, with the housing market as collateral damage.
Funny that anyone can think this spin is remotely true. The fact that solo practitioner lawyers could have such an impact on the system is not proof that they are miscreants, as the Journal implies. It is that the foundation of mortgage securitzations is rotten as a result of widespread abuses, first on the origination end, later in the foreclosure process. These small firm players are using the legal equivalent of toothpicks; the fact that their efforts have destablized the foundation of the residential mortgage backed securities market is tangible proof that they were imperiled to begin with.
Let’s parse some sections of the article, starting from the top:
The paperwork mess muddying home foreclosures erupted last month. But the legal strategy behind it traces to a lawyer’s gambit in 2006 that has helped keep one couple in their home six years beyond their last mortgage payment.
Not bad in the drive-by shooting category. The foreclosure crisis, which is the result of what increasingly appears to be a widespread failure to convey borrower promissory notes and related liens properly to the the securitization entity is reduced to a mere “paperwork mess”. So the idea that the shortcomings are serious is dismissed. Similarly, the efforts of various attorneys who have been chipping away as aspects of this problem are incorrectly lumped together, as if there was really only a single, simpleminded strategy, a mere “lawyer’s gambit” which by implication, was copied by other low life attorneys. And this effort was to keep a deadbeat borrower illegitimately housed.
Funny, this James Kowalski, the attorney behind this dastardly act, did what members of the bar normally do (at least if they are competent): they look for weaknesses in fact and law in the case presented by the other side. And part of the process involves, stunningly enough, depositions! Kowalski’s evil deed was that he was early, perhaps first, to find a robo signer, back in 2006.
But robo signers are an abuse of court process. You can’t have it one way, and say you believe in law and order and the sanctity of contract, and then say it’s just fine to abuse legal procedures if you are pretty sure you are right. Well you can’t unless you are the Journal, skilled in the art of defending plutocrats, no matter how much in the way of mental gymnastics that might require.
But this implicit focus on robo signers (which admittedly did bring the bigger issue of foreclosure abuses into the limelight) again is a convenient diversion, since the robo signer is far from the most serious problem now affecting the foreclosure process.
Back to the Journal’s account:
It was a first step in the growth of a legal sub-specialty called foreclosure defense that has sown confusion and turmoil in the housing market. Lawyers in the field now commonly use a technique more identified with corporate litigation: probing depositions, designed to uncover any lapses in judgment, flaws in a process or wrongdoing. In the 23 states where foreclosures entail a court hearing, the bank may be ordered to pay the homeowner’s legal bill if a lawyer can convince a judge that the bank has submitted false documents, such as affidavits saying employees personally reviewed the details of loans when they didn’t.
Huh? With all due respect, this is the first time I’ve heard of this “foreclosure defense” sub specialty. Please. These are consumer lawyers, and some of them have gotten good enough at fighting foreclosures that they do it full time. But “sub-speciality” implies a degree of fomalization and coordination of effort that isn’t there. Oh, and the Journal deems it to be bad form for mere consumer lawyers to use the techniques of decent trial lawyers (only corporations are supposed to have access to competent litigators, it seems).
But it gets even better. The Journal couldn’t be bothered letting facts get in the way of a tidy narrative. Kowalski weighed in in the comment section of the article:
Despite my best efforts to answer all of Mr. Whelan’s questions, the article contains a number of misstatements. First, Mr. and Mrs. Jackson did not face a foreclosure hearing after simply stopping payment – they paid the entire amount due per a statement sent to them by GMAC, and paid by certified check. GMAC mistakenly refused the check, alleging it was an NSF payment (not possible with certified funds), then placed the couple in foreclosure. I was simply trying to track the facts of the payment by deposing a witness who had sworn in court documents that she had reviewed the entire file and was familiar with the payment history, when, as it turned out, she was not only not familiar with the payment history, but the substance of her entire affidavit was false, including the allegation that the affidavit was sworn to in front of a notary. These were substantive questions I needed answers to – not an excuse for a delay. Further, the judge did not “throw out the case” – it is still pending, with GMAC still suing the Jacksons, years later.
I, and most of my fellow consumer attorneys who are members of the National Association of Consumer Advocates, do not raise these issues for delay – we raise them because we all have cases (this is the bulk of my foreclosure defense practice) where all or part of the foreclosure is purely the fault of the servicer or mill law firm – from homeowners whose payments were misrouted by the servicer, to servicers who simply changed the address of the property and then force-placed flood insurance, to servicers who ignore insurance plans the borrowers paid for (all examples from my cases) to servicers who refuse to even accept HAMP-type loan modification documents – all are substantive, real problems that were not the fault of the borrowers. The deposition was, in the Jackson case, merely an effort to get at the truth of the reversed payment – instead, GMAC admitted to wholesale manufacture of court documents, then promised to fix the practice, then continued that practice unabated for 4 more years.
Most of what we have uncovered are criminal violations – false testimony under oath, notary fraud, etc. These problems will continue until the attorneys general who have formed a task force recognize and confront the significant criminal violations, and will continue unless we have real reform of the servicing practices that emphasize speed over the truth.
Not a single one of my clients wants (or deserves) a free house. What they want (and deserve) is for their voices to be heard, and, for better or worse, consumer lawyers are the only ones capable of achieving this at the moment.
Oh, and it would have been nice if Mr. Whelan had taken the time to spell my name correctly throughout the article.
Yves here. Servicer abuses that result in foreclosures are simply not getting the media attention they deserve. The prevailing perception, and the party line from the banks, is that the borrowers are all deadbeats and therefore any efforts to aid them are simply an abuse of court processes.
But servicers are modern judges, juries, and to the extent they can railroad foreclosures through, executioners. When a payment arrives after the due date (and servicers have been found to hold checks to render payments late), under RESPA and the bank’s agreement with the borrower, the bank is supposed to apply payments to principal and interest first, then any late fees. But if you incur a late fee, they instead apply the payment to that first, which makes your regular monthly payment come up short. So then you get an insufficiency fee.
Servicers don’t send detailed monthly statements like credit card companies, telling you how your payments were applied. This process of misapplication of payment and failure to notify borrowers when fees have been incurred guarantees that the charges will balloon. It isn’t until months have passed and the extra balance become large, say $2000 or more, that the homeowner realizes they are under water according to their servicer, even though they have made all their regular payments. Many lack the extra money to clear out all these largely bogus fees; other have tried fighting, only to find the servicer won’t budge, and they rack up more charges, which forces them either to capitulate or lose their home.
Nevertheless, the Journal runs the party line that nothing is wrong with the foreclosure machinery, when the intense pushback suggests otherwise, and brandishes the usual financial services industry threat: hurt us, and it will hurt you even more:
“There is a movement afoot by [state attorneys general] and private lawyers to use technical problems to avoid foreclosures where the borrower is in default and the foreclosure is in all respects substantively appropriate. These are lawyers where the best job they can do for their clients is to keep them in their houses without paying the mortgage,” said Andrew L. Sandler, a Washington securities lawyer who represents banks and firms that service mortgages.
Mr. Sandler added: “The class-action lawyers are swarming around this issue right now, because they perceive that it can result in significant fees for them. But they’re not well-founded cases, and the banks will vigorously contest any class action around these issues.”
The big risk to banks and the housing market, indeed, is that more homeowners and lawyers come to see such cases as attractive to fight.
It’s certainly fair to say some legal actions are based on weak theories; we dissed the widely touted investor suit against Countrywide on mortgage putbacks yesterday, and have selectively argued against other legal theories. But some of these cases are based on careful study of real abuses and are attacking improper, potentially fraudulent actions. This is one of the few checks we have left on misuse of power, but the powers that be want the public to see these legal challenges as a threat to their financial security and accept compromises, just as we have been forced to accept diminished civil liberties and ever more intrusive surveillance in the name of personal security.
One encouraging sign: I didn’t take a careful tally, but despite the Journal’s heavy spin on this story, its comment section seemed to be running at only a 50% acceptance of its position. The more the banks try to press the merits of their case on dubious evidence, the more the public is coming to realize they are not to be believed.
Topics: Banana republic, Banking industry, Credit markets, Legal, Media watch, Politics, Real estate, Social values
they aren’t all dead beats. some got their the new fangled way. the servicer did it
not-affiliated-with-Wall Street Says:
October 21st, 2010 at 3:39 pm
I wish you wouldn’t throw in that stuff about the graybar hotel. It’s a depressing reminder that these kinds of people never go to jail. They just get richer.
beaufou Says:
October 21st, 2010 at 5:12 pm
JCynic.
I would suggest a name for Diamond Dave’s new boat: my ass is grass.
People are talking, he is going down.
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
Mark E Hoffer Says:
October 21st, 2010 at 8:52 pm
I don’t knoe about all y’all, though, there’s something about ‘limited hangout’ that I’d be looking into..
and, this, ‘knoe’, was a key-stroke off, as in ‘know’..
Gracias~! QWERTY!
willid3 Says:
October 21st, 2010 at 9:33 pm
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
nope.
they just want to make sure we know.
dsawy Says:
October 22nd, 2010 at 3:28 am
What is the statute of limitations on what he has done? That’s the biggest question I have before taking an over/under on this.
Hot Links: Social Media Guru The Reformed Broker Says:
October 22nd, 2010 at 7:19 am
How to pimp hard amidst the ruins of Foreclosure Florida. (TBP)
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
I think you published the first part two days ago. This is his second piece on the subject.
More on Why the PIMCO, BlackRock, Freddie, NY Fed Letter to Countrywide on Putbacks Is Way Overhyped
I still laying odds on the perp walk.
rktbrkr Says:
October 21st, 2010 at 5:02 pm
How could Donovan say foreclosure problems weren’t systemic and then admit to Jim Lehrer that they didn’t know the extent of the problems yet? Not very truthy.
I really have a hard time seeing how the mortgage issue will be a big deal in non-judicial foreclosure states.
In judicial foreclosure states the homeowner has to actively defend themselves unless the courts start becoming activist.
Both require en-masse participatation by the homeowners in bringing or responding to a lawsuit AND for the servicers processes to be so messed up they can’t ever produce the note.
I can see it happening in the margins, but not en-masse. And thus it will be a relative non-event as far as keeping people who aren’t paying their mortgages in their homes. It will be an event played out over a very long time between bondholders, servicers and originators and it will cost billions over many years. But in the end it’s sort of a “meh” event in my view. The processes will be fixed and some additional losses not currently reserved for will be taken, spread out over time.
I do see a change watching RE listings in my local area, in the last few days I can tell a lot of short sales that had been stalled have been noted that they are getting responses from the bank. So at least over the short term the banks are shifting resources into that department.
Why should I waste my beautiful mind on something like this? It will all be taken care of after the election in the Homeland Property Title Rectification and Forward Looking Respect for Law Act of 2010.
Mark E Hoffer Says:
October 21st, 2010 at 5:57 pm
the utter (f******) Bilge that passes for the MSM is enough to give one Zebra Mussels..
These guys are not much better than the others in the limelight.
Mark E Hoffer Says:
October 21st, 2010 at 6:04 pm
Roger,
no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …
suspiciously similar to http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=the+passing+of+the+Federal+Reserve+Act+of+1913
“DENMARK, Maine (NEWS CENTER) — An attorney from Portland is getting national attention after uncovering the faulty methods banks were using to review foreclosure documents.
Thomas Cox volunteers at Pine Tree Legal, giving free legal advice to people facing foreclosure. While reviewing Nicole Bradbury of Denmark’s foreclosure documents, he realized they were signed by someone with the title “limited signing officer,” meaning the person’s only job was to sign the papers. Cox arranged a deposition with the signer, and he admitted to signing hundreds of foreclosure documents without ever reading them. Now the nation’s attorneys general are investigating. Banks have responded, saying that the problems are technical, and the facts in all of these cases are true. Cox says that answer is unacceptable.
“The message that the industry’s putting out that these are just technical mistakes are a real red herring to the fact that they grossly abused the American judicial system by presenting many, many thousands of false affidavits to courts all over the country that judges believed to be true and entered judgements, taking away homes based upon them” Cox told NEWS CENTER.
Cox says Nicole Bradbury is still living in her house. GMAC filed a motion to dismiss her foreclosure to fix the problems and start the process over again. An attorney representing GMAC and Fannie Mae, the mortgage company that owns Bradbury’s loan, declined to comment because the foreclosure case is still pending.”
mote Says:
October 21st, 2010 at 6:30 pm
From “A question of property rights,” excerpted quotefest follows.
Objects in the rear view mirror:
Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”
Nothing but Blue Skies:
Joseph Mason, a finance professor at Louisiana State University, said concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.
Houston, we have a problem:
Some analysts are not sure that banks can proceed so freely. Katherine Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.
Tax man’s whatif:
Robert Willens, a tax expert, said documentation issues had created potentially severe tax problems for investors in mortgage securities and “there is enough of a question here that the courts might well have to resolve the issue.”
Now investors who bought mortgage trusts – investment vehicles composed of mortgages – are wondering if the loans inside them were recorded properly. If not, the tax advantages of the trusts could be wiped out, leaving mortgage securities investors with significant tax bills.
Guantanamo Bay revisited:
Lenders and their representatives have sought to minimize the significance of robo-signing and, while acknowledging legal lapses in how they documented loans, have argued that foreclosures should proceed anyway. After all, the lenders say, the homeowners owe the money.
But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.”
” Regulator Says Fannie, Freddie Cost at Mercy of Economy.. To be filed under Duh! ”
I keep coming back to this droll of a subject for your wit BR. Your youthful character is evident in your exuberance and cultural relevance. If your a Dad, I bet your a good one and know your children well, if not you will be.
Swarm The Banks Says:
October 21st, 2010 at 7:03 pm
Forcing people to fall behind on their mortgages before being eligible for HAMP, even though this triggers parallel foreclosure and hastens the loss of the property is beyond a smoking gun, it’s a stinking gun because it’s been going on for a year and a half now.
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
“Let’s hope there’s a better explanation than “we have created [our biggest banks], and we’re sort of past that point, and I think that in some sense, the genie’s out of the bottle.”
ACS Says:
October 21st, 2010 at 7:05 pm
Every time a bank is shut down, a law school should be shut as well.
Vilgrad Says:
October 21st, 2010 at 7:52 pm
Gonzalo Lira, who’s post was stolen by David Kotok as his own. Real lowlife move.
Barry, what became of Parts 3-5 in the series “Forclosure Fraud for Dummies”?
dss Says:
October 21st, 2010 at 8:32 pm
@ACS,
Great observation.
Ltdata Says:
October 21st, 2010 at 8:59 pm
File this under Law of unintended results: Quite frankly, even if a megabank, etc. does not know their exposure – their auditor WILL find some way to sample the mess, quantify it for the financials, and bill, bill, bill. If they thought shoddy was cheap, wait til they get the audit bill.
Roger Bigod Says:
October 21st, 2010 at 9:30 pm
Mark E Hoffer
“no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …”
Oh, yes. Afterward, the Preznit will get that serious, stern look and point the finger at the GOP for killing the option of public, non-electronic property records. Especially since he fought for the option it so fiercely. At least there will be a special approproation to help the county clerk’s offices pay for shredding and burning all the backward-looking paper records.
The Curmudgeon Says:
October 21st, 2010 at 9:47 pm
“But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.” ”
~The good associate professor of law is surely aware that liberty interests enjoy far greater protections under the constititution than do property interests. Due process for the denial of property interests (think Kelo, e.g.) is far less stringent than due process for the denial of liberty interests (think Miranda and its progeny). I doubt anyone will seriously attempt to formulate an exclusionary rule for mortgage foreclosures, where the failure to submit a properly attested affidavit means the mortgage company is barred from admitting into evidence the promissory note. But that’s the reasonable view. And these are markedly unreasonable times. So, who knows?
franklin411 Says:
October 21st, 2010 at 9:52 pm
This is what happens to bad little Democrats who actually propose making Wall Street pay for the mess it created:
Wealthy financier is mysterious funder of ads attacking DeFazio
Robert Mercer, the co-CEO of one of the world’s largest hedge funds, is the mysterious donor who has been paying for $300,000 of attack ads aimed at Rep. Peter DeFazio, D-Ore.
Not a big deal? it is already a big deal and I suspect (because NOBODY knows for sure) it may get a great deal bigger. Remember when Ben Stein told us on national TV that the sub-prime mortgae “event” would blow over?
S Brennan Says:
October 21st, 2010 at 10:16 pm
Off topic, but food for thought…read it through, the punches get thrown at the end.
I’ve been reading a lot of the blogging on the foreclosure mess. Every time I think I understand it fully something else comes up that makes me wonder if I do. Some of the reports make it sound like the whole idea of of MBS tranches is inherently illegal. Let me explain.
Take this excerpt from http://www.huffingtonpost.com/ellen-brown/foreclosuregate_b_752788.html
“The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default.”
So this sound to me like there would be no legal way to do tranches. Or at least no way to do it without breaking the chain of title or violating tax laws. The note must be in legal limbo until you know what tranche it goes in. And assigning it to the trust after the default will always be against REMIC tax rules.
Am I understanding this POV correctly? Was there some legal way these tranches could have been done?
VennData Says:
October 21st, 2010 at 10:53 pm
I wonder what the GOP media machine, Fox news and the World-Wide Chamber of Commerce would say if instead of a moratorium on foreclosures …
…say they had a moratorium on… uh… I dunno… say on oil drilling or something. I wonder if they would be so blasé about that? It would be interesting to know. Anyone have any idea?
The Curmudgeon Says:
October 21st, 2010 at 11:02 pm
I thought all hedge fund managers were dem’s?!? didn’t they line Obama’s pockets in 2008? What, they’re just whores like the rest of ‘em, licking their finger and pointing it in the air to see which way the political wind is blowing?
GeorgeBurnsWasRight Says:
October 21st, 2010 at 11:06 pm
There was a report on NPR today of yet another part of the foreclosure mess. In Florida they have something called the “Rocket Docket”, courts that handle 200 foreclosures a day. The judges admit they don’t have time to either look at the documents or listen to arguments. So you can imagine the level of “justice” being dispensed.
call me ahab Says:
October 21st, 2010 at 11:16 pm
GeorgeBurns-
and we care why? the people that aren’t paying should stay? what’s your point exactly (as if anyone cares)
VennData-
one trick pony with nothing to say (over and over and over again)-
Strange that those of the opinion that this situation will have a limited and manageable but perhaps costly resolution, seem to completely discount the criminality of what has taken place. Is the idea that this industry is immune from prosecution a given? If it is, we’re more screwed than I thought, and y’all know how screwed I think we are.
i was just reading farmera1′s reference to the baseline scenario’s treatment (great blog) of the this subject…
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
While I would join many other investors in the n/a mbs mkt in celebration if a significant amount of loans out of these deals were put back to the issuers, the reality is that the big originators/issuers/banks have the upper hand here. They will drag this fight out on a loan by loan basis. I don’t care how big you are (ny fed, pimco, blackrock, etc.), the diligence expense is prohibitive. You have to understand how time intensive a project like this would be.
BofA seems like it is in serious trouble, and they will probably settle for some huge amount of money, but the idea of fighting them loan by loan is not remotely feasible. What gets missed in this discussion is that money managers, hedge funds, insurance companies, etc should have done more diligence at before purchasing said security. While the big IBs certainly ran with market, buyers had access to the loan tapes. They had the prospectus. And they got greedy and it all fell apart. It’s a disgrace that that the big $mm are not on media trial right next to the head of GS. The “buy” side is just as much to blame as the big IBs. But that wont happen. Such is life.
Effective Demand Says:
October 22nd, 2010 at 12:22 am
Been going around looking at the RE investor boards, none of the trustee sale buyers are having trouble getting title insurance…
27 Responses to “Stern Foreclosure Factory: $260 Million in 2009 Revenues”
wunsacon Says:
October 21st, 2010 at 10:34 am
I suspect Shakespeare’s Henry VI said it best.
http://www.spectacle.org/797/finkel.html
NoKidding Says:
October 21st, 2010 at 10:36 am
“The goal here was not to pursue prosecute foreclosures on behalf of a banking client; rather it was to crank out the assembly line factory to grab 100s of millions of dollars, legally or illegally, consequences be damned.”
Intuition tells me your assessment is correct, but nothing in the quoted bit of that story did.
We’re in a foreclosure boom and there’s work involved. Somebody has to do it.
wunsacon Says:
October 21st, 2010 at 10:36 am
Er, “Dick The Butcher”…
Mannwich Says:
October 21st, 2010 at 10:38 am
Oh, it’s 100%. In the grand scheme of things, he’s such a minor player and the perfect fall guy for Eric Holder.
rktbrkr Says:
October 21st, 2010 at 10:42 am
There’s never just 1 rat, there were a handful of FL lawfirms like this, Stern was just the biggest rat. So does the florida court system throw out all the work done by Stern and similar firms? A couple hundred thousand do-overs?
In New York, attorneys already have an obligation to ensure that the documents they present to the court are valid, but New York Chief Judge Jonathan Lippman said having them sign something affirming that all papers got a proper review will hold them accountable like never before.
“We want to make sure that everyone is focusing like a laser on these particular types of proceedings,” he said. “It puts them on notice. That’s what this is all about. We all have to make doubly sure that we are doing what we should be doing in the first place.”
The rule requiring a signed affirmation applies to both new cases and the 78,000 foreclosure actions already under way in New York courts.
Lawyers handling pending foreclosure actions will probably need to go back to their clients and verify that all proper steps were followed, Lippman said. The form created by the court requires the lawyers to give the name of the bank employee who affirmed that the records were accurate and the date the conversation took place.
The president of the New York State Bar Association, Stephen Younger, issued a statement praising the new rule. “The chief judge has taken swift steps to address a nationwide problem in foreclosure actions,” he said.
BennyProfane Says:
October 21st, 2010 at 10:49 am
I might even bet you that he doesn’t see any type of prosecution at all – maybe a nice, 5-10% deal, a la Mozilo, that the company can write off somehow offshore.
rktbrkr Says:
October 21st, 2010 at 10:50 am
Start the music, it’s time for Musical Chairs!
BofA Sues FDIC Over Taylor Bean Mortgage Losses
Bank of America, the largest U.S. bank, has sued the Federal Deposit Insurance Corp over $1.75 billion of investor losses mainly from the 2009 collapses of a large regional bank and large mortgage lender.
The lawsuit concerns the FDIC’s role as receiver for the main banking unit of Alabama’s Colonial BancGroup, and the implosion of Taylor, Bean & Whitaker Mortgage, where federal prosecutors say a multi-billion dollar mortgage fraud took place. Bank of America is trustee for notes issued by Taylor Bean’s Ocala Funding unit.
SnIp
RiskAverseAlert Says:
October 21st, 2010 at 10:59 am
I’ll take the under. This thing is so bad the President hasn’t even the clout to convince the Sheriff of his own Cook County that the recent voluntary foreclosure moratorium was the result of mere “technicalities.”
Sechel Says:
October 21st, 2010 at 11:20 am
David Stern knew what he was doing(to a point). He appointed four of the seven directors. It’s made clear that shareholders should find it difficult if not impossible to take disciplinary action against him, not withstanding any fiduciary obligations they may have in this respect.
AHodge Says:
October 21st, 2010 at 11:40 am
no shortables no options
i see it down abt 6% today
JerseyCynic Says:
October 21st, 2010 at 11:48 am
it’s perfect Mannwich
I’m always most cynical when individual assholes are singled out to cover for industry wide corruption.
OH good!! now we don’t have to dig deeper and run the whole lot of f%$kers out of town!
what happens when the next shit storm hits ? — student loan debt has now surpassed credit card debt
I wonder how many of our big bailed out banks set up their own back door foreclosure mills YEARS ago when they were setting the stage for this round in the boom/bust cycle of real estate
Several top executives of Florida’s largest foreclosure processing company resigned and its chairman was replaced Tuesday, amid a national controversy over questionable foreclosure filings and investigations into possible wrongdoing by lenders, loan servicers and law firms.
Plantation, Fla.-based DJSP Enterprises has been impacted by the temporary suspension of foreclosure filings by some of the nation’s largest lenders and some industry insiders are questioning the future of the business.
The company announced Tuesday that Chairman David Stern would step down, take the new title of president and remain the CEO. Stephen Bernstein will take over as chairman.
DL Says:
October 21st, 2010 at 12:10 pm
I just want to know why the company is incorporated in the Virgin Islands.
JerseyCynic Says:
October 21st, 2010 at 12:43 pm
oh what a fabulous story!!!
….In a nod to his foreclosure work, according to the acquaintance, Mr. Stern mused about possibly naming the larger yacht Su Casa Es Mi Casa — “Your House Is My House.” But his wife and others cautioned against it, according to this acquaintance, and Mr. Stern named the boat “Misunderstood.” Mr. Stern denies that he considered the “Su Casa Es Mi Casa” name.
I see Mr. Wallace at the ethical spectacle has the same fears as I do about the impending student loan bailout
http://www.spectacle.org/1010/rags.html
“Banks which lend these amounts of money for education are engaging in many cases in exactly the behavior of banks which loaned absurd amounts of money for real estate purchases by people who would never be able to repay it unless a miracle occurred. Such lending is doubly irresponsible, putting the bank at risk and ultimately forcing bail-outs with public money, but also encouraging individuals to engage in risky behavior. The spectacle of young people starting their adult lives as much as a quarter million dollars underwater is very disturbing. The role of government in sponsoring, encouraging and guaranteeing student loans also needs to be re-examined. A government role which made sense when people were graduating with $20,000 in debt looks entirely different when the number is ten times as much.”
wally Says:
October 21st, 2010 at 12:54 pm
Since these guys – and there are a lot of them recently – end up keeping most of their gains they are business heroes in this country.
Unsympathetic Says:
October 21st, 2010 at 1:10 pm
Barry, he will not be spending any time in jail.
He will, however, buy late-night TV infomercial time describing how you can get rich quick using his tried and true techniques.
b_thunder Says:
October 21st, 2010 at 2:14 pm
My odds on David Stern’s future:
5% – he’ll pay at most 10% of his gains as a fine, and will lose law license for at most 3 years w/out admitting anything
25% – he’ll become a billionaire suing evil banks on behalf of foreclosed homeowners
20% – he’ll become a billionaire AND in 4 years will be elected the Governor of Florida
60% – he will be the next CFTC judge
willid3 Says:
October 21st, 2010 at 3:17 pm
Yves smith has this take
t take a fair degree of skill to pen a journalistic story that hews to the appearance of objectivity yet is out to sell a point of view.
The lead article in the Journal tonight, “Niche Lawyers Spawned Housing Fracas” telegraphs its bias in its headline: the foreclosure crisis is merely the creation of two bit lawyers who by implication don’t know what they are doing, and are pumping trivial issues up for their own enrichment, with the housing market as collateral damage.
Funny that anyone can think this spin is remotely true. The fact that solo practitioner lawyers could have such an impact on the system is not proof that they are miscreants, as the Journal implies. It is that the foundation of mortgage securitzations is rotten as a result of widespread abuses, first on the origination end, later in the foreclosure process. These small firm players are using the legal equivalent of toothpicks; the fact that their efforts have destablized the foundation of the residential mortgage backed securities market is tangible proof that they were imperiled to begin with.
Let’s parse some sections of the article, starting from the top:
The paperwork mess muddying home foreclosures erupted last month. But the legal strategy behind it traces to a lawyer’s gambit in 2006 that has helped keep one couple in their home six years beyond their last mortgage payment.
Not bad in the drive-by shooting category. The foreclosure crisis, which is the result of what increasingly appears to be a widespread failure to convey borrower promissory notes and related liens properly to the the securitization entity is reduced to a mere “paperwork mess”. So the idea that the shortcomings are serious is dismissed. Similarly, the efforts of various attorneys who have been chipping away as aspects of this problem are incorrectly lumped together, as if there was really only a single, simpleminded strategy, a mere “lawyer’s gambit” which by implication, was copied by other low life attorneys. And this effort was to keep a deadbeat borrower illegitimately housed.
Funny, this James Kowalski, the attorney behind this dastardly act, did what members of the bar normally do (at least if they are competent): they look for weaknesses in fact and law in the case presented by the other side. And part of the process involves, stunningly enough, depositions! Kowalski’s evil deed was that he was early, perhaps first, to find a robo signer, back in 2006.
But robo signers are an abuse of court process. You can’t have it one way, and say you believe in law and order and the sanctity of contract, and then say it’s just fine to abuse legal procedures if you are pretty sure you are right. Well you can’t unless you are the Journal, skilled in the art of defending plutocrats, no matter how much in the way of mental gymnastics that might require.
But this implicit focus on robo signers (which admittedly did bring the bigger issue of foreclosure abuses into the limelight) again is a convenient diversion, since the robo signer is far from the most serious problem now affecting the foreclosure process.
Back to the Journal’s account:
It was a first step in the growth of a legal sub-specialty called foreclosure defense that has sown confusion and turmoil in the housing market. Lawyers in the field now commonly use a technique more identified with corporate litigation: probing depositions, designed to uncover any lapses in judgment, flaws in a process or wrongdoing. In the 23 states where foreclosures entail a court hearing, the bank may be ordered to pay the homeowner’s legal bill if a lawyer can convince a judge that the bank has submitted false documents, such as affidavits saying employees personally reviewed the details of loans when they didn’t.
Huh? With all due respect, this is the first time I’ve heard of this “foreclosure defense” sub specialty. Please. These are consumer lawyers, and some of them have gotten good enough at fighting foreclosures that they do it full time. But “sub-speciality” implies a degree of fomalization and coordination of effort that isn’t there. Oh, and the Journal deems it to be bad form for mere consumer lawyers to use the techniques of decent trial lawyers (only corporations are supposed to have access to competent litigators, it seems).
But it gets even better. The Journal couldn’t be bothered letting facts get in the way of a tidy narrative. Kowalski weighed in in the comment section of the article:
Despite my best efforts to answer all of Mr. Whelan’s questions, the article contains a number of misstatements. First, Mr. and Mrs. Jackson did not face a foreclosure hearing after simply stopping payment – they paid the entire amount due per a statement sent to them by GMAC, and paid by certified check. GMAC mistakenly refused the check, alleging it was an NSF payment (not possible with certified funds), then placed the couple in foreclosure. I was simply trying to track the facts of the payment by deposing a witness who had sworn in court documents that she had reviewed the entire file and was familiar with the payment history, when, as it turned out, she was not only not familiar with the payment history, but the substance of her entire affidavit was false, including the allegation that the affidavit was sworn to in front of a notary. These were substantive questions I needed answers to – not an excuse for a delay. Further, the judge did not “throw out the case” – it is still pending, with GMAC still suing the Jacksons, years later.
I, and most of my fellow consumer attorneys who are members of the National Association of Consumer Advocates, do not raise these issues for delay – we raise them because we all have cases (this is the bulk of my foreclosure defense practice) where all or part of the foreclosure is purely the fault of the servicer or mill law firm – from homeowners whose payments were misrouted by the servicer, to servicers who simply changed the address of the property and then force-placed flood insurance, to servicers who ignore insurance plans the borrowers paid for (all examples from my cases) to servicers who refuse to even accept HAMP-type loan modification documents – all are substantive, real problems that were not the fault of the borrowers. The deposition was, in the Jackson case, merely an effort to get at the truth of the reversed payment – instead, GMAC admitted to wholesale manufacture of court documents, then promised to fix the practice, then continued that practice unabated for 4 more years.
Most of what we have uncovered are criminal violations – false testimony under oath, notary fraud, etc. These problems will continue until the attorneys general who have formed a task force recognize and confront the significant criminal violations, and will continue unless we have real reform of the servicing practices that emphasize speed over the truth.
Not a single one of my clients wants (or deserves) a free house. What they want (and deserve) is for their voices to be heard, and, for better or worse, consumer lawyers are the only ones capable of achieving this at the moment.
Oh, and it would have been nice if Mr. Whelan had taken the time to spell my name correctly throughout the article.
Yves here. Servicer abuses that result in foreclosures are simply not getting the media attention they deserve. The prevailing perception, and the party line from the banks, is that the borrowers are all deadbeats and therefore any efforts to aid them are simply an abuse of court processes.
But servicers are modern judges, juries, and to the extent they can railroad foreclosures through, executioners. When a payment arrives after the due date (and servicers have been found to hold checks to render payments late), under RESPA and the bank’s agreement with the borrower, the bank is supposed to apply payments to principal and interest first, then any late fees. But if you incur a late fee, they instead apply the payment to that first, which makes your regular monthly payment come up short. So then you get an insufficiency fee.
Servicers don’t send detailed monthly statements like credit card companies, telling you how your payments were applied. This process of misapplication of payment and failure to notify borrowers when fees have been incurred guarantees that the charges will balloon. It isn’t until months have passed and the extra balance become large, say $2000 or more, that the homeowner realizes they are under water according to their servicer, even though they have made all their regular payments. Many lack the extra money to clear out all these largely bogus fees; other have tried fighting, only to find the servicer won’t budge, and they rack up more charges, which forces them either to capitulate or lose their home.
Nevertheless, the Journal runs the party line that nothing is wrong with the foreclosure machinery, when the intense pushback suggests otherwise, and brandishes the usual financial services industry threat: hurt us, and it will hurt you even more:
“There is a movement afoot by [state attorneys general] and private lawyers to use technical problems to avoid foreclosures where the borrower is in default and the foreclosure is in all respects substantively appropriate. These are lawyers where the best job they can do for their clients is to keep them in their houses without paying the mortgage,” said Andrew L. Sandler, a Washington securities lawyer who represents banks and firms that service mortgages.
Mr. Sandler added: “The class-action lawyers are swarming around this issue right now, because they perceive that it can result in significant fees for them. But they’re not well-founded cases, and the banks will vigorously contest any class action around these issues.”
The big risk to banks and the housing market, indeed, is that more homeowners and lawyers come to see such cases as attractive to fight.
It’s certainly fair to say some legal actions are based on weak theories; we dissed the widely touted investor suit against Countrywide on mortgage putbacks yesterday, and have selectively argued against other legal theories. But some of these cases are based on careful study of real abuses and are attacking improper, potentially fraudulent actions. This is one of the few checks we have left on misuse of power, but the powers that be want the public to see these legal challenges as a threat to their financial security and accept compromises, just as we have been forced to accept diminished civil liberties and ever more intrusive surveillance in the name of personal security.
One encouraging sign: I didn’t take a careful tally, but despite the Journal’s heavy spin on this story, its comment section seemed to be running at only a 50% acceptance of its position. The more the banks try to press the merits of their case on dubious evidence, the more the public is coming to realize they are not to be believed.
Topics: Banana republic, Banking industry, Credit markets, Legal, Media watch, Politics, Real estate, Social values
they aren’t all dead beats. some got their the new fangled way. the servicer did it
not-affiliated-with-Wall Street Says:
October 21st, 2010 at 3:39 pm
I wish you wouldn’t throw in that stuff about the graybar hotel. It’s a depressing reminder that these kinds of people never go to jail. They just get richer.
beaufou Says:
October 21st, 2010 at 5:12 pm
JCynic.
I would suggest a name for Diamond Dave’s new boat: my ass is grass.
People are talking, he is going down.
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
Mark E Hoffer Says:
October 21st, 2010 at 8:52 pm
I don’t knoe about all y’all, though, there’s something about ‘limited hangout’ that I’d be looking into..
and, this, ‘knoe’, was a key-stroke off, as in ‘know’..
Gracias~! QWERTY!
willid3 Says:
October 21st, 2010 at 9:33 pm
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
nope.
they just want to make sure we know.
dsawy Says:
October 22nd, 2010 at 3:28 am
What is the statute of limitations on what he has done? That’s the biggest question I have before taking an over/under on this.
Hot Links: Social Media Guru The Reformed Broker Says:
October 22nd, 2010 at 7:19 am
How to pimp hard amidst the ruins of Foreclosure Florida. (TBP)
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
I think you published the first part two days ago. This is his second piece on the subject.
More on Why the PIMCO, BlackRock, Freddie, NY Fed Letter to Countrywide on Putbacks Is Way Overhyped
I still laying odds on the perp walk.
rktbrkr Says:
October 21st, 2010 at 5:02 pm
How could Donovan say foreclosure problems weren’t systemic and then admit to Jim Lehrer that they didn’t know the extent of the problems yet? Not very truthy.
I really have a hard time seeing how the mortgage issue will be a big deal in non-judicial foreclosure states.
In judicial foreclosure states the homeowner has to actively defend themselves unless the courts start becoming activist.
Both require en-masse participatation by the homeowners in bringing or responding to a lawsuit AND for the servicers processes to be so messed up they can’t ever produce the note.
I can see it happening in the margins, but not en-masse. And thus it will be a relative non-event as far as keeping people who aren’t paying their mortgages in their homes. It will be an event played out over a very long time between bondholders, servicers and originators and it will cost billions over many years. But in the end it’s sort of a “meh” event in my view. The processes will be fixed and some additional losses not currently reserved for will be taken, spread out over time.
I do see a change watching RE listings in my local area, in the last few days I can tell a lot of short sales that had been stalled have been noted that they are getting responses from the bank. So at least over the short term the banks are shifting resources into that department.
Why should I waste my beautiful mind on something like this? It will all be taken care of after the election in the Homeland Property Title Rectification and Forward Looking Respect for Law Act of 2010.
Mark E Hoffer Says:
October 21st, 2010 at 5:57 pm
the utter (f******) Bilge that passes for the MSM is enough to give one Zebra Mussels..
These guys are not much better than the others in the limelight.
Mark E Hoffer Says:
October 21st, 2010 at 6:04 pm
Roger,
no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …
suspiciously similar to http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=the+passing+of+the+Federal+Reserve+Act+of+1913
“DENMARK, Maine (NEWS CENTER) — An attorney from Portland is getting national attention after uncovering the faulty methods banks were using to review foreclosure documents.
Thomas Cox volunteers at Pine Tree Legal, giving free legal advice to people facing foreclosure. While reviewing Nicole Bradbury of Denmark’s foreclosure documents, he realized they were signed by someone with the title “limited signing officer,” meaning the person’s only job was to sign the papers. Cox arranged a deposition with the signer, and he admitted to signing hundreds of foreclosure documents without ever reading them. Now the nation’s attorneys general are investigating. Banks have responded, saying that the problems are technical, and the facts in all of these cases are true. Cox says that answer is unacceptable.
“The message that the industry’s putting out that these are just technical mistakes are a real red herring to the fact that they grossly abused the American judicial system by presenting many, many thousands of false affidavits to courts all over the country that judges believed to be true and entered judgements, taking away homes based upon them” Cox told NEWS CENTER.
Cox says Nicole Bradbury is still living in her house. GMAC filed a motion to dismiss her foreclosure to fix the problems and start the process over again. An attorney representing GMAC and Fannie Mae, the mortgage company that owns Bradbury’s loan, declined to comment because the foreclosure case is still pending.”
mote Says:
October 21st, 2010 at 6:30 pm
From “A question of property rights,” excerpted quotefest follows.
Objects in the rear view mirror:
Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”
Nothing but Blue Skies:
Joseph Mason, a finance professor at Louisiana State University, said concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.
Houston, we have a problem:
Some analysts are not sure that banks can proceed so freely. Katherine Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.
Tax man’s whatif:
Robert Willens, a tax expert, said documentation issues had created potentially severe tax problems for investors in mortgage securities and “there is enough of a question here that the courts might well have to resolve the issue.”
Now investors who bought mortgage trusts – investment vehicles composed of mortgages – are wondering if the loans inside them were recorded properly. If not, the tax advantages of the trusts could be wiped out, leaving mortgage securities investors with significant tax bills.
Guantanamo Bay revisited:
Lenders and their representatives have sought to minimize the significance of robo-signing and, while acknowledging legal lapses in how they documented loans, have argued that foreclosures should proceed anyway. After all, the lenders say, the homeowners owe the money.
But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.”
” Regulator Says Fannie, Freddie Cost at Mercy of Economy.. To be filed under Duh! ”
I keep coming back to this droll of a subject for your wit BR. Your youthful character is evident in your exuberance and cultural relevance. If your a Dad, I bet your a good one and know your children well, if not you will be.
Swarm The Banks Says:
October 21st, 2010 at 7:03 pm
Forcing people to fall behind on their mortgages before being eligible for HAMP, even though this triggers parallel foreclosure and hastens the loss of the property is beyond a smoking gun, it’s a stinking gun because it’s been going on for a year and a half now.
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
“Let’s hope there’s a better explanation than “we have created [our biggest banks], and we’re sort of past that point, and I think that in some sense, the genie’s out of the bottle.”
ACS Says:
October 21st, 2010 at 7:05 pm
Every time a bank is shut down, a law school should be shut as well.
Vilgrad Says:
October 21st, 2010 at 7:52 pm
Gonzalo Lira, who’s post was stolen by David Kotok as his own. Real lowlife move.
Barry, what became of Parts 3-5 in the series “Forclosure Fraud for Dummies”?
dss Says:
October 21st, 2010 at 8:32 pm
@ACS,
Great observation.
Ltdata Says:
October 21st, 2010 at 8:59 pm
File this under Law of unintended results: Quite frankly, even if a megabank, etc. does not know their exposure – their auditor WILL find some way to sample the mess, quantify it for the financials, and bill, bill, bill. If they thought shoddy was cheap, wait til they get the audit bill.
Roger Bigod Says:
October 21st, 2010 at 9:30 pm
Mark E Hoffer
“no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …”
Oh, yes. Afterward, the Preznit will get that serious, stern look and point the finger at the GOP for killing the option of public, non-electronic property records. Especially since he fought for the option it so fiercely. At least there will be a special approproation to help the county clerk’s offices pay for shredding and burning all the backward-looking paper records.
The Curmudgeon Says:
October 21st, 2010 at 9:47 pm
“But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.” ”
~The good associate professor of law is surely aware that liberty interests enjoy far greater protections under the constititution than do property interests. Due process for the denial of property interests (think Kelo, e.g.) is far less stringent than due process for the denial of liberty interests (think Miranda and its progeny). I doubt anyone will seriously attempt to formulate an exclusionary rule for mortgage foreclosures, where the failure to submit a properly attested affidavit means the mortgage company is barred from admitting into evidence the promissory note. But that’s the reasonable view. And these are markedly unreasonable times. So, who knows?
franklin411 Says:
October 21st, 2010 at 9:52 pm
This is what happens to bad little Democrats who actually propose making Wall Street pay for the mess it created:
Wealthy financier is mysterious funder of ads attacking DeFazio
Robert Mercer, the co-CEO of one of the world’s largest hedge funds, is the mysterious donor who has been paying for $300,000 of attack ads aimed at Rep. Peter DeFazio, D-Ore.
Not a big deal? it is already a big deal and I suspect (because NOBODY knows for sure) it may get a great deal bigger. Remember when Ben Stein told us on national TV that the sub-prime mortgae “event” would blow over?
S Brennan Says:
October 21st, 2010 at 10:16 pm
Off topic, but food for thought…read it through, the punches get thrown at the end.
I’ve been reading a lot of the blogging on the foreclosure mess. Every time I think I understand it fully something else comes up that makes me wonder if I do. Some of the reports make it sound like the whole idea of of MBS tranches is inherently illegal. Let me explain.
Take this excerpt from http://www.huffingtonpost.com/ellen-brown/foreclosuregate_b_752788.html
“The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default.”
So this sound to me like there would be no legal way to do tranches. Or at least no way to do it without breaking the chain of title or violating tax laws. The note must be in legal limbo until you know what tranche it goes in. And assigning it to the trust after the default will always be against REMIC tax rules.
Am I understanding this POV correctly? Was there some legal way these tranches could have been done?
VennData Says:
October 21st, 2010 at 10:53 pm
I wonder what the GOP media machine, Fox news and the World-Wide Chamber of Commerce would say if instead of a moratorium on foreclosures …
…say they had a moratorium on… uh… I dunno… say on oil drilling or something. I wonder if they would be so blasé about that? It would be interesting to know. Anyone have any idea?
The Curmudgeon Says:
October 21st, 2010 at 11:02 pm
I thought all hedge fund managers were dem’s?!? didn’t they line Obama’s pockets in 2008? What, they’re just whores like the rest of ‘em, licking their finger and pointing it in the air to see which way the political wind is blowing?
GeorgeBurnsWasRight Says:
October 21st, 2010 at 11:06 pm
There was a report on NPR today of yet another part of the foreclosure mess. In Florida they have something called the “Rocket Docket”, courts that handle 200 foreclosures a day. The judges admit they don’t have time to either look at the documents or listen to arguments. So you can imagine the level of “justice” being dispensed.
call me ahab Says:
October 21st, 2010 at 11:16 pm
GeorgeBurns-
and we care why? the people that aren’t paying should stay? what’s your point exactly (as if anyone cares)
VennData-
one trick pony with nothing to say (over and over and over again)-
Strange that those of the opinion that this situation will have a limited and manageable but perhaps costly resolution, seem to completely discount the criminality of what has taken place. Is the idea that this industry is immune from prosecution a given? If it is, we’re more screwed than I thought, and y’all know how screwed I think we are.
i was just reading farmera1′s reference to the baseline scenario’s treatment (great blog) of the this subject…
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
While I would join many other investors in the n/a mbs mkt in celebration if a significant amount of loans out of these deals were put back to the issuers, the reality is that the big originators/issuers/banks have the upper hand here. They will drag this fight out on a loan by loan basis. I don’t care how big you are (ny fed, pimco, blackrock, etc.), the diligence expense is prohibitive. You have to understand how time intensive a project like this would be.
BofA seems like it is in serious trouble, and they will probably settle for some huge amount of money, but the idea of fighting them loan by loan is not remotely feasible. What gets missed in this discussion is that money managers, hedge funds, insurance companies, etc should have done more diligence at before purchasing said security. While the big IBs certainly ran with market, buyers had access to the loan tapes. They had the prospectus. And they got greedy and it all fell apart. It’s a disgrace that that the big $mm are not on media trial right next to the head of GS. The “buy” side is just as much to blame as the big IBs. But that wont happen. Such is life.
Effective Demand Says:
October 22nd, 2010 at 12:22 am
Been going around looking at the RE investor boards, none of the trustee sale buyers are having trouble getting title insurance…
27 Responses to “Stern Foreclosure Factory: $260 Million in 2009 Revenues”
wunsacon Says:
October 21st, 2010 at 10:34 am
I suspect Shakespeare’s Henry VI said it best.
http://www.spectacle.org/797/finkel.html
NoKidding Says:
October 21st, 2010 at 10:36 am
“The goal here was not to pursue prosecute foreclosures on behalf of a banking client; rather it was to crank out the assembly line factory to grab 100s of millions of dollars, legally or illegally, consequences be damned.”
Intuition tells me your assessment is correct, but nothing in the quoted bit of that story did.
We’re in a foreclosure boom and there’s work involved. Somebody has to do it.
wunsacon Says:
October 21st, 2010 at 10:36 am
Er, “Dick The Butcher”…
Mannwich Says:
October 21st, 2010 at 10:38 am
Oh, it’s 100%. In the grand scheme of things, he’s such a minor player and the perfect fall guy for Eric Holder.
rktbrkr Says:
October 21st, 2010 at 10:42 am
There’s never just 1 rat, there were a handful of FL lawfirms like this, Stern was just the biggest rat. So does the florida court system throw out all the work done by Stern and similar firms? A couple hundred thousand do-overs?
In New York, attorneys already have an obligation to ensure that the documents they present to the court are valid, but New York Chief Judge Jonathan Lippman said having them sign something affirming that all papers got a proper review will hold them accountable like never before.
“We want to make sure that everyone is focusing like a laser on these particular types of proceedings,” he said. “It puts them on notice. That’s what this is all about. We all have to make doubly sure that we are doing what we should be doing in the first place.”
The rule requiring a signed affirmation applies to both new cases and the 78,000 foreclosure actions already under way in New York courts.
Lawyers handling pending foreclosure actions will probably need to go back to their clients and verify that all proper steps were followed, Lippman said. The form created by the court requires the lawyers to give the name of the bank employee who affirmed that the records were accurate and the date the conversation took place.
The president of the New York State Bar Association, Stephen Younger, issued a statement praising the new rule. “The chief judge has taken swift steps to address a nationwide problem in foreclosure actions,” he said.
BennyProfane Says:
October 21st, 2010 at 10:49 am
I might even bet you that he doesn’t see any type of prosecution at all – maybe a nice, 5-10% deal, a la Mozilo, that the company can write off somehow offshore.
rktbrkr Says:
October 21st, 2010 at 10:50 am
Start the music, it’s time for Musical Chairs!
BofA Sues FDIC Over Taylor Bean Mortgage Losses
Bank of America, the largest U.S. bank, has sued the Federal Deposit Insurance Corp over $1.75 billion of investor losses mainly from the 2009 collapses of a large regional bank and large mortgage lender.
The lawsuit concerns the FDIC’s role as receiver for the main banking unit of Alabama’s Colonial BancGroup, and the implosion of Taylor, Bean & Whitaker Mortgage, where federal prosecutors say a multi-billion dollar mortgage fraud took place. Bank of America is trustee for notes issued by Taylor Bean’s Ocala Funding unit.
SnIp
RiskAverseAlert Says:
October 21st, 2010 at 10:59 am
I’ll take the under. This thing is so bad the President hasn’t even the clout to convince the Sheriff of his own Cook County that the recent voluntary foreclosure moratorium was the result of mere “technicalities.”
Sechel Says:
October 21st, 2010 at 11:20 am
David Stern knew what he was doing(to a point). He appointed four of the seven directors. It’s made clear that shareholders should find it difficult if not impossible to take disciplinary action against him, not withstanding any fiduciary obligations they may have in this respect.
AHodge Says:
October 21st, 2010 at 11:40 am
no shortables no options
i see it down abt 6% today
JerseyCynic Says:
October 21st, 2010 at 11:48 am
it’s perfect Mannwich
I’m always most cynical when individual assholes are singled out to cover for industry wide corruption.
OH good!! now we don’t have to dig deeper and run the whole lot of f%$kers out of town!
what happens when the next shit storm hits ? — student loan debt has now surpassed credit card debt
I wonder how many of our big bailed out banks set up their own back door foreclosure mills YEARS ago when they were setting the stage for this round in the boom/bust cycle of real estate
Several top executives of Florida’s largest foreclosure processing company resigned and its chairman was replaced Tuesday, amid a national controversy over questionable foreclosure filings and investigations into possible wrongdoing by lenders, loan servicers and law firms.
Plantation, Fla.-based DJSP Enterprises has been impacted by the temporary suspension of foreclosure filings by some of the nation’s largest lenders and some industry insiders are questioning the future of the business.
The company announced Tuesday that Chairman David Stern would step down, take the new title of president and remain the CEO. Stephen Bernstein will take over as chairman.
DL Says:
October 21st, 2010 at 12:10 pm
I just want to know why the company is incorporated in the Virgin Islands.
JerseyCynic Says:
October 21st, 2010 at 12:43 pm
oh what a fabulous story!!!
….In a nod to his foreclosure work, according to the acquaintance, Mr. Stern mused about possibly naming the larger yacht Su Casa Es Mi Casa — “Your House Is My House.” But his wife and others cautioned against it, according to this acquaintance, and Mr. Stern named the boat “Misunderstood.” Mr. Stern denies that he considered the “Su Casa Es Mi Casa” name.
I see Mr. Wallace at the ethical spectacle has the same fears as I do about the impending student loan bailout
http://www.spectacle.org/1010/rags.html
“Banks which lend these amounts of money for education are engaging in many cases in exactly the behavior of banks which loaned absurd amounts of money for real estate purchases by people who would never be able to repay it unless a miracle occurred. Such lending is doubly irresponsible, putting the bank at risk and ultimately forcing bail-outs with public money, but also encouraging individuals to engage in risky behavior. The spectacle of young people starting their adult lives as much as a quarter million dollars underwater is very disturbing. The role of government in sponsoring, encouraging and guaranteeing student loans also needs to be re-examined. A government role which made sense when people were graduating with $20,000 in debt looks entirely different when the number is ten times as much.”
wally Says:
October 21st, 2010 at 12:54 pm
Since these guys – and there are a lot of them recently – end up keeping most of their gains they are business heroes in this country.
Unsympathetic Says:
October 21st, 2010 at 1:10 pm
Barry, he will not be spending any time in jail.
He will, however, buy late-night TV infomercial time describing how you can get rich quick using his tried and true techniques.
b_thunder Says:
October 21st, 2010 at 2:14 pm
My odds on David Stern’s future:
5% – he’ll pay at most 10% of his gains as a fine, and will lose law license for at most 3 years w/out admitting anything
25% – he’ll become a billionaire suing evil banks on behalf of foreclosed homeowners
20% – he’ll become a billionaire AND in 4 years will be elected the Governor of Florida
60% – he will be the next CFTC judge
willid3 Says:
October 21st, 2010 at 3:17 pm
Yves smith has this take
t take a fair degree of skill to pen a journalistic story that hews to the appearance of objectivity yet is out to sell a point of view.
The lead article in the Journal tonight, “Niche Lawyers Spawned Housing Fracas” telegraphs its bias in its headline: the foreclosure crisis is merely the creation of two bit lawyers who by implication don’t know what they are doing, and are pumping trivial issues up for their own enrichment, with the housing market as collateral damage.
Funny that anyone can think this spin is remotely true. The fact that solo practitioner lawyers could have such an impact on the system is not proof that they are miscreants, as the Journal implies. It is that the foundation of mortgage securitzations is rotten as a result of widespread abuses, first on the origination end, later in the foreclosure process. These small firm players are using the legal equivalent of toothpicks; the fact that their efforts have destablized the foundation of the residential mortgage backed securities market is tangible proof that they were imperiled to begin with.
Let’s parse some sections of the article, starting from the top:
The paperwork mess muddying home foreclosures erupted last month. But the legal strategy behind it traces to a lawyer’s gambit in 2006 that has helped keep one couple in their home six years beyond their last mortgage payment.
Not bad in the drive-by shooting category. The foreclosure crisis, which is the result of what increasingly appears to be a widespread failure to convey borrower promissory notes and related liens properly to the the securitization entity is reduced to a mere “paperwork mess”. So the idea that the shortcomings are serious is dismissed. Similarly, the efforts of various attorneys who have been chipping away as aspects of this problem are incorrectly lumped together, as if there was really only a single, simpleminded strategy, a mere “lawyer’s gambit” which by implication, was copied by other low life attorneys. And this effort was to keep a deadbeat borrower illegitimately housed.
Funny, this James Kowalski, the attorney behind this dastardly act, did what members of the bar normally do (at least if they are competent): they look for weaknesses in fact and law in the case presented by the other side. And part of the process involves, stunningly enough, depositions! Kowalski’s evil deed was that he was early, perhaps first, to find a robo signer, back in 2006.
But robo signers are an abuse of court process. You can’t have it one way, and say you believe in law and order and the sanctity of contract, and then say it’s just fine to abuse legal procedures if you are pretty sure you are right. Well you can’t unless you are the Journal, skilled in the art of defending plutocrats, no matter how much in the way of mental gymnastics that might require.
But this implicit focus on robo signers (which admittedly did bring the bigger issue of foreclosure abuses into the limelight) again is a convenient diversion, since the robo signer is far from the most serious problem now affecting the foreclosure process.
Back to the Journal’s account:
It was a first step in the growth of a legal sub-specialty called foreclosure defense that has sown confusion and turmoil in the housing market. Lawyers in the field now commonly use a technique more identified with corporate litigation: probing depositions, designed to uncover any lapses in judgment, flaws in a process or wrongdoing. In the 23 states where foreclosures entail a court hearing, the bank may be ordered to pay the homeowner’s legal bill if a lawyer can convince a judge that the bank has submitted false documents, such as affidavits saying employees personally reviewed the details of loans when they didn’t.
Huh? With all due respect, this is the first time I’ve heard of this “foreclosure defense” sub specialty. Please. These are consumer lawyers, and some of them have gotten good enough at fighting foreclosures that they do it full time. But “sub-speciality” implies a degree of fomalization and coordination of effort that isn’t there. Oh, and the Journal deems it to be bad form for mere consumer lawyers to use the techniques of decent trial lawyers (only corporations are supposed to have access to competent litigators, it seems).
But it gets even better. The Journal couldn’t be bothered letting facts get in the way of a tidy narrative. Kowalski weighed in in the comment section of the article:
Despite my best efforts to answer all of Mr. Whelan’s questions, the article contains a number of misstatements. First, Mr. and Mrs. Jackson did not face a foreclosure hearing after simply stopping payment – they paid the entire amount due per a statement sent to them by GMAC, and paid by certified check. GMAC mistakenly refused the check, alleging it was an NSF payment (not possible with certified funds), then placed the couple in foreclosure. I was simply trying to track the facts of the payment by deposing a witness who had sworn in court documents that she had reviewed the entire file and was familiar with the payment history, when, as it turned out, she was not only not familiar with the payment history, but the substance of her entire affidavit was false, including the allegation that the affidavit was sworn to in front of a notary. These were substantive questions I needed answers to – not an excuse for a delay. Further, the judge did not “throw out the case” – it is still pending, with GMAC still suing the Jacksons, years later.
I, and most of my fellow consumer attorneys who are members of the National Association of Consumer Advocates, do not raise these issues for delay – we raise them because we all have cases (this is the bulk of my foreclosure defense practice) where all or part of the foreclosure is purely the fault of the servicer or mill law firm – from homeowners whose payments were misrouted by the servicer, to servicers who simply changed the address of the property and then force-placed flood insurance, to servicers who ignore insurance plans the borrowers paid for (all examples from my cases) to servicers who refuse to even accept HAMP-type loan modification documents – all are substantive, real problems that were not the fault of the borrowers. The deposition was, in the Jackson case, merely an effort to get at the truth of the reversed payment – instead, GMAC admitted to wholesale manufacture of court documents, then promised to fix the practice, then continued that practice unabated for 4 more years.
Most of what we have uncovered are criminal violations – false testimony under oath, notary fraud, etc. These problems will continue until the attorneys general who have formed a task force recognize and confront the significant criminal violations, and will continue unless we have real reform of the servicing practices that emphasize speed over the truth.
Not a single one of my clients wants (or deserves) a free house. What they want (and deserve) is for their voices to be heard, and, for better or worse, consumer lawyers are the only ones capable of achieving this at the moment.
Oh, and it would have been nice if Mr. Whelan had taken the time to spell my name correctly throughout the article.
Yves here. Servicer abuses that result in foreclosures are simply not getting the media attention they deserve. The prevailing perception, and the party line from the banks, is that the borrowers are all deadbeats and therefore any efforts to aid them are simply an abuse of court processes.
But servicers are modern judges, juries, and to the extent they can railroad foreclosures through, executioners. When a payment arrives after the due date (and servicers have been found to hold checks to render payments late), under RESPA and the bank’s agreement with the borrower, the bank is supposed to apply payments to principal and interest first, then any late fees. But if you incur a late fee, they instead apply the payment to that first, which makes your regular monthly payment come up short. So then you get an insufficiency fee.
Servicers don’t send detailed monthly statements like credit card companies, telling you how your payments were applied. This process of misapplication of payment and failure to notify borrowers when fees have been incurred guarantees that the charges will balloon. It isn’t until months have passed and the extra balance become large, say $2000 or more, that the homeowner realizes they are under water according to their servicer, even though they have made all their regular payments. Many lack the extra money to clear out all these largely bogus fees; other have tried fighting, only to find the servicer won’t budge, and they rack up more charges, which forces them either to capitulate or lose their home.
Nevertheless, the Journal runs the party line that nothing is wrong with the foreclosure machinery, when the intense pushback suggests otherwise, and brandishes the usual financial services industry threat: hurt us, and it will hurt you even more:
“There is a movement afoot by [state attorneys general] and private lawyers to use technical problems to avoid foreclosures where the borrower is in default and the foreclosure is in all respects substantively appropriate. These are lawyers where the best job they can do for their clients is to keep them in their houses without paying the mortgage,” said Andrew L. Sandler, a Washington securities lawyer who represents banks and firms that service mortgages.
Mr. Sandler added: “The class-action lawyers are swarming around this issue right now, because they perceive that it can result in significant fees for them. But they’re not well-founded cases, and the banks will vigorously contest any class action around these issues.”
The big risk to banks and the housing market, indeed, is that more homeowners and lawyers come to see such cases as attractive to fight.
It’s certainly fair to say some legal actions are based on weak theories; we dissed the widely touted investor suit against Countrywide on mortgage putbacks yesterday, and have selectively argued against other legal theories. But some of these cases are based on careful study of real abuses and are attacking improper, potentially fraudulent actions. This is one of the few checks we have left on misuse of power, but the powers that be want the public to see these legal challenges as a threat to their financial security and accept compromises, just as we have been forced to accept diminished civil liberties and ever more intrusive surveillance in the name of personal security.
One encouraging sign: I didn’t take a careful tally, but despite the Journal’s heavy spin on this story, its comment section seemed to be running at only a 50% acceptance of its position. The more the banks try to press the merits of their case on dubious evidence, the more the public is coming to realize they are not to be believed.
Topics: Banana republic, Banking industry, Credit markets, Legal, Media watch, Politics, Real estate, Social values
they aren’t all dead beats. some got their the new fangled way. the servicer did it
not-affiliated-with-Wall Street Says:
October 21st, 2010 at 3:39 pm
I wish you wouldn’t throw in that stuff about the graybar hotel. It’s a depressing reminder that these kinds of people never go to jail. They just get richer.
beaufou Says:
October 21st, 2010 at 5:12 pm
JCynic.
I would suggest a name for Diamond Dave’s new boat: my ass is grass.
People are talking, he is going down.
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
Mark E Hoffer Says:
October 21st, 2010 at 8:52 pm
I don’t knoe about all y’all, though, there’s something about ‘limited hangout’ that I’d be looking into..
and, this, ‘knoe’, was a key-stroke off, as in ‘know’..
Gracias~! QWERTY!
willid3 Says:
October 21st, 2010 at 9:33 pm
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
nope.
they just want to make sure we know.
dsawy Says:
October 22nd, 2010 at 3:28 am
What is the statute of limitations on what he has done? That’s the biggest question I have before taking an over/under on this.
Hot Links: Social Media Guru The Reformed Broker Says:
October 22nd, 2010 at 7:19 am
How to pimp hard amidst the ruins of Foreclosure Florida. (TBP)
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
When homeowners face foreclosure on a property they are renting out, tenants often begin to worry about the status of their home. Will the landlord be able to avoid foreclosure? Should the tenants stop paying rent? Will the new owner at the auction evict them, or will the purchaser honor the lease agreement? Unfortunately, many of these questions exist due to differences in the treatment of tenants under state law.
Many times, the first action a purchaser at a foreclosure auction takes is to begin the process of evicting former owners or tenants, whether this action is legal or not. In many cases, although it is not legal, the new owners will pursue this anyway in their effort to take possession of the property as quickly as possible. If this happens, it is usually up to the tenants to assert their rights under the lease.
Much of the confusion rests on two related issues. The first is that tenants' rights after a foreclosure are defined under state law, and each state will treat the issue slightly differently. Another issue is that tenants are the group most forgotten about in all of the efforts and discussion to help homeowners stop foreclosure. Protecting the rights of the renter is far down the list of priorities for most politicians attempting to help homeowners save their homes.
Tenants in different situations will have different rights. State law plays a large role, as does the nature of the lease itself. For instance, a lease that was entered into before the mortgage was placed on the property will usually survive a foreclosure. The lease existed before the mortgage was entered into, while the mortgage was in default, and during the foreclosure process. A purchaser at auction will not receive a greater interest in the property than existed before the mortgage.
There are two different views on the much more common issue of a lease entered into after a mortgage is executed. The majority opinion is that a lease will survive foreclosure if the lender is on notice that the tenancy exists. The exception to this rule is if the foreclosing lender makes the tenants are party to the foreclosure lawsuit; in this case, the lease may be exterminated after the foreclosure is completed.
Another view on this issue is that the foreclosure terminates the lease whether or not the tenants are made a party to the foreclosure lawsuit. In cases of nonjudicial foreclosure through a power of sale clause, most courts have held that the foreclosure extinguishes the tenants' rights in the property under the lease agreement. This gives tenants very few rights to defend their interest in the home.
One issue that homeowners, lenders, and tenants need to be aware of is that of the notice requirement mentioned above. If the lender has notice of the lease agreement, either actual or constructive, and does not include the tenants in the foreclosure proceedings, the lease will most likely survive the foreclosure auction. This makes the notice extremely important for tenants, foreclosing lenders, and purchasers at auction.
A number of different documents or actions can provide notice to the lender of the lease agreement. A recorded lease provides notice, for example. Also, if it should be apparent that tenants are living in the property, the lender may have the responsibility of investigating to determine the tenants' claims. An apartment building or property with more than one unit may also provide notice just by the nature of the building itself.
Homeowners are usually somewhat lacking in their efforts to help tenants deal with the foreclosure process. This often leaves renters on their own to figure out how to respond, and many end up not paying rent and being evicted quickly after a foreclosure auction. Unfortunately, this is often the worst possible scenario, and may not even be legal. But too few tenants know their rights after the home they are renting is foreclosed.
Robert M Says:
October 21st, 2010 at 4:53 pm
I think you published the first part two days ago. This is his second piece on the subject.
More on Why the PIMCO, BlackRock, Freddie, NY Fed Letter to Countrywide on Putbacks Is Way Overhyped
I still laying odds on the perp walk.
rktbrkr Says:
October 21st, 2010 at 5:02 pm
How could Donovan say foreclosure problems weren’t systemic and then admit to Jim Lehrer that they didn’t know the extent of the problems yet? Not very truthy.
Soylent Green Is People Says:
October 21st, 2010 at 5:03 pm
This was an interesting read:
http://www.reuters.com/article/idUSTRE69J6F520101020
Effective Demand Says:
October 21st, 2010 at 5:05 pm
I really have a hard time seeing how the mortgage issue will be a big deal in non-judicial foreclosure states.
In judicial foreclosure states the homeowner has to actively defend themselves unless the courts start becoming activist.
Both require en-masse participatation by the homeowners in bringing or responding to a lawsuit AND for the servicers processes to be so messed up they can’t ever produce the note.
I can see it happening in the margins, but not en-masse. And thus it will be a relative non-event as far as keeping people who aren’t paying their mortgages in their homes. It will be an event played out over a very long time between bondholders, servicers and originators and it will cost billions over many years. But in the end it’s sort of a “meh” event in my view. The processes will be fixed and some additional losses not currently reserved for will be taken, spread out over time.
I do see a change watching RE listings in my local area, in the last few days I can tell a lot of short sales that had been stalled have been noted that they are getting responses from the bank. So at least over the short term the banks are shifting resources into that department.
AHodge Says:
October 21st, 2010 at 5:16 pm
i cut the money shot from this FT earlier
http://ftalphaville.ft.com/blog/2010/10/21/378606/sarbanes-oxley-meets-servicer-execs/
Roger Bigod Says:
October 21st, 2010 at 5:56 pm
Why should I waste my beautiful mind on something like this? It will all be taken care of after the election in the Homeland Property Title Rectification and Forward Looking Respect for Law Act of 2010.
Mark E Hoffer Says:
October 21st, 2010 at 5:57 pm
the utter (f******) Bilge that passes for the MSM is enough to give one Zebra Mussels..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Zebra+Mussels
tyaresun Says:
October 21st, 2010 at 6:02 pm
Consumer complaints about Provident and Associates:
http://www.consumeraffairs.com/finance/provident_funding_associates.html
These guys are not much better than the others in the limelight.
Mark E Hoffer Says:
October 21st, 2010 at 6:04 pm
Roger,
no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …
suspiciously similar to http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=the+passing+of+the+Federal+Reserve+Act+of+1913
‘all clouds’-link
http://search.yippy.com/search?v%3aproject=clusty&v%3afile=viv_7jKTyb&sec=1287698174&v%3astate=%28root-0-999%29%7croot&v%3aframe=tree&
mavenwatch Says:
October 21st, 2010 at 6:28 pm
“An attorney from Portland is getting national attention after uncovering the faulty methods banks were using to review foreclosure documents.”
http://www.wcsh6.com/news/story.aspx?storyid=133138&catid=2
watch video to right from link above
“DENMARK, Maine (NEWS CENTER) — An attorney from Portland is getting national attention after uncovering the faulty methods banks were using to review foreclosure documents.
Thomas Cox volunteers at Pine Tree Legal, giving free legal advice to people facing foreclosure. While reviewing Nicole Bradbury of Denmark’s foreclosure documents, he realized they were signed by someone with the title “limited signing officer,” meaning the person’s only job was to sign the papers. Cox arranged a deposition with the signer, and he admitted to signing hundreds of foreclosure documents without ever reading them. Now the nation’s attorneys general are investigating. Banks have responded, saying that the problems are technical, and the facts in all of these cases are true. Cox says that answer is unacceptable.
“The message that the industry’s putting out that these are just technical mistakes are a real red herring to the fact that they grossly abused the American judicial system by presenting many, many thousands of false affidavits to courts all over the country that judges believed to be true and entered judgements, taking away homes based upon them” Cox told NEWS CENTER.
Cox says Nicole Bradbury is still living in her house. GMAC filed a motion to dismiss her foreclosure to fix the problems and start the process over again. An attorney representing GMAC and Fannie Mae, the mortgage company that owns Bradbury’s loan, declined to comment because the foreclosure case is still pending.”
mote Says:
October 21st, 2010 at 6:30 pm
From “A question of property rights,” excerpted quotefest follows.
Objects in the rear view mirror:
Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”
Nothing but Blue Skies:
Joseph Mason, a finance professor at Louisiana State University, said concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.
Houston, we have a problem:
Some analysts are not sure that banks can proceed so freely. Katherine Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.
Tax man’s whatif:
Robert Willens, a tax expert, said documentation issues had created potentially severe tax problems for investors in mortgage securities and “there is enough of a question here that the courts might well have to resolve the issue.”
Now investors who bought mortgage trusts – investment vehicles composed of mortgages – are wondering if the loans inside them were recorded properly. If not, the tax advantages of the trusts could be wiped out, leaving mortgage securities investors with significant tax bills.
Guantanamo Bay revisited:
Lenders and their representatives have sought to minimize the significance of robo-signing and, while acknowledging legal lapses in how they documented loans, have argued that foreclosures should proceed anyway. After all, the lenders say, the homeowners owe the money.
But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.”
http://www.chron.com/disp/story.mpl/business/7256693.html
Maseratij Says:
October 21st, 2010 at 6:38 pm
” Regulator Says Fannie, Freddie Cost at Mercy of Economy.. To be filed under Duh! ”
I keep coming back to this droll of a subject for your wit BR. Your youthful character is evident in your exuberance and cultural relevance. If your a Dad, I bet your a good one and know your children well, if not you will be.
Swarm The Banks Says:
October 21st, 2010 at 7:03 pm
Forcing people to fall behind on their mortgages before being eligible for HAMP, even though this triggers parallel foreclosure and hastens the loss of the property is beyond a smoking gun, it’s a stinking gun because it’s been going on for a year and a half now.
http://www.parallelforeclosure.com
farmera1 Says:
October 21st, 2010 at 7:04 pm
And from the Baseline Scenario we have this:
http://baselinescenario.com/2010/10/16/once-more-into-the-breach/#more-8112
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
“Let’s hope there’s a better explanation than “we have created [our biggest banks], and we’re sort of past that point, and I think that in some sense, the genie’s out of the bottle.”
ACS Says:
October 21st, 2010 at 7:05 pm
Every time a bank is shut down, a law school should be shut as well.
Vilgrad Says:
October 21st, 2010 at 7:52 pm
Gonzalo Lira, who’s post was stolen by David Kotok as his own. Real lowlife move.
http://gonzalolira.blogspot.com/2010/10/mulligan-mortgagesthe-banks-only-way.html
philipat Says:
October 21st, 2010 at 8:31 pm
Barry, what became of Parts 3-5 in the series “Forclosure Fraud for Dummies”?
dss Says:
October 21st, 2010 at 8:32 pm
@ACS,
Great observation.
Ltdata Says:
October 21st, 2010 at 8:59 pm
File this under Law of unintended results: Quite frankly, even if a megabank, etc. does not know their exposure – their auditor WILL find some way to sample the mess, quantify it for the financials, and bill, bill, bill. If they thought shoddy was cheap, wait til they get the audit bill.
Roger Bigod Says:
October 21st, 2010 at 9:30 pm
Mark E Hoffer
“no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …”
Oh, yes. Afterward, the Preznit will get that serious, stern look and point the finger at the GOP for killing the option of public, non-electronic property records. Especially since he fought for the option it so fiercely. At least there will be a special approproation to help the county clerk’s offices pay for shredding and burning all the backward-looking paper records.
The Curmudgeon Says:
October 21st, 2010 at 9:47 pm
“But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.” ”
~The good associate professor of law is surely aware that liberty interests enjoy far greater protections under the constititution than do property interests. Due process for the denial of property interests (think Kelo, e.g.) is far less stringent than due process for the denial of liberty interests (think Miranda and its progeny). I doubt anyone will seriously attempt to formulate an exclusionary rule for mortgage foreclosures, where the failure to submit a properly attested affidavit means the mortgage company is barred from admitting into evidence the promissory note. But that’s the reasonable view. And these are markedly unreasonable times. So, who knows?
franklin411 Says:
October 21st, 2010 at 9:52 pm
This is what happens to bad little Democrats who actually propose making Wall Street pay for the mess it created:
Wealthy financier is mysterious funder of ads attacking DeFazio
Robert Mercer, the co-CEO of one of the world’s largest hedge funds, is the mysterious donor who has been paying for $300,000 of attack ads aimed at Rep. Peter DeFazio, D-Ore.
http://blog.oregonlive.com/mapesonpolitics/2010/10/wealthy_financier_is_mysteriou.html
victor Says:
October 21st, 2010 at 9:53 pm
To Effective Demand,
Not a big deal? it is already a big deal and I suspect (because NOBODY knows for sure) it may get a great deal bigger. Remember when Ben Stein told us on national TV that the sub-prime mortgae “event” would blow over?
S Brennan Says:
October 21st, 2010 at 10:16 pm
Off topic, but food for thought…read it through, the punches get thrown at the end.
http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html
einniv Says:
October 21st, 2010 at 10:37 pm
I’ve been reading a lot of the blogging on the foreclosure mess. Every time I think I understand it fully something else comes up that makes me wonder if I do. Some of the reports make it sound like the whole idea of of MBS tranches is inherently illegal. Let me explain.
Take this excerpt from http://www.huffingtonpost.com/ellen-brown/foreclosuregate_b_752788.html
“The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default.”
So this sound to me like there would be no legal way to do tranches. Or at least no way to do it without breaking the chain of title or violating tax laws. The note must be in legal limbo until you know what tranche it goes in. And assigning it to the trust after the default will always be against REMIC tax rules.
Am I understanding this POV correctly? Was there some legal way these tranches could have been done?
VennData Says:
October 21st, 2010 at 10:53 pm
I wonder what the GOP media machine, Fox news and the World-Wide Chamber of Commerce would say if instead of a moratorium on foreclosures …
…say they had a moratorium on… uh… I dunno… say on oil drilling or something. I wonder if they would be so blasé about that? It would be interesting to know. Anyone have any idea?
The Curmudgeon Says:
October 21st, 2010 at 11:02 pm
I thought all hedge fund managers were dem’s?!? didn’t they line Obama’s pockets in 2008? What, they’re just whores like the rest of ‘em, licking their finger and pointing it in the air to see which way the political wind is blowing?
GeorgeBurnsWasRight Says:
October 21st, 2010 at 11:06 pm
There was a report on NPR today of yet another part of the foreclosure mess. In Florida they have something called the “Rocket Docket”, courts that handle 200 foreclosures a day. The judges admit they don’t have time to either look at the documents or listen to arguments. So you can imagine the level of “justice” being dispensed.
call me ahab Says:
October 21st, 2010 at 11:16 pm
GeorgeBurns-
and we care why? the people that aren’t paying should stay? what’s your point exactly (as if anyone cares)
VennData-
one trick pony with nothing to say (over and over and over again)-
push on to political blogs
S Brennan Says:
October 21st, 2010 at 11:30 pm
http://www.cleveland.com/business/index.ssf/2010/10/mortgage_foreclosure_uproar_sw.html
Petey Wheatstraw Says:
October 21st, 2010 at 11:37 pm
Strange that those of the opinion that this situation will have a limited and manageable but perhaps costly resolution, seem to completely discount the criminality of what has taken place. Is the idea that this industry is immune from prosecution a given? If it is, we’re more screwed than I thought, and y’all know how screwed I think we are.
wunsacon Says:
October 21st, 2010 at 11:38 pm
I’ve had this happen to me, too!
http://www.zerohedge.com/article/open-letter-secs-worthless-enforcement-division
jimh Says:
October 22nd, 2010 at 12:02 am
i was just reading farmera1′s reference to the baseline scenario’s treatment (great blog) of the this subject…
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
While I would join many other investors in the n/a mbs mkt in celebration if a significant amount of loans out of these deals were put back to the issuers, the reality is that the big originators/issuers/banks have the upper hand here. They will drag this fight out on a loan by loan basis. I don’t care how big you are (ny fed, pimco, blackrock, etc.), the diligence expense is prohibitive. You have to understand how time intensive a project like this would be.
BofA seems like it is in serious trouble, and they will probably settle for some huge amount of money, but the idea of fighting them loan by loan is not remotely feasible. What gets missed in this discussion is that money managers, hedge funds, insurance companies, etc should have done more diligence at before purchasing said security. While the big IBs certainly ran with market, buyers had access to the loan tapes. They had the prospectus. And they got greedy and it all fell apart. It’s a disgrace that that the big $mm are not on media trial right next to the head of GS. The “buy” side is just as much to blame as the big IBs. But that wont happen. Such is life.
Effective Demand Says:
October 22nd, 2010 at 12:22 am
Been going around looking at the RE investor boards, none of the trustee sale buyers are having trouble getting title insurance…
27 Responses to “Stern Foreclosure Factory: $260 Million in 2009 Revenues”
wunsacon Says:
October 21st, 2010 at 10:34 am
I suspect Shakespeare’s Henry VI said it best.
http://www.spectacle.org/797/finkel.html
NoKidding Says:
October 21st, 2010 at 10:36 am
“The goal here was not to pursue prosecute foreclosures on behalf of a banking client; rather it was to crank out the assembly line factory to grab 100s of millions of dollars, legally or illegally, consequences be damned.”
Intuition tells me your assessment is correct, but nothing in the quoted bit of that story did.
We’re in a foreclosure boom and there’s work involved. Somebody has to do it.
wunsacon Says:
October 21st, 2010 at 10:36 am
Er, “Dick The Butcher”…
Mannwich Says:
October 21st, 2010 at 10:38 am
Oh, it’s 100%. In the grand scheme of things, he’s such a minor player and the perfect fall guy for Eric Holder.
rktbrkr Says:
October 21st, 2010 at 10:42 am
There’s never just 1 rat, there were a handful of FL lawfirms like this, Stern was just the biggest rat. So does the florida court system throw out all the work done by Stern and similar firms? A couple hundred thousand do-overs?
http://wiki.answers.com/Q/Which_countries_have_no_extradition_treaties_with_the_United_States
rktbrkr Says:
October 21st, 2010 at 10:47 am
In New York, attorneys already have an obligation to ensure that the documents they present to the court are valid, but New York Chief Judge Jonathan Lippman said having them sign something affirming that all papers got a proper review will hold them accountable like never before.
“We want to make sure that everyone is focusing like a laser on these particular types of proceedings,” he said. “It puts them on notice. That’s what this is all about. We all have to make doubly sure that we are doing what we should be doing in the first place.”
The rule requiring a signed affirmation applies to both new cases and the 78,000 foreclosure actions already under way in New York courts.
Lawyers handling pending foreclosure actions will probably need to go back to their clients and verify that all proper steps were followed, Lippman said. The form created by the court requires the lawyers to give the name of the bank employee who affirmed that the records were accurate and the date the conversation took place.
The president of the New York State Bar Association, Stephen Younger, issued a statement praising the new rule. “The chief judge has taken swift steps to address a nationwide problem in foreclosure actions,” he said.
BennyProfane Says:
October 21st, 2010 at 10:49 am
I might even bet you that he doesn’t see any type of prosecution at all – maybe a nice, 5-10% deal, a la Mozilo, that the company can write off somehow offshore.
rktbrkr Says:
October 21st, 2010 at 10:50 am
Start the music, it’s time for Musical Chairs!
BofA Sues FDIC Over Taylor Bean Mortgage Losses
Bank of America, the largest U.S. bank, has sued the Federal Deposit Insurance Corp over $1.75 billion of investor losses mainly from the 2009 collapses of a large regional bank and large mortgage lender.
The lawsuit concerns the FDIC’s role as receiver for the main banking unit of Alabama’s Colonial BancGroup, and the implosion of Taylor, Bean & Whitaker Mortgage, where federal prosecutors say a multi-billion dollar mortgage fraud took place. Bank of America is trustee for notes issued by Taylor Bean’s Ocala Funding unit.
SnIp
RiskAverseAlert Says:
October 21st, 2010 at 10:59 am
I’ll take the under. This thing is so bad the President hasn’t even the clout to convince the Sheriff of his own Cook County that the recent voluntary foreclosure moratorium was the result of mere “technicalities.”
Sechel Says:
October 21st, 2010 at 11:20 am
David Stern knew what he was doing(to a point). He appointed four of the seven directors. It’s made clear that shareholders should find it difficult if not impossible to take disciplinary action against him, not withstanding any fiduciary obligations they may have in this respect.
AHodge Says:
October 21st, 2010 at 11:40 am
no shortables no options
i see it down abt 6% today
JerseyCynic Says:
October 21st, 2010 at 11:48 am
it’s perfect Mannwich
I’m always most cynical when individual assholes are singled out to cover for industry wide corruption.
OH good!! now we don’t have to dig deeper and run the whole lot of f%$kers out of town!
what happens when the next shit storm hits ? — student loan debt has now surpassed credit card debt
I wonder how many of our big bailed out banks set up their own back door foreclosure mills YEARS ago when they were setting the stage for this round in the boom/bust cycle of real estate
Sechel Says:
October 21st, 2010 at 11:49 am
http://www.law.com/jsp/article.jsp?id=1202473607711&Fla_Foreclosure_Firm_Undergoes_ShakeUp_as_Chairman_Vacates_Post
abandon ship!
Several top executives of Florida’s largest foreclosure processing company resigned and its chairman was replaced Tuesday, amid a national controversy over questionable foreclosure filings and investigations into possible wrongdoing by lenders, loan servicers and law firms.
Plantation, Fla.-based DJSP Enterprises has been impacted by the temporary suspension of foreclosure filings by some of the nation’s largest lenders and some industry insiders are questioning the future of the business.
The company announced Tuesday that Chairman David Stern would step down, take the new title of president and remain the CEO. Stephen Bernstein will take over as chairman.
DL Says:
October 21st, 2010 at 12:10 pm
I just want to know why the company is incorporated in the Virgin Islands.
JerseyCynic Says:
October 21st, 2010 at 12:43 pm
oh what a fabulous story!!!
….In a nod to his foreclosure work, according to the acquaintance, Mr. Stern mused about possibly naming the larger yacht Su Casa Es Mi Casa — “Your House Is My House.” But his wife and others cautioned against it, according to this acquaintance, and Mr. Stern named the boat “Misunderstood.” Mr. Stern denies that he considered the “Su Casa Es Mi Casa” name.
http://www.nytimes.com/2010/09/05/business/05house.html?_r=1&pagewanted=5
**wunsacon
great link ! great piece
I see Mr. Wallace at the ethical spectacle has the same fears as I do about the impending student loan bailout
http://www.spectacle.org/1010/rags.html
“Banks which lend these amounts of money for education are engaging in many cases in exactly the behavior of banks which loaned absurd amounts of money for real estate purchases by people who would never be able to repay it unless a miracle occurred. Such lending is doubly irresponsible, putting the bank at risk and ultimately forcing bail-outs with public money, but also encouraging individuals to engage in risky behavior. The spectacle of young people starting their adult lives as much as a quarter million dollars underwater is very disturbing. The role of government in sponsoring, encouraging and guaranteeing student loans also needs to be re-examined. A government role which made sense when people were graduating with $20,000 in debt looks entirely different when the number is ten times as much.”
wally Says:
October 21st, 2010 at 12:54 pm
Since these guys – and there are a lot of them recently – end up keeping most of their gains they are business heroes in this country.
Unsympathetic Says:
October 21st, 2010 at 1:10 pm
Barry, he will not be spending any time in jail.
He will, however, buy late-night TV infomercial time describing how you can get rich quick using his tried and true techniques.
b_thunder Says:
October 21st, 2010 at 2:14 pm
My odds on David Stern’s future:
5% – he’ll pay at most 10% of his gains as a fine, and will lose law license for at most 3 years w/out admitting anything
25% – he’ll become a billionaire suing evil banks on behalf of foreclosed homeowners
20% – he’ll become a billionaire AND in 4 years will be elected the Governor of Florida
60% – he will be the next CFTC judge
willid3 Says:
October 21st, 2010 at 3:17 pm
Yves smith has this take
t take a fair degree of skill to pen a journalistic story that hews to the appearance of objectivity yet is out to sell a point of view.
The lead article in the Journal tonight, “Niche Lawyers Spawned Housing Fracas” telegraphs its bias in its headline: the foreclosure crisis is merely the creation of two bit lawyers who by implication don’t know what they are doing, and are pumping trivial issues up for their own enrichment, with the housing market as collateral damage.
Funny that anyone can think this spin is remotely true. The fact that solo practitioner lawyers could have such an impact on the system is not proof that they are miscreants, as the Journal implies. It is that the foundation of mortgage securitzations is rotten as a result of widespread abuses, first on the origination end, later in the foreclosure process. These small firm players are using the legal equivalent of toothpicks; the fact that their efforts have destablized the foundation of the residential mortgage backed securities market is tangible proof that they were imperiled to begin with.
Let’s parse some sections of the article, starting from the top:
The paperwork mess muddying home foreclosures erupted last month. But the legal strategy behind it traces to a lawyer’s gambit in 2006 that has helped keep one couple in their home six years beyond their last mortgage payment.
Not bad in the drive-by shooting category. The foreclosure crisis, which is the result of what increasingly appears to be a widespread failure to convey borrower promissory notes and related liens properly to the the securitization entity is reduced to a mere “paperwork mess”. So the idea that the shortcomings are serious is dismissed. Similarly, the efforts of various attorneys who have been chipping away as aspects of this problem are incorrectly lumped together, as if there was really only a single, simpleminded strategy, a mere “lawyer’s gambit” which by implication, was copied by other low life attorneys. And this effort was to keep a deadbeat borrower illegitimately housed.
Funny, this James Kowalski, the attorney behind this dastardly act, did what members of the bar normally do (at least if they are competent): they look for weaknesses in fact and law in the case presented by the other side. And part of the process involves, stunningly enough, depositions! Kowalski’s evil deed was that he was early, perhaps first, to find a robo signer, back in 2006.
But robo signers are an abuse of court process. You can’t have it one way, and say you believe in law and order and the sanctity of contract, and then say it’s just fine to abuse legal procedures if you are pretty sure you are right. Well you can’t unless you are the Journal, skilled in the art of defending plutocrats, no matter how much in the way of mental gymnastics that might require.
But this implicit focus on robo signers (which admittedly did bring the bigger issue of foreclosure abuses into the limelight) again is a convenient diversion, since the robo signer is far from the most serious problem now affecting the foreclosure process.
Back to the Journal’s account:
It was a first step in the growth of a legal sub-specialty called foreclosure defense that has sown confusion and turmoil in the housing market. Lawyers in the field now commonly use a technique more identified with corporate litigation: probing depositions, designed to uncover any lapses in judgment, flaws in a process or wrongdoing. In the 23 states where foreclosures entail a court hearing, the bank may be ordered to pay the homeowner’s legal bill if a lawyer can convince a judge that the bank has submitted false documents, such as affidavits saying employees personally reviewed the details of loans when they didn’t.
Huh? With all due respect, this is the first time I’ve heard of this “foreclosure defense” sub specialty. Please. These are consumer lawyers, and some of them have gotten good enough at fighting foreclosures that they do it full time. But “sub-speciality” implies a degree of fomalization and coordination of effort that isn’t there. Oh, and the Journal deems it to be bad form for mere consumer lawyers to use the techniques of decent trial lawyers (only corporations are supposed to have access to competent litigators, it seems).
But it gets even better. The Journal couldn’t be bothered letting facts get in the way of a tidy narrative. Kowalski weighed in in the comment section of the article:
Despite my best efforts to answer all of Mr. Whelan’s questions, the article contains a number of misstatements. First, Mr. and Mrs. Jackson did not face a foreclosure hearing after simply stopping payment – they paid the entire amount due per a statement sent to them by GMAC, and paid by certified check. GMAC mistakenly refused the check, alleging it was an NSF payment (not possible with certified funds), then placed the couple in foreclosure. I was simply trying to track the facts of the payment by deposing a witness who had sworn in court documents that she had reviewed the entire file and was familiar with the payment history, when, as it turned out, she was not only not familiar with the payment history, but the substance of her entire affidavit was false, including the allegation that the affidavit was sworn to in front of a notary. These were substantive questions I needed answers to – not an excuse for a delay. Further, the judge did not “throw out the case” – it is still pending, with GMAC still suing the Jacksons, years later.
I, and most of my fellow consumer attorneys who are members of the National Association of Consumer Advocates, do not raise these issues for delay – we raise them because we all have cases (this is the bulk of my foreclosure defense practice) where all or part of the foreclosure is purely the fault of the servicer or mill law firm – from homeowners whose payments were misrouted by the servicer, to servicers who simply changed the address of the property and then force-placed flood insurance, to servicers who ignore insurance plans the borrowers paid for (all examples from my cases) to servicers who refuse to even accept HAMP-type loan modification documents – all are substantive, real problems that were not the fault of the borrowers. The deposition was, in the Jackson case, merely an effort to get at the truth of the reversed payment – instead, GMAC admitted to wholesale manufacture of court documents, then promised to fix the practice, then continued that practice unabated for 4 more years.
Most of what we have uncovered are criminal violations – false testimony under oath, notary fraud, etc. These problems will continue until the attorneys general who have formed a task force recognize and confront the significant criminal violations, and will continue unless we have real reform of the servicing practices that emphasize speed over the truth.
Not a single one of my clients wants (or deserves) a free house. What they want (and deserve) is for their voices to be heard, and, for better or worse, consumer lawyers are the only ones capable of achieving this at the moment.
Oh, and it would have been nice if Mr. Whelan had taken the time to spell my name correctly throughout the article.
Yves here. Servicer abuses that result in foreclosures are simply not getting the media attention they deserve. The prevailing perception, and the party line from the banks, is that the borrowers are all deadbeats and therefore any efforts to aid them are simply an abuse of court processes.
But servicers are modern judges, juries, and to the extent they can railroad foreclosures through, executioners. When a payment arrives after the due date (and servicers have been found to hold checks to render payments late), under RESPA and the bank’s agreement with the borrower, the bank is supposed to apply payments to principal and interest first, then any late fees. But if you incur a late fee, they instead apply the payment to that first, which makes your regular monthly payment come up short. So then you get an insufficiency fee.
Servicers don’t send detailed monthly statements like credit card companies, telling you how your payments were applied. This process of misapplication of payment and failure to notify borrowers when fees have been incurred guarantees that the charges will balloon. It isn’t until months have passed and the extra balance become large, say $2000 or more, that the homeowner realizes they are under water according to their servicer, even though they have made all their regular payments. Many lack the extra money to clear out all these largely bogus fees; other have tried fighting, only to find the servicer won’t budge, and they rack up more charges, which forces them either to capitulate or lose their home.
Nevertheless, the Journal runs the party line that nothing is wrong with the foreclosure machinery, when the intense pushback suggests otherwise, and brandishes the usual financial services industry threat: hurt us, and it will hurt you even more:
“There is a movement afoot by [state attorneys general] and private lawyers to use technical problems to avoid foreclosures where the borrower is in default and the foreclosure is in all respects substantively appropriate. These are lawyers where the best job they can do for their clients is to keep them in their houses without paying the mortgage,” said Andrew L. Sandler, a Washington securities lawyer who represents banks and firms that service mortgages.
Mr. Sandler added: “The class-action lawyers are swarming around this issue right now, because they perceive that it can result in significant fees for them. But they’re not well-founded cases, and the banks will vigorously contest any class action around these issues.”
The big risk to banks and the housing market, indeed, is that more homeowners and lawyers come to see such cases as attractive to fight.
It’s certainly fair to say some legal actions are based on weak theories; we dissed the widely touted investor suit against Countrywide on mortgage putbacks yesterday, and have selectively argued against other legal theories. But some of these cases are based on careful study of real abuses and are attacking improper, potentially fraudulent actions. This is one of the few checks we have left on misuse of power, but the powers that be want the public to see these legal challenges as a threat to their financial security and accept compromises, just as we have been forced to accept diminished civil liberties and ever more intrusive surveillance in the name of personal security.
One encouraging sign: I didn’t take a careful tally, but despite the Journal’s heavy spin on this story, its comment section seemed to be running at only a 50% acceptance of its position. The more the banks try to press the merits of their case on dubious evidence, the more the public is coming to realize they are not to be believed.
Topics: Banana republic, Banking industry, Credit markets, Legal, Media watch, Politics, Real estate, Social values
they aren’t all dead beats. some got their the new fangled way. the servicer did it
not-affiliated-with-Wall Street Says:
October 21st, 2010 at 3:39 pm
I wish you wouldn’t throw in that stuff about the graybar hotel. It’s a depressing reminder that these kinds of people never go to jail. They just get richer.
beaufou Says:
October 21st, 2010 at 5:12 pm
JCynic.
I would suggest a name for Diamond Dave’s new boat: my ass is grass.
People are talking, he is going down.
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
Mark E Hoffer Says:
October 21st, 2010 at 8:52 pm
I don’t knoe about all y’all, though, there’s something about ‘limited hangout’ that I’d be looking into..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=limited+hang-out
Mark E Hoffer Says:
October 21st, 2010 at 8:54 pm
and, this, ‘knoe’, was a key-stroke off, as in ‘know’..
Gracias~! QWERTY!
willid3 Says:
October 21st, 2010 at 9:33 pm
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
nope.
they just want to make sure we know.
dsawy Says:
October 22nd, 2010 at 3:28 am
What is the statute of limitations on what he has done? That’s the biggest question I have before taking an over/under on this.
Hot Links: Social Media Guru The Reformed Broker Says:
October 22nd, 2010 at 7:19 am
How to pimp hard amidst the ruins of Foreclosure Florida. (TBP)
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49 Responses to “Mortgage Madness Linkfest”
Robert M Says:
October 21st, 2010 at 4:53 pm
I think you published the first part two days ago. This is his second piece on the subject.
More on Why the PIMCO, BlackRock, Freddie, NY Fed Letter to Countrywide on Putbacks Is Way Overhyped
I still laying odds on the perp walk.
rktbrkr Says:
October 21st, 2010 at 5:02 pm
How could Donovan say foreclosure problems weren’t systemic and then admit to Jim Lehrer that they didn’t know the extent of the problems yet? Not very truthy.
Soylent Green Is People Says:
October 21st, 2010 at 5:03 pm
This was an interesting read:
http://www.reuters.com/article/idUSTRE69J6F520101020
Effective Demand Says:
October 21st, 2010 at 5:05 pm
I really have a hard time seeing how the mortgage issue will be a big deal in non-judicial foreclosure states.
In judicial foreclosure states the homeowner has to actively defend themselves unless the courts start becoming activist.
Both require en-masse participatation by the homeowners in bringing or responding to a lawsuit AND for the servicers processes to be so messed up they can’t ever produce the note.
I can see it happening in the margins, but not en-masse. And thus it will be a relative non-event as far as keeping people who aren’t paying their mortgages in their homes. It will be an event played out over a very long time between bondholders, servicers and originators and it will cost billions over many years. But in the end it’s sort of a “meh” event in my view. The processes will be fixed and some additional losses not currently reserved for will be taken, spread out over time.
I do see a change watching RE listings in my local area, in the last few days I can tell a lot of short sales that had been stalled have been noted that they are getting responses from the bank. So at least over the short term the banks are shifting resources into that department.
AHodge Says:
October 21st, 2010 at 5:16 pm
i cut the money shot from this FT earlier
http://ftalphaville.ft.com/blog/2010/10/21/378606/sarbanes-oxley-meets-servicer-execs/
Roger Bigod Says:
October 21st, 2010 at 5:56 pm
Why should I waste my beautiful mind on something like this? It will all be taken care of after the election in the Homeland Property Title Rectification and Forward Looking Respect for Law Act of 2010.
Mark E Hoffer Says:
October 21st, 2010 at 5:57 pm
the utter (f******) Bilge that passes for the MSM is enough to give one Zebra Mussels..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Zebra+Mussels
tyaresun Says:
October 21st, 2010 at 6:02 pm
Consumer complaints about Provident and Associates:
http://www.consumeraffairs.com/finance/provident_funding_associates.html
These guys are not much better than the others in the limelight.
Mark E Hoffer Says:
October 21st, 2010 at 6:04 pm
Roger,
no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …
suspiciously similar to http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=the+passing+of+the+Federal+Reserve+Act+of+1913
‘all clouds’-link
http://search.yippy.com/search?v%3aproject=clusty&v%3afile=viv_7jKTyb&sec=1287698174&v%3astate=%28root-0-999%29%7croot&v%3aframe=tree&
mavenwatch Says:
October 21st, 2010 at 6:28 pm
“An attorney from Portland is getting national attention after uncovering the faulty methods banks were using to review foreclosure documents.”
http://www.wcsh6.com/news/story.aspx?storyid=133138&catid=2
watch video to right from link above
“DENMARK, Maine (NEWS CENTER) — An attorney from Portland is getting national attention after uncovering the faulty methods banks were using to review foreclosure documents.
Thomas Cox volunteers at Pine Tree Legal, giving free legal advice to people facing foreclosure. While reviewing Nicole Bradbury of Denmark’s foreclosure documents, he realized they were signed by someone with the title “limited signing officer,” meaning the person’s only job was to sign the papers. Cox arranged a deposition with the signer, and he admitted to signing hundreds of foreclosure documents without ever reading them. Now the nation’s attorneys general are investigating. Banks have responded, saying that the problems are technical, and the facts in all of these cases are true. Cox says that answer is unacceptable.
“The message that the industry’s putting out that these are just technical mistakes are a real red herring to the fact that they grossly abused the American judicial system by presenting many, many thousands of false affidavits to courts all over the country that judges believed to be true and entered judgements, taking away homes based upon them” Cox told NEWS CENTER.
Cox says Nicole Bradbury is still living in her house. GMAC filed a motion to dismiss her foreclosure to fix the problems and start the process over again. An attorney representing GMAC and Fannie Mae, the mortgage company that owns Bradbury’s loan, declined to comment because the foreclosure case is still pending.”
mote Says:
October 21st, 2010 at 6:30 pm
From “A question of property rights,” excerpted quotefest follows.
Objects in the rear view mirror:
Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”
Nothing but Blue Skies:
Joseph Mason, a finance professor at Louisiana State University, said concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.
Houston, we have a problem:
Some analysts are not sure that banks can proceed so freely. Katherine Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.
Tax man’s whatif:
Robert Willens, a tax expert, said documentation issues had created potentially severe tax problems for investors in mortgage securities and “there is enough of a question here that the courts might well have to resolve the issue.”
Now investors who bought mortgage trusts – investment vehicles composed of mortgages – are wondering if the loans inside them were recorded properly. If not, the tax advantages of the trusts could be wiped out, leaving mortgage securities investors with significant tax bills.
Guantanamo Bay revisited:
Lenders and their representatives have sought to minimize the significance of robo-signing and, while acknowledging legal lapses in how they documented loans, have argued that foreclosures should proceed anyway. After all, the lenders say, the homeowners owe the money.
But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.”
http://www.chron.com/disp/story.mpl/business/7256693.html
Maseratij Says:
October 21st, 2010 at 6:38 pm
” Regulator Says Fannie, Freddie Cost at Mercy of Economy.. To be filed under Duh! ”
I keep coming back to this droll of a subject for your wit BR. Your youthful character is evident in your exuberance and cultural relevance. If your a Dad, I bet your a good one and know your children well, if not you will be.
Swarm The Banks Says:
October 21st, 2010 at 7:03 pm
Forcing people to fall behind on their mortgages before being eligible for HAMP, even though this triggers parallel foreclosure and hastens the loss of the property is beyond a smoking gun, it’s a stinking gun because it’s been going on for a year and a half now.
http://www.parallelforeclosure.com
farmera1 Says:
October 21st, 2010 at 7:04 pm
And from the Baseline Scenario we have this:
http://baselinescenario.com/2010/10/16/once-more-into-the-breach/#more-8112
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
“Let’s hope there’s a better explanation than “we have created [our biggest banks], and we’re sort of past that point, and I think that in some sense, the genie’s out of the bottle.”
ACS Says:
October 21st, 2010 at 7:05 pm
Every time a bank is shut down, a law school should be shut as well.
Vilgrad Says:
October 21st, 2010 at 7:52 pm
Gonzalo Lira, who’s post was stolen by David Kotok as his own. Real lowlife move.
http://gonzalolira.blogspot.com/2010/10/mulligan-mortgagesthe-banks-only-way.html
philipat Says:
October 21st, 2010 at 8:31 pm
Barry, what became of Parts 3-5 in the series “Forclosure Fraud for Dummies”?
dss Says:
October 21st, 2010 at 8:32 pm
@ACS,
Great observation.
Ltdata Says:
October 21st, 2010 at 8:59 pm
File this under Law of unintended results: Quite frankly, even if a megabank, etc. does not know their exposure – their auditor WILL find some way to sample the mess, quantify it for the financials, and bill, bill, bill. If they thought shoddy was cheap, wait til they get the audit bill.
Roger Bigod Says:
October 21st, 2010 at 9:30 pm
Mark E Hoffer
“no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …”
Oh, yes. Afterward, the Preznit will get that serious, stern look and point the finger at the GOP for killing the option of public, non-electronic property records. Especially since he fought for the option it so fiercely. At least there will be a special approproation to help the county clerk’s offices pay for shredding and burning all the backward-looking paper records.
The Curmudgeon Says:
October 21st, 2010 at 9:47 pm
“But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.” ”
~The good associate professor of law is surely aware that liberty interests enjoy far greater protections under the constititution than do property interests. Due process for the denial of property interests (think Kelo, e.g.) is far less stringent than due process for the denial of liberty interests (think Miranda and its progeny). I doubt anyone will seriously attempt to formulate an exclusionary rule for mortgage foreclosures, where the failure to submit a properly attested affidavit means the mortgage company is barred from admitting into evidence the promissory note. But that’s the reasonable view. And these are markedly unreasonable times. So, who knows?
franklin411 Says:
October 21st, 2010 at 9:52 pm
This is what happens to bad little Democrats who actually propose making Wall Street pay for the mess it created:
Wealthy financier is mysterious funder of ads attacking DeFazio
Robert Mercer, the co-CEO of one of the world’s largest hedge funds, is the mysterious donor who has been paying for $300,000 of attack ads aimed at Rep. Peter DeFazio, D-Ore.
http://blog.oregonlive.com/mapesonpolitics/2010/10/wealthy_financier_is_mysteriou.html
victor Says:
October 21st, 2010 at 9:53 pm
To Effective Demand,
Not a big deal? it is already a big deal and I suspect (because NOBODY knows for sure) it may get a great deal bigger. Remember when Ben Stein told us on national TV that the sub-prime mortgae “event” would blow over?
S Brennan Says:
October 21st, 2010 at 10:16 pm
Off topic, but food for thought…read it through, the punches get thrown at the end.
http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html
einniv Says:
October 21st, 2010 at 10:37 pm
I’ve been reading a lot of the blogging on the foreclosure mess. Every time I think I understand it fully something else comes up that makes me wonder if I do. Some of the reports make it sound like the whole idea of of MBS tranches is inherently illegal. Let me explain.
Take this excerpt from http://www.huffingtonpost.com/ellen-brown/foreclosuregate_b_752788.html
“The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default.”
So this sound to me like there would be no legal way to do tranches. Or at least no way to do it without breaking the chain of title or violating tax laws. The note must be in legal limbo until you know what tranche it goes in. And assigning it to the trust after the default will always be against REMIC tax rules.
Am I understanding this POV correctly? Was there some legal way these tranches could have been done?
VennData Says:
October 21st, 2010 at 10:53 pm
I wonder what the GOP media machine, Fox news and the World-Wide Chamber of Commerce would say if instead of a moratorium on foreclosures …
…say they had a moratorium on… uh… I dunno… say on oil drilling or something. I wonder if they would be so blasé about that? It would be interesting to know. Anyone have any idea?
The Curmudgeon Says:
October 21st, 2010 at 11:02 pm
I thought all hedge fund managers were dem’s?!? didn’t they line Obama’s pockets in 2008? What, they’re just whores like the rest of ‘em, licking their finger and pointing it in the air to see which way the political wind is blowing?
GeorgeBurnsWasRight Says:
October 21st, 2010 at 11:06 pm
There was a report on NPR today of yet another part of the foreclosure mess. In Florida they have something called the “Rocket Docket”, courts that handle 200 foreclosures a day. The judges admit they don’t have time to either look at the documents or listen to arguments. So you can imagine the level of “justice” being dispensed.
call me ahab Says:
October 21st, 2010 at 11:16 pm
GeorgeBurns-
and we care why? the people that aren’t paying should stay? what’s your point exactly (as if anyone cares)
VennData-
one trick pony with nothing to say (over and over and over again)-
push on to political blogs
S Brennan Says:
October 21st, 2010 at 11:30 pm
http://www.cleveland.com/business/index.ssf/2010/10/mortgage_foreclosure_uproar_sw.html
Petey Wheatstraw Says:
October 21st, 2010 at 11:37 pm
Strange that those of the opinion that this situation will have a limited and manageable but perhaps costly resolution, seem to completely discount the criminality of what has taken place. Is the idea that this industry is immune from prosecution a given? If it is, we’re more screwed than I thought, and y’all know how screwed I think we are.
wunsacon Says:
October 21st, 2010 at 11:38 pm
I’ve had this happen to me, too!
http://www.zerohedge.com/article/open-letter-secs-worthless-enforcement-division
jimh Says:
October 22nd, 2010 at 12:02 am
i was just reading farmera1′s reference to the baseline scenario’s treatment (great blog) of the this subject…
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
While I would join many other investors in the n/a mbs mkt in celebration if a significant amount of loans out of these deals were put back to the issuers, the reality is that the big originators/issuers/banks have the upper hand here. They will drag this fight out on a loan by loan basis. I don’t care how big you are (ny fed, pimco, blackrock, etc.), the diligence expense is prohibitive. You have to understand how time intensive a project like this would be.
BofA seems like it is in serious trouble, and they will probably settle for some huge amount of money, but the idea of fighting them loan by loan is not remotely feasible. What gets missed in this discussion is that money managers, hedge funds, insurance companies, etc should have done more diligence at before purchasing said security. While the big IBs certainly ran with market, buyers had access to the loan tapes. They had the prospectus. And they got greedy and it all fell apart. It’s a disgrace that that the big $mm are not on media trial right next to the head of GS. The “buy” side is just as much to blame as the big IBs. But that wont happen. Such is life.
Effective Demand Says:
October 22nd, 2010 at 12:22 am
Been going around looking at the RE investor boards, none of the trustee sale buyers are having trouble getting title insurance…
27 Responses to “Stern Foreclosure Factory: $260 Million in 2009 Revenues”
wunsacon Says:
October 21st, 2010 at 10:34 am
I suspect Shakespeare’s Henry VI said it best.
http://www.spectacle.org/797/finkel.html
NoKidding Says:
October 21st, 2010 at 10:36 am
“The goal here was not to pursue prosecute foreclosures on behalf of a banking client; rather it was to crank out the assembly line factory to grab 100s of millions of dollars, legally or illegally, consequences be damned.”
Intuition tells me your assessment is correct, but nothing in the quoted bit of that story did.
We’re in a foreclosure boom and there’s work involved. Somebody has to do it.
wunsacon Says:
October 21st, 2010 at 10:36 am
Er, “Dick The Butcher”…
Mannwich Says:
October 21st, 2010 at 10:38 am
Oh, it’s 100%. In the grand scheme of things, he’s such a minor player and the perfect fall guy for Eric Holder.
rktbrkr Says:
October 21st, 2010 at 10:42 am
There’s never just 1 rat, there were a handful of FL lawfirms like this, Stern was just the biggest rat. So does the florida court system throw out all the work done by Stern and similar firms? A couple hundred thousand do-overs?
http://wiki.answers.com/Q/Which_countries_have_no_extradition_treaties_with_the_United_States
rktbrkr Says:
October 21st, 2010 at 10:47 am
In New York, attorneys already have an obligation to ensure that the documents they present to the court are valid, but New York Chief Judge Jonathan Lippman said having them sign something affirming that all papers got a proper review will hold them accountable like never before.
“We want to make sure that everyone is focusing like a laser on these particular types of proceedings,” he said. “It puts them on notice. That’s what this is all about. We all have to make doubly sure that we are doing what we should be doing in the first place.”
The rule requiring a signed affirmation applies to both new cases and the 78,000 foreclosure actions already under way in New York courts.
Lawyers handling pending foreclosure actions will probably need to go back to their clients and verify that all proper steps were followed, Lippman said. The form created by the court requires the lawyers to give the name of the bank employee who affirmed that the records were accurate and the date the conversation took place.
The president of the New York State Bar Association, Stephen Younger, issued a statement praising the new rule. “The chief judge has taken swift steps to address a nationwide problem in foreclosure actions,” he said.
BennyProfane Says:
October 21st, 2010 at 10:49 am
I might even bet you that he doesn’t see any type of prosecution at all – maybe a nice, 5-10% deal, a la Mozilo, that the company can write off somehow offshore.
rktbrkr Says:
October 21st, 2010 at 10:50 am
Start the music, it’s time for Musical Chairs!
BofA Sues FDIC Over Taylor Bean Mortgage Losses
Bank of America, the largest U.S. bank, has sued the Federal Deposit Insurance Corp over $1.75 billion of investor losses mainly from the 2009 collapses of a large regional bank and large mortgage lender.
The lawsuit concerns the FDIC’s role as receiver for the main banking unit of Alabama’s Colonial BancGroup, and the implosion of Taylor, Bean & Whitaker Mortgage, where federal prosecutors say a multi-billion dollar mortgage fraud took place. Bank of America is trustee for notes issued by Taylor Bean’s Ocala Funding unit.
SnIp
RiskAverseAlert Says:
October 21st, 2010 at 10:59 am
I’ll take the under. This thing is so bad the President hasn’t even the clout to convince the Sheriff of his own Cook County that the recent voluntary foreclosure moratorium was the result of mere “technicalities.”
Sechel Says:
October 21st, 2010 at 11:20 am
David Stern knew what he was doing(to a point). He appointed four of the seven directors. It’s made clear that shareholders should find it difficult if not impossible to take disciplinary action against him, not withstanding any fiduciary obligations they may have in this respect.
AHodge Says:
October 21st, 2010 at 11:40 am
no shortables no options
i see it down abt 6% today
JerseyCynic Says:
October 21st, 2010 at 11:48 am
it’s perfect Mannwich
I’m always most cynical when individual assholes are singled out to cover for industry wide corruption.
OH good!! now we don’t have to dig deeper and run the whole lot of f%$kers out of town!
what happens when the next shit storm hits ? — student loan debt has now surpassed credit card debt
I wonder how many of our big bailed out banks set up their own back door foreclosure mills YEARS ago when they were setting the stage for this round in the boom/bust cycle of real estate
Sechel Says:
October 21st, 2010 at 11:49 am
http://www.law.com/jsp/article.jsp?id=1202473607711&Fla_Foreclosure_Firm_Undergoes_ShakeUp_as_Chairman_Vacates_Post
abandon ship!
Several top executives of Florida’s largest foreclosure processing company resigned and its chairman was replaced Tuesday, amid a national controversy over questionable foreclosure filings and investigations into possible wrongdoing by lenders, loan servicers and law firms.
Plantation, Fla.-based DJSP Enterprises has been impacted by the temporary suspension of foreclosure filings by some of the nation’s largest lenders and some industry insiders are questioning the future of the business.
The company announced Tuesday that Chairman David Stern would step down, take the new title of president and remain the CEO. Stephen Bernstein will take over as chairman.
DL Says:
October 21st, 2010 at 12:10 pm
I just want to know why the company is incorporated in the Virgin Islands.
JerseyCynic Says:
October 21st, 2010 at 12:43 pm
oh what a fabulous story!!!
….In a nod to his foreclosure work, according to the acquaintance, Mr. Stern mused about possibly naming the larger yacht Su Casa Es Mi Casa — “Your House Is My House.” But his wife and others cautioned against it, according to this acquaintance, and Mr. Stern named the boat “Misunderstood.” Mr. Stern denies that he considered the “Su Casa Es Mi Casa” name.
http://www.nytimes.com/2010/09/05/business/05house.html?_r=1&pagewanted=5
**wunsacon
great link ! great piece
I see Mr. Wallace at the ethical spectacle has the same fears as I do about the impending student loan bailout
http://www.spectacle.org/1010/rags.html
“Banks which lend these amounts of money for education are engaging in many cases in exactly the behavior of banks which loaned absurd amounts of money for real estate purchases by people who would never be able to repay it unless a miracle occurred. Such lending is doubly irresponsible, putting the bank at risk and ultimately forcing bail-outs with public money, but also encouraging individuals to engage in risky behavior. The spectacle of young people starting their adult lives as much as a quarter million dollars underwater is very disturbing. The role of government in sponsoring, encouraging and guaranteeing student loans also needs to be re-examined. A government role which made sense when people were graduating with $20,000 in debt looks entirely different when the number is ten times as much.”
wally Says:
October 21st, 2010 at 12:54 pm
Since these guys – and there are a lot of them recently – end up keeping most of their gains they are business heroes in this country.
Unsympathetic Says:
October 21st, 2010 at 1:10 pm
Barry, he will not be spending any time in jail.
He will, however, buy late-night TV infomercial time describing how you can get rich quick using his tried and true techniques.
b_thunder Says:
October 21st, 2010 at 2:14 pm
My odds on David Stern’s future:
5% – he’ll pay at most 10% of his gains as a fine, and will lose law license for at most 3 years w/out admitting anything
25% – he’ll become a billionaire suing evil banks on behalf of foreclosed homeowners
20% – he’ll become a billionaire AND in 4 years will be elected the Governor of Florida
60% – he will be the next CFTC judge
willid3 Says:
October 21st, 2010 at 3:17 pm
Yves smith has this take
t take a fair degree of skill to pen a journalistic story that hews to the appearance of objectivity yet is out to sell a point of view.
The lead article in the Journal tonight, “Niche Lawyers Spawned Housing Fracas” telegraphs its bias in its headline: the foreclosure crisis is merely the creation of two bit lawyers who by implication don’t know what they are doing, and are pumping trivial issues up for their own enrichment, with the housing market as collateral damage.
Funny that anyone can think this spin is remotely true. The fact that solo practitioner lawyers could have such an impact on the system is not proof that they are miscreants, as the Journal implies. It is that the foundation of mortgage securitzations is rotten as a result of widespread abuses, first on the origination end, later in the foreclosure process. These small firm players are using the legal equivalent of toothpicks; the fact that their efforts have destablized the foundation of the residential mortgage backed securities market is tangible proof that they were imperiled to begin with.
Let’s parse some sections of the article, starting from the top:
The paperwork mess muddying home foreclosures erupted last month. But the legal strategy behind it traces to a lawyer’s gambit in 2006 that has helped keep one couple in their home six years beyond their last mortgage payment.
Not bad in the drive-by shooting category. The foreclosure crisis, which is the result of what increasingly appears to be a widespread failure to convey borrower promissory notes and related liens properly to the the securitization entity is reduced to a mere “paperwork mess”. So the idea that the shortcomings are serious is dismissed. Similarly, the efforts of various attorneys who have been chipping away as aspects of this problem are incorrectly lumped together, as if there was really only a single, simpleminded strategy, a mere “lawyer’s gambit” which by implication, was copied by other low life attorneys. And this effort was to keep a deadbeat borrower illegitimately housed.
Funny, this James Kowalski, the attorney behind this dastardly act, did what members of the bar normally do (at least if they are competent): they look for weaknesses in fact and law in the case presented by the other side. And part of the process involves, stunningly enough, depositions! Kowalski’s evil deed was that he was early, perhaps first, to find a robo signer, back in 2006.
But robo signers are an abuse of court process. You can’t have it one way, and say you believe in law and order and the sanctity of contract, and then say it’s just fine to abuse legal procedures if you are pretty sure you are right. Well you can’t unless you are the Journal, skilled in the art of defending plutocrats, no matter how much in the way of mental gymnastics that might require.
But this implicit focus on robo signers (which admittedly did bring the bigger issue of foreclosure abuses into the limelight) again is a convenient diversion, since the robo signer is far from the most serious problem now affecting the foreclosure process.
Back to the Journal’s account:
It was a first step in the growth of a legal sub-specialty called foreclosure defense that has sown confusion and turmoil in the housing market. Lawyers in the field now commonly use a technique more identified with corporate litigation: probing depositions, designed to uncover any lapses in judgment, flaws in a process or wrongdoing. In the 23 states where foreclosures entail a court hearing, the bank may be ordered to pay the homeowner’s legal bill if a lawyer can convince a judge that the bank has submitted false documents, such as affidavits saying employees personally reviewed the details of loans when they didn’t.
Huh? With all due respect, this is the first time I’ve heard of this “foreclosure defense” sub specialty. Please. These are consumer lawyers, and some of them have gotten good enough at fighting foreclosures that they do it full time. But “sub-speciality” implies a degree of fomalization and coordination of effort that isn’t there. Oh, and the Journal deems it to be bad form for mere consumer lawyers to use the techniques of decent trial lawyers (only corporations are supposed to have access to competent litigators, it seems).
But it gets even better. The Journal couldn’t be bothered letting facts get in the way of a tidy narrative. Kowalski weighed in in the comment section of the article:
Despite my best efforts to answer all of Mr. Whelan’s questions, the article contains a number of misstatements. First, Mr. and Mrs. Jackson did not face a foreclosure hearing after simply stopping payment – they paid the entire amount due per a statement sent to them by GMAC, and paid by certified check. GMAC mistakenly refused the check, alleging it was an NSF payment (not possible with certified funds), then placed the couple in foreclosure. I was simply trying to track the facts of the payment by deposing a witness who had sworn in court documents that she had reviewed the entire file and was familiar with the payment history, when, as it turned out, she was not only not familiar with the payment history, but the substance of her entire affidavit was false, including the allegation that the affidavit was sworn to in front of a notary. These were substantive questions I needed answers to – not an excuse for a delay. Further, the judge did not “throw out the case” – it is still pending, with GMAC still suing the Jacksons, years later.
I, and most of my fellow consumer attorneys who are members of the National Association of Consumer Advocates, do not raise these issues for delay – we raise them because we all have cases (this is the bulk of my foreclosure defense practice) where all or part of the foreclosure is purely the fault of the servicer or mill law firm – from homeowners whose payments were misrouted by the servicer, to servicers who simply changed the address of the property and then force-placed flood insurance, to servicers who ignore insurance plans the borrowers paid for (all examples from my cases) to servicers who refuse to even accept HAMP-type loan modification documents – all are substantive, real problems that were not the fault of the borrowers. The deposition was, in the Jackson case, merely an effort to get at the truth of the reversed payment – instead, GMAC admitted to wholesale manufacture of court documents, then promised to fix the practice, then continued that practice unabated for 4 more years.
Most of what we have uncovered are criminal violations – false testimony under oath, notary fraud, etc. These problems will continue until the attorneys general who have formed a task force recognize and confront the significant criminal violations, and will continue unless we have real reform of the servicing practices that emphasize speed over the truth.
Not a single one of my clients wants (or deserves) a free house. What they want (and deserve) is for their voices to be heard, and, for better or worse, consumer lawyers are the only ones capable of achieving this at the moment.
Oh, and it would have been nice if Mr. Whelan had taken the time to spell my name correctly throughout the article.
Yves here. Servicer abuses that result in foreclosures are simply not getting the media attention they deserve. The prevailing perception, and the party line from the banks, is that the borrowers are all deadbeats and therefore any efforts to aid them are simply an abuse of court processes.
But servicers are modern judges, juries, and to the extent they can railroad foreclosures through, executioners. When a payment arrives after the due date (and servicers have been found to hold checks to render payments late), under RESPA and the bank’s agreement with the borrower, the bank is supposed to apply payments to principal and interest first, then any late fees. But if you incur a late fee, they instead apply the payment to that first, which makes your regular monthly payment come up short. So then you get an insufficiency fee.
Servicers don’t send detailed monthly statements like credit card companies, telling you how your payments were applied. This process of misapplication of payment and failure to notify borrowers when fees have been incurred guarantees that the charges will balloon. It isn’t until months have passed and the extra balance become large, say $2000 or more, that the homeowner realizes they are under water according to their servicer, even though they have made all their regular payments. Many lack the extra money to clear out all these largely bogus fees; other have tried fighting, only to find the servicer won’t budge, and they rack up more charges, which forces them either to capitulate or lose their home.
Nevertheless, the Journal runs the party line that nothing is wrong with the foreclosure machinery, when the intense pushback suggests otherwise, and brandishes the usual financial services industry threat: hurt us, and it will hurt you even more:
“There is a movement afoot by [state attorneys general] and private lawyers to use technical problems to avoid foreclosures where the borrower is in default and the foreclosure is in all respects substantively appropriate. These are lawyers where the best job they can do for their clients is to keep them in their houses without paying the mortgage,” said Andrew L. Sandler, a Washington securities lawyer who represents banks and firms that service mortgages.
Mr. Sandler added: “The class-action lawyers are swarming around this issue right now, because they perceive that it can result in significant fees for them. But they’re not well-founded cases, and the banks will vigorously contest any class action around these issues.”
The big risk to banks and the housing market, indeed, is that more homeowners and lawyers come to see such cases as attractive to fight.
It’s certainly fair to say some legal actions are based on weak theories; we dissed the widely touted investor suit against Countrywide on mortgage putbacks yesterday, and have selectively argued against other legal theories. But some of these cases are based on careful study of real abuses and are attacking improper, potentially fraudulent actions. This is one of the few checks we have left on misuse of power, but the powers that be want the public to see these legal challenges as a threat to their financial security and accept compromises, just as we have been forced to accept diminished civil liberties and ever more intrusive surveillance in the name of personal security.
One encouraging sign: I didn’t take a careful tally, but despite the Journal’s heavy spin on this story, its comment section seemed to be running at only a 50% acceptance of its position. The more the banks try to press the merits of their case on dubious evidence, the more the public is coming to realize they are not to be believed.
Topics: Banana republic, Banking industry, Credit markets, Legal, Media watch, Politics, Real estate, Social values
they aren’t all dead beats. some got their the new fangled way. the servicer did it
not-affiliated-with-Wall Street Says:
October 21st, 2010 at 3:39 pm
I wish you wouldn’t throw in that stuff about the graybar hotel. It’s a depressing reminder that these kinds of people never go to jail. They just get richer.
beaufou Says:
October 21st, 2010 at 5:12 pm
JCynic.
I would suggest a name for Diamond Dave’s new boat: my ass is grass.
People are talking, he is going down.
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
Mark E Hoffer Says:
October 21st, 2010 at 8:52 pm
I don’t knoe about all y’all, though, there’s something about ‘limited hangout’ that I’d be looking into..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=limited+hang-out
Mark E Hoffer Says:
October 21st, 2010 at 8:54 pm
and, this, ‘knoe’, was a key-stroke off, as in ‘know’..
Gracias~! QWERTY!
willid3 Says:
October 21st, 2010 at 9:33 pm
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
nope.
they just want to make sure we know.
dsawy Says:
October 22nd, 2010 at 3:28 am
What is the statute of limitations on what he has done? That’s the biggest question I have before taking an over/under on this.
Hot Links: Social Media Guru The Reformed Broker Says:
October 22nd, 2010 at 7:19 am
How to pimp hard amidst the ruins of Foreclosure Florida. (TBP)
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Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
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Fox <b>News</b> Fair And Balanced | MSNBC Political coverage | Mediaite
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
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Following CULV notebooks, Tonino Lamborghini releases in Hong Kong its Spyder line of luxury mobile phones. There are six models, S-600, S-610, S-620,
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Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
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49 Responses to “Mortgage Madness Linkfest”
Robert M Says:
October 21st, 2010 at 4:53 pm
I think you published the first part two days ago. This is his second piece on the subject.
More on Why the PIMCO, BlackRock, Freddie, NY Fed Letter to Countrywide on Putbacks Is Way Overhyped
I still laying odds on the perp walk.
rktbrkr Says:
October 21st, 2010 at 5:02 pm
How could Donovan say foreclosure problems weren’t systemic and then admit to Jim Lehrer that they didn’t know the extent of the problems yet? Not very truthy.
Soylent Green Is People Says:
October 21st, 2010 at 5:03 pm
This was an interesting read:
http://www.reuters.com/article/idUSTRE69J6F520101020
Effective Demand Says:
October 21st, 2010 at 5:05 pm
I really have a hard time seeing how the mortgage issue will be a big deal in non-judicial foreclosure states.
In judicial foreclosure states the homeowner has to actively defend themselves unless the courts start becoming activist.
Both require en-masse participatation by the homeowners in bringing or responding to a lawsuit AND for the servicers processes to be so messed up they can’t ever produce the note.
I can see it happening in the margins, but not en-masse. And thus it will be a relative non-event as far as keeping people who aren’t paying their mortgages in their homes. It will be an event played out over a very long time between bondholders, servicers and originators and it will cost billions over many years. But in the end it’s sort of a “meh” event in my view. The processes will be fixed and some additional losses not currently reserved for will be taken, spread out over time.
I do see a change watching RE listings in my local area, in the last few days I can tell a lot of short sales that had been stalled have been noted that they are getting responses from the bank. So at least over the short term the banks are shifting resources into that department.
AHodge Says:
October 21st, 2010 at 5:16 pm
i cut the money shot from this FT earlier
http://ftalphaville.ft.com/blog/2010/10/21/378606/sarbanes-oxley-meets-servicer-execs/
Roger Bigod Says:
October 21st, 2010 at 5:56 pm
Why should I waste my beautiful mind on something like this? It will all be taken care of after the election in the Homeland Property Title Rectification and Forward Looking Respect for Law Act of 2010.
Mark E Hoffer Says:
October 21st, 2010 at 5:57 pm
the utter (f******) Bilge that passes for the MSM is enough to give one Zebra Mussels..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=Zebra+Mussels
tyaresun Says:
October 21st, 2010 at 6:02 pm
Consumer complaints about Provident and Associates:
http://www.consumeraffairs.com/finance/provident_funding_associates.html
These guys are not much better than the others in the limelight.
Mark E Hoffer Says:
October 21st, 2010 at 6:04 pm
Roger,
no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …
suspiciously similar to http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=the+passing+of+the+Federal+Reserve+Act+of+1913
‘all clouds’-link
http://search.yippy.com/search?v%3aproject=clusty&v%3afile=viv_7jKTyb&sec=1287698174&v%3astate=%28root-0-999%29%7croot&v%3aframe=tree&
mavenwatch Says:
October 21st, 2010 at 6:28 pm
“An attorney from Portland is getting national attention after uncovering the faulty methods banks were using to review foreclosure documents.”
http://www.wcsh6.com/news/story.aspx?storyid=133138&catid=2
watch video to right from link above
“DENMARK, Maine (NEWS CENTER) — An attorney from Portland is getting national attention after uncovering the faulty methods banks were using to review foreclosure documents.
Thomas Cox volunteers at Pine Tree Legal, giving free legal advice to people facing foreclosure. While reviewing Nicole Bradbury of Denmark’s foreclosure documents, he realized they were signed by someone with the title “limited signing officer,” meaning the person’s only job was to sign the papers. Cox arranged a deposition with the signer, and he admitted to signing hundreds of foreclosure documents without ever reading them. Now the nation’s attorneys general are investigating. Banks have responded, saying that the problems are technical, and the facts in all of these cases are true. Cox says that answer is unacceptable.
“The message that the industry’s putting out that these are just technical mistakes are a real red herring to the fact that they grossly abused the American judicial system by presenting many, many thousands of false affidavits to courts all over the country that judges believed to be true and entered judgements, taking away homes based upon them” Cox told NEWS CENTER.
Cox says Nicole Bradbury is still living in her house. GMAC filed a motion to dismiss her foreclosure to fix the problems and start the process over again. An attorney representing GMAC and Fannie Mae, the mortgage company that owns Bradbury’s loan, declined to comment because the foreclosure case is still pending.”
mote Says:
October 21st, 2010 at 6:30 pm
From “A question of property rights,” excerpted quotefest follows.
Objects in the rear view mirror:
Banks “have essentially sidestepped 400 years of property law in the United States,” said Rebel Cole, a professor of finance and real estate at DePaul University. “There are so many questionable aspects to this thing it’s scary.”
Nothing but Blue Skies:
Joseph Mason, a finance professor at Louisiana State University, said concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.
Houston, we have a problem:
Some analysts are not sure that banks can proceed so freely. Katherine Porter, a visiting law professor at Harvard University and an expert on consumer credit law, said that lenders were wrong to minimize problems with the legal documentation.
Tax man’s whatif:
Robert Willens, a tax expert, said documentation issues had created potentially severe tax problems for investors in mortgage securities and “there is enough of a question here that the courts might well have to resolve the issue.”
Now investors who bought mortgage trusts – investment vehicles composed of mortgages – are wondering if the loans inside them were recorded properly. If not, the tax advantages of the trusts could be wiped out, leaving mortgage securities investors with significant tax bills.
Guantanamo Bay revisited:
Lenders and their representatives have sought to minimize the significance of robo-signing and, while acknowledging legal lapses in how they documented loans, have argued that foreclosures should proceed anyway. After all, the lenders say, the homeowners owe the money.
But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.”
http://www.chron.com/disp/story.mpl/business/7256693.html
Maseratij Says:
October 21st, 2010 at 6:38 pm
” Regulator Says Fannie, Freddie Cost at Mercy of Economy.. To be filed under Duh! ”
I keep coming back to this droll of a subject for your wit BR. Your youthful character is evident in your exuberance and cultural relevance. If your a Dad, I bet your a good one and know your children well, if not you will be.
Swarm The Banks Says:
October 21st, 2010 at 7:03 pm
Forcing people to fall behind on their mortgages before being eligible for HAMP, even though this triggers parallel foreclosure and hastens the loss of the property is beyond a smoking gun, it’s a stinking gun because it’s been going on for a year and a half now.
http://www.parallelforeclosure.com
farmera1 Says:
October 21st, 2010 at 7:04 pm
And from the Baseline Scenario we have this:
http://baselinescenario.com/2010/10/16/once-more-into-the-breach/#more-8112
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
“Let’s hope there’s a better explanation than “we have created [our biggest banks], and we’re sort of past that point, and I think that in some sense, the genie’s out of the bottle.”
ACS Says:
October 21st, 2010 at 7:05 pm
Every time a bank is shut down, a law school should be shut as well.
Vilgrad Says:
October 21st, 2010 at 7:52 pm
Gonzalo Lira, who’s post was stolen by David Kotok as his own. Real lowlife move.
http://gonzalolira.blogspot.com/2010/10/mulligan-mortgagesthe-banks-only-way.html
philipat Says:
October 21st, 2010 at 8:31 pm
Barry, what became of Parts 3-5 in the series “Forclosure Fraud for Dummies”?
dss Says:
October 21st, 2010 at 8:32 pm
@ACS,
Great observation.
Ltdata Says:
October 21st, 2010 at 8:59 pm
File this under Law of unintended results: Quite frankly, even if a megabank, etc. does not know their exposure – their auditor WILL find some way to sample the mess, quantify it for the financials, and bill, bill, bill. If they thought shoddy was cheap, wait til they get the audit bill.
Roger Bigod Says:
October 21st, 2010 at 9:30 pm
Mark E Hoffer
“no doubt, in an action deemed ‘Passed’, by voice vote, during the ‘lame duck’ …”
Oh, yes. Afterward, the Preznit will get that serious, stern look and point the finger at the GOP for killing the option of public, non-electronic property records. Especially since he fought for the option it so fiercely. At least there will be a special approproation to help the county clerk’s offices pay for shredding and burning all the backward-looking paper records.
The Curmudgeon Says:
October 21st, 2010 at 9:47 pm
“But such reasoning is the “Guantanamo Bay argument” said Adam Levitin, an associate professor of law at Georgetown University.
“We know these guys are terrorists, we picked them on the battlefield, and we don’t need to give them any legal rights,” Levitin said. “Yet the courts have said they get some rights. Surely American families are entitled to that same level of process, that they get a fair trial, even if they are deadbeats.” ”
~The good associate professor of law is surely aware that liberty interests enjoy far greater protections under the constititution than do property interests. Due process for the denial of property interests (think Kelo, e.g.) is far less stringent than due process for the denial of liberty interests (think Miranda and its progeny). I doubt anyone will seriously attempt to formulate an exclusionary rule for mortgage foreclosures, where the failure to submit a properly attested affidavit means the mortgage company is barred from admitting into evidence the promissory note. But that’s the reasonable view. And these are markedly unreasonable times. So, who knows?
franklin411 Says:
October 21st, 2010 at 9:52 pm
This is what happens to bad little Democrats who actually propose making Wall Street pay for the mess it created:
Wealthy financier is mysterious funder of ads attacking DeFazio
Robert Mercer, the co-CEO of one of the world’s largest hedge funds, is the mysterious donor who has been paying for $300,000 of attack ads aimed at Rep. Peter DeFazio, D-Ore.
http://blog.oregonlive.com/mapesonpolitics/2010/10/wealthy_financier_is_mysteriou.html
victor Says:
October 21st, 2010 at 9:53 pm
To Effective Demand,
Not a big deal? it is already a big deal and I suspect (because NOBODY knows for sure) it may get a great deal bigger. Remember when Ben Stein told us on national TV that the sub-prime mortgae “event” would blow over?
S Brennan Says:
October 21st, 2010 at 10:16 pm
Off topic, but food for thought…read it through, the punches get thrown at the end.
http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html
einniv Says:
October 21st, 2010 at 10:37 pm
I’ve been reading a lot of the blogging on the foreclosure mess. Every time I think I understand it fully something else comes up that makes me wonder if I do. Some of the reports make it sound like the whole idea of of MBS tranches is inherently illegal. Let me explain.
Take this excerpt from http://www.huffingtonpost.com/ellen-brown/foreclosuregate_b_752788.html
“The top tranche is triple A because it includes the mortgages that did NOT default; but no one could know which those were until the defaults occurred, when the defaulting mortgages got assigned to the lower tranches and foreclosure went forward. That could explain why the mortgages could not be assigned to the proper group of investors immediately: the homes only fell into their designated tranches when they went into default.”
So this sound to me like there would be no legal way to do tranches. Or at least no way to do it without breaking the chain of title or violating tax laws. The note must be in legal limbo until you know what tranche it goes in. And assigning it to the trust after the default will always be against REMIC tax rules.
Am I understanding this POV correctly? Was there some legal way these tranches could have been done?
VennData Says:
October 21st, 2010 at 10:53 pm
I wonder what the GOP media machine, Fox news and the World-Wide Chamber of Commerce would say if instead of a moratorium on foreclosures …
…say they had a moratorium on… uh… I dunno… say on oil drilling or something. I wonder if they would be so blasé about that? It would be interesting to know. Anyone have any idea?
The Curmudgeon Says:
October 21st, 2010 at 11:02 pm
I thought all hedge fund managers were dem’s?!? didn’t they line Obama’s pockets in 2008? What, they’re just whores like the rest of ‘em, licking their finger and pointing it in the air to see which way the political wind is blowing?
GeorgeBurnsWasRight Says:
October 21st, 2010 at 11:06 pm
There was a report on NPR today of yet another part of the foreclosure mess. In Florida they have something called the “Rocket Docket”, courts that handle 200 foreclosures a day. The judges admit they don’t have time to either look at the documents or listen to arguments. So you can imagine the level of “justice” being dispensed.
call me ahab Says:
October 21st, 2010 at 11:16 pm
GeorgeBurns-
and we care why? the people that aren’t paying should stay? what’s your point exactly (as if anyone cares)
VennData-
one trick pony with nothing to say (over and over and over again)-
push on to political blogs
S Brennan Says:
October 21st, 2010 at 11:30 pm
http://www.cleveland.com/business/index.ssf/2010/10/mortgage_foreclosure_uproar_sw.html
Petey Wheatstraw Says:
October 21st, 2010 at 11:37 pm
Strange that those of the opinion that this situation will have a limited and manageable but perhaps costly resolution, seem to completely discount the criminality of what has taken place. Is the idea that this industry is immune from prosecution a given? If it is, we’re more screwed than I thought, and y’all know how screwed I think we are.
wunsacon Says:
October 21st, 2010 at 11:38 pm
I’ve had this happen to me, too!
http://www.zerohedge.com/article/open-letter-secs-worthless-enforcement-division
jimh Says:
October 22nd, 2010 at 12:02 am
i was just reading farmera1′s reference to the baseline scenario’s treatment (great blog) of the this subject…
“The scary possibility is that what they’re really afraid of is systemic risk: the possibility that, as Konczal and others have pointed out, the mortgage securitization trusts (the entities that bought mortgages and issued mortgage-backed securities) could sue the investment banks, forcing them to buy back the underlying mortgages at the original cost. Since those mortgages are now worth far less than before, this would impose huge losses on the Big Six banks.”
While I would join many other investors in the n/a mbs mkt in celebration if a significant amount of loans out of these deals were put back to the issuers, the reality is that the big originators/issuers/banks have the upper hand here. They will drag this fight out on a loan by loan basis. I don’t care how big you are (ny fed, pimco, blackrock, etc.), the diligence expense is prohibitive. You have to understand how time intensive a project like this would be.
BofA seems like it is in serious trouble, and they will probably settle for some huge amount of money, but the idea of fighting them loan by loan is not remotely feasible. What gets missed in this discussion is that money managers, hedge funds, insurance companies, etc should have done more diligence at before purchasing said security. While the big IBs certainly ran with market, buyers had access to the loan tapes. They had the prospectus. And they got greedy and it all fell apart. It’s a disgrace that that the big $mm are not on media trial right next to the head of GS. The “buy” side is just as much to blame as the big IBs. But that wont happen. Such is life.
Effective Demand Says:
October 22nd, 2010 at 12:22 am
Been going around looking at the RE investor boards, none of the trustee sale buyers are having trouble getting title insurance…
27 Responses to “Stern Foreclosure Factory: $260 Million in 2009 Revenues”
wunsacon Says:
October 21st, 2010 at 10:34 am
I suspect Shakespeare’s Henry VI said it best.
http://www.spectacle.org/797/finkel.html
NoKidding Says:
October 21st, 2010 at 10:36 am
“The goal here was not to pursue prosecute foreclosures on behalf of a banking client; rather it was to crank out the assembly line factory to grab 100s of millions of dollars, legally or illegally, consequences be damned.”
Intuition tells me your assessment is correct, but nothing in the quoted bit of that story did.
We’re in a foreclosure boom and there’s work involved. Somebody has to do it.
wunsacon Says:
October 21st, 2010 at 10:36 am
Er, “Dick The Butcher”…
Mannwich Says:
October 21st, 2010 at 10:38 am
Oh, it’s 100%. In the grand scheme of things, he’s such a minor player and the perfect fall guy for Eric Holder.
rktbrkr Says:
October 21st, 2010 at 10:42 am
There’s never just 1 rat, there were a handful of FL lawfirms like this, Stern was just the biggest rat. So does the florida court system throw out all the work done by Stern and similar firms? A couple hundred thousand do-overs?
http://wiki.answers.com/Q/Which_countries_have_no_extradition_treaties_with_the_United_States
rktbrkr Says:
October 21st, 2010 at 10:47 am
In New York, attorneys already have an obligation to ensure that the documents they present to the court are valid, but New York Chief Judge Jonathan Lippman said having them sign something affirming that all papers got a proper review will hold them accountable like never before.
“We want to make sure that everyone is focusing like a laser on these particular types of proceedings,” he said. “It puts them on notice. That’s what this is all about. We all have to make doubly sure that we are doing what we should be doing in the first place.”
The rule requiring a signed affirmation applies to both new cases and the 78,000 foreclosure actions already under way in New York courts.
Lawyers handling pending foreclosure actions will probably need to go back to their clients and verify that all proper steps were followed, Lippman said. The form created by the court requires the lawyers to give the name of the bank employee who affirmed that the records were accurate and the date the conversation took place.
The president of the New York State Bar Association, Stephen Younger, issued a statement praising the new rule. “The chief judge has taken swift steps to address a nationwide problem in foreclosure actions,” he said.
BennyProfane Says:
October 21st, 2010 at 10:49 am
I might even bet you that he doesn’t see any type of prosecution at all – maybe a nice, 5-10% deal, a la Mozilo, that the company can write off somehow offshore.
rktbrkr Says:
October 21st, 2010 at 10:50 am
Start the music, it’s time for Musical Chairs!
BofA Sues FDIC Over Taylor Bean Mortgage Losses
Bank of America, the largest U.S. bank, has sued the Federal Deposit Insurance Corp over $1.75 billion of investor losses mainly from the 2009 collapses of a large regional bank and large mortgage lender.
The lawsuit concerns the FDIC’s role as receiver for the main banking unit of Alabama’s Colonial BancGroup, and the implosion of Taylor, Bean & Whitaker Mortgage, where federal prosecutors say a multi-billion dollar mortgage fraud took place. Bank of America is trustee for notes issued by Taylor Bean’s Ocala Funding unit.
SnIp
RiskAverseAlert Says:
October 21st, 2010 at 10:59 am
I’ll take the under. This thing is so bad the President hasn’t even the clout to convince the Sheriff of his own Cook County that the recent voluntary foreclosure moratorium was the result of mere “technicalities.”
Sechel Says:
October 21st, 2010 at 11:20 am
David Stern knew what he was doing(to a point). He appointed four of the seven directors. It’s made clear that shareholders should find it difficult if not impossible to take disciplinary action against him, not withstanding any fiduciary obligations they may have in this respect.
AHodge Says:
October 21st, 2010 at 11:40 am
no shortables no options
i see it down abt 6% today
JerseyCynic Says:
October 21st, 2010 at 11:48 am
it’s perfect Mannwich
I’m always most cynical when individual assholes are singled out to cover for industry wide corruption.
OH good!! now we don’t have to dig deeper and run the whole lot of f%$kers out of town!
what happens when the next shit storm hits ? — student loan debt has now surpassed credit card debt
I wonder how many of our big bailed out banks set up their own back door foreclosure mills YEARS ago when they were setting the stage for this round in the boom/bust cycle of real estate
Sechel Says:
October 21st, 2010 at 11:49 am
http://www.law.com/jsp/article.jsp?id=1202473607711&Fla_Foreclosure_Firm_Undergoes_ShakeUp_as_Chairman_Vacates_Post
abandon ship!
Several top executives of Florida’s largest foreclosure processing company resigned and its chairman was replaced Tuesday, amid a national controversy over questionable foreclosure filings and investigations into possible wrongdoing by lenders, loan servicers and law firms.
Plantation, Fla.-based DJSP Enterprises has been impacted by the temporary suspension of foreclosure filings by some of the nation’s largest lenders and some industry insiders are questioning the future of the business.
The company announced Tuesday that Chairman David Stern would step down, take the new title of president and remain the CEO. Stephen Bernstein will take over as chairman.
DL Says:
October 21st, 2010 at 12:10 pm
I just want to know why the company is incorporated in the Virgin Islands.
JerseyCynic Says:
October 21st, 2010 at 12:43 pm
oh what a fabulous story!!!
….In a nod to his foreclosure work, according to the acquaintance, Mr. Stern mused about possibly naming the larger yacht Su Casa Es Mi Casa — “Your House Is My House.” But his wife and others cautioned against it, according to this acquaintance, and Mr. Stern named the boat “Misunderstood.” Mr. Stern denies that he considered the “Su Casa Es Mi Casa” name.
http://www.nytimes.com/2010/09/05/business/05house.html?_r=1&pagewanted=5
**wunsacon
great link ! great piece
I see Mr. Wallace at the ethical spectacle has the same fears as I do about the impending student loan bailout
http://www.spectacle.org/1010/rags.html
“Banks which lend these amounts of money for education are engaging in many cases in exactly the behavior of banks which loaned absurd amounts of money for real estate purchases by people who would never be able to repay it unless a miracle occurred. Such lending is doubly irresponsible, putting the bank at risk and ultimately forcing bail-outs with public money, but also encouraging individuals to engage in risky behavior. The spectacle of young people starting their adult lives as much as a quarter million dollars underwater is very disturbing. The role of government in sponsoring, encouraging and guaranteeing student loans also needs to be re-examined. A government role which made sense when people were graduating with $20,000 in debt looks entirely different when the number is ten times as much.”
wally Says:
October 21st, 2010 at 12:54 pm
Since these guys – and there are a lot of them recently – end up keeping most of their gains they are business heroes in this country.
Unsympathetic Says:
October 21st, 2010 at 1:10 pm
Barry, he will not be spending any time in jail.
He will, however, buy late-night TV infomercial time describing how you can get rich quick using his tried and true techniques.
b_thunder Says:
October 21st, 2010 at 2:14 pm
My odds on David Stern’s future:
5% – he’ll pay at most 10% of his gains as a fine, and will lose law license for at most 3 years w/out admitting anything
25% – he’ll become a billionaire suing evil banks on behalf of foreclosed homeowners
20% – he’ll become a billionaire AND in 4 years will be elected the Governor of Florida
60% – he will be the next CFTC judge
willid3 Says:
October 21st, 2010 at 3:17 pm
Yves smith has this take
t take a fair degree of skill to pen a journalistic story that hews to the appearance of objectivity yet is out to sell a point of view.
The lead article in the Journal tonight, “Niche Lawyers Spawned Housing Fracas” telegraphs its bias in its headline: the foreclosure crisis is merely the creation of two bit lawyers who by implication don’t know what they are doing, and are pumping trivial issues up for their own enrichment, with the housing market as collateral damage.
Funny that anyone can think this spin is remotely true. The fact that solo practitioner lawyers could have such an impact on the system is not proof that they are miscreants, as the Journal implies. It is that the foundation of mortgage securitzations is rotten as a result of widespread abuses, first on the origination end, later in the foreclosure process. These small firm players are using the legal equivalent of toothpicks; the fact that their efforts have destablized the foundation of the residential mortgage backed securities market is tangible proof that they were imperiled to begin with.
Let’s parse some sections of the article, starting from the top:
The paperwork mess muddying home foreclosures erupted last month. But the legal strategy behind it traces to a lawyer’s gambit in 2006 that has helped keep one couple in their home six years beyond their last mortgage payment.
Not bad in the drive-by shooting category. The foreclosure crisis, which is the result of what increasingly appears to be a widespread failure to convey borrower promissory notes and related liens properly to the the securitization entity is reduced to a mere “paperwork mess”. So the idea that the shortcomings are serious is dismissed. Similarly, the efforts of various attorneys who have been chipping away as aspects of this problem are incorrectly lumped together, as if there was really only a single, simpleminded strategy, a mere “lawyer’s gambit” which by implication, was copied by other low life attorneys. And this effort was to keep a deadbeat borrower illegitimately housed.
Funny, this James Kowalski, the attorney behind this dastardly act, did what members of the bar normally do (at least if they are competent): they look for weaknesses in fact and law in the case presented by the other side. And part of the process involves, stunningly enough, depositions! Kowalski’s evil deed was that he was early, perhaps first, to find a robo signer, back in 2006.
But robo signers are an abuse of court process. You can’t have it one way, and say you believe in law and order and the sanctity of contract, and then say it’s just fine to abuse legal procedures if you are pretty sure you are right. Well you can’t unless you are the Journal, skilled in the art of defending plutocrats, no matter how much in the way of mental gymnastics that might require.
But this implicit focus on robo signers (which admittedly did bring the bigger issue of foreclosure abuses into the limelight) again is a convenient diversion, since the robo signer is far from the most serious problem now affecting the foreclosure process.
Back to the Journal’s account:
It was a first step in the growth of a legal sub-specialty called foreclosure defense that has sown confusion and turmoil in the housing market. Lawyers in the field now commonly use a technique more identified with corporate litigation: probing depositions, designed to uncover any lapses in judgment, flaws in a process or wrongdoing. In the 23 states where foreclosures entail a court hearing, the bank may be ordered to pay the homeowner’s legal bill if a lawyer can convince a judge that the bank has submitted false documents, such as affidavits saying employees personally reviewed the details of loans when they didn’t.
Huh? With all due respect, this is the first time I’ve heard of this “foreclosure defense” sub specialty. Please. These are consumer lawyers, and some of them have gotten good enough at fighting foreclosures that they do it full time. But “sub-speciality” implies a degree of fomalization and coordination of effort that isn’t there. Oh, and the Journal deems it to be bad form for mere consumer lawyers to use the techniques of decent trial lawyers (only corporations are supposed to have access to competent litigators, it seems).
But it gets even better. The Journal couldn’t be bothered letting facts get in the way of a tidy narrative. Kowalski weighed in in the comment section of the article:
Despite my best efforts to answer all of Mr. Whelan’s questions, the article contains a number of misstatements. First, Mr. and Mrs. Jackson did not face a foreclosure hearing after simply stopping payment – they paid the entire amount due per a statement sent to them by GMAC, and paid by certified check. GMAC mistakenly refused the check, alleging it was an NSF payment (not possible with certified funds), then placed the couple in foreclosure. I was simply trying to track the facts of the payment by deposing a witness who had sworn in court documents that she had reviewed the entire file and was familiar with the payment history, when, as it turned out, she was not only not familiar with the payment history, but the substance of her entire affidavit was false, including the allegation that the affidavit was sworn to in front of a notary. These were substantive questions I needed answers to – not an excuse for a delay. Further, the judge did not “throw out the case” – it is still pending, with GMAC still suing the Jacksons, years later.
I, and most of my fellow consumer attorneys who are members of the National Association of Consumer Advocates, do not raise these issues for delay – we raise them because we all have cases (this is the bulk of my foreclosure defense practice) where all or part of the foreclosure is purely the fault of the servicer or mill law firm – from homeowners whose payments were misrouted by the servicer, to servicers who simply changed the address of the property and then force-placed flood insurance, to servicers who ignore insurance plans the borrowers paid for (all examples from my cases) to servicers who refuse to even accept HAMP-type loan modification documents – all are substantive, real problems that were not the fault of the borrowers. The deposition was, in the Jackson case, merely an effort to get at the truth of the reversed payment – instead, GMAC admitted to wholesale manufacture of court documents, then promised to fix the practice, then continued that practice unabated for 4 more years.
Most of what we have uncovered are criminal violations – false testimony under oath, notary fraud, etc. These problems will continue until the attorneys general who have formed a task force recognize and confront the significant criminal violations, and will continue unless we have real reform of the servicing practices that emphasize speed over the truth.
Not a single one of my clients wants (or deserves) a free house. What they want (and deserve) is for their voices to be heard, and, for better or worse, consumer lawyers are the only ones capable of achieving this at the moment.
Oh, and it would have been nice if Mr. Whelan had taken the time to spell my name correctly throughout the article.
Yves here. Servicer abuses that result in foreclosures are simply not getting the media attention they deserve. The prevailing perception, and the party line from the banks, is that the borrowers are all deadbeats and therefore any efforts to aid them are simply an abuse of court processes.
But servicers are modern judges, juries, and to the extent they can railroad foreclosures through, executioners. When a payment arrives after the due date (and servicers have been found to hold checks to render payments late), under RESPA and the bank’s agreement with the borrower, the bank is supposed to apply payments to principal and interest first, then any late fees. But if you incur a late fee, they instead apply the payment to that first, which makes your regular monthly payment come up short. So then you get an insufficiency fee.
Servicers don’t send detailed monthly statements like credit card companies, telling you how your payments were applied. This process of misapplication of payment and failure to notify borrowers when fees have been incurred guarantees that the charges will balloon. It isn’t until months have passed and the extra balance become large, say $2000 or more, that the homeowner realizes they are under water according to their servicer, even though they have made all their regular payments. Many lack the extra money to clear out all these largely bogus fees; other have tried fighting, only to find the servicer won’t budge, and they rack up more charges, which forces them either to capitulate or lose their home.
Nevertheless, the Journal runs the party line that nothing is wrong with the foreclosure machinery, when the intense pushback suggests otherwise, and brandishes the usual financial services industry threat: hurt us, and it will hurt you even more:
“There is a movement afoot by [state attorneys general] and private lawyers to use technical problems to avoid foreclosures where the borrower is in default and the foreclosure is in all respects substantively appropriate. These are lawyers where the best job they can do for their clients is to keep them in their houses without paying the mortgage,” said Andrew L. Sandler, a Washington securities lawyer who represents banks and firms that service mortgages.
Mr. Sandler added: “The class-action lawyers are swarming around this issue right now, because they perceive that it can result in significant fees for them. But they’re not well-founded cases, and the banks will vigorously contest any class action around these issues.”
The big risk to banks and the housing market, indeed, is that more homeowners and lawyers come to see such cases as attractive to fight.
It’s certainly fair to say some legal actions are based on weak theories; we dissed the widely touted investor suit against Countrywide on mortgage putbacks yesterday, and have selectively argued against other legal theories. But some of these cases are based on careful study of real abuses and are attacking improper, potentially fraudulent actions. This is one of the few checks we have left on misuse of power, but the powers that be want the public to see these legal challenges as a threat to their financial security and accept compromises, just as we have been forced to accept diminished civil liberties and ever more intrusive surveillance in the name of personal security.
One encouraging sign: I didn’t take a careful tally, but despite the Journal’s heavy spin on this story, its comment section seemed to be running at only a 50% acceptance of its position. The more the banks try to press the merits of their case on dubious evidence, the more the public is coming to realize they are not to be believed.
Topics: Banana republic, Banking industry, Credit markets, Legal, Media watch, Politics, Real estate, Social values
they aren’t all dead beats. some got their the new fangled way. the servicer did it
not-affiliated-with-Wall Street Says:
October 21st, 2010 at 3:39 pm
I wish you wouldn’t throw in that stuff about the graybar hotel. It’s a depressing reminder that these kinds of people never go to jail. They just get richer.
beaufou Says:
October 21st, 2010 at 5:12 pm
JCynic.
I would suggest a name for Diamond Dave’s new boat: my ass is grass.
People are talking, he is going down.
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
Mark E Hoffer Says:
October 21st, 2010 at 8:52 pm
I don’t knoe about all y’all, though, there’s something about ‘limited hangout’ that I’d be looking into..
http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus&v%3Aproject=clusty&query=limited+hang-out
Mark E Hoffer Says:
October 21st, 2010 at 8:54 pm
and, this, ‘knoe’, was a key-stroke off, as in ‘know’..
Gracias~! QWERTY!
willid3 Says:
October 21st, 2010 at 9:33 pm
Mannwich Says:
October 21st, 2010 at 6:27 pm
@willid3: Do we really need any MORE proof that the WSJ is in the back pocket of the elites? I guess we do, since they keep reaffirming that every day with their absurdly slanted screeds.
nope.
they just want to make sure we know.
dsawy Says:
October 22nd, 2010 at 3:28 am
What is the statute of limitations on what he has done? That’s the biggest question I have before taking an over/under on this.
Hot Links: Social Media Guru The Reformed Broker Says:
October 22nd, 2010 at 7:19 am
How to pimp hard amidst the ruins of Foreclosure Florida. (TBP)
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If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
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Following CULV notebooks, Tonino Lamborghini releases in Hong Kong its Spyder line of luxury mobile phones. There are six models, S-600, S-610, S-620,
<b>News</b> Corp's Carey: MySpace's Ongoing Losses 'Not Acceptable Or <b>...</b>
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
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Fox <b>News</b> Fair And Balanced | MSNBC Political coverage | Mediaite
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Tonino Lamborghini Spyder Series Luxury Mobile Phones | iTech <b>News</b> <b>...</b>
Following CULV notebooks, Tonino Lamborghini releases in Hong Kong its Spyder line of luxury mobile phones. There are six models, S-600, S-610, S-620,
<b>News</b> Corp's Carey: MySpace's Ongoing Losses 'Not Acceptable Or <b>...</b>
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
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Fox <b>News</b> Fair And Balanced | MSNBC Political coverage | Mediaite
If one believes that the cable news landscape is symptomatic of our two-party political system, then one also probably and predictably saw a different tone in last nights election results. Fox News presented its coverage with a patina ...
Tonino Lamborghini Spyder Series Luxury Mobile Phones | iTech <b>News</b> <b>...</b>
Following CULV notebooks, Tonino Lamborghini releases in Hong Kong its Spyder line of luxury mobile phones. There are six models, S-600, S-610, S-620,
<b>News</b> Corp's Carey: MySpace's Ongoing Losses 'Not Acceptable Or <b>...</b>
Continued MySpace (NSDQ: NWS) declines pulled down News Corp.'s digital media group earnings again in its first quarter, meaning operating losses in the company's Other segment grew by $30 million from last year, to $156 million. ...
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When homeowners face foreclosure on a property they are renting out, tenants often begin to worry about the status of their home. Will the landlord be able to avoid foreclosure? Should the tenants stop paying rent? Will the new owner at the auction evict them, or will the purchaser honor the lease agreement? Unfortunately, many of these questions exist due to differences in the treatment of tenants under state law.
Many times, the first action a purchaser at a foreclosure auction takes is to begin the process of evicting former owners or tenants, whether this action is legal or not. In many cases, although it is not legal, the new owners will pursue this anyway in their effort to take possession of the property as quickly as possible. If this happens, it is usually up to the tenants to assert their rights under the lease.
Much of the confusion rests on two related issues. The first is that tenants' rights after a foreclosure are defined under state law, and each state will treat the issue slightly differently. Another issue is that tenants are the group most forgotten about in all of the efforts and discussion to help homeowners stop foreclosure. Protecting the rights of the renter is far down the list of priorities for most politicians attempting to help homeowners save their homes.
Tenants in different situations will have different rights. State law plays a large role, as does the nature of the lease itself. For instance, a lease that was entered into before the mortgage was placed on the property will usually survive a foreclosure. The lease existed before the mortgage was entered into, while the mortgage was in default, and during the foreclosure process. A purchaser at auction will not receive a greater interest in the property than existed before the mortgage.
There are two different views on the much more common issue of a lease entered into after a mortgage is executed. The majority opinion is that a lease will survive foreclosure if the lender is on notice that the tenancy exists. The exception to this rule is if the foreclosing lender makes the tenants are party to the foreclosure lawsuit; in this case, the lease may be exterminated after the foreclosure is completed.
Another view on this issue is that the foreclosure terminates the lease whether or not the tenants are made a party to the foreclosure lawsuit. In cases of nonjudicial foreclosure through a power of sale clause, most courts have held that the foreclosure extinguishes the tenants' rights in the property under the lease agreement. This gives tenants very few rights to defend their interest in the home.
One issue that homeowners, lenders, and tenants need to be aware of is that of the notice requirement mentioned above. If the lender has notice of the lease agreement, either actual or constructive, and does not include the tenants in the foreclosure proceedings, the lease will most likely survive the foreclosure auction. This makes the notice extremely important for tenants, foreclosing lenders, and purchasers at auction.
A number of different documents or actions can provide notice to the lender of the lease agreement. A recorded lease provides notice, for example. Also, if it should be apparent that tenants are living in the property, the lender may have the responsibility of investigating to determine the tenants' claims. An apartment building or property with more than one unit may also provide notice just by the nature of the building itself.
Homeowners are usually somewhat lacking in their efforts to help tenants deal with the foreclosure process. This often leaves renters on their own to figure out how to respond, and many end up not paying rent and being evicted quickly after a foreclosure auction. Unfortunately, this is often the worst possible scenario, and may not even be legal. But too few tenants know their rights after the home they are renting is foreclosed.