by Mario Rizzo

Investors’ eagerness to invest in mortgage debt helped drive mortgage rates to all-time lows this week, Freddie Mac said.

The average rate on 30-year fixed-rate mortgages was 4.78%, the agency said Wednesday, matching a record low set in April. That was down from 4.83% from the previous week and 5.97% a year ago

I am amazed that aggregate-demand economists can look at the housing market and simply wonder how to bring it back to normalcy. Today the Wall Street Journal reports that investors are flocking to invest in mortgage-backed securities now that the Fed has been buying them. Freddie and Fannie are too big to fail, and so forth. The risk premium relative to Treasuries has fallen to the narrowest point this year.

From the investor’s perspective these are relatively safe problem-free investments. On the other hand, from the social perspective these investments delay the necessary adjustment of resources out of housing — remember: the over-expanded bubble sector?

Our aggregate-demanders (aka “Keynesians”) do not need to worry because during recessions the allocation of resources is not important. All that matters is propping up spending and restoring “confidence” in something called “the economy.”

From the makers of bankrupt Social Security, indebted Postal Service, broke Fannie Mae, deteriorating Medicare and Medicaid, and broke Freddie Mac, comes health care.

It is ironic that We the People   may have a communist dictatorship to thank for saving us from our own President and Congress.

Our President, Barack Obama went hat in hand and on bended knee to our nation’s banker this past week to beg that our mortgage be extended and even that we be allowed to take out an additional mortgage.  The man who holds the post that has been considered the most powerful in the world  due to his policies seemed to see no shame in begging another country  to  bail out and continue to finance the profligate spending of  the nation he is supposed to be governing and he is, because of his policies and agenda, demanding.

And what did China leaders say?    China which now holds over $500 billion in US Treasury Notes and that much again in actual US properties  told President Obama that they are seriously  concerned about the irresponsible spending  of his administration and think that his proposed health care reform bill  is more than our nation can afford considering  the money to fund this monster would have to come from China and the Chinese people’s  thrift and savings and doing without what they can not afford.

I am appalled that I would live to see the greatest nation ever known come to this in only a few short decades !  I watched C-span Washington Journal – C-SPAN last night  and listened to two very astute ladies discuss our economy and what has happened and what they feel is going to happen.  The videos are below and are rather long but well worth listening to.

First is Judy Shelton whom most of you may be more familiar with as a Wall Street Journal contributing OPED columnist.  Ms. Shelton is careful not to criticize any current or even past  official, she merely states what she feels should have been done instead and gives guidance for the future.   When asked point-blank what current official she  thinks is acting correctly ” Bernanke , Geithener”  she avoided the question altogether and named one of her most admired Economist instead,  and in that way not only answered the question beyond a doubt  but also changed the topic. You might take that to mean a resounding Nay! vote on any of  the people currently making decisions which affect our lives.

The second interview was Nomi Prins discussing her book It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street (Wiley; September 22, 2009) with Vermont Senator Bernie Sanders (I).  Ms. Prins is quite frank and open in discussing her views and placing blame.  She agrees that Wall Street is greedy and grasping and interested in nothing but profits.  She agrees that  Wall Street did build the situation that led to the Bail Out 2008-9  by taking a handful of what came to be called toxic mortgages and created  what she called an upside down pyramid of speculation and profiteering  with derivatives.

If you will recall I once explained derivatives as bets on nothing substantial..  I think  Iused a  fight between two opponents as my basis (mortgage).  This was substance and real and had some value as such.  Subject A and subject B bet on  who would win the battle or the outcome of the fight by choosing sides.  Still some substance and value at this point and little risk of their bet (money).  Subject C and Subject D came along  with a created derivative and bet on  who would be right Subject A or Subject B.  The derivative was based on nothing substantial, nothing but air, nothing but the opinion of another subject in this case.  The risk was greater as  they could lose their money if one of any number of things occurred:  they could lose if any one or all of the two combatants or the Subjects A and/or B  simply walked away  and removed themselves from the action for one example.  Now usually with these transactions this didn’t happen but instead of just dropping out the subject would try to sell his stake to another subject (at a profit of course).  Imaging this then becoming a pyramid of bets on the bets or opinions of others being bought and sold and bought and sold and piled higher and higher.

It was this speculation and play with derivatives that Ms. Prins  explains and blames for the Financial Crisis 2008-9. And  she agrees that  Wall Street’s greed caused all  of this.  However, she explained that it was the Federal government’s (Congress)  insuring any losses that encouraged and enabled this reckless behavior. Wall Street was the animal doing what Wall Street does: churning the paper and making profits.  If the federal government had not encouraged and enabled this risk taking so that the risk was minimized then it would not have happened.

Now let us go back to these toxic mortgages, or mortgages given to people who could not by any prudent lending measures afford the mortgages they were given.  The Federal Government enabled this by almost forcing banks to give these loans and it started with President Carter, picked up again with President Clinton and continued to run amok with the  under the direction of Representative Barney Frank and Senator Chris Dodd  as they  failed to enforce any of the regulation on the Federal Reserve, Fannie Mae and Freddy Mac.

President George Bush again and again called for enforcement of the regulation.  Senator McCain and others called for enforcement.  But because the then privately owned Freddie Mac and Fannie Mae and the Wall Street bankers were making such good campaign donations the Congress overlooked what was going on and allowed the disaster to happen.  The Bail Out   paid off all the “bet” made in the example above and then bought Freddie Mac and Fannie Mae.  Yes, you the tax payer now own the two largest mortgage holders in the world  along with all the foreclosed homes and lost mortgage payments!  And, no one was blamed for the mess.  No one was found guilty or even had to say I’m sorry.

On the topic of “too big to fail”  Ms. Prins  answers that these institutions are too big NOT to fail. They must in her opinion be broken up immediately.  But instead of doing this the Congress with new laws are encouraging them to merge and merge again into larger and larger entities that will eventually become impossible to contain or control and regulate.

And Ms. Prins goes on to explain that regardless of all the noise coming out of Congress (Frank and Dodd) the games are being encouraged , enabled and smiled upon again which is leading to an even greater disaster sometime soon.

This was not news to me since if some of you may recall I have been blogging about this and throwing the belief out at every opportunity to help prepare my readers and myself to the coming deep depression, but it was nice to have two such intelligent renowned economist as these two ladies back my beliefs up.  That is, this beat up old lady with obsolete degrees in education, psychology and avocations in philosophy and history could see it coming so it must be apparent to our congressmen and women so why are they not doing something about it?  Why are they instead continuing on this path of spending, spending, spending?  Why?

And what are We the People going to do about it?

I don’t know the answer to that question.  Congress seems deaf to all the shouting of the Tea Parties, Town-halls, Marches on Washington and probably more town-halls during this Thanksgiving Holiday.  And the elections of 2010 is really going to be too late to do a whole lot  IMO. Besides, I do not trust the American people not to elected again the same thieves and criminals they have been electing.  Rep. Barney Frank will die in his office being elected by a tiny,. tiny group of people and yet holding life and death power over the rest of us.  Congress has the ability to police itself and rid itself of these Rep. Murthas but has rarely done so and is not about to do anything now as far as I can see.  So what is the answer?

Perhaps as I stated in the beginning:  Communist China as our banker has the power and just may use it to save our nation.  You see we are at this time China’s golden goose; we are the consumers of China’s goods so it behooves them to temporarily keep us afloat.  In other words the United States is too big to fail—RIGHT NOW!  The future may be another story and if we don’t get our act together as a nation then we will die as a nation at some later date you can be sure of this.  China is expanding its market area and also growing a more afluent society that will  support its own industry so the time will come very shortly when we are no longer important to China.  It is this time we need to be prepared for and have our house in order so that we can reasonably repay our debt.    Or am I dreaming?  BB

By the way you might want to put C-span Washington Journal – C-SPAN on your to watch list when there is nothing else on TV  or to check on line their video library for topics that interest you.  It will become the most comprehensive “click” on your  blog list I am sure.  C-span is a daily must for me.  I may begin using features programing to post on in conjunction with the usual media.  BB

Here’s the video: (H/T Neil Simpson)

If the video is removed, try watching it here.

And here’s the transcript:

ANNOUNCER: We will now take you live to Beijing for the joint press conference already underway between U.S. President Obama and Chinese President Hu Jintao.

OBAMA: As I already said privately, I would like to thank President Jintao for his kind welcome and generous hospitality, and I hope that during this visit we can have a productive dialogue about the serious issues of concern that remain between our two countries — issues ranging from the unfair valuation of your currency to the trade imbalance, and most importantly, human rights. I believe there can be a great partnership between us but it will require compromise and understanding.

(Hu Jintao “speaks.”)

INTERPRETER: Thank you, Mr. President. I would like to add that I completely understand why you feel entitled to come here and lecture China on our shortcomings. After all, my country does owe the United States a great deal of money. Oh, wait. Hold on a moment. I believe I had that backwards. In fact, now that I think about it, it is your country that owes us a large sum of money. Is this correct?

OBAMA: Uh… yes.

(Hu Jintao “speaks.”)

INTERPRETER: Now, it’s coming back to me. I believe it’s $800 billion.

OBAMA: That is correct.

(Hu Jintao “speaks.”)

INTERPRETER: Such a large sum.

OBAMA: Yes, it is.

(Hu Jintao “speaks.”)

INTERPRETER: And yet you haven’t even mentioned it. That’s so odd.

OBAMA: Uh, look, you’re going to get your money.

(Hu Jintao “speaks.”)

INTERPRETER: Are we? Are we going to get our money? Because from what I read your country is in the middle of a serious recession.

OBAMA: Uh, while this is true, there are signs that our bailout has steadied the financial markets and our stimulus package has been effective in fixing the job crisis.

(Hu Jintao “speaks.”)

INTERPRETER: I’m curious. How many jobs has it created?

OBAMA: Uh, so far, none.

(Hu Jintao “speaks.”)

INTERPRETER: I see.

OBAMA: But our health care reform plan, we’re confident, is going to lead to enormous savings.

(Hu Jintao “speaks.”)

INTERPRETER: How exactly is extending health care coverage to 30 million people going to save you money?

OBAMA: I… don’t know.

(Hu Jintao “speaks.”)

INTERPRETER: And this “Cash for Clunkers” program– I have read that you purchased many clunkers with our money.

OBAMA: Yes, we have.

(Hu Jintao “speaks.”)

INTERPRETER: What does this word “clunkers” mean?

(Hu Jintao “speaks.”)

OBAMA: Well, a clunker is a car…

(Hu Jintao “speaks.”)

INTERPRETER: I know what a clunker is. And just so there is no misunderstanding, you are not allowed to pay us back in clunkers.

OBAMA:Of course not.

(Hu Jintao “speaks.”)

INTERPRETER: You know, as I listen to you, I am noticing that each of your plans to save money involves spending even more money. This does not inspire confidence.

OBAMA: I assure you, you’re going to get your money.

(Hu Jintao “speaks.”)

INTERPRETER: Will you kiss me?

OBAMA: Sorry?

(Hu Jintao “speaks.”)

INTERPRETER: Will you kiss me?

OBAMA: I don’t understand.

(Hu Jintao “speaks.”)

INTERPRETER: I like to be kissed, (shouts) when someone is doing sex to me!

OBAMA: There’s no need for that.

(Hu Jintao “speaks.”)

INTERPRETER: No? You know how many uninsured we have in China? One and a quarter billion, billion. But I’ll tell you this: We don’t owe anyone $800 billion.

OBAMA: Well, obviously, we take our debt to you very seriously.

(Hu Jintao “speaks.”)

INTERPRETER: I suppose if I really wanted to get my money I could call and say I was a Wall Street banker who needs his bonus. But really, why should I have to stoop to that level?

OBAMA: You don’t have to stoop to any level.

(Hu Jintao “speaks.”)

INTERPRETER: Please understand if it were my $800 billion I wouldn’t care, but it belongs to my country. I feel like I should bring it up.

OBAMA: You’re going to get your money.

(Hu Jintao “speaks.”)

INTERPRETER: Say, while you’re here, are you at least going to treat me to dinner and a movie?

OBAMA: I’m sorry?

(Hu Jintao “speaks.”)

INTERPRETER: I think it’s the polite thing to do, (shouts) before doing sex to me!

OBAMA: Mr. President, please.

(Hu Jintao “speaks.”)

INTERPRETER: Very well.

OBAMA: I assure you that as soon we solve this economic crisis…

(Hu Jintao “speaks.”)

INTERPRETER: Which one? The one that your country’s reckless real estate speculation caused? That one? I just want to make sure I know which one we’re talking about.

OBAMA: We are taking steps to make sure that what happened will never happen again.

(Hu Jintao “speaks.”)

INTERPRETER: What steps?

OBAMA: Uh, reform of banking regulations.

(Hu Jintao “speaks.”)

INTERPRETER: Do I look like Mrs. Obama?

OBAMA: What?

(Hu Jintao “speaks.”)

INTERPRETER: Do I look like Mrs. Obama?

OBAMA: Of course not.

(Hu Jintao “speaks.”)

INTERPRETER: Then why are you trying to (shouts) do sex to me like I was Mrs. Obama?

OBAMA: Now, now.

(Hu Jintao “speaks.”)

INTERPRETER: Just do it. Get it over with.

OBAMA: Mr. President!

(Hu Jintao “speaks.”)

INTERPRETER: Don’t be a tease.

OBAMA: I just…

(Hu Jintao “speaks.”)

INTERPRETER: I can take it.

OBAMA: This is not the time or place.

(Hu Jintao “speaks.”)

INTERPRETER: Very well. In that case, I call this press conference to a close, and Live from New York, it’s Saturday Night!

La disoccupazione preoccupa. Il tasso di disoccupazione, in ottobre, è salito al 10,2%, il massimo negli ultimi 26 anni. Un dato che preoccupa la Casa Bianca. È banale ricordare che più le persone perdono impiego e busta paga, più la propensione al consumo diminuisce.

Le vendite al dettaglio: si spera nel Natale. David Wyss, capo economista di S&P’s ricorda alla CnnMoney : «Se i consumatori, a Natale, (e già durante il Thanksginving, ndr) avranno paura di fronte alle vetrine, potremmo ricadere in recessione».

Il mondo dell’auto: quale futuro dopo gli incentivi?  La debolezza della domanda nel settore è prevista: fondamentale è monitorare il suo andamento senza il paracadute delle sovvenzioni statali (negli Usa come in Europa).

Caro, caro, caro, petrolio? Il petrolio, alla stregua dell’oro, è diventato (anche) un asset finanziario. Molti investitori puntano sul barile di carta alla ricerca di un ritorno sull’investimento: nel caso di un nuovo balzo delle quotazioni bisognerà, quindi, capire quanto è il peso dell’investment demand e quanto, invece, della domanda reale. Solo quest’ultima sarà l’indizio di una possibile ripresa della congiuntura.

Casa, dolce casa…Le insolvenze sui prestiti salgono e, nel commercial housing cui molte banche locali sono esposte, si assiste ad un pericoloso aumento delle morosità. Non solo: le difficoltà dei due enti parastatali Fannie Mae e Freddie Mac, che hanno ricevuto più di 110 miliardi di dollari dal governo di Washington per il loro salvataggio, pone seri problemi su fronte di eventuali ulteriori sostegni pubblici.

Il debito a stelle e strisce… alle stelle. Pensare a iniezioni di denaro pubblico è, infatti, molto difficile. Proprio di recente, l’esecutivo ha pubblicato l’ultimo dato sul debito pubblico. Secondo quanto indicato dal dipartimento del Tesoro Usa, il debito ha superato la soglia dei 12mila miliardi di dollari. Al 16 novembre 2009 ammonta a 12.031,30 miliardi contro 11.999,51 miliardi il giorno prima.

Qui l’articolo completo

“These cases encourage debtors and other parties to defensively use the mortgage securitization servicing system to prohibit servicers and other non-lending parties from enforcing rights under a mortgage. This trend, if it continues, may have significant impacts for consumer-debtor lawyers, as well as law firms that enforce mortgages and participated in mortgage loan securitization.”

“A note and mortgage may go through multiple transfers. Documentation of these transfers is imperfect, and many assignments were not recorded at the local real estate filing offices.”

“The creation of Mortgage Electronic Registration Systems, Inc. (“MERS”) further complicated matters.”

“For instance, if a debtor raises these or similar defenses, it may only be necessary for the servicers and the mortgagees to complete and file the proper assignment documents.“

The fabricated fraudulant assignment.

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http://4closurefraud.wordpress.com/

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Indymac Bank F.S.B. v Yano-Horoski

“Upon the Court’s own motion, it is

ORDERED that the Adjustable Rate Note in the amount of $ 292,500.00 dated August 4, 2004 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. shall be and the same is hereby cancelled, voided, avoided, nullified, set aside and is of no further force and effect; and it is further

ORDERED that the Mortgage in the amount of $ 292,500.00 which secures said Adjustable Rate Note given by Diana J. Yano-Horoski to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages as Page 285, as assigned to IndyMac Bank F.S.B. by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 shall be and the same is hereby vacated, cancelled, released and discharged of record; and it is further

ORDERED that the Plaintiff, its successors and assigns are hereby barred, prohibited and foreclosed from attempting, in any manner, directly or indirectly, to enforce any provision of the [*7]aforesaid Adjustable Rate Note and Mortgage or any portion thereof as against Defendant, her heirs or successors; and it is further

ORDERED that the Judgment of Foreclosure & Sale granted under this index number on January 12, 2009 and entered in the Office of the Clerk of Suffolk County on January 23, 2009 shall be and the same is hereby vacated and set aside; and it is further

ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on July 27, 2005 under sequence no. 172456, which was extended by Order dated September 2, 2008 shall be and the same is hereby cancelled, vacated and set aside; and it is further

ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on August 29, 2008 under sequence no. 199616, shall be and the same is hereby cancelled, vacated and set aside; and it is further

ORDERED that the Clerk of Suffolk County shall cause a copy of this Order & Judgment to be filed in the Land Records so as to effectuate of record each and every one of the provisions hereinabove set forth with respect to cancellation of the instruments and items of record; and it is further

ORDERED that Plaintiff shall pay to the Clerk of Suffolk County, within ten (10) days from the date of entry hereof, any and all fees and costs required to effect cancellation of record of the Mortgage, Notices of Pendency and any other fees so levied; and it is further

ORDERED that within ten (10) days of the date of entry hereof, Plaintiff’s counsel shall serve a copy of this Order upon the Clerk of Suffolk County and the Defendant.

This shall constitute the Decision, Judgment and Order of this Court.”

2009 NY Slip Op 52333(U)
Decided on November 19, 2009
Supreme Court, Suffolk County
Spinner, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on November 19, 2009

Supreme Court, Suffolk County

Indymac Bank F.S.B., Plaintiff

against

Diana Yano-Horoski, Wells Fargo Bank Minnesota National Association as Trustee for Soundview Home Equity Loan Trust 2001-1 and Kimberly Horoski, Defendants.

2005-17926

Steven J. Baum P.C.

Attorney for Plaintiff

P.O. Box 1291

Buffalo, New York 14240

Diana Yano-Horoski

Defendant Pro Se

8 Oakland Street

East Patchogue, New York 11772-5767

Jeffrey Arlen Spinner, J.

This is an action wherein the Plaintiff claims foreclosure of a mortgage dated August 4, 2004 in the original principal amount of $ 292,500.00 recorded with the Clerk of Suffolk County, New York in Liber 20826 of Mortgages at Page 285. The mortgage secures an adjustable rate note of the same amount with an initial interest rate of 10.375%. The mortgage encumbers real property commonly known as 8 Oakland Street, East Patchogue, Town of Brookhaven, New York and described as District 0200 Section 979.50 Block 05.00 Lot 001.000 on the Tax Map of Suffolk County. Plaintiff commenced this action by filing a Summons, Verified Complaint and Notice of Pendency on July 27, 2005. The Notice of Pendency was extended by Order dated April 28, 2008 and a Judgment of Foreclosure & Sale was granted on January 12, 2009.

Thereafter and in accordance with the Laws of 2008, Ch. 472, Sec. 3-a and in view of the fact that the loan at issue was deemed to be “sub-prime” or “high cost” in nature, Defendant seasonably requested that the Court convene a settlement conference. That request was granted and a conference was commenced on February 24, 2009 which was continued five times in a series of unsuccessful attempts by the Court to obtain meaningful cooperation from Plaintiff. In view of Plaintiff’s intransigence in its continuing failure and refusal to cooperate, both with the Court and with Defendant’s multiple and reasonable requests, the Court directed that Plaintiff produce an officer of the bank at the adjourned conference scheduled for September 22, 2009.

At the conference held on September 22, 2009, Karen Dickinson, Regional Manager of [*2]Loss Mitigation for IndyMac Mortgage Services, division of OneWest Bank F.S.B. (“IndyMac”) appeared on behalf of Plaintiff. IndyMac purports to be the servicer of the loan for the benefit of Deutsche Bank who, it is claimed, is the owner and holder of the note and mortgage (though the record holder is IndyMac Bank F.S.B., an entity which no longer is in existence). At that conference, it was celeritously made clear to the Court that Plaintiff had no good faith intention whatsoever of resolving this matter in any manner other than a complete and forcible devolution of title from Defendant. Although IndyMac had prepared a two page document entitled “Mediation Yano-Horoski” which contained what purported to be a financial analysis, Ms. Dickinson’s affirmative statements made it abundantly clear that no form of mediation, resolution or settlement would be acceptable to Plaintiff. IndyMac asserts the total amount due it to be in excess of $ 525,000.00 and freely concedes that the property securing the loan is worth no more than $ 275,000.00. Although Ms. Dickinson insisted that Ms. Yano-Horoski had been offered a “Forbearance Agreement” in the recent past upon which she quickly defaulted, it was only after substantial prodding by the Court that Ms. Dickinson conceded, with great reluctance, that it had not been sent to Defendant until after its stated first payment due date and hence, Defendant could not have consummated it under any circumstances (Defendant, through Plaintiff’s duplicity, found herself to be in the unique and uncomfortable position of being placed in default of the “agreement” even before she had received it). Plaintiff flatly rejected an offer by Plaintiff’s daughter to purchase the house for its fair market value (a so-called “short sale”) with third party financing. Plaintiff refused to consider a loan modification utilizing any more than 25% of the income of Plaintiff’s husband and daughter (both of whom reside in the premises with her), the excuse being that “We can’t control what non-obligors do with their money” (the logical follow up to this statement is how does the bank control what the obligor does with her money?). The Court found IndyMac’s position to be deeply troubling, especially since a plethora of sub-prime loans in this County’s Foreclosure Conference Part have been successfully modified with the lender’s reliance upon the income of non-obligors who reside in the premises under foreclosure. The Plaintiff also summarily rejected an offer by both Plaintiff’s husband and daughter to voluntarily obligate themselves for payment upon the full indebtedness, thus committing their individual incomes expressly to the purpose of a loan modification. It should be noted here that Defendant did not even request any waiver or “forgiveness” of the indebtedness aside from some tinkering with the interest rate, just a modification of terms so as to enable her to repay the same. It was evident from Ms. Dickinson’s opprobrious demeanor and condescending attitude that no proffer by Defendant (short of consent to foreclosure and ejectment of Defendant and her family) would be acceptable to Plaintiff. Even a final and desperate offer of a deed in lieu of foreclosure was met with bland equivocation. In short, each and every proposal by Defendant, no matter how reasonable, was soundly rebuffed by Plaintiff. Viewed objectively, it is apparent that Plaintiff’s conduct in this matter falls within the definitions set forth in 22 NYCRR § 130-1.1( c)(2), which might well warrant the imposition of monetary sanctions.

On the Court’s own motion, a hearing was held on November 18, 2009 in order to explore the issues herein. At the hearing, Ms. Dickinson appeared as well as Mr. Horoski. IndyMac claimed a balance due, as of September 22, 2009 of $ 527,437.73 which included an escrow overdraft of $ 46,627.88 for taxes advanced since the date of default but did not include attorney’s fees and costs.. Plaintiff was unable to tell the Court the amount of the principal [*3]balance owed. Mr. Horoski advised the Court that according to two letters received from Plaintiff, the principal balance was said to be $ 285,381.70 as of February 9, 2009 and $ 283,992.48 as of August 10, 2009. Plaintiff stated was that Defendant must have made payments though it was conceded that in fact no payment had been made.Plaintiff insisted that it had remained in regular contact with Defendant in an effort to reach an amicable resolution, that it had extended two modification offers to Defendant which she did not accept and further, that due to her financial status she was not qualified for any modification, even under the Federal HAMP guidelines. Plaintiff denied that it had “singled out” Defendants, simply stating that her status was such that she fell outside applicable guidelines. All of these assertions were disputed by Defendant.

That having been said, the Court is greatly disturbed by Plaintiff’s assertions of the amount claimed to be due from Defendant. The Referee’s Report dated June 30, 2008, which has its genesis in a sworn affidavit by a representative of Plaintiff (presumably one with knowledge of the account), reflects a total amount due and owing of $ 392,983.42. The principal balance is reported to be $ 290,687.85 with interest computed at the rates of 10.375% from November 1, 2005 through August 31, 2006 ($ 25,118.62), 12.50% from September 1, 2006 to February 28, 2007 ($ 18,018.66), 12.375% from March 1, 2007 to March 31, 2008 ($ 39,126.39) and 11.375% from April 1, 2008 to June 24, 2008 ($ 7,700.24) totalling $ 89,963.91. Plaintiff also claims $ 20.00 in non-sufficient funds charges, $ 295.00 in property inspection fees and $ 12,016.66 for tax and insurance advances. The Judgment of Foreclosure & Sale dated January 12, 2009 was granted in the amount of $ 392,983.42 with interest at the contract rate from June 24, 2008 through January 12, 2009 and at the statutory rate thereafter plus attorney’s fees of $ 2,300.00 and a bill of costs in the amount of $ 1,705.00. Even computing the accrual of pre-judgment interest of $ 18,299.18 (using Plaintiff’s per diem rate in the Referee’s Report) together with post-judgment interest at a statutory 9% through November 19, 2009 (an additional $ 31,740.90), the application of simple addition yields a total amount due of $ 447,028.50. This figure is $ 80,409.23 less than the $ 527,437.73 asserted by Plaintiff to be due and owing from Defendant. The Court is astounded that Plaintiff now claims to be owed an escrow advance amount of $ 46,627.88 when, under oath, its officer swore that as of June 24, 2008 that amount was actually $ 34,611.22 less. Moreover, it now appears that the elusive principal balance is either $ 290,687.85, $ 285,381.70 or $ 283,992.48.

It is the province and indeed the obligation of the trial court to assess and to determine issues regarding credibility, Morgan v. McCaffrey 14 AD3d 670 (2nd Dept. 2005). In the matter before the Court, the pendulum of credibility swings heavily in favor of Defendant. When the conduct of Plaintiff in this proceeding is viewed in its entirety, it compels the Court to invoke the ancient and venerable principle of “Falsus in uno, falsus in omni” (Latin; “false in one, false in all”) upon Defendant which, after review, is wholly appropriate in the context presented, Deering v. Metcalf 74 NY 501 (1878). Regrettably, the Court has been unable to find even so much as a scintilla of good faith on the part of Plaintiff. Plaintiff comes before this Court with unclean hands yet has the insufferable temerity to demand equitable relief against Defendant.

The Court, over the course of some six substantive appearances in seven months, has been afforded more than ample opportunity to assess the demeanor, credibility and general state [*4]of relevant affairs of Defendant and Plaintiff. Although not actually relevant to the disposition of this matter, the Court is constrained to note that Defendant is afflicted with multiple health problems which outwardly manifest in her experiencing great difficulty in ambulation, necessitating the use of mechanical supports. Moreover, Defendant’s husband, Mr. Gregory Horoski, suffers from a myriad of serious medical conditions which greatly impede most aspects of his daily existence. Nonetheless, both of these persons, together with their adult daughter who resides with them and who is substantially and gainfully employed, receive income which they are more than willing to commit, in good faith, toward repayment of the debt to Plaintiff and indeed, despite their physical challenges, they have appeared at each and every scheduled conference before this Court. At each appearance, they have assiduously attempted to resolve this controversy in an amicable fashion, only to be callously and arbitrarily turned away by Plaintiff. This has been so even in spite of the Court’s continuing albeit futile endeavors at brokering a settlement.

As a relevant aside, the scenario presented here raises the specter of a much greater social problem, that of housing those persons whose homes are foreclosed and who are thereafter dispossessed. It is certainly no secret that Suffolk County is in the yawning abyss of a deep mortgage and housing crisis with foreclosure filings at a record high rate and a corresponding paucity of emergency housing. While foreclosure and its attendant eviction are clearly the inevitable (and in some cases, proper) result in a number of these situations, the Court is persuaded that this need not be the case here. In this matter, Defendant is plainly willing to make arrangements for repayment and both her husband and daughter are likewise willing to allocate their respective incomes in order to reach the same end. Were Plaintiff amenable, she would presumably continue to maintain the property’s physical plant, pay taxes thereon and the property would retain or perhaps increase its market value. Plaintiff would receive a regular income stream, albeit with a reduced rate of interest and without sustaining a loss of several hundred thousand dollars. In addition, no neighborhood blight would occur from the boarding of the property after foreclosure which would, in turn, avert problems of litter, dumping, vagrancy and vandalism as well as a corresponding decline in the property values in the immediate area. In short, a loan modification would result in a proverbial “win-win” for all parties involved. To do otherwise would result in virtually certain undomiciled status for two physically unhealthy persons and their daughter, leading to an additional level of problems, both for them and for society.

Since an action claiming foreclosure of a mortgage is one sounding in equity, Jamaica Savings Bank v. M.S. Investing Co. 274 NY 215 (1937), the very commencement of the action by Plaintiff invokes the Court’s equity jurisdiction. While it must be noted that the formal distinctions between an action at law and a suit in equity have long since been abolished in New York (see CPLR 103, Field Code Of 1848 §§ 2, 3, 4, 69), the Supreme Court nevertheless has equity jurisdiction and distinct rules regarding equity are still extant, Carroll v. Bullock 207 NY 567, 101 NE 438 (1913). Speaking generally and broadly, it is settled law that “Stability of contract obligations must not be undermined by judicial sympathy…” Graf v. Hope Building Corporation 254 NY 1 (1930). However, it is true with equal force and effect that equity must not and cannot slavishly and blindly follow the law, Hedges v. Dixon County 150 US 182, 192 (1893). Moreover, as succinctly decreed by our Court of Appeals in the matter of Noyes v. [*5]Anderson 124 NY 175 (1890) “A party having a legal right shall not be permitted to avail himself of it for the purposes of injustice or oppression…” 124 NY at 179.

In the matter of Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup. Ct., New York County, 1954), Special Term stated that “The maxim of “clean hands” fundamentally was conceived in equity jurisprudence to refuse to lend its aid in any manner to one seeking its active interposition who has been guilty of unlawful, unconscionable or inequitable conduct in the matter with relation to which he seeks relief.” 133 NYS2d at 925, citing First Trust & Savings Bank v. Iowa-Wisconsin Bridge Co. 98 F 2d 416 (8th Cir. 1938), cert. denied 305 US 650, 59 S. Ct. 243, 83 L. Ed. 240 (1938), reh. denied 305 US 676, 59 S Ct. 356 83 L. Ed. 437 (1939); General Excavator Co. v. Keystone Driller Co. 65 F 2d 39 (6th Cir. 1933), cert. granted 289 US 721, 53 S. Ct. 791, 77 L. Ed. 1472 (1933), aff’d 290 US 240, 54 S. Ct. 146, 78 L. Ed. 793 (1934).

In attempting to arrive at a determination as to whether or not equity should properly intervene in this matter so as to permit foreclosure of the mortgage, the Court is required to look at the situattion in toto, giving due and careful consideration as to whether the remedy sought by Plaintiff would be repugnant to the public interest when seen from the point of view of public morality, see, for example, 55 NY Jur. Equity § 113, Molinas v. Podloff 133 NYS2d 743 (Sup. Ct., New York County, 1954). Equitable relief will not lie in favor of one who acts in a manner which is shocking to the conscience, Duggan v. Platz 238 AD 197, 264 NYS 403 (3rd Dept. 1933), mod. on other grounds 263 NY 505, 189 NE 566 (1934), neither will equity be available to one who acts in a manner that is oppressive or unjust or whose conduct is sufficiently egregious so as to prohibit the party from asserting its legal rights against a defaulting adversary, In Re Foreclosure Of Tax Liens 117 NYS2d 725 (Sup. Ct. Kings County, 1952), aff’d on other grounds 286 AD 1027, 145 NYS2d 97 (2nd Dept. 1955), mod. on other grounds on reargument 1 AD2d 95, 148 NYS2d 173 (2nd Dept. 1955), appeal granted 7 AD2d 784, 149 NYS2d 227 (2nd Dept. 1956). The compass by which the questioned conduct must be measured is a moral one and the acts complained of (those that are sufficient so as to prevent equity’s intervention) need not be criminal nor actionable at law but must merely be willful and unconscionable or be of such a nature that honest and fair minded folk would roundly denounce such actions as being morally and ethically wrong, Pecorella v. Greater Buffalo Press Inc. 107 AD2d 1064, 468 NYS2d 562 (4th Dept. 1985). Thus, where a party acts in a manner that is offensive to good conscience and justice, he will be completely without recourse in a court of equity, regardless of what his legal rights may be, Eastman Kodak Co. v. Schwartz 133 NYS2d 908 (Sup. Ct., New York County, 1954), York v. Searles 97 AD 331, 90 NYS 37 (2nd Dept. 1904), aff’d 189 NY 573, 82 NE 1134 (1907).

An objective and painstaking examination of the totality of the facts and circumstances herein leads this Court to the inescapable conclusion that the affirmative conduct exhibited by Plaintiff at least since since February 24, 2009 (and perhaps earlier) has been and is inequitable, unconscionable, vexatious and opprobrious. The Court is constrained, solely as a result of Plaintiff’s affirmative acts, to conclude that Plaintiff’s conduct is wholly unsupportable at law or in equity, greatly egregious and so completely devoid of good faith that equity cannot be permitted to intervene on its behalf. Indeed, Plaintiff’s actions toward Defendant in this matter have been harsh, repugnant, shocking and repulsive to the extent that it must be appropriately [*6]sanctioned so as to deter it from imposing further mortifying abuse against Defendant. The Court cannot be assured that Plaintiff will not repeat this course of conduct if this action is merely dismissed and hence, dismissal standing alone is not a reasonable option. Likewise, the imposition of monetary sanctions under 22 NYCRR § 130-1.1 et. seq. is not likely to have a salubrious or remedial effect on these proceedings and certainly would not inure to Defendant’s benefit. This Court is of the opinion that cancellation of the indebtedness and discharge of the mortgage, when taken together, constitute the appropriate equitable disposition under the unique facts and circumstances presented herein.

After careful consideration, it is the determination of this Court that the indebtedness evidenced by the Adjustable Rate Note dated August 4, 2004 in the original principal amount of $ 292,500.00 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. should be cancelled, voided and set aside. In addition, the Mortgage which secures the Adjustable Rate Note, given to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages at Page 285, as assigned by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 should be cancelled and discharged of record. Further, Plaintiff, its successors and assigns should be forever barred and prohibited from any action to collect upon the Adjustable Rate Note. In addition, the Judgment of Foreclosure & Sale granted on January 12, 2009 and entered on January 23, 2009 should be vacated and set aside and the Notice of Pendency should be cancelled and discharged of record. For this Court to decree anything less than the foregoing would be for the Court to be wholly derelict in the performance of its obligations.

Upon the Court’s own motion, it is

ORDERED that the Adjustable Rate Note in the amount of $ 292,500.00 dated August 4, 2004 made by Diana J. Yano-Horoski in favor of IndyMac Bank F.S.B. shall be and the same is hereby cancelled, voided, avoided, nullified, set aside and is of no further force and effect; and it is further

ORDERED that the Mortgage in the amount of $ 292,500.00 which secures said Adjustable Rate Note given by Diana J. Yano-Horoski to Mortgage Electronic Registration Systems Inc. As Nominee For IndyMac Bank F.S.B. dated August 4, 2004 and recorded with the Clerk of Suffolk County on August 16, 2004 in Liber 20826 of Mortgages as Page 285, as assigned to IndyMac Bank F.S.B. by Assignment recorded with the Clerk of Suffolk County in Liber 21273 of Mortgages at Page 808 shall be and the same is hereby vacated, cancelled, released and discharged of record; and it is further

ORDERED that the Plaintiff, its successors and assigns are hereby barred, prohibited and foreclosed from attempting, in any manner, directly or indirectly, to enforce any provision of the [*7]aforesaid Adjustable Rate Note and Mortgage or any portion thereof as against Defendant, her heirs or successors; and it is further

ORDERED that the Judgment of Foreclosure & Sale granted under this index number on January 12, 2009 and entered in the Office of the Clerk of Suffolk County on January 23, 2009 shall be and the same is hereby vacated and set aside; and it is further

ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on July 27, 2005 under sequence no. 172456, which was extended by Order dated September 2, 2008 shall be and the same is hereby cancelled, vacated and set aside; and it is further

ORDERED that the Notice of Pendency filed with the Clerk of Suffolk County on August 29, 2008 under sequence no. 199616, shall be and the same is hereby cancelled, vacated and set aside; and it is further

ORDERED that the Clerk of Suffolk County shall cause a copy of this Order & Judgment to be filed in the Land Records so as to effectuate of record each and every one of the provisions hereinabove set forth with respect to cancellation of the instruments and items of record; and it is further

ORDERED that Plaintiff shall pay to the Clerk of Suffolk County, within ten (10) days from the date of entry hereof, any and all fees and costs required to effect cancellation of record of the Mortgage, Notices of Pendency and any other fees so levied; and it is further

ORDERED that within ten (10) days of the date of entry hereof, Plaintiff’s counsel shall serve a copy of this Order upon the Clerk of Suffolk County and the Defendant.

This shall constitute the Decision, Judgment and Order of this Court.

Dated: November 19, 2009

Riverhead, New York

E N T E R:

______________________________________

JEFFREY ARLEN SPINNER, J.S.C.

4closureFraud
http://4closurefraud.wordpress.com/

Hurricane Katrina was one of the greatest catastrophes to hit the United States.  Nearly 1,600 died in Louisiana alone with massive flooding in New Orleans when its levees failed.  The storm displaced about 300,000 people and caused over $80 billion in damage.  While a natural disaster was initially blamed for the damage, it is now evident that our government had significant responsibility.

In a scathing decision, US District Court Judge Stanwood Duval Jr. placed significant blame for the damage to New Orleans during the Hurricane squarely in the lap of the Army Corps of Engineers.  Judge Duval found that:

“It is the court’s opinion that the negligence of the Corps, in this instance by failing to maintain the MRGO [Mississippi River Gulf Outlet] properly, was not policy, but insouciance, myopia and short-sightedness,”

“For over 40 years, the Corps was aware that the Reach II levee protecting Chalmette and the Lower Ninth Ward was going to be compromised by the continued deterioration of the MRGO … The Corps had an opportunity to take a myriad of actions to alleviate this deterioration or rehabilitate this deterioration and failed to do so.  Clearly, the expression ‘talk is cheap’ applies here.”

“This court cannot but comment that the Corps’ approach reminds the court of the old adage, ‘Close your eyes and you become invisible,’”

“It is beyond arbitrary and capricious — it flies in the face of the purpose of NEPA [the National Environmental Policy Act] and ignores the very heart of what ‘operation’ means,”

Referring to the Corps’ actions: “were in direct contravention of professional engineering and safety standards,” ……. “… Ignoring safety and poor engineering are not policy, and clearly the Corps engaged in such activities.”

According to Duval, the MRGO channel that was managed by the Army Corps of Engineers was not properly maintained.  As a result, it widened with erosion and deteriorated making the walls vulnerable to waves from Lake Borgne.  This led to levee failure and subsequent flooding of portions of New Orleans.

The Court’s ruling was in favor of a half dozen plaintiffs whose property was damaged by Katrina.  While the damages amounted only to about $700,000, there were 100,000 homes and businesses in the affected parish and Lower 9th Ward.  Judge Duval’s ruling will lead to compensation for many more.  So, first taxpayers pay to build the levees and maintain them and now we get to pay for the incompetence of our government.  Look for a multi-billion dollar bill added to our already ballooning deficit.

If government caused catastrophes like Katrina were isolated, it could be passed off as a bad mistake.  However, it is not.  Governments have a history of creating “mistakes” that are very expensive.  Whether it is construction projects such as Katrina, scientific/system failures as in the space shuttle Challenger disaster, wrongly predicting oncoming events such as Y2K, or not properly managing agencies such as Fannie Mae and Freddie Mac, the government’s track record is very poor.

Given the recent letdowns of the private sector such as the Wall Street banks, some Americans look to government for the cure.  If history is the judge, it indicates that the cure is often worse than the disease!

MORTGAGE ELECTRONIC
REGISTRATION SYSTEMS, INC. and
COUNTRYWIDE HOME LOANS, INC.,

v

WARREN E. AGIN, TRUSTEE,

A Massachusetts federal judge has upheld a bankruptcy court ruling allowing a trustee to treat a mortgage as an unsecured claim, which strips the mortgage holder of foreclosure rights, because of defective mortgage paperwork.

4closureFraud
http://4closurefraud.wordpress.com/

In a recent WSJ piece, Edward Pinto links the housing bubble to liberal advocacy groups like Acorn.  The argument goes something like this: government polices aimed at increasing home ownership forced entities like Freddie Mac to lower lending standards and acquire large amounts of risky mortgages.

“The flood of CRA and affordable-housing loans with loosened underwriting standards, combined with declining mortgage interest rates—to 5% in 2003 from 10% in early 1991—resulted in a massive increase in borrowing capacity and fueled a house price bubble of unprecedented magnitude over the period 1997-2006.”

Groups like Acorn lobbied for “innovative and flexible” lending practices and helped “ignite” the housing bubble. Acorn is a large political advocacy group that pushes issues for low-income earners.  Pinto links Acorn’s efforts to increase homeownership to the recent housing bubble and financial crisis.

Does he have a case? First we should recognize his bias.  Mr. Pinto was chief credit officer at Fannie Mae from 1987-1989. Not surprising then that he would defend his former professional affiliation.  However, a massive increase in loans made without due diligence over the past 15 years is an undeniable cause for collapse.  As Pinto points out, loans made with less than 5 percent down increased from 9 percent in 1991, to 29 percent in 2007.  Default rates also increased.  Government-sponsored enterprises’ high-risk loans faced a 10.3 percent default rate.

Bankers and regulators should have known better.  Barney Frank, Chairman of the Financial Services Committee, argued to switch the focus from home ownership to rental properties.  This would have isolated the mortgage industry from reckless lending practices.  He made his argument back in 2002.

Lack of due diligence is the real crime here.  Why did the nation’s largest mortgage lenders ignore a fundamental principle of finance?   The answer to that question will help us avoid another meltdown.  You cannot blame a poverty-advocacy group for a banker’s lack of competence.  Yes, policies aimed at increasing homeownership failed.  But that is only part of the puzzle.  Financial innovation, de-regulation, derivatives, Glass-Steagall, China and Fed policy where other factors.

Though I agree with Pinto’s analysis, blaming community groups for advocating loose lending standards is a bit harsh.  Bankers need to take some responsibility.

Tom Powell

A critical question buyers need to consider when buying a condo in Carlsbad, or anywhere else in San Diego, is  “are those occupants residents or tenants?“

I don’t mean that we fundamentally care who is living there.

The issue has to do with the mortgage requirements that a minimum of 51% of the units in a condominium complex must be owner occupants (i.e., not second homes or investor-owned properties).

If you can find this out before  getting too far along in the offer process (your REALTOR will help with this) you can save yourself some possible disappointment.

During the due diligence process here in CA we investigate the status of the HOA, review HOA docs and budget and other matters, which includes the percentage of owner occupancy. But finding out before you get that far along will save time and heartache. It MAY be stated in the MLS but in my experience it usually isn’t.

While many condos do meet that requirement easily, there are some complexes that are popular with investors so it is an important detail to add to your due diligence as a buyer.

Citing FHA’s deteriorating financial position, Reps. Spencer Bachus (Ala.) and Shelley Capito (W. Va.) are urging committee chairman Barney Frank, D-Mass., to schedule a hearing as soon as possible.

Republican leaders on the House Financial Services Committee are calling for hearings on the financial health of the ailing Federal Housing Administration reserve fund, which recently reported a sharp drop in its capital ratio to 0.57%.

“If home prices do not recover, the economic value of the Mutual Mortgage Insurance Fund could fall below zero. We are concerned that such a drop could force HUD to request an appropriation from Congress,” the two Republican lawmakers say in a letter.

FHA officials maintain that they have taken corrective actions and the insurance fund is in no imminent danger of running out of cash. If necessary, the agency could raise the FHA upfront premium to keep the fund in the black.

However, Reps. Bachus and Capito also have concerns about FHA’s technological and management capacity.

“It is incumbent upon our committee to get prompt answers to many of the questions surrounding FHA’s risk management practices and finances,” the Republicans say in a letter to Rep. Frank.

_______________________

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EXECUTIVE ORDER 13519

- – - – - – -

ESTABLISHMENT OF THE FINANCIAL FRAUD ENFORCEMENT TASK FORCE

By the authority vested in me as President by the Constitution and the laws of the United States of America, and in order to strengthen the efforts of the Department of Justice, in conjunction with Federal, State, tribal, territorial, and local agencies, to investigate and prosecute significant financial crimes and other violations relating to the current financial crisis and economic recovery efforts, recover the proceeds of such crimes and violations, and ensure just and effective punishment of those who perpetrate financial crimes and violations, it is hereby ordered as follows:

Section 1. Establishment. There is hereby established an interagency Financial Fraud Enforcement Task Force (Task Force) led by the Department of Justice.

Sec. 2. Membership and Operation. The Task Force shall be chaired by the Attorney General and consist of senior-level officials from the following departments, agencies, and offices, selected by the heads of the respective departments, agencies, and offices in consultation with the Attorney General:

(a) the Department of Justice;

(b) the Department of the Treasury;

(c) the Department of Commerce;

(d) the Department of Labor;

(e) the Department of Housing and Urban Development;

(f) the Department of Education;

(g) the Department of Homeland Security;

(h) the Securities and Exchange Commission;

(i) the Commodity Futures Trading Commission;

(j) the Federal Trade Commission;

(k) the Federal Deposit Insurance Corporation;

(l) the Board of Governors of the Federal Reserve System;

(m) the Federal Housing Finance Agency;

(n) the Office of Thrift Supervision;

(o) the Office of the Comptroller of the Currency;

(p) the Small Business Administration;

(q) the Federal Bureau of Investigation;

(r) the Social Security Administration;

(s) the Internal Revenue Service, Criminal Investigations;

(t) the Financial Crimes Enforcement Network;

(u) the United States Postal Inspection Service;

(v) the United States Secret Service;

(w) the United States Immigration and Customs Enforcement;

(x) relevant Offices of Inspectors General and related Federal entities, including without limitation the Office of the Inspector General for the Department of Housing and Urban Development, the Recovery Accountability and Transparency Board, and the Office of the Special Inspector General for the Troubled Asset Relief Program; and

(y) such other executive branch departments, agencies, or offices as the President may, from time to time, designate or that the Attorney General may invite.

The Attorney General shall convene and, through the Deputy Attorney General, direct the work of the Task Force in fulfilling all its functions under this order. The Attorney General shall convene the first meeting of the Task Force within 30 days of the date of this order and shall thereafter convene the Task Force at such times as he deems appropriate. At the direction of the Attorney General, the Task Force may establish subgroups consisting exclusively of Task Force members or their designees under this section, including but not limited to a Steering Committee chaired by the Deputy Attorney General, and subcommittees addressing enforcement efforts, training and information sharing, and victims’ rights, as the Attorney General deems appropriate.

Sec. 3. Mission and Functions. Consistent with the authorities assigned to the Attorney General by law, and other applicable law, the Task Force shall:

(a) provide advice to the Attorney General for the investigation and prosecution of cases of bank, mortgage, loan, and lending fraud; securities and commodities fraud; retirement plan fraud; mail and wire fraud; tax crimes; money laundering; False Claims Act violations; unfair competition; discrimination; and other financial crimes and violations (hereinafter financial crimes and violations), when such cases are determined by the Attorney General, for purposes of this order, to be significant;

(b) make recommendations to the Attorney General, from time to time, for action to enhance cooperation among Federal, State, local, tribal, and territorial authorities responsible for the investigation and prosecution of significant financial crimes and violations; and

(c) coordinate law enforcement operations with representatives of State, local, tribal, and territorial law enforcement.

Sec. 4. Coordination with State, Local, Tribal, and Territorial Law Enforcement. Consistent with the objectives set out in this order, and to the extent permitted by law, the Attorney General is encouraged to invite the following representatives of State, local, tribal, and territorial law enforcement to participate in the Task Force’s subcommittee addressing enforcement efforts in the subcommittee’s performance of the functions set forth in section 3(c) of this order relating to the coordination of Federal, State, local, tribal, and territorial law enforcement operations involving financial crimes and violations:

(a) the National Association of Attorneys General;

(b) the National District Attorneys Association; and

(c) such other representatives of State, local, tribal, and territorial law enforcement as the Attorney General deems appropriate.

Sec. 5. Outreach. Consistent with the law enforcement objectives set out in this order, the Task Force, in accordance with applicable law, in addition to regular meetings, shall conduct outreach with representatives of financial institutions, corporate entities, nonprofit organizations, State, local, tribal, and territorial governments and agencies, and other interested persons to foster greater coordination and participation in the detection and prosecution of financial fraud and financial crimes, and in the enforcement of antitrust and antidiscrimination laws.

Sec. 6. Administration. The Department of Justice, to the extent permitted by law and subject to the availability of appropriations, shall provide administrative support and funding for the Task Force.

Sec. 7. General Provisions. (a) Nothing in this order shall be construed to impair or otherwise affect:

(i) authority granted by law to an executive department, agency, or the head thereof, or the status of that department or agency within the Federal Government; or

(ii) functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b) This Task Force shall replace, and continue the work of, the Corporate Fraud Task Force created by Executive Order 13271 of July 9, 2002. Executive Order 13271 is hereby terminated pursuant to section 6 of that order.

(c) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.

(d) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

Sec. 8. Termination. The Task Force shall terminate when directed by the President or, with the approval of the President, by the Attorney General.

THE WHITE HOUSE,

November 17, 2009.

4closureFraud
http://4closurefraud.wordpress.com/

Robert Toll, CEO of Toll Brothers (TOL), the largest luxury homebuilder in the U.S., is cautioning that the Federal Housing Administration is going to end up as the next subprime mortgage crisis.

And with good reason, too:

Bloomberg: “Yesterday’s subprime is today’s FHA,” Toll said today at a New York conference for builders sponsored by UBS AG. “It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.” Toll Brothers is largest U.S. luxury homes builder.

For Full article: http://www.businessinsider.com/toll-brothers-ceo-fha-lending-is-a-train-wreck-2009-11

Außerdem wird in nachfolgendem Artikel das nächste größere Problem in den Staaten angesprochen: dem staatlichen Hypothekengarant “Federal Housing Administration” droht ebenfalls der Kollaps… Siehe auch “USA: Einlagensicherungsfond FDIC kommt in finanzielle Nöte!“.

Gefunden bei telepolis.de:

Banken müssen die US-Einlagensicherung retten

Ralf Streck 17.11.2009

Die große Zahl der Bankenpleiten in den USA hat Einlagensicherungsbehörde an den Rand einer Pleite gebracht

Es war zu erwarten, dass die vielen Bankenpleiten auch die US-Einlagensicherungsbehörde (FDIC) in Bedrängnis bringen würden (Finanzkrise: “Das Schlimmste kommt noch”). Schon vor einem Jahr war die Einlagensumme auf einen historischen Tiefstand von 45 Milliarden Dollar geschrumpft. Die sind nun auf ein Minimum eingedampft, denn in diesem Jahr sind in den USA schon mehr als 120 Banken abgestürzt und darunter sind auch einige große Institute (Arbeitslosigkeit in den USA steigt stärker als erwartet).

Am vergangenen Wochenende wurde die Einlagensicherung erneut über die Pleite von drei Instituten geschröpft. So waren zwei Banken in Florida – die Orion Bank of Naples und die Century Bank – betroffen und dazu kam ein kleineres Institut in Kalifornien, die Pacific Coast National Bank of San Clemente. Der neue Aderlass schlägt ein neues Loch in die FDIC-Kassen, denn die drei Institute hatten zusammen fast drei Milliarden Dollar an Einlagen.

So sah sich die FDIC zu einem dramatischen Schritt gezwungen. Mit den Mitgliedsbanken wurde vereinbart, dass diese eine Vorauszahlung der Gebühren für die nächsten drei Jahre leisten müssen. Damit erhält die Federal Deposit Insurance Corp rund 45 Milliarden Dollar. Doch dass die lange reichen, davon darf kaum ausgegangen werden. Denn das Bankensterben geht immer schneller voran. Waren im vergangenen Jahr 25 Institute abgeschmiert, waren es 2007 waren sogar nur drei. Die 123 Pleitekandidaten haben also in nur knapp 11 Monaten die 45 Milliarden aufgebraucht, die nun an frischem Kapital an die FDIC fließen könnten.

Die rote Liste der FDIC wird zudem immer länger, sie umfasste im Sommer schon mehr als 400 Institute. Zum Jahresbeginn waren es noch 252 gewesen, obwohl sich die Zahl im Vergleich zum Vorjahr schon verdreifacht hatte. Und ob tatsächlich 45 Milliarden fließen werden, ist auch fraglich. Die FDIC kann bei besonders klammen Instituten auch Ausnahmen zulassen, die dann die Vorauszahlung nicht leisten müssen, die für alle anderen Banken bis zum Ende dieses Jahres fällig wird. So wird die Zahlung wohl zu einem kleinen Stresstest für viele Banken, der vielleicht mehr über deren Zustand aussagt, als es der nicht so stressige Test von Präsident Obama ausgesagt hatte.

Ohnehin ist die Lage in den USA weiter alles andere als rosig. Wegen der schlechten Daten vom Arbeitsmarkt ist das Verbrauchervertrauen deutlich gefallen. Die Arbeitslosigkeitsquote hat offiziell die 10-Prozenthürde überwunden. Real liegt sie längst weit darüber, weil sich viele Arbeitslose schlicht nicht mehr melden, wie auch eine Statistik der der Household-Survey belegt. Das Verbrauchervertrauen ging deshalb im November von 70,6 auf 66,0 Punkte in die Knie. Es fiel damit auf den tiefsten Stand seit August. Die Experten hatten eigentlich sogar einen Anstieg auf 71 Punkte erwartet. Das ist ein fatales Zeichen für eine Wirtschaft, die am Inlandskonsum hängt.

Zudem wächst ein neues Debakel heran. Dem staatlichen Hypothekengarant Federal Housing Administration (FHA) droht ebenfalls der Kollaps. Die Reserven der FHA haben sich in den letzten Monaten drastisch reduziert. Der Puffer beträgt nur mehr 0,53 % von 653 Milliarden Dollar an Hypotheken, die durch die FHA versichert werden. Vorgeschrieben ist ein Wert von 2 %. “Es besteht die Möglichkeit, dass die Reserven unter Null gehen und auch dort bleiben”, sagt Shaun Donovan, Chef des Ministeriums für “Housing and Urban and Development”. Nach [extern] Angaben der FTD hatte sich die FHA zuletzt als wichtiger Akteur bei der Vergabe von Krediten hervorgetan. Ihr Marktanteil sei seit September von 24 auf 63 % angeschwollen..

Pikant ist, dass die FHA ausgerechnet gemeinsam mit der staatlichen Finanzierungsagentur Ginnie Mae die schlecht abgesicherten Subprime-Hypotheken wiederbelebt hat. Derlei Ramsch-Kredite zählen zu den Auslösern der Finanzkrise und die wurden zuvor auch zuhauf von den Großen im Geschäft vergeben. Das Handelsblatt berichtet mit Bezug auf eine Studie der US-Notenbank in San Francisco, die FHA habe nach dem Zusammenbruch des Marktes 2008 den Anteil dieser Subprime-Kredite wieder auf 20 % erhöht, damit wäre der Wert sogar höher als vor dem Absturz. Die großen Vorbilder von Ginnie sind Fannie Mae und Freddie Mac, die zuhauf mit diesen Krediten gehandelt hatten und längst verstaatlicht wurden, hängen am Tropf der Steuerzahler, weil sie seit neun Quartalen in Folge nur Milliardenverluste einfahren.

FNMA 30-YR 4.5%

Previous close 101.781

Opened down 0.09BPs @ 101.688

Key Economic Data:

EUR / USD 1.4928 Up 0.0051
USD / JPY 89.280 Up 0.0262
GBP / USD 1.6790 Down 0.0022

OIL 79.60 Up 0.46
Gold 1,145.90 Up 6.50

Key Economic News:

CPI and housing, Geithner and Bullard.

8:30: Consumer pirce index for Oct…a moderate report? On headline, median forecast (of 78): +0.2%, ranging from -0.2% to +0.5%; last +0.2%. On core, median forecast (of 77): +0.1%, ranging from -0.2% to +0.2%; last +0.2%. We made some modest adjustments to our forecast after PPI, but basic nature of the forecast has not changed. As was the case wthe PPI, we expect the CPI to feature a benign core reading with food and energy pulling the headline up, though not nearly as much as in the PPI. Within the core index, the rental components should continue to be flat or slighly negative, and apparel prices should also be off a bit. Medical and lodging away from home are the higher components of our forecast. Price increases for tobacco took effect late in the month to show up materially in this report; they’ll be an issue for November.

8:30: Housing starts and permits for Oct…look for a small increase. On starts, median forecast (of 77) +1.7%, ranging from -3.4% to +8.2%; last -1.2% (since revised to -0.9%). With sales of new homes and builder sentiment both stalling of late, we expect gains in housing starts will be limited.

9:00: Treasury Secretary Timothy Geithner hosts a small business financing forum at the US Treasury Department…

9:15: St. Louis Federal Reserve President James Bullard speaks on the US economic outlook…Bullard has surprised us in both directions since he’s been on the job, so hard to know what to expect. He rotates onto the voting membership of the FOMC next year.

Advice:

CPI – Gas and cars vs Everything Else in the CPI; Starts Down surprisingly.

Bottom Line:
A highly skewed report on consumer prices, with vehicles accounting for more than 80% of the core increase and energy driving most of the rest. Housing starts weaken as high vacancies weigh on new construction, especially of multifamily projects.

Key Numbers:
CPI +0.27% in Oct (mom, -0.2% yoy) vs median forecast +0.2%.
ex food and energy +0.18% (mom, +1.7% yoy) vs median forecast +0.1%.
Housing starts -10.6% in Oct (mom, -7.2% yoy) vs median forecast +1.7%.

Based on CPI and Housing Starts, I see today following in yesterdays footsteps. With all this uncertainty I would lock today.

by Mercedes B. Suleik, for Manila Bulletin, November 18, 2009.

“In the next century, a company will stand or fall on its values,” Robert Hass, CEO of Levi Strauss was quoted to have said. I have sometimes used this quote to begin one of my lectures on corporate governance, saying that this statement has been validated by the humongous scandals and failures in the West – Enron, the mother of all f…k-ups, Worldcom, Tyco, even one of the big 5 accounting firms, Andersen, etc. in 2000, and repeated in 2008 with Lehman Brothers, Bear Stearns, AIG, US housing giants Fannie Mae and Freddie Mac, not the mention the big banks…all of whom had to bailed out (with the exception of Lehman) with taxpayers money. What indeed were the values espoused by these companies?

In discussing what corporate governance is about, I usually short-cut it by taking each of the elements in a definition I found very useful, that given by former World Bank President, James D. Wolfensohn: “Corporate governance is about promoting fairness, transparency, and accountability.” Transposing the letters to make an easy acronym, FAT, I have also added another letter to make FATE, with E representing Ethics.

Of course it could be said that observing FAT really means that underlying it all is the observance of E. If a company observes fairness, accountability, and transparency, then underlying it all, it must be ethical. FAT after all means that a good company assures that its shareholders are treated equitably, promotes long term value, and balances its profit motive with prudentially protecting its investments. FAT also means that in the relationships among the three important groups in a company – the shareholders, directors and management – each is accountable to the other, with the Board being accountable to the shareholders who own the company, and the Board being responsible for the actions of management which it appoints to implement its strategic and policy decisions. FAT also means that the Board ensures timely and accurate disclosure of all material matters, including material foreseeable risks, and requires a system of monitoring and reporting based on accepted standards of adequate disclosure…(continue reading)

“Well, in short, in the words of the Rapper Puff Daddy, “It’s all about the benjamins, Baby.”

By O. Max Gardner III

Wayne Gretzky once said that his success was due to the fact that he focused on where the puck was going to be, not where it was. For most consumer debtors who have home mortgage loans and are involved in Chapter 13 bankruptcy cases, this Gretzkyism is somewhat of a double entendre. The fact of the matter is that most of these debtors have no idea who really owns their home mortgage loan and they most assuredly do not know why the balance owed keeps going up. Or, as Yogi Berra might say, these “guys have been double-pucked!”

And, the so-called “double-pucking” all starts with mortgage securitization. Securitization is a complex series of financial transactions designed to maximize the cash flow and cash out options for loan originators. The securitization and sale of assets is what gets the “off the balance sheet” boost in reported income for the originator. The originators secure immediate liquidity from assets that, in some circumstances, could not be readily traded in the capital markets. On paper, it sounds simple, in the real world it involves the creation of numerous Special Purpose Vehicle Corporations (SPV) designed to create the legal impression of an actual BPF sales transaction. However, the residuals, credit enhancements, and other derivative rights retained by the originators in the transferred assets create a Pandora’s Box of problems. A good example is Enron. Enron had enhanced the credit worthiness of thousands of asset-backed securitizations with Enron stock. When the Enron stock tanked so did the securitizations and Enron had to “recognize” all of these “off the books” transactions as liabilities. We know the rest of the story.

To securitize an asset, the loan originator creates a pool of financial assets such as mortgage loans. It then uses one or more SPV corporations to convert the large pools of these mortgages into complex investment certificates, backed or securitized by valid liens on the transferred collateral. These certificates are then rated and offered for sale to asset capital investors, foreign investors and life insurance companies to name a few. The certificates are normally split into various types or tranches, each of which has pre-determined cash flow or equity positions in the underlying collateral.

Unlike conventional bonds, payments of principal and interest from these mortgage backed securities (MBS) are based on the cash generated by the pooled assets. Cash can be generated by monthly mortgage payments and the pre-payment of the mortgage instruments by refinancing or early payment. The collateral for all of these bonds is always a pooled trust of the underlying assets, administered by a designated Trustee. The Trustee then enters into an agreement with a third-party to actually service the collection of the income from the pooled assets. These servicing agreements are normally consummated prior to the initial funding or transfer of the assets to the trust and are normally referred to as a Pooling and Servicing Agreement (PSA).

In many cases, the entity that originates or aggregates the assets for securitization will retain the rights to service the pool of mortgage loans for the trustee. These rights are referred to in the mortgage context as retained mortgage servicing rights (MSR). The entity holding the MSR rights is normally referred to as the Master Mortgage Servicer. The PSA may give the Master Mortgage Servicer the right to “farm-out” the actual servicing and collection of the mortgage loans to a primary servicer, a secondary or subservicer, or a default servicer. In the vast majority of cases, the consumer-mortgagor is making his or her monthly payments to one of these servicers, whom they erroneously believe is the entity that actually “owns their mortgage.”

The rights to service a mortgage loan are considered to be assets with recognized value. In fact, Mortgage Servicing Assets (MSA) are sold, assigned, and securitized just like the mortgage loans they service. Suffice it to say, the buying and selling of servicing rights accounts for much of the consumer confusion that leads to the common misstatement that “my mortgage has been sold 4 times in the past five years.” The mortgage has not been sold, just the rights to service the mortgage, the mortgage is still swimming in a pool with other similar debt instruments. And, since a Master Mortgage Servicer receives a service release premium (SRP) when it sells the servicing rights, the market is certainly active.

The final element in understanding this financial model is that you have public and private label placements of mortgage securitizations. All of the public placements are originated by the Government Sponsored Entities (FannieMae, FreddieMac, and GinnieMae commonly referred to as the GSE’s) and normally involve a single form of an investment bond or certificate called Pass-Through Certificates. All of these placements are the subject of detailed SEC filings and other public reports. The private-label placements, on the other hand, represent mortgages that have been aggregated on the secondary market by private investors and the pooled trusts of these assets are normally not subject to any SEC reporting or filing requirements. The private placement MBS’s also normally offer multiple forms of investments and create these instruments by splitting the income and principal aspects of the MBS trust into many different segments or tranches. The GSE’s have historically purchased for securitization only traditional mortgage products but in recent years have expanded into a variety of areas such as loan size, higher loan-to-value loans, alternative mortgages (ARMS, Hybrid ARMS, Interest Only ARMS, etc.). The private label aggregators, on the other hand, have purchased all of the others including Alt-A, sub-prime, etc.

At his point, you might ask what does any of this have to do with consumer mortgages and Chapter 13 bankruptcy cases. Well, in short, in the words of the Rapper Puff Daddy1, “It’s all about the benjamins, Baby.”* The problem arises out of the fact that in most cases the “income” for servicing a mortgage is “fixed” at the time of securitization. The “fixing” of this compensation is based on historical financial models of the pooled mortgages that make certain assumptions on default rates, foreclosure rates, the ability to market REO (real estate owned) properties, and the like. If these projections are not accurate, then the costs of servicing an above average pool of defaulted mortgage loans may be a money losing proposition for the servicers. And there is a fine margin in the mortgage servicing business between operating in the black or in the red.

One of the most startling statements about these revenue reduction problems that this writer has seen was one reported in the August 2005 edition of Mortgage Banking. Mortgage Banking is published monthly by the Mortgage Bankers Association of America and touts itself as “the magazine of real estate finance.” In an Article by Thomas J. Healy, a Certified Mortgage Banker employed by HanoverTrade Inc., the following statement is made:

“Because servicers average approximately $60 per loan per year in net profit, it does not take much in the way of additional non reimbursable inspections/collections/foreclosure costs to wipe out the profits on a lot of loans.”

This statement is supported by a “cost of servicing” survey that is being conducted by the Research Department of the Mortgage Bankers Association of America. Marina Walsh, the Director of this Department, was recently quoted as saying that “in general, servicing costs [for subprime mortgages] were about three times that of the prime side.” Ms. Walsh went on to state that when subprime loans go into default, the servicing costs are 4.5 times higher than for defaulted prime loans.

These quotes and these statistics remind me of some advice I received about 30 years ago from a veteran personal injury attorney. We were about to settle a very large medical malpractice case and our fee was based on a percentage of the total recovery. I remember asking the veteran, “How much is 33% of that settlement?” He responded as follows: “I don’t know for sure but 33% of a lot is a lot!” Well, in order to enhance their default servicing revenues, mortgage servicers “involved in” consumer bankruptcy cases have created all sorts of new fees and charges that are not assessed against the investors (the holders of the certificates in the pooled trusts, who will not pay these fees) but against the poor Chapter 13 debtors.

What type of fees are we talking about? Well in Mr. Healy’s article, he writes about inspections. What type of inspections is he referring to? I guess the best place to start would be with Gerald Stark, a civil engineer for whom I filed a Chapter 13 case about 10 years ago. Gerald had a mortgage loan that had been securitized by FannieMae and was being serviced by Crestar Mortgage Corporation. The mortgage was current on the petition date and remained current during the course of the plan. Notwithstanding the Chapter 13 filing, Crestar continued to send monthly billing statements to the debtor. It was not the billing statements that concerned Gerald but the $9.00 additional fee added to his statement each month designated as “other charges.” Mr. Stark called Crestar numerous times about these charges and was told everything from “we have no idea” to they are just “bankruptcy fees.” Mr. Stark took the matter up with me when the total amount of the monthly property inspection charges reached $135.00.

Mr. Stark subsequently filed a motion for sanctions against Crestar for violations of the automatic stay. Crestar admitted that it had caused the home to be inspected once per month so as to make sure it had not been vacated, which was curious in itself since the debtor at all times remained current on his mortgage payments. If Gerald had abandoned his home, you would assume he would have stopped making the mortgage payments.

The property inspection fees in Stark’s case were allegedly paid to third parties who would simply ride by the house and file a written report indicating such things as the grass was mowed. Crestar’s defense to Gerald’s motion was that, as servicer, it was only acting in compliance with the Mortgage Servicing Guidelines issued by FannieMae. In rejecting this defense, and holding in favor of the debtor, the Bankruptcy Court stated: “The $9.00 monthly inspection fee that Crestar imposed on the debtors in this case was in effect a monthly bankruptcy ‘monitoring fee’”. Stark v. Crestar Mortgage Corp., 242 B.R. 866, 871 (Bankr. W.D.N.C. 199). The Court went on to hold that “since Crestar attempted to collect these ‘inspection or bankruptcy monitoring fees’ from the debtors while the stay was in effect, by adding fees to the debtor’s monthly statements, Crestar violated Section 362(a)(3).” Id. at 873.

Gerald Stark’s case turned out to be the tip of a very large ice-berg of unlawful and illegal mortgage servicer fees in consumer bankruptcy cases. The next case that came to light involved the practice of advancing various sums of money against the mortgage for the costs of alleged legal fees related to the filing of a proof of claim in a Chapter 13 case. Samuel and Melinda Smith filed a Chapter 13 case in 2000 (W.D.N.C., 00-31220) and scheduled a secured debt to TMS Mortgage, Inc (now HomEq). TMS filed a proof of claim that included the sum of $125.00 for “legal fees related to the preparation and filing of the claim.” TMS admitted that it had never filed a motion under Code Section 506(b) or Bankruptcy Rule 2016 for approval of this fee. About the same time, Jason and Sherri Tate, who had filed a Chapter 13 case in 1997 (W.D.N.C. 97-32126), noticed that the proof of claim on their home mortgage filed by Nationsbanc Mortgage Corporation (now Bank of America) included the sum of $125.00 for “bankruptcy fees”. Tate v. Nationsbanc Mortgage, 253 B.R. 653,660 (Bankr. W.D.N.C 2000). Nationsbanc’s defense was that it had outsourced the proof of claim process to a law firm in Texas and the $125.00 was a reasonable fee for their services. The charge was a flat fee that the lawyers charged per case, per claim.

In rejecting these arguments, the Court in Smith and Tate found these attorney fees to be procedurally “per se unreasonable.” Id. at 665. Specifically, the Court noted that Rule 2016 sets forth “a straight forward methodology for requesting payment of attorney fees. The rule applies to any person or entity seeking compensation for services or reimbursements of expenses from estate assets.” Id. To the Court, it seemed pretty simple: 11 U.S.C. Section 506(b) authorizes the payment of legal fees to secured creditors who seek such fees upon the filing of a proper application with adequate notice; and, the Court has authority under 11 U.S.C. 105 to enforce a failure or refusal of a creditor to so comply. Id. at 668. In concluding the decision in Tate, the Court stated: “In summary, Section 105 authorizes this Court to take whatever action is necessary to enforce the Code’s provisions. The bankruptcy court is entitled to exercise its powers under the Code to restrain a creditor from overreaching. To do otherwise would allow Nationsbanc to perpetuate a fraud on the Court and other parties in interest.” Id. at 669.

Unfortunately, the only thing the Mortgage Servicers appear to have learned from any of their cases is that the vast majority of Chapter 13 debtors and their attorneys do little or nothing about these illegal fees and charges. As a result, it is actually profitable to “perpetrate a fraud” on the Bankruptcy Courts, the Bankruptcy Trustees, the attorney for the debtors, and of course the debtors. A good example of these practices can be found in a trilogy of cases presented to the Bankruptcy Court in New York in November of 2002. In Re Gorshtein, 285 B.R. 118, 120 (Bankr. S.D.N.Y. 2002).

One of the Gorshtein cases was a Chapter 13 case, which had been filed by Mandy Abrue in July of 2000. On February 7. 2001, Fairbanks Capital Corp. (now Select Portfolio Servicing) filed a motion for relief from stay in which it alleged that “no post-petition payments have been received from the Debtors.” Id. The debtor objected and provided proof that all these payments had been made. The motion was thereafter withdrawn. Exactly one year later Fairbanks filed a second motion for relief from stay in which it made the same allegations as the first motion (no payments had been made on the mortgage since filing). This second motion was filed by the same attorney who filed the first motion. Once again the debtors objected and provided proof of all post-petition payments. Fairbanks explained that due to some type of internal accounting function the motions had been filed because the payments had been placed “into a debtor’s suspense account” and therefore they had never been applied to the mortgage loan. Id. at 123. (FN2). The use of various forms of “suspense accounts” by the mortgage servicers deserves a separate Chapter. The accounts, in short, allow the servicers to “hide payments” and then raid the accounts to pay themselves bogus fees and charges.

The Gorshtein court imposed sanctions on its own motion pursuant to Bankruptcy Rule 9011 in all three of the consolidated cases including the one involving Fairbanks. The Court noted that whether “the cause of the false certification [of a serious payment default in each case] should be labeled intent to deceive, gross negligence, incompetence or mere inadvertence is indeterminable and, in any event, it really does not matter. It does not matter because the result is the same for the debtor and the judicial process, which will be victimized by the misstatement if for any reason the debtor fails to respond timely to a baseless motion.” Id. at 126.

Fairbanks learned little if nothing from the Court in Gorshtein. On July 16, 2002 the Bankruptcy Court for the District of Massachusetts entered a judgment for sanctions against Fairbanks (including rescinding the mortgage) in the case of Pearl Maxwell, an 83 year old woman with minimal schooling and limited financial recourses. This case provides a textbook illustration of the extent to which the mortgage servicing industry is out of control.

During the Maxwell case, Vince Brando, who identified himself as a Special Default Technician, testified that “ Fairbanks buys loans in bulk without checking to ascertain whether each loan is accompanied by proper documentation.” Maxwell v. Fairbanks, 2002 W.L. 1586325 (Bankr. D. Mass. 2002). Mr. Brando testified at one time Fairbanks paid $129,344.00 for the Maxwell loan but admitted that Fairbanks at another point claimed to have paid $175,955.00. In trying to explain this and other inconsistencies in the amount of the default, the principal balance owed, the corporate advances and the use of suspense accounts, Mr. Brando indicated that “Fairbanks has no documents in its possession to substantiate payments of that amount, and Fairbanks cannot identify any account, fund or other source of monies from which that amount was paid.”

Brando later testified that rather than purchase the mortgage Fairbanks actually only acquired the servicing rights. When questioned about the payment history, he said that Fairbanks, “never had the prior payment history from the prior servicer.” He added that “he could not say what happened when the prior lender owned the loan.” And, when pressed how Fairbanks could determine the amount owed, the amount of arrears, or the current payment status without a payment history, he said: “I go off of whatever the computer has for me and what it offers me, because that’s all the information we would have. No one would have any more than that.” Id. Fairbanks, of course, was later involved in a consumer class action and was named in a Fair Debt Collection Act enforcement proceeding filed by the FTC. In addition to agreeing to pay more than $56,000,000.00 in the class action, Fairbanks also agreed to terminate the CEO and president, and to terminate many officers, attorneys, agents, and employees.

The abuses of the mortgage servicers have been described by many knowledgeable commentators as “predatory mortgage servicing.” This term does not do justice to the current practices of these parties. These practices are beyond predatory in that they constitute more of a premeditated plan to ignore the entire bankruptcy process. The actions of these mortgage servicers in consumer bankruptcy cases are nothing more or less than an intentional abuse of the judicial process and the rule of law. It is also part of a pervasive pattern of chicanery, fraud, trickery, deceit, double-dealing and just plain old-fashioned illegal conduct.

During the past 7 years I have compiled a list of my own Top 10 Mortgage Servicer Abuses. The list is reprinted below along with representative cases if applicable:

1. The systematic and universal creation of junk fees such as monthly property inspections, monthly property preservation fees, broker price opinion fees, proof of claim preparation fees, review of Chapter 13 plan fees, and other similar and related charges. Case Examples: In Re Coates, 292 B.R. 894 (Bankr. D. Ill 2003) and Dawkins v. Chase Manhattan, unpublished Slip Opinion, Case No. 99-40552. (Chase was actually seeking over $11,000 in attorney fees for simply a motion for relief from stay that Chase lost).

2. The systematic failure to disclose any of the junk fees during the pendency of the Chapter 13 case by way of the filing of a proper Rule 2016 Fee Application with adequate due process notice and the right to object. Case Example: Tate v. NationsBanc Mortg. Corp. (In Re Tate), 253 B.R. 653 (Bankr. W.D.N.C. 2000); Harris v. First Union Mortg. Corp. (In re Harris), 2002 Bankr. LEXIS 771 (Bankr. D. Ala. 2002) (awarding $2,000,000 in damages).

3. The sinister collection of these fees post-discharge in Chapter 13 cases when the debtor no longer has the benefit of a bankruptcy attorney or any other party who can review a payoff statement for accuracy. Since many Chapter 13 debtors are eligible to refinance their mortgage loans after a Chapter 13 discharge, many of these charges are secretly collected at closing. And, most of the software systems used by the servicers are programmed to automatically download all of the fees and charges held in “suspense” into a payoff quote.

4. The use of these fees to create negative payment histories that result in motions for relief from stay. The system developed by the servicers is both complex and simple. The servicer establishes a software program that automatically adds a late charge to any post-petition payment based solely on the pre-petition default. The system is also designed to transfer any post-petition payment that does not include the “secret late fee” into a suspense or forbearance account. The funds in these accounts are obviously not applied to the post-petition mortgage payments. The debtor receives no interest on these funds and the suspense account is not a trust account. In many instances, the servicers will raid the suspense accounts to pay the unlawful corporate advances and other undisclosed fees and charges.

5. As the court noted in Gorshtein, the attorneys for the mortgage servicers are guilty of the repeated and systemic filing of false representations of defaults in motions for relief from stay. The attorneys know or should know that the data they are receiving from the servicers is not accurate or otherwise reliable; yet, in order to keep a “good client” they continue to accept the cases and file the motions.

6. The attorneys for the servicers who do ask for court approval of their legal fees in connection with a motion for relief from stay are also guilty of making false representations to the Court, the Trustee, the debtor, and the attorney for the debtor. These false representations relate to the nature and extent of their attorney fee agreements with the servicers. For example, many courts have a presumed no-look fee of $450.00 for a motion for relief from stay plus the filing fee of $150.00. Many attorneys for the servicers agree to these fees with full knowledge that their firm has been paid $850.00 plus the $150.00 filing fee by the servicer and that these “actual” fees and not the court approved fees will be charged back to the debtor’s account.

7. The creation of bogus “escrow” accounts to fund unlawful corporate advances. The obvious intent is to use these “escrow accounts” to hide the improper application and disbursement of funds from the debtor’s contractual payments and from the Trustee arrearage payments.

8. The practice of including undisclosed legal fees in attachments to proofs of claim and then inserting language in a hidden addendum that the failure of the debtor to object to these fees constitutes a waiver, estoppel, or res judicatta defense. See Slick v. Norwest Mortg. Inc. (In re Slick), 2002 Bankr. LEXIS 772 (Bankr. D. Ala. 2002 ).

9. The placement of forced-place insurance with a captive company (i.e., a wholly owned or related subsidiary) when debtors have such insurance. This triggers an escrow review, an enhanced payment, and more money for the suspense accounts.

10. The advancement of funds against the debtor’s mortgage loan for monetary damages actually paid to the same debtor for violations of the bankruptcy law. The servicer will also charge the debtor for the attorney fees incurred in defending such action. Case Example: In Re Riser, 289 B.R. 201 (Bankr. D. Fla. 2003).

*The writer is fully aware that Puff Daddy is currently known as “Diddy” per his request, but thought Puff Daddy to be the more accurate name for such an old school song reference.

Mr. Gardner received his undergraduate degree from the University of North Carolina at Chapel Hill in 1969 and graduated with high honors from the UNC School of Law in 1974. Among others, he was a member of the Law Review, President of the Student Bar Foundation and elected to the Order of the Coif. Following graduation, he served as law clerk to the Hon. William H. Bobbitt, the late Chief Justice of the North Carolina Supreme Court, and to the Hon. William Copeland, an Associate Justice.

He opened a law practice in Shelby, NC in 1977 and currently limits his practice to consumer bankruptcy issues and related law.

Gardner was named the Outstanding Consumer Lawyer of 2004 by the National Association of Consumer Bankruptcy Lawyers and was elected a Member of the North Carolina Legal Elite by Business North Carolina in December of 2004. He is a long-time member of NACBA and NACA and a frequent national speaker on bankruptcy law and consumer representation.

4closureFraud

Good news!  In spite of going through the wash-rinse-repeat cycle of loss recognition-equity writedown-beg for taxpayer money as “capital” so many times they’re folliclly challenged, Freddie Mac (FRE) is hiring.  The bad news?  The “in demand” jobs are in their appropriately named Default Asset Management division, or DAM.  I love the irony.  Like a dam ready to burst, well, just read this from the description of the department:

Default Asset Management careers at Freddie Mac put you in the department responsible for developing and implementing effective loss mitigation, foreclosure prevention, REO disposition and capital recovery strategies and practices that enable Freddie Mac to mitigate and manage credit losses. In Default Asset Management (DAM), your job is important to Freddie Mac’s efforts in support of Making Home Affordable and our classic workout programs to help preserve homeownership and support our housing mission. Default Asset Management also partners with national and local authorities, its servicers, and non-profit housing counselors to support borrower education and outreach efforts on foreclosure avoidance and sustainable homeownership.

Let’s be honest: the frequent use of words like “mitigate”, “avoidance”, “foreclosure”, and “prevention” tells me your job is going to be extremely difficult.

Why? Because it will be obvious from Day 1 on the job that the people you will be dealing with really need to be foreclosed on, the properties auctioned off, charge-offs taken, and write-downs to the company’s capital need to be taken and reported.  In short, you will probably want to fix bayonets and bayonet the critically wounded on the battlefield of the mortgage/credit downturn.

That’s what should be going on and for all intensive purposes, but if you read what the department’s purpose is, it’s to do the opposite.  Beg, plead, twist arms, and possibly cry to keep people in their homes even though they’ve missed payments for at least 90 days or they’re so far upside down on the loan their kids will inherit mortgage principal payments along with that family heirloom.

I should take this time to mention you won’t hear me referring to these events as a “disruption” or a “crisis.”  It’s not that I don’t appreciate what has happened, I just don’t see it as an anomaly.  I see it as the backside of the housing boom in the earlier part of the decade and it was both predictable and avoidable.

At any rate, that’s your job.  Plug the leaky dam even though water has been cascading everywhere for years and the dam is already broken.

But hey, it’s a job.  It might be the consumer lending equivalent of repeatedly banging your head into the wall expecting it not to hurt, but it has a steady check from Uncle Sam.

And somebody has to do it.  But what Freddie shouldn’t be doing is originating any new loan purchases or doing any securitizations it intends to hold on to.  They need to be put in receivership, and the portfolio should be in runoff mode.  When that’s done, the case for GSEs should be shut and never opened again.

“It’s actually been happening for a year or more in large numbers. Why the media hasn’t picked up on this story is a good question to ask…

I don’t think anyone realizes how big this area of fraud actually is or could believe that it’s truly happening. The biggest reason is probably because the judicial system is a player in this area of fraud. Not as an active participant but more as a guilty bystander. In about half of the states in the Union, foreclosures must be brought in a lawsuit in court, otherwise called judicial states. One would think that in non-judicial states, it would be much easier to get away with the fraud because the courts are not involved usually. Sorry to say but it might even be easier to commit Foreclosure Fraud in judicial states because no one’s really asking any questions in these foreclosure cases as I think that just about anyone would automatically assume that the Judicial System would exert much more quality control to prevent such massive fraud to work its way through the system. Guess again…

Statistically speaking, 98% of all foreclosure cases, judicial or non-judicial, go uncontested by the borrower. In other words, the borrower does nothing whatsoever to defend themselves in the foreclosure process. In a judicial state, an uncontested foreclosure complaint results in a Default Judgment against the borrower/defendant. Essentially, any and all claims made by the Plaintiff is accepted as true and legitimate at face value. The presiding judges, at least here in Florida, are doing practically nothing to inspect the merits of the case based on the documents produced – which, by the way, is very little – or the actual authenticity of the documents that are produced. Yes, they are slammed and overrun with foreclosure cases. No, it’s no excuse to deny citizens due process.

Here in Florida, 80-90% of the cases are being filed without any evidence of the debt, which is the original Promissory Note, not some early copy of it. Take a sampling of any 10 or 100 cases filed in court and you’ll find this to be true. In other words, a company/institution is coming into court, suing a borrower and alleging that the borrower owes them $_______. Yes, really fill in the blank… and they are producing NO DOCUMENTARY EVIDENCE that this allegation has any truth to it.

Oh, but it gets better. They are alleging that they lost the Note (or it was destroyed). Hmmm… if I gave you a $1000 check, would you lose it? How about if I gave you a $50,000 check? How would you treat that little piece of paper? But lo and behold, these institutions are saying that in 80-90% of the cases they have Lost the Notes! Now, let’s put this in perspective… in January 2009, Lee County, FL alone had about 2200 foreclosure cases filed. So let’s do the math together, shall we? That would put us at over 1700 cases where the Notes were mysteriously LOST! And that’s just one month’s worth folks. Now anyone with just a bit of common sense would say, something’s fishy with this. No? But most judges seem to have taken no issue with this. I mean, doesn’t this very fact make you, the reader, say to yourself, “this is not right, something’s up here, there should be an investigation into this.” But no, our judicial system seems to have no problem with this or even ask the deeper question as to “why?”

But it gets better… not only have they “lost” the notes, but the mortgages that were “recorded” in public records after closing (to declare to the public of who has a lawful lien on this property) are in someone else’s name. Let’s call them “ABC Lender.” So ABC Lender is the “mortgagee” of record in the public records. But ABC Lender is not the Plaintiff suing for Foreclosure! No, it’s XYZ Lender who is the Plaintiff; and in XYZ Lender’s Foreclosure Complaint, they allege that they are the owner and holder of the Note (that was lost) and the mortgage was assigned to them. Problem is (besides no note of course) is that there’s no Assignment of Mortgage recorded in Public Records; oh and no Lost Note Affidavit either, which by the way is supposed to be required.

Public records still show ABC Lender as the mortgagee. More than that, XYZ Lender/Plaintiff produces that very mortgage (which they can print online from the Clerk of Court’s website) in their Foreclosure Complaint and then simply states, for the record, that the Mortgage (in ABC Lender’s name) was assigned to them. But no assignment is recorded NOR is an assignment even produced in the foreclosure case in at least 50% of the cases. And when we do see an Assignment produced, lo and behold, you know who drafted that Assignment of Mortgage? Allow me to answer that… it’s the law firm that filed the foreclosure complaint for the Plaintiff. How about that, so you’re telling me that now foreclosure law firms are also in the business of transferring mortgages and notes? I think not. But this is exactly what is happening folks. Sure as my fingers are typing this post.

Oh, but I’ll do you one better… but before I do, all of what I just stated above is enough for XYZ Lender to be granted foreclosure in 98% of the cases because these ALLEGATIONS by XYZ Lender are never even challenged by the borrower/defendant. So the court places the proverbial RUBBER STAMP on this fraud and away you go… “NEXT” as most Florida Judges would say… all in about 15 seconds in their self-proclaimed ROCKET DOCKETS. Nice.

So back to doing one better… in these 2% of cases where the borrower does even a little something to defend themselves or better, has a competent attorney represent them against this FRAUD, we would ask the Plaintiff to actually prove their case. You know, “excuse me but I don’t think your claims are true Mr. XYZ Lender. Yes, I borrowed and owe the money to someone, but I have no idea at all who YOU are and I don’t think I owe the money to you and I don’t think that you have any right whatsoever to be here in this court suing me and trying to take my home away from me.” That’s how I would say it at least but attorneys are little more verbose than me…

So guess what these Plaintiff/XYZ Lender’s come back with to that request… you’re going to love this… “If it will please the court, your honor, these requests are out of line and merely meant to ’stall’ the process. The defendant hasn’t paid their mortgage in ____ months your honor; and this request for us to disclose who the real owner of the mortgage and note is proprietary information and we are not required to disclose that information.” Oh, I’m sorry, I thought you alleged in your original complaint that YOU were the owner and holder… now someone else is but you can’t tell us? Hmmm. By the way, 15 U.S.C. 1641(f)(2) says that the Servicers are under federal obligation to disclose the true owner of the obligation. Read the federal law here! Scroll down to paragraph “F” part 2.

Yep, you’re tracking with me now…. it gets even better. Somehow, by some miracle of St. Mary, mother of Jesus, in some of these cases, the Note magically appears! Oh, thank heaven, the Note has appeared. So XYZ Lender puts the court and everyone else on notice with a “Notice of Filing Original Documents” in the court record. To the unsuspecting citizen, this Note, purportedly a copy of the Original Note, sure does look the part. Never mind that one of these Notes can be re-created out of thin air. Have we Alzheimer’s this bad folks? I mean, what gives? Have we not been talking and ranting and raving as a country about all the FRAUD that occurred in the mortgage industry and WALL STREET these past 7-8 years? Does no one think that these Notes aren’t really being re-created. I mean, XYZ Lender did swear before the court that the Note was Lost. Was that a lie or is the Note they are now producing a fraud? I mean, which one is it? Or is our judicial system going to let them do both… Lie and commit Fraud that is.

But you see, I have a little more knowledge about this whole “SECURITIZATION THING” than the unsuspecting homeowner and probably even these foreclosure attorneys representing these financial institutions. You see, since the mid-80’s when the Secondary Mortgage Market Enhancement Reform Act of 1984 was enacted, 99% of all residential mortgages have been securitized. The opposite of a Securitized Loan is what we call a Portfolio Loan. These are our 2 options folks… it’s either a Portfolio Loan or it was a Securitized Loan. Your honor, it’s either Option A or Option B. Not BOTH.

So let me break this down into byte sized pieces. A Portfolio loan is a loan where ABC Lender makes the loan (ie. lends the money) and keeps that loan in their “portfolio” for the life of the loan. ABC Lender is going to keep the loan, service the loan and manage it until it is paid off. This “portfolio lending” thing is a DINOSAUR folks. This is a bona fide fact.

So, Option B, your honor, is this thing we call “Securitization.” And yes, your honor, I expect that we all take the time to UNDERSTAND IT because these thousands of CASES before your court involve PEOPLE, human beings (the same people who elected you by the way) and their lives, and their credit and their liability if this ‘aint done right.

Sorry about that, as you might guess, I am perturbed with the “pleading ignorance” of the courts or worse “I just don’t care” judges who’s pat answer is that “the borrower/defendant hasn’t paid their mortgage in 6 months so throw justice and matters of law aside because they’re all a bunch of deadbeats. I read the Wall Street Journal article on Feb. 18, 2009. We can all read between the lines your honor… Now let me say this real quick before I give a quick overview of securitization and the applicability of it to foreclosure cases… Not all judges are created equal. There are some very good one’s out there who care about the law and due process and making sure that the law is actually followed. For those judges out there who aren’t letting these issues just get swept under the rug because it’s so damn “inconvenient” – all these foreclosure cases, -we thank you and we hope you’ll see to it that more of your peers adopt the same position.

By the way, the question that the judges referred to in the Wall Street Journal story asked, “Are you paying your mortgage and are you living in your home?” – these 2 questions are completely inappropriate and immaterial to the case and matters of law. If I’m a homeowner and I don’t know who the heck owns my mortgage and my inquiries into this fact go unanswered, then I’m not paying ANYONE until I figure this out already! So if I”m before that judge my answer is very clear, “Excuse me your honor but that question is completely immaterial to my case before you. I owe the money to someone but I dispute the assertion by the Plaintiff that I owe the money to them.

I have asked them to provide valid and authentic documentation that I in fact owe them the money and they have failed to provide that documentation. The documentation that they have provided appears to be a complete fraud on this court and therefore I would humbly request your honor look into the material facts in this case, not whether or not I’m paying someone I don’t know even exists or if I’m living in a home that I have valid title to.” – and Judge G. Keith Cary, the Chief Judge in Lee County said, “A guy hasn’t paid his mortgage in a year, what’s there to talk about?” – well your honor, I believe I’ve presented plenty to talk about. If not, let me continue…

Ok, securitization and how it applies to a judicial foreclosure case. In securitization there are specific entities who are the “players” in this process. Not all entities are created the same because they have different ROLES in the securitization process. Roles: Originator, Sponsor, Master Servicer, Depositor, Issuer, Trustee and Custodian are the main ones. We also might see a “Special Servicer” in the mix here and there. The Originator is ABC Lender in the above fictitious case I mentioned. XYZ Lender from above is the Sponsor who usually serves as the Servicer as well.

Folks in 99.9% of these loans, the Trust owns the loan. The Trust is comprised of several to several hundred investors who own a “piece” of the loan. But more than that… EVERY loan including the specific loan in our fictitious case above has been bought and sold NO LESS THAN 3-4 times. When a Note is sold/transferred (and it is a true sale by the way), the Note MUST be endorsed, just like a check. From one payee to the next. IF the loan was securitized and it is very safe to assume that every loan is/was, there will be NO LESS THAN 3 endorsements on the actual, ORIGINAL note which has the borrower/defendant’s wet signature on it.

So when XYZ Lender produces the “Original” Note for the court and it has NO endorsements on it, it’s what we call a FRAUD folks – one way or another, it is NOT the original nor is it a copy of the original note OR, in the alternative, XYZ Lender lied to the SEC, the Securities and Exchange Commission AND the IRS. You see, in securitization, all of this activity MUST be disclosed. No, it’s not proprietary or confidential, it’s PUBLIC DISCLOSURE. These documents filed with the SEC are very specific. The players involved are all disclosed. Their ROLES are disclosed, the CHAIN OF OWNERSHIP of the loans in the Asset Pool is disclosed. The governing or operative document for this loan pool is the Pooling and Servicing Agreement, and it is disclosed. These Trusts are electing to be treated as a REMIC (short for Real Estate Mortgage Investment Conduit), which provides Pass-Through Taxation on the pool cash-flow, so that the Trust avoids double-taxation. That’s disclosed and strict guidelines of the chain of ownership AND timelines of ownership must be adhered to OR the REMIC status will be/can be revoked by the IRS.

So when XYZ Lender comes into a court of law and throws all these allegations of ownership, produces nothing to speak of, and expects to take Mrs. Smith’s home from her, I suggest that our judicial system do something more than turn a blind eye and claim that is their job to “efficiently dispose” of the case – all in about 15 seconds – or worse, ask completely inappropriate questions of that homeowner. I also suggest that Mrs. Smith defend herself and I highly suggest our local and national media do more to expose what you can now call “FORECLOSURE FRAUD” because it’s happening ladies and gentleman. The SAME INSTITUTIONS that created this global meltdown through greed and fraud, who have received hundreds of BILLIONS of taxpayer dollars to bail them out of their gross (and greedy) mismanagement are NOW stealing citizen’s homes from them like a thief in the night to boot. The FBI should be investigating, prosecuting and sending these fraudsters to jail – both the bank reps/employees AND their law firms colluding with them on this massive fraud!”
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Author Info: Lane Houk has 8 years of mortgage banking and finance experience and also maintains an active real estate license in Florida. Lane has done well over 400 hours of research on Foreclosure Defense and Consumer Rights Issues in the areas of Fair Credit Reporting Act, Fair Debt Collection Practices Act, Truth in Lending Act, RESPA and more. He has combined his research, reading and experience in the real estate and finance industries to develop resources to help others who find themselves in a tough situation. You care read more on Lane’s Educational Blog at http://www.thePatriotsWar.com

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