Foreclosuregate – The Biggest Fraud In The History Of Capital Markets?
If you work in the mortgage industry or for a title insurer, you might not want to make any plans for the next six months. Foreclosuregate is about to explode. It is being alleged that many prominent mortgage lenders have been using materially flawed paperwork to evict homeowners. Apparently officials at quite a few of these firms have been signing thousands upon thousands of foreclosure documents without even looking at them. In addition, it is being alleged that much of the documentation for these mortgages that are being foreclosed upon is either “improper” or is actually “missing”. As lawyers start to smell blood in the water, lawsuits challenging these foreclosures have already started springing up from coast to coast.
In fact, some are already calling Foreclosuregate the biggest fraud in the history of the capital markets.
JPMorgan Chase (NYSE:JPM), Ally Bank’s GMAC Mortgage and PNC Financial (NYSE:PNC) have all suspended foreclosures in the 23 U.S. states where foreclosures must be approved by a judge. Bank of America has actually suspended foreclosures in all 50 states. Now, law enforcement authorities from coast to coast are calling for investigations into this controversy and it could be years before this thing gets unraveled.
This thing just seems to escalate with each passing day. It is being reported that the attorneys general of up to 40 U.S. states will be working together on a joint investigation into this foreclosure crisis. Lawmakers in both houses of the U.S. Congress, including Nancy Pelosi and Christopher Dodd, have called for an investigation to begin on the national level. U.S. Attorney General Eric Holder said last week that he is looking into the issue. Things are certainly getting very serious out there. Never before has there ever been such a national focus on foreclosure paperwork.
But apparently there are good reasons for such scrutiny….
*One GMAC Mortgage official admitted during a December 2009 deposition that his team of 13 people signed approximately 10,000 foreclosure documents a month without reading them.
*One Bank of America (NYSE:BAC) employee confessed during a Massachusetts bankruptcy case that she signed up to 8,000 foreclosure documents a month and typically did not look them over “because of the volume”.
But the “robo-signing” aspect of Foreclosuregate is just the tip of the iceberg. Apparently there is a whole lot more going on than just a bunch of bad signatures.
Peter J. Henning, a professor at Wayne State University Law School in Detroit, was recently quoted by MSNBC as saying the following about Foreclosuregate….
“You’ve got so many potential avenues of liability. You don’t even know the parameters of this yet.”
The sad truth is that potentially millions of foreclosures across the United States could potentially be invalid because the securitization process has muddied the chain of ownership. In fact, an increasing number of judges from coast to coast have been ruling that the “owners” of the mortgage have no right to foreclose on a property because they lack clear title.
At the core of this title controversy is MERS - Mortgage Electronic Registration Systems. MERS is based in Reston, Virginia and it was created by the mortgage industry to enable that big financial firms to securitize and swap mortgages at high speed. MERS allowed these big financial firms to largely avoid the hassle of filling out more forms and submitting new filing fees every time that a mortgage was traded.
But now MERS is facing some very serious legal challenges. A recent article in Businessweek described the situation this way….
A lawsuit filed on September 28th in federal court in Louisville on behalf of all Kentucky homeowners claims that MERS was part of a conspiracy to create false promissory notes, affidavits, and mortgage assignments to be used in mortgage foreclosures. Similar class actions have been filed on behalf of homeowners in Florida and New York. Karmela Lejarde, a MERS spokeswoman, declined to comment on any pending litigation.
The reality is that as millions of U.S. mortgages have been bunched together and traded around the globe at lightning speed, it has become increasingly unclear who actually has title to them and who actually has the right to foreclose on these properties.
Title insurers have backed the titles of millions of these foreclosed properties and now potentially find themselves in a heap of trouble. Some of the biggest title insurers have already begun circling the wagons in an attempt at damage control. For example, one of the biggest title insurance companies in the United States, Old Republic National Title Insurance, has already declared that it will no longer write new policies for homes that have been foreclosed on by JPMorgan Chase and GMAC Mortgage.
So what happens if nearly all title insurers start avoiding foreclosed properties?
Won’t that make it much more difficult for the banks to sell the massive backlog of foreclosed properties that they have accumulated?
In addition, Americans that have purchased foreclosed homes may now be facing some serious problems themselves. Millions of Americans may now ”own” homes that they do not have clear title for. When it comes times to sell those homes, many Americans may find themselves unable to do so.
Needless to say, this is a complete and total mess.
Already, U.S. banks have a record number of foreclosed properties that they need to clear out, and now all of this scrutiny on foreclosure paperwork and all of these lawsuits are going to grind the process of getting these homes sold off to a standstill.
In fact, the true legacy of Foreclosuregate may be the massive amount of bank failures that it causes.
It would be difficult to understate how much of a nightmare Foreclosuregate is going to be for U.S. mortgage lenders. Having to go back through the paperwork of millions of old mortgages is going to be a complete and total disaster. If banks end up being unable to foreclose on a large number of bad mortgages, it could potentially be enough to put many banks out of commission for good. Not only that, but the legal fees that many of these banks will accumulate defending lawsuits related to Foreclosuregate will be astronomical.
The U.S. mortgage industry was already on the verge of death, and Foreclosuregate may just be the straw that broke the camel’s back.
The reality is that U.S. banks are drowning in foreclosures and this current crisis is just going to make things a lot worse. Back in 2005, there were approximately 100,000 home repossessions in the United States. In 2009, there were approximately 1 million home repossessions in the U.S. and RealtyTrac is now projecting that there will be an all-time record of 1.2 million home repossessions in the United States this year.
For the U.S. mortgage industry, Foreclosuregate must feel like someone has dropped a bomb on them after they have already been beaten up and doused with gasoline.
Attorney Richard Kessler, who recently conducted a study that found serious errors in approximately three-fourths of court filings related to home repossessions, says that foreclosuregate could haunt the U.S. mortgage industry for the next ten years….
“Defective documentation has created millions of blighted titles that will plague the nation for the next decade.”
While it may be easy to beat up U.S. mortgage lenders and say that they deserve all this, let us not forget that this is going to impact a whole lot of other people too.
It is going to become much harder to get a mortgage. It is going to become much harder to buy a home. It is going to become much harder to sell a home. The U.S. housing industry is likely to suffer a significant downturn due to all of this. There is even a good chance that the entire U.S. economy could be dragged down for an extended period of time.
So no, Foreclosuregate is not good news for anyone.
Well, except maybe for lawyers.
But for virtually everyone else this is really bad news. Any hope that the U.S. housing industry would experience a quick recovery is completely and totally gone.
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Hoisted on their own petard.
Corrupted the American land records, the judiciary, the many levels of government, the faith and hope of millions of Americans, and stolen the very roofs over our families’ heads.
Financiers near ’bout took America and turned it into a feudalistic nation.
What arrogance and nerve! To ignore the REMIC, SEC, IRS, state & federal laws, rules and regulations, sell us time-bomb loans, bet against them, misrepresent the value of the houses and the loans and the trusts and the loan files, sell off the CDOs to global municipalities & pension funds, bet against the garbage trusts with credit default swaps, get a fat bail-out, call us deadbeats, then to try to fabricate over it all with robosigned fraudulent documents and what……..HOPE WE WOULDN’T NOTICE?
Democracy? HOLD ON! HOLD ON! We’re coming! HANG IN THERE WITH US!
Lisa
ForeclosureHamlet.org
Now we all know that Ron Paul was right when he said,”Abolish” the fed and IRS.
Okay – that’s the final nail in the coffin of the US economy. Time to leave the sinking ship. There is no way that the banking industry will survive this mess. And that’ll take what’s left of the value of US currency down with it. I’m glad I work in an industry that I can walk down the street (to the next country) and setup shop. My family has been here 3 generations; we spent 3 generations in Holland before that and 3 generations in Spain before that. I’d hoped my kids would graduate high school here. No point in that now. Sin loi!
This foreclosuregate goes beyond delinquent accounts. FTA, ‘an increasing number of judges from coast to coast have been ruling that the owners of the mortgage have no right to foreclose on a property because they lack clear title’. OK. What about someone who just refinanced or otherwise got a Mortgage Discharge? Did the signor of the discharge have authority?
I hear ya Vejadu: if contract law doesn’t offer bankers (and other businessmen) needed security then we in essence have no laws that equitably and fairly support a capitalistic economy and recovery. Rather, we spend thousands of dollars in title insurance and closing fees and sign a stack of papers every time we buy/sell a home yet despite such regulated assurances we still find ourselves in a legal morass that in essence “uncouples” a mortgage holder from his mortgage — so that if you can’t pay your mortgage you still don’t have to worry about being foreclosed upon for some time — maybe forever. Tis’ really just another way to redistribute money from taxpayers to non-working entitlement-grasping freeloaders — and my pocket is about empty. In a perfect world you wouldn’t be able to buy a home you couldn’t afford — and if you did the buyer, rather than the mortgage holder. would be held accountable. Obviously this is a very imperfect world
In my case the promissory note was created by covering the identifying data with a piece of paper, enlarging the note and covering it with false endorsements after I objected to the note attached to the Complaint not belonging to the GMAC entity suing to take my home for the second time. (The first time they tried to take my home they sued me as MERS.) In the second foreclosure, a false Affidavit signed by Manish Verma claimed that the multiply endorsed note was a true and correct copy of the note, but the GMAC entity refused to produce it. The note used to start the foreclosure had no endorsements and belonged to Aegis Mortgage. I just checked the assignment of mortgage from MERS to the GMAC entity and found that it was signed by Jeffrey Stephan, an employee of GMAC and famous robo-signor, claiming to be vice-president of MERS and his co-hort, Kenneth Ugwuadu, claiming to be the secretary of (illegible) GMAC? According to the deposition of Jeffrey Stephan, he did not work for MERS and was trained bv Ugwuadu. I have spent thousands of hours trying to defend my home. The GMAC entities have broken into my home twice and refused my payments 4 times, including returning the first payment under a mortgage modification by FedEx in 24 hours, after I qualified for the modification. These are not technical errors, but a racketeering enterprise committing fraud on the courts twice. All this from a bailed out private equities group that just recently incorporated as Ally Financial, Inc. They owe the taxpayers about 17 billion dollars never owned the mortgages they are foreclosing. If this is the banking system that we are supposed to rely on, let it fail. There are many honest community banks and credit unions who will prosper when the racketeers all go to prison.
Letter to Wells Fargo spokesman Chris Hammond,
Dear Mr. Chris Hammond,
In recent Wells Fargo’s press release, it declared that “We are working hard to do all that is possible to
keep homeowners in their homes,”
That’s a lie. I can say for a fact that Wells Fargo made mortgage loan and foreclosed my
home based on hugely inflated and fraudulent appraisal,
Wells Fargo and its army of attorneys knew it is Category C felony to make mortgage
loan and foreclose home based on fraudulent appraisal. However they chose to defraud us
by foreclosing our home.
For almost a year, we pleaded with Wells Fargo to carry out its promises to us to rescind
the loan contract and help us to recovery our finanical losses. Wells Fargo bluntly refused
and challenged us to sue it for justice.
Wells Fargo committed prosecutable crime against us. We lost our home. Something is
wrong with this picture.
1. it is illegal for Wells Fargo to make mortgage loan to us based on hugely inflated
appraisal.
Fact: – Wells Fargo’s fraudulent appraisal valued our home at $718,000
- Wells Fargo’s own review appraisal valued our home at $475,000
- Nevada Attorney General’s office suspended the appraiser’s license for committing
appraisal fraud on our home.
- Nevada Appraiser Licensing Board mandated the appraiser to complete appraisal fraud
course before regaining his real estate appraiser license.
- Nevada Revised Statue NRS 205.372 states that it’s category C felony to make
mortgage loans based on fraudulent appraisal.
- Cases of Attorney General’s indictments against attorneys, loan brokers for teaming up
make fraudulent loans to defraud homeowners.
2. it is illegal for Wells Fargo to wrongfully foreclose our home based on fraudulent
appraisal and mortgage loan.
You can find all the facts on our website. http://www.wellsfargomortgagefraud.com.
In 2009, GMAC FORECLOSED ON ONE OF MY PROPERTIES; THEY ESCALATED THE PAYMENTS TO A 15 YEAR TERM PAYMENT FROM A NEG-AM DUE TO A PROVISION IN THE PROMISSORY NOTE THAT STATED THAT THE LOAN BALANCE COULD NOT EXCEED 120%. I THEN MADE A PRINCIPAL PAYMENT THE NEXT MONTH TO REDUCE THE PRINCIPAL TO UNDER 120%. GMAC BEGAN TO RETURN MY INTEREST-ONLY LOAN PAYMENTS STATING THEY WERE INSUFFICIENT. GMAC CONTENDED THAT ONCE THE 120% WAS EXCEEDED, THAT THERE WAS NO ABILITY TO RETURN TO NEG-AM OR TO INTEREST-ONLY, OR EVEN A 30 YEAR AMMORTIZATION. I STATED THAT THAT WAS NOT IN THE TERMS OF THE PROMISORRY NOTE; BUT THEIR LOAN MANAGER STATED THAT THIS WAS OUT OF THEIR HANDS…..THAT THEY WERE A SERVICING AGENT FOR MULTIPLE BENEFICIARIES.
I SUSPECT THAT THEY SIMPLY WANTED THE FEES ASSOCIATED WITH THE FORECLOSURE
Consider the following:
Johny Lunchbucket owns a home, pays on time and has a real hard time doing it. He struggles to make ends meet, and worries constantly about tough choices he has to make. He works hard, loves his kids, baseball, and apple pie, and is a generally good American who wants to do the right thing. However, Johny has been watching his neighbor Jimmy Deadbeat not pay his mortgage for a year and a half and not only is Jimmy still in his house, not paying, living rent free, and actually making out way better than Johny because Jimmy doesn’t have to worry about a little expense called his mortgage payment and thus has a tremendously unfair percentage of more disposable income . Johny doesnt like it, actually resents the hell out of Jimmy, but Johny knows he is doing the right thing by paying his mortgage on time because he believes Jimmy will get his. Well, Johny is going to get up late on Sunday, flip on “Meet the Press” and start seeing talking heads discussing facts that quickly lead Johny to understand that Jimmy wont be getting thrown out of his home for living up to his last name.
Johny is pissed. Really pissed.
Thoughts start occurring to Johny. Thoughts like “Why should I bother paying MY mortgage on time?” and “I’ve been paying on time and have gotten NO relief, but I know of plenty of others who are way late who not only qualify for govt programs and modifications etc., but now CANNOT be even be evicted”
Johny gets even more pissed. Gets his wife riled up. Talks to his neighbors and co-workers about these and other injustices that Johny is fed up and mad as hell about.
So what does Johny do? He say’s F-U to the grassholes at the bank and stops paying.
There are millions upon millions of Johnys.
To me, this is the real systemic risk, because it cannot be controlled. Cannot. Can…..Not. Can? Not!
Perception is everything, and this prior scenario is very very real, and so is the systemic risk.
There are millions of Americans like Johny who have been barely able to hang on to their house and every month debate whether to pay the mortgage or….health insurance. Then mortgage or….second car. Mortgage or….food. You get the idea.
What if these millions upon millions of homeowners who have been on the fence about whether to pay the mortgage for months now suddenly have the same thoughts that Johny starts to have?
This is a classic moral hazard. And its real, and its happening already. Over the coming weeks more and more homeowners will reach the same conclusion that Johny has, and simply stop paying. And why wouldn’t they? The servicers collecting have no legal right to. Period. Hell, the servicers really have nowhere to send the money they arent allowed to collect anyway as claims were paid out via a CDS on the RMBS.
So back to Johny. Now that he and his millions have discovered these cruel and rather ironic twists, they just stop paying. But they don’t do it overnight. Mortgages run on calander months, so Johny and his gang have weeks to stew this over as well, thereby creating even more fear and uncertainty…for the banks!
They know this, and they know they have screwed the pooch, and they are crapping biscuits. BOA is being set up to fall on their sword very soon. Why did Wells settle the other day to the tune of 773 mil? Probably because they see this whole MERS fiasco coming and also know that those old world pick-a-pays are not only a ticking time bomb (Most of which were done up on a 5 year schedule, so all of those resets are coming due rather soon) but as a way to determine if a affirmation or reaffirmation of debt by way through an internal modification gets them past the MERS issue by getting the homeowner to effectively sign on a new dotted line. Wells probably also figures that by not halting foreclosures yet, that BOA, chase etc will be in the crosshairs first just by virtue of the media attention and subseuquent run of defaults for reasons mentioned earlier.
Im sure the line of thinking is that BOA will go down first, promting the gov to step in with “Son of TARP” and to bail out the others. The issue is, that amount of money would be simply to big to bear, even for the US.
and now for the finale:
How can BOA stay solvent with no way to move their REO tape, million upon millions of new defaults CAUSED by the foreclosure freeze, dubious claims to title on all their other mortgage backed collateral and the amazing amount of litigation they are about to experience?
I can see a very quick nightmare scenario started early next week as these truths become evident to all these populist blowhard politcians screaming for a “foreclosure freeze” and BOA’s stock literally tanks overnight, causing the dominoes to all start falling just like 2 years ago, except its all gone so FUBARed that you cannot stop what has started. Next step, nationalization of the banks, and more than likely, the US govt. becomes de facto owner of most of the mortgages in America. Nice.
Even if it doesnt happen that fast, its still going to happen. Remember Johny and Jimmy? Well, they are real people. Thats what everyone forgot when they made these MBSs, that the bond itself were made up of little parts that were backed by actual real property and owned by millions of Johnys; you simply can’t jut sweep that under the rug because the Johny’s of the world have one simple piece of leverage, the ability to NOT pay on their mortgage, and suddenly have an almost unionized opportunity to unwittingly stick it to the banks. The question really is does this new found moral hazard not only stick its to the banks, but eventually to all of us?
Delicious irony to be sure.
Johny’s coming kids….and he is really pissed.
Darby Shaw
Patriot
Does no one care about history? Does no one know of the history of the Money Trust?
Nothing more disgusting than watching peons attack other peons because of intentionally contrived economic undulations of the Money Trust. They shut off the money supply on purpose in order to loot the citizenry who will subsequently not be able to pay…and then use the media to refer to said citizens as deadbeats. And then others from the peon class, minds like putty, believe what they are told, and hate their neighbors for not being able to pay the cost of their debt slavery.
Anyone who takes the side of the bankers is not a patriot, but a stooge. Anyone who refers to their peon brethren as deadbeats is not a patriot, but a stooge. The struggle is between the peons and the privileged banker/politician class. Peons who can’t figure this out..who blame their brethren for this mess..they would be better off with their mouths shut.
Contract law does offer protection, there is one catch though, you have to follow it.
johny don’t cut your own nose off to spite your face.
These servicers have completely taken advantage of the system.The HAMP program is a joke and Aurora Loan Services is one of the biggest ones.They have received all this money from our government and have helped no one. You can look them up on the internet and you will see what i mean.They pull the same dirty tricks on every seeking help from them.They put people in trial payment plans and try to foreclose while they are in plan,or they put people in payment plans for many months to get as much money as they can before they foreclose,and i know this for a fact,because, all of this they have done to me and many,many people.They have nothing but horror stories on the internet.Aurora Loan Services has to be stopped,there is just so many homes taken by them and so many lives destroyed.