I hope readers will forgive the overweight reporting on Florida, but it is serving as a test ground for how battles over foreclosures and mortgage fraud will play out around the US. Florida is not only one of the states with the highest level of foreclosures, but it also has the most cohesive group of anti-foreclosure lawyers, as well as more intensive reporting of developments within the state, thanks to sites like 4ClosureFraud.org and ForeclosureHamlet.org. So in many respects, this conflict is more advanced in Florida than in other states.
One development which has not gotten much attention is how the local foreclosure mills, which were targeted in an investigation by the state’s Republican attorney general Bill McCollum, seem to be escaping the inquiry. Given the opportunistic timing of the launch of McCollum’s probes, and the fact that the biggest foreclosure mill operator, David Stern, promptly hired the biggest Republican fixer in the state, this outcome should not be surprising. But the investigation is being sidestepped in a very obvious manner; one would think it would have been more seemly to have it peter out, post election, when media interest would have moved on. There appears to have been more than the usual winks and nods to get this matter out of the courts and safely in the hands of the Florida Bar Association:
Letter From the Florida Bar to 6th Circuit Chief Judge Mcgrady
From the Palm Beach Post (hat tip Lisa Epstein):
Florida’s attorney general has no authority to investigate or discipline one of the state’s large foreclosure law firms, a Palm Beach County judge ruled Monday.
The five-page ruling from Circuit Judge Jack S. Cox was in response to a request from the Shapiro & Fishman law firm to quash an attorney general’s subpoena for information. The attorney general’s office announced in August it was investigating Shapiro & Fishman, which has offices in Boca Raton and Tampa, as well as two other large firms that represent lenders in foreclosure hearings.
Cox said the Florida Bar, not the attorney general’s office, is responsible for investigating allegations of misconduct, including complaints that foreclosure paperwork was doctored in order to rush cases through the courts.
After Monday’s ruling, the Plantation-based firm of David J. Stern, one of the so-called “foreclosure mills” targeted by the state, filed its own motion to quash the attorney general’s subpoena in Broward County.
“The attorney general’s case is over. This is a great victory for our client,” said Shapiro & Fishman attorney Gerald Richman of Richman Greer, P.A. “This was a totally unfair and inappropriate subpoena.” …
And while attorneys general in several states have announced investigations into lenders’ faulty foreclosure documents, Florida’s attorney general’s office does not have the power to investigate banks, spokesman [for the attorney general] Ryan Wiggins said.
“I can’t believe that the jurisdiction of the attorney general cannot include law firms and individuals working within law firms who may be engaged in improper conduct,” St. Petersburg attorney Matt Weidner said about Monday’s ruling. “I cannot believe that this will be allowed to stand, considering the extent of the allegations of serious wrongdoing.”
Gee, I wonder how AGs in 11 states, including Florida, managed to get a settlement from Countrywide? Or was McCullom along for the ride and the other ten AGs did all the heavy lifting?
In case you had any doubts regarding how lucrative the foreclosure mills are, and hence their ability to buy their way out of trouble, the David Stern law operations (which include title abstract companies and other aligned businesses) earned $260 million in gross revenues in 2009.
Foreclosure Issues Pose Risks, Should Be Resolved With Time
Summary
Recently, some issues surrounding foreclosure sale proceedings have come to the forefront, leading several large banks to halt foreclosure sale proceedings in many states. The purpose of this note is twofold: to clear up some confusion on what exactly the issues at hand are and to bring some perspective to those issues. For instance, we note that the “foreclosure issue” that we are addressing here is separate from considerations surrounding potential bank loan repurchases. After the JPMorgan Chase earnings call, in which the company announced increased repurchase reserves, the two issues seem to have been muddied.
With respect to the issues surrounding foreclosure sales, while there are some outstanding risks, we think the issues that can be definitively addressed suggest a resolution could be possible over a matter of months. While that resolution should involve time, effort, and cost, we do not believe it will result in a major long–term disruption to the housing or mortgage markets.
Background
The issues surrounding foreclosure sale proceedings were initially brought to light on September 17, when GMAC/Ally halted evictions and REO sales in 23 judicial foreclosure states. Since that time, GMAC has extended their review to all 50 states, and four other large banks have halted foreclosure sales or launched internal reviews of their foreclosure processes: Bank of America has halted foreclosure sales in 50 states, JPMorgan Chase in 41 states, PNC in 23 states, and Litton is reviewing proceedings. Wells Fargo has stated that they are reviewing all pending foreclosures, but not halting the process and are confident their processes are robust. Attorneys General from all 50 states announced Wednesday that they have formed the Mortgage Foreclosure Multistate Group to review some of the practices around foreclosures proceedings.
The “foreclosure issues” being discussed at this point seem to encompass a few distinct problems, which we think it is useful to break down: robo-signers, MERS, and trust transfers.
The Robo-Signer Issue
While judicial foreclosure proceedings vary from state to state depending on different laws, many involve the presentation of an “affidavit of debt” before the court, which certifies that an employee of the mortgage servicer is familiar with the mortgage and borrower under question. Across several servicers burdened with an increasing number of foreclosures, there were employees who allegedly signed large numbers of affidavits without “personal knowledge” of the stated information. In addition, some affidavits were not notarized at the time of affidavit signing. These deficiencies created became a problem when brought before judges.
Importantly, however, although these deficiencies introduce risk, the issue does not seem to be insurmountable. We believe that the likelihood for widespread outright forgiveness of debt in cases where affidavits were signed or attested improperly is low. The details behind resolving cases such as these are not clear from a legal standpoint, but they seem likely to be, in part, a matter of rectifying the affidavit, issues of time, effort, and cost. Similar issues exist for fixing faulty foreclosure processes from the start; it may be possible to solve the robo-signer issue by staffing up teams or via other efforts. While more costly, and likely to delay foreclosure processes a few to several months, again, in our view, the issues do not seem to be insurmountable.
The MERS Issue
A second issue that has arisen questions the validity of MERS, an electronic registration system for mortgages meant to simplify the process of transferring mortgage ownership. In the past, there have been court rulings in support of the MERS model, e.g. that holding title for the benefit of another party was valid or that foreclosure initiation in the name of MERS was valid. There have also been cases in which the model was not supported (e.g. Landmark v. Kessler in Kansas), but in most instances it seems those efforts have failed or been overturned. In the event the matters challenging MERS succeed, resolution seems to be a practical issue; while the process is unclear at this point, it may simply be a matter of assigning the mortgage from MERS to the foreclosing party in cases where foreclosure in the name of MERS is ruled against or of simply foreclosing in the name of the bank instead of in the name of MERS. There has been at least one case (U.S. Bank v. Ibanez) in Massachusetts, which calls into question the separation of legal and beneficial title holding, similar to that used in the MERS model. That case is currently under appeal.
In addition, there also seems to be some misinformation about the MERS system itself and whether some banks are utilizing it or not. MERS put out a press release yesterday to address some of these concerns, citing the fact that Chase registers their correspondent loans in MERS, but does not register their retail loans.
The Trust Transfer Issue
A third issue that has arisen concerns the validity of the trust as the owner of the mortgage for loans that have been securitized. When the note is transferred to a trust, it is endorsed “in blank”, meaning that the owner of the note is not assigned. The note is only endorsed to the trustee or servicer on behalf of the trust if they need to institute foreclosure proceedings. Our understanding is that this is a common practice when notes are transferred to a trust. With respect to physical documents, those are delivered and held by the designated custodian for the trust. Both the seller and the custodian should have verified the existence and validity of the notes upon transfer. If there were any deficiencies, the custodian should have notified the seller to remedy any deficiencies or if they could not be remedied, put the loan back to the seller. The transfer of the notes is governed by the loan purchase agreement which also provides for evidence of ownership of the loans by the trust. Also, when the notes are transferred, the servicer records the ownership of the loans with MERS.
The Risks
The primary risk in our view is not that the affidavits issue remains unresolved, but how much time and effort the resolution will take and how far the scope of investigations expands beyond this issue. As mentioned, the Attorneys General from each state have formed a task force to look into the affidavit matter to determine if they were processed correctly under state laws. However, given that AGs from non-judicial states have joined the task force, the scope of their investigation may expand beyond this issue and lengthen the timeframe for resolution. Complicating matters is that servicers have to abide by individual state regulations with respect to foreclosure processing.
In the end, we believe that the vast majority of foreclosures will stand assuming that the actions were taken against borrowers who were delinquent. However, the end result will likely be a further extension of foreclosure timelines. We believe that the incremental increase in loss severity should be minimal if these issues can be resolved in the next 3-6 months. For servicers this means additional staffing requirements as well as increased costs. With respect to investors, headline risk will remain the predominant near term concern. Additionally, the allocation of additional costs due to advancing and legal fees will have to worked out. We do believe that the tenets of securitization, MERS, extensive legal foundation that has been established over the last 30 years, and REMIC eligibility will stand.
In other words: all shall be well, and all manner of thing shall be well.
Exclusive: Yahoo Courts Former <b>News</b> Corp. Digital Exec Ross <b>...</b>
He's baaaaaack. Former Fox Interactive Media President Ross Levinsohn, that is, who is the top candidate to replace Hilary Schneider as Yahoo's US head, according to several sources close to the situation.
Lujiazui Breakfast: <b>News</b> And Views About China Stocks (Oct. 27 <b>...</b>
Investors and traders in China's main financial district are talking about the following before the start of trade today: Shares in automaker Hong Kong-listed BYD tanked by 9% after the company said profit fell by 99% in the third ...
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News and opinion about US politics from a liberal perspective.
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Exclusive: Yahoo Courts Former <b>News</b> Corp. Digital Exec Ross <b>...</b>
He's baaaaaack. Former Fox Interactive Media President Ross Levinsohn, that is, who is the top candidate to replace Hilary Schneider as Yahoo's US head, according to several sources close to the situation.
Lujiazui Breakfast: <b>News</b> And Views About China Stocks (Oct. 27 <b>...</b>
Investors and traders in China's main financial district are talking about the following before the start of trade today: Shares in automaker Hong Kong-listed BYD tanked by 9% after the company said profit fell by 99% in the third ...
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News and opinion about US politics from a liberal perspective.
bench craft company complaints bench craft company complaints
I hope readers will forgive the overweight reporting on Florida, but it is serving as a test ground for how battles over foreclosures and mortgage fraud will play out around the US. Florida is not only one of the states with the highest level of foreclosures, but it also has the most cohesive group of anti-foreclosure lawyers, as well as more intensive reporting of developments within the state, thanks to sites like 4ClosureFraud.org and ForeclosureHamlet.org. So in many respects, this conflict is more advanced in Florida than in other states.
One development which has not gotten much attention is how the local foreclosure mills, which were targeted in an investigation by the state’s Republican attorney general Bill McCollum, seem to be escaping the inquiry. Given the opportunistic timing of the launch of McCollum’s probes, and the fact that the biggest foreclosure mill operator, David Stern, promptly hired the biggest Republican fixer in the state, this outcome should not be surprising. But the investigation is being sidestepped in a very obvious manner; one would think it would have been more seemly to have it peter out, post election, when media interest would have moved on. There appears to have been more than the usual winks and nods to get this matter out of the courts and safely in the hands of the Florida Bar Association:
Letter From the Florida Bar to 6th Circuit Chief Judge Mcgrady
From the Palm Beach Post (hat tip Lisa Epstein):
Florida’s attorney general has no authority to investigate or discipline one of the state’s large foreclosure law firms, a Palm Beach County judge ruled Monday.
The five-page ruling from Circuit Judge Jack S. Cox was in response to a request from the Shapiro & Fishman law firm to quash an attorney general’s subpoena for information. The attorney general’s office announced in August it was investigating Shapiro & Fishman, which has offices in Boca Raton and Tampa, as well as two other large firms that represent lenders in foreclosure hearings.
Cox said the Florida Bar, not the attorney general’s office, is responsible for investigating allegations of misconduct, including complaints that foreclosure paperwork was doctored in order to rush cases through the courts.
After Monday’s ruling, the Plantation-based firm of David J. Stern, one of the so-called “foreclosure mills” targeted by the state, filed its own motion to quash the attorney general’s subpoena in Broward County.
“The attorney general’s case is over. This is a great victory for our client,” said Shapiro & Fishman attorney Gerald Richman of Richman Greer, P.A. “This was a totally unfair and inappropriate subpoena.” …
And while attorneys general in several states have announced investigations into lenders’ faulty foreclosure documents, Florida’s attorney general’s office does not have the power to investigate banks, spokesman [for the attorney general] Ryan Wiggins said.
“I can’t believe that the jurisdiction of the attorney general cannot include law firms and individuals working within law firms who may be engaged in improper conduct,” St. Petersburg attorney Matt Weidner said about Monday’s ruling. “I cannot believe that this will be allowed to stand, considering the extent of the allegations of serious wrongdoing.”
Gee, I wonder how AGs in 11 states, including Florida, managed to get a settlement from Countrywide? Or was McCullom along for the ride and the other ten AGs did all the heavy lifting?
In case you had any doubts regarding how lucrative the foreclosure mills are, and hence their ability to buy their way out of trouble, the David Stern law operations (which include title abstract companies and other aligned businesses) earned $260 million in gross revenues in 2009.
Foreclosure Issues Pose Risks, Should Be Resolved With Time
Summary
Recently, some issues surrounding foreclosure sale proceedings have come to the forefront, leading several large banks to halt foreclosure sale proceedings in many states. The purpose of this note is twofold: to clear up some confusion on what exactly the issues at hand are and to bring some perspective to those issues. For instance, we note that the “foreclosure issue” that we are addressing here is separate from considerations surrounding potential bank loan repurchases. After the JPMorgan Chase earnings call, in which the company announced increased repurchase reserves, the two issues seem to have been muddied.
With respect to the issues surrounding foreclosure sales, while there are some outstanding risks, we think the issues that can be definitively addressed suggest a resolution could be possible over a matter of months. While that resolution should involve time, effort, and cost, we do not believe it will result in a major long–term disruption to the housing or mortgage markets.
Background
The issues surrounding foreclosure sale proceedings were initially brought to light on September 17, when GMAC/Ally halted evictions and REO sales in 23 judicial foreclosure states. Since that time, GMAC has extended their review to all 50 states, and four other large banks have halted foreclosure sales or launched internal reviews of their foreclosure processes: Bank of America has halted foreclosure sales in 50 states, JPMorgan Chase in 41 states, PNC in 23 states, and Litton is reviewing proceedings. Wells Fargo has stated that they are reviewing all pending foreclosures, but not halting the process and are confident their processes are robust. Attorneys General from all 50 states announced Wednesday that they have formed the Mortgage Foreclosure Multistate Group to review some of the practices around foreclosures proceedings.
The “foreclosure issues” being discussed at this point seem to encompass a few distinct problems, which we think it is useful to break down: robo-signers, MERS, and trust transfers.
The Robo-Signer Issue
While judicial foreclosure proceedings vary from state to state depending on different laws, many involve the presentation of an “affidavit of debt” before the court, which certifies that an employee of the mortgage servicer is familiar with the mortgage and borrower under question. Across several servicers burdened with an increasing number of foreclosures, there were employees who allegedly signed large numbers of affidavits without “personal knowledge” of the stated information. In addition, some affidavits were not notarized at the time of affidavit signing. These deficiencies created became a problem when brought before judges.
Importantly, however, although these deficiencies introduce risk, the issue does not seem to be insurmountable. We believe that the likelihood for widespread outright forgiveness of debt in cases where affidavits were signed or attested improperly is low. The details behind resolving cases such as these are not clear from a legal standpoint, but they seem likely to be, in part, a matter of rectifying the affidavit, issues of time, effort, and cost. Similar issues exist for fixing faulty foreclosure processes from the start; it may be possible to solve the robo-signer issue by staffing up teams or via other efforts. While more costly, and likely to delay foreclosure processes a few to several months, again, in our view, the issues do not seem to be insurmountable.
The MERS Issue
A second issue that has arisen questions the validity of MERS, an electronic registration system for mortgages meant to simplify the process of transferring mortgage ownership. In the past, there have been court rulings in support of the MERS model, e.g. that holding title for the benefit of another party was valid or that foreclosure initiation in the name of MERS was valid. There have also been cases in which the model was not supported (e.g. Landmark v. Kessler in Kansas), but in most instances it seems those efforts have failed or been overturned. In the event the matters challenging MERS succeed, resolution seems to be a practical issue; while the process is unclear at this point, it may simply be a matter of assigning the mortgage from MERS to the foreclosing party in cases where foreclosure in the name of MERS is ruled against or of simply foreclosing in the name of the bank instead of in the name of MERS. There has been at least one case (U.S. Bank v. Ibanez) in Massachusetts, which calls into question the separation of legal and beneficial title holding, similar to that used in the MERS model. That case is currently under appeal.
In addition, there also seems to be some misinformation about the MERS system itself and whether some banks are utilizing it or not. MERS put out a press release yesterday to address some of these concerns, citing the fact that Chase registers their correspondent loans in MERS, but does not register their retail loans.
The Trust Transfer Issue
A third issue that has arisen concerns the validity of the trust as the owner of the mortgage for loans that have been securitized. When the note is transferred to a trust, it is endorsed “in blank”, meaning that the owner of the note is not assigned. The note is only endorsed to the trustee or servicer on behalf of the trust if they need to institute foreclosure proceedings. Our understanding is that this is a common practice when notes are transferred to a trust. With respect to physical documents, those are delivered and held by the designated custodian for the trust. Both the seller and the custodian should have verified the existence and validity of the notes upon transfer. If there were any deficiencies, the custodian should have notified the seller to remedy any deficiencies or if they could not be remedied, put the loan back to the seller. The transfer of the notes is governed by the loan purchase agreement which also provides for evidence of ownership of the loans by the trust. Also, when the notes are transferred, the servicer records the ownership of the loans with MERS.
The Risks
The primary risk in our view is not that the affidavits issue remains unresolved, but how much time and effort the resolution will take and how far the scope of investigations expands beyond this issue. As mentioned, the Attorneys General from each state have formed a task force to look into the affidavit matter to determine if they were processed correctly under state laws. However, given that AGs from non-judicial states have joined the task force, the scope of their investigation may expand beyond this issue and lengthen the timeframe for resolution. Complicating matters is that servicers have to abide by individual state regulations with respect to foreclosure processing.
In the end, we believe that the vast majority of foreclosures will stand assuming that the actions were taken against borrowers who were delinquent. However, the end result will likely be a further extension of foreclosure timelines. We believe that the incremental increase in loss severity should be minimal if these issues can be resolved in the next 3-6 months. For servicers this means additional staffing requirements as well as increased costs. With respect to investors, headline risk will remain the predominant near term concern. Additionally, the allocation of additional costs due to advancing and legal fees will have to worked out. We do believe that the tenets of securitization, MERS, extensive legal foundation that has been established over the last 30 years, and REMIC eligibility will stand.
In other words: all shall be well, and all manner of thing shall be well.
bench craft company complaints
Exclusive: Yahoo Courts Former <b>News</b> Corp. Digital Exec Ross <b>...</b>
He's baaaaaack. Former Fox Interactive Media President Ross Levinsohn, that is, who is the top candidate to replace Hilary Schneider as Yahoo's US head, according to several sources close to the situation.
Lujiazui Breakfast: <b>News</b> And Views About China Stocks (Oct. 27 <b>...</b>
Investors and traders in China's main financial district are talking about the following before the start of trade today: Shares in automaker Hong Kong-listed BYD tanked by 9% after the company said profit fell by 99% in the third ...
AMERICAblog <b>News</b>: In Afghanistan, 'The insurgency seems to be <b>...</b>
News and opinion about US politics from a liberal perspective.
bench craft company complaints bench craft company complaints
Exclusive: Yahoo Courts Former <b>News</b> Corp. Digital Exec Ross <b>...</b>
He's baaaaaack. Former Fox Interactive Media President Ross Levinsohn, that is, who is the top candidate to replace Hilary Schneider as Yahoo's US head, according to several sources close to the situation.
Lujiazui Breakfast: <b>News</b> And Views About China Stocks (Oct. 27 <b>...</b>
Investors and traders in China's main financial district are talking about the following before the start of trade today: Shares in automaker Hong Kong-listed BYD tanked by 9% after the company said profit fell by 99% in the third ...
AMERICAblog <b>News</b>: In Afghanistan, 'The insurgency seems to be <b>...</b>
News and opinion about US politics from a liberal perspective.
bench craft company complaints bench craft company complaints
Exclusive: Yahoo Courts Former <b>News</b> Corp. Digital Exec Ross <b>...</b>
He's baaaaaack. Former Fox Interactive Media President Ross Levinsohn, that is, who is the top candidate to replace Hilary Schneider as Yahoo's US head, according to several sources close to the situation.
Lujiazui Breakfast: <b>News</b> And Views About China Stocks (Oct. 27 <b>...</b>
Investors and traders in China's main financial district are talking about the following before the start of trade today: Shares in automaker Hong Kong-listed BYD tanked by 9% after the company said profit fell by 99% in the third ...
AMERICAblog <b>News</b>: In Afghanistan, 'The insurgency seems to be <b>...</b>
News and opinion about US politics from a liberal perspective.
bench craft company complaints bench craft company complaints
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