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FIRM Commentary: MONEY TALKS. Investors in mortgage backed security trusts have been screwed right along with homeowners by banks throughout the mortgage crisis.
Here's the difference: Investors have the financial resources to get some kind of justice. Bank of America had no idea what they were really buying when they purchased Countrywide. The $4.1 Billion sales price seemed like a deal at the time. Now you can add another $8.5 Billion to the cost.
Meanwhile, home owners in financial distress, continue to get the shaft from Bank of America's horrific management of its Loan Modification program. While the federal government talks a good story about its crack down on loan servicers who do not comply with the guidelines of the HAMP, it has done little to effectuate compliance. Perhaps empowering FANNIE MAE to administer the program was not the best idea.
http://www.msnbc.msn.com/id/43569643/ns/business-us_business/t/bofa-pay-b-housing-crash-settlement/from/toolbar
NEW YORK -- Bank of America Corp said on Wednesday that it will pay $8.5 billion to settle claims from investors that lost money on mortgage-backed securities, in a landmark pact that could influence other major banks to settle mortgage claims.
The sum would be big banks' largest single settlement thus far related to the financial crisis that helped spark the Great Recession. The settlement, which Bank of America said would lead to a second-quarter loss, is subject to court approval.
"This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us," said Bank of America Chief Executive Officer Brian Moynihan in a statement. "We will continue to act aggressively, and in the best interest of our shareholders, to clean up the mortgage issues largely stemming from our purchase of Countrywide."
Bank of America said the charges would include an additional $5.5 billion to cover expected payments to other mortgage bond investors.
As a result of the settlement, Bank of America said in a statement that it expects to report a net loss in the range of $8.6 billion to $9.1 billion in the second quarter of 2011, or $0.88 to $0.93 per diluted share.
The $8.5 billion settlement covers claims from 22 institutional investors, including BlackRock Financial Management, Pacific Investment Management Co and Western Asset Management. The bank said the settlement is linked to mortgages made by Countrywide Financial Corp, once the nation's largest mortgage lender, which it bought in 2008.
The settlement could pressure other big banks, including JPMorgan Chase & Co and Wells Fargo & Co, to settle similar lawsuits with mortgage bond investors.
Moynihan said Wednesday that the settlement would minimize "future economic uncertainty" in the banking business and "clean up the mortgage issues largely stemming from our purchase of Countrywide."
For several months, Bank of America battled claims based on estimates "that were much different from ours," Moynihan said. But at this point, it made more sense to settle than to keep fighting, he said.
"We have said consistently if people are reasonable and can get to a reasonable assessment of their claims and it's in the best interest of shareholders, we will settle," Moynihan told Wall Street analysts in a conference call.
Citi analyst Keith Horowitz said the settlement, which amounts to only 2 percent of the original principal balance, removes one of the largest investor risks for Bank of America.
"We think this could prove to be a step forward" for Bank of America, Horowitz said. It would show investors that the bank can manage through crisis without raising additional capital.
Firm Commentary: If a pitch from a "law firm" sounds too good to be true, it probably is. The subprime mortgage culture has infected the legal profession in Southern California. Use your instincts: The telemarketing hype of commision driven agents of attorneys should be avoided. The true practice of law requires a degree of ethical consideration that exceeds that of the average used car salesman. A good consumer attorney strives to honestly evaluate your financial ailment...not aggravate it. If you sense hype or sales pressure...shut down the conversation and move on.
Suing a mortgage lender or bank, with their seemingly unlimited resources, is a time consuming and expensive endeavor.
Don't buy into the hype: suing a lender does not mean you are getting a free house.
To understand the nature of the various MASS JOINDER LAWSUIT SCAMS, read the Department of Real Estate Consumer Warning below:
California Department of Real Estate
** CONSUMER ALERT **
1
FRAUD WARNING REGARDING LAWSUIT MARKETERS REQUESTING UPFRONT
FEES FOR SO-CALLED "MASS JOINDER" OR CLASS LITIGATION PROMISING
EXTRAORDINARY HOME MORTGAGE RELIEF
By Wayne S. Bell
Chief Counsel, California Department of Real Estate
I. HOME MORTGAGE RELIEF THROUGH LITIGATION (and "Too Good to Be True"
Claims Regarding Its Use to Avoid and/or Stop Foreclosure, Obtain Loan Principal
Reduction, and to Let You Have Your Home "Free and Clear" of Any Mortgage).
This alert is written to warn consumers about marketing companies, unlicensed entities,
lawyers, and so-called attorney-backed, attorney-affiliated, and lawyer referral entities
that offer and sell false hope and request the payment of upfront fees for so-called "mass
joinder" or class litigation that will supposedly result in extraordinary home mortgage
relief.
The California Department of Real Estate ("DRE" or "Department") previously issued a
consumer alert and fraud warning on loan modification and foreclosure rescue scams in
California. That alert was followed by warnings and alerts regarding forensic loan audit
fraud, scams in connection with short sale transactions, false and misleading
designations and claims of special expertise, certifications and credentials in connection
with home loan relief services, and other real estate and home loan relief scams.
The Department continues to administratively prosecute those who engage in such fraud
and to work in collaboration with the California State Bar, the Federal Trade
Commission, and federal, State and local criminal law enforcement authorities to bring
such frauds to justice.
On October 11, 2009, Senate Bill 94 was signed into law in California, and it became
effective that day. It prohibited any person, including real estate licensees and attorneys,
from charging, claiming, demanding, collecting or receiving an upfront fee from a
homeowner borrower in connection with a promise to modify the borrower's residential
loan or some other form of mortgage loan forbearance.
Senate Bill 94's prohibitions seem to have significantly impacted the rampant fraud that
was occurring and escalating with respect to the payment of upfront fees for loan
modification work.
Also, forensic loan auditors must now register with the California Department of Justice
and cannot accept payments in advance for their services under California law once a
Notice of Default has been recorded. There are certain exceptions for lawyers and real
estate brokers. 2
On January 31, 2011, an important and broad advance fee ban issued by the Federal
Trade Commission became effective and outlaws providers of mortgage assistance relief
services from requesting or collecting advance fees from a homeowner.
Discussions about Senate Bill 94, the Federal advance fee ban, and the Consumer
Alerts of the DRE, are available on the DRE's website at www.dre.ca.gov.
Lawyer Exemption from the Federal Advance Fee Ban --
The advance fee ban issued by the Federal Trade Commission includes a narrow and
conditional carve out for attorneys.
If lawyers meet the following four conditions, they are generally exempt from the rule:
1. They are engaged in the practice of law, and mortgage assistance relief is part of
their practice.
2. They are licensed in the State where the consumer or the dwelling is located.
3. They are complying with State laws and regulations governing the "same type of
conduct the [FTC] rule requires".
4. They place any advance fees they collect in a client trust account and comply with
State laws and regulations covering such accounts. This requires that client funds
be kept separate from the lawyers' personal and/or business funds until such time
as the funds have been earned.
It is important to note that the exemption for lawyers discussed above does not allow
lawyers to collect money upfront for loan modifications or loan forbearance services,
which advance fees are banned by the more restrictive California Senate Bill 94.
But those who continue to prey on and victimize vulnerable homeowners have not given
up. They just change their tactics and modify their sales pitches to keep taking
advantage of those who are desperate to save their homes. And some of the frauds
seeking to rip off desperate homeowners are trying to use the lawyer exemption above to collect
advance fees for mortgage assistance relief litigation.
This alert and warning is issued to call to your attention the often overblown and
exaggerated "sales pitch(es)" regarding the supposed value of questionable
"Mass Joinder" or Class Action Litigation.
Whether they call themselves Foreclosure Defense Experts, Mortgage Loan Litigators,
Living Free and Clear experts, or some other official, important or impressive sounding
title(s), individuals and companies are marketing their services in the State of California
and on the Internet. They are making a wide variety of claims and sales pitches,
and offering impressive sounding legal and litigation services, with quite
extraordinary remedies promised, with the goal of taking and getting some of your
money. 3
While there are lawyers and law firms which are legitimate and qualified to handle
complex class action or joinder litigation, you must be cautious and BEWARE. And
certainly check out the lawyers on the State Bar website and via other means, as
discussed below in Section III.
II. QUESTIONABLE AND/OR FALSE CLAIMS OF THE SO-CALLED MORTGAGE LOAN
DEFENSE OR "MASS JOINDER" AND CLASS LITIGATORS.
A. What are the Claims/Sales Pitches?
They are many and varied, and include:
1. You can join in a mass joinder or class action lawsuit already filed against your
lender and stay in your home. You can stop paying your lender.
2. The mortgage loans can be stripped entirely from your home.
3. Your payment obligation and foreclosure against your home can be stopped when
the lawsuit is filed.
4. The litigation will take the power away from your lender.
5. A jury will side with you and against your lender.
6. The lawsuit will give you the leverage you need to stay in your home.
7. The lawsuit may give you the right to rescind your home loan, or to reduce your
principal.
8. The lawsuit will help you modify your home loan. It will give you a step up in the
loan modification process.
9. The litigation will be performed through "powerful" litigation attorney
representation.
10. Litigation attorneys are "turning the tables on lenders and getting cash settlements
for homeowners".
In one Internet advertisement, the marketing materials say, "the damages sought in your
behalf are nothing less than a full lien strip or in otherwords [sic] a free and clear house if
the bank can't produce the documents they own the note on your home. Or at the very
least, damages could be awarded that would reduce the principal balance of the note on
your home to 80% of market value, and give you a 2% interest rate for the life of the
loan".
B. Discussion.
Please don't be fooled by slick come-ons by scammers who just want your money. Some
of the claims above might be true in a particular case, based on the facts and evidence
presented before a Court or a jury, or have a ring or hint of truth, but you must carefully
examine and analyze each and every one of them to determine if filing a lawsuit against
your lender or joining a class or mass joinder lawsuit will have any value for you and your
situation. Be particularly skeptical of all such claims, since agreeing to participate in 4
such litigation may require you to pay for legal or other services, often before any legal
work is performed (e.g., a significant upfront retainer fee is required).
The reality is that litigation is time-consuming (with formal discovery such as
depositions, interrogatories, requests for documents, requests for admissions,
motions, and the like), expensive, and usually vigorously defended. There can be
no guarantees or assurances with respect to the outcome of a lawsuit.
Even if a lender or loan owner defendant were to lose at trial, it can appeal, and the
entire process can take years. Also, there is no statistical or other competent data
that supports the claims that a mass joinder and class action lawsuit, even if
performed by a licensed, legitimate and trained lawyer(s), will provide the
remedies that the marketers promise.
There are two other important points to be made here:
First, even assuming that the lawyers can identify fraud or other legal violations
performed by your lender in the loan origination process, your loan may be owned by an
investor - that is, someone other than your lender. The investor will most assuredly
argue that your claims against your originating lender do not apply against the investor
(the purchaser of your loan). And even if your lender still owns the loan, they are not
legally required, absent a court judgment or order, to modify your loan or to halt the
foreclosure process if you are behind in your payments. If they happen to lose the
lawsuit, they can appeal, as noted above. Also, the violations discovered may be minor
or inconsequential, which will not provide for any helpful remedies.
Second, and very importantly, loan modifications and other types of foreclosure relief are
simply not possible for every homeowner, and the "success rate" is currently very low in
California. This is where the lawsuit marketing scammers come in and try to convince
you that they offer you "a leg up". They falsely claim or suggest that they can guarantee
to stop a foreclosure in its tracks, leave you with a home "free and clear" of any
mortgage loan(s), make lofty sounding but hollow promises, exaggerate or make bold
statements regarding their litigation successes, charge you for a retainer, and leave you
with less money.
III. THE KEY HERE IS FOR YOU TO BE ON GUARD AND CHECK THE LAWYERS OUT
(Know Who You Are or May Be Dealing With) - Do Your Own Homework (Avoid
The Traps Set by the Litigation Marketing Frauds).
Before entering into an attorney-client relationship, or paying for "legal" or litigation
services, ascertain the name of the lawyer or lawyers who will be providing the services.
Then check them out on the State Bar's website, at www.calbar.ca.gov. Make certain
that they are licensed by the State Bar of California. If they are licensed, see if they have
been disciplined. 5
Check them out through the Better Business Bureau to see if the Bureau has received
any complaints about the lawyer, law firm or marketing firm offering the services (and
remember that only lawyers can provide legal services). And please understand that this
is just another resource for you to check, as the litigation services provider might be so
new that the Better Business Bureau may have little or nothing on them (or something
positive because of insufficient public input).
Check them out through a Google or related search on the Internet. You may be
amazed at what you can and will find out doing such a search. Often consumers
who have been scammed will post their experiences, insights, and warnings long
before any criminal, civil or administrative action has been brought against the
scammers.
Also, ask them lots of specific, detailed questions about their litigation experience, clients
and successful results. For example, you should ask them how many mortgage-related
joinder or class lawsuits they have filed and handled through settlement or trial. Ask
them for pleadings they have filed and news stories about their so-called successes. Ask
them for a list of current and past "satisfied" clients. If they provide you with a list, call
those people and ask those former clients if they would use the lawyer or law firm again.
Ask the lawyers if they are class action or joinder litigation specialists and ask them what
specialist qualifications they have. Then ask what they will actually do for you (what
specific services they will be providing and for what fees and costs). Get that in writing,
and take the time to fully understand what the attorney-client contract says and what the
end result will be before proceeding with the services. Remember to always ask for and
demand copies of all documents that you sign.
IV. CONCLUSION.
Mortgage rescue frauds are extremely good at selling false hope to consumers in trouble
with regard to home loans. The scammers continue to adapt and to modify their
schemes as soon as their last ones became ineffective. Promises of successes through
mass joinder or class litigation are now being marketed.
Please be careful, do your own diligence to protect yourself, and be highly suspect if
anyone asks you for money up front before doing any service on your behalf. Most
importantly, DON'T LET FRAUDS TAKE YOUR HARD EARNED MONEY.
FIRM COMMENTARY: Remember: Loan servicers usually only make 00.25% to 00.50% of a monthly mortgage payment in fees to service a loan that is not in default. When a loan goes into default, loan servicers make a mint: they charge late fees, inspection fees, interest on suspense accounts, BPOs, fore placed insurance, escrow fees, attorney fees, trustee fees, REO fees etc. It doesn't matter that no payments are coming in from the borrower: the servicers rack up a huge lien that gets paid off after foreclosure proceeds are received. Wells, Chase and B of A scoop the money off the top before passing off the loss to a mortgage backed security trust. They have no skin in the game and no real incentive to help homeowners.
Gov't faults 3 lenders over mortgage-aid efforts
WASHINGTON (AP) - The Obama administration is blaming the three largest U.S. mortgage lenders for the failures of its foreclosure-prevention program. It says they've done little to help people at risk of losing their homes.
Wells Fargo & Co., Bank of America and JPMorgan Chase & Co. have failed to help enough people permanently lower their mortgage payments so they can stay in their homes, the Treasury Department said Thursday. [Treasury is to blame for not enforcing the HAMP contract and allowing FANNIE MAE to run the program...it's like letting the "Fox watch the Chickens"]
Based on those lenders' lackluster success for the first three months of 2011, the government is withholding financial incentives that amounted to up to $1,000 per permanent loan modification. Treasury said the three lenders incorrectly determined that many people were ineligible for the program. [The withheld incentive is a drop in the bucket...]
The lenders are disputing the data. They say the findings are based on old reports, not audits from the first quarter of the year as Treasury claimed. One of them, Wells Fargo, is formally appealing the government's decision to cut off its incentives.
The three lenders have already received about $24 million from the government as of last month.
The program was launched in 2009 and was intended to help those at risk of foreclosure by lowering their monthly payments. Borrowers start with lower payments on a trial basis. But the program has struggled to convert them into permanent loan modifications. [Had judicial loan modification been passed in the Senate...Bankruptcy judges would be modifying loans....this crisis would be almost over. Too bad broke people don't have lobbyists]
More than 1.6 million troubled homeowners received trial modifications over the past two years. Roughly 44 percent of those who applied, or about 700,000, have had their mortgage permanently lowered as of April. A majority of the applicants, or about 843,000 homeowners, have dropped out of the program.
Homeowners who are accepted into the program receive interest rates as low as 2 percent for five years. They can repay their loans over a longer period. The median savings for those who remain in the program is about $526 per month.
Homeowners have complained that the program has been a bureaucratic mess. Many have said they were disqualified after banks lost their documents and failed to return their phone calls. Banks have blamed homeowners for failing to submit needed paperwork.
[AGAIN....Treasury is to blame for not enforcing the HAMP contract and allowing FANNIE MAE to run the program...this has been going on for over 2 years"]
The banks are not obligated to participate in the program, so the administration can't fine them. But Timothy Massad, Treasury's acting assistant secretary for financial stability, said the administration can publicly shame them at a time when foreclosures are at record levels and hurting the broader economy.
"This is a way for us to enhance performance," Massad said.
The banks questioned why the audits date back to the early months of the program. Treasury has tweaked the program dozens of times in its first two years, making it difficult for the companies to comply, they contend.
The report "paints an unfairly negative picture of our modification efforts and contradicts previous written assessments shared with us by the Treasury," Wells Fargo said in a statement. It said the report "in no way reflects the improvements Wells Fargo has made in our processes and the work we have done to help homeowners."
A JPMorgan spokesman said the bank "respectfully disagrees with the assessment." He said the bank has improved significantly since Treasury's audit.
Bank of America issued a statement acknowledging that the lender must make improvements in key areas. But it said it has made progress in several of the factors that Treasury cited.
Another firm, Ocwen Loan Servcing, was also cited as needing substantial improvement. But its incentive payments will not be withheld.
Ocwen General Counsel Paul Koches said the company took responsibility for 300,000 loans from other servicers since the start of the modification program. Some of the criticism from Treasury was unfair because the loans were the other servicers' responsibility at the time, he said.
Ocwen "never imagined we could somehow be saddled with the actions or inactions of prior servicers," Koches said.
Despite the lenders' complaints, the government stands "by the conclusions we put out," Treasury's Massad said.
Six other firms -- American Home Mortgage Servicing, CitiMortgage, GMAC Mortgage, Litton Loan Servicing, OneWest Bank and Select Portfolio Servicing -- require moderate improvement. But Treasury said they will not lose their cash incentives.
The Treasury Department said that when the program began, most of the lenders did not have the needed staff or resources to help the many homeowners seeking lower mortgage payments.
[So I expect any other result? The servicers are not in the loan mod business....why think they'd be good at it or spend any time or money on such an endeavor...especially servicer who have an economic incentive to foreclose....or risk the chance they may have to buy back defaulted loans from mortgage backed security trusts?]
By DANIEL WAGNER, DEREK KRAVITZ
http://money.msn.com/home-loans/news.aspx?feed=AP&date=20110609&id=13750931
FIRM COMMENTARY: Every time we sue a loan servicer, like CHASE, and name the trustee of a mortgage backed security trust, like Deutsche Bank, for foreclosure and assignment fraud, the two entities share the same attorney.
But its the investors of mortgage backed security trusts ["MBSTs"] that share something in common with borrowers: Each group is getting ripped off by the big loan servicers. It's a fact that loan servicers are using fabricated assignments, affidavits and other documentation to create the illusion that specific MBSTs became the owners of thousands of mortgage notes AFTER the borrower default. It's a game of hot potato, where servicers, some facing liability for failing to properly transfer mortgage notes, are using robo-docs to effectively dump the losses associated with bad loans into the MBSTs.
The question we've always asked is: why are the trustees of the MBSTs allowing this? Why aren't they joining borrowers in speaking out against the use of robo-signers? Perhaps the investigation below will shine some light on the business practices of these trustees. Maybe.
New York's top legal officer is seeking information from Deutsche Bank AG and Bank of New York Mellon about their role as trustees for mortgage-backed securities, an expansion of his probe of mortgage practices, said a person familiar with the matter.
New York Attorney General Eric Schneiderman's office is examining whether the banks fulfilled their administrative duties owed to investors set out in agreements that pool mortgages into securities, according to the source.
This person requested anonymity because of a lack of authorization to speak publicly about the probe.
Kevin Heine, a spokesman for Bank of New York Mellon, declined to comment. John Gallagher, a spokesman for Deutsche Bank, also declined to comment.
The New York Times first reported the inquiry into the role of the trustees. The newspaper also said New York's Schneiderman had teamed with Joseph Biden III, his counterpart in Delaware.
Mortgage securitization deals, which bundle loans into securities, have been blamed for helping to fuel the issuance of questionable mortgages to satisfy a buying binge by investors seeking to take advantage of rising real estate prices. After housing prices dropped and the number of homeowners who defaulted on their mortgages rose, those deals came under scrutiny by investors and regulators.
In these deals, the trustee is usually responsible for maintaining documentation about loans provided by the originator and the mortgage servicer.
Roughly 80 percent of mortgage securitization trusts are governed by New York law, which puts Schneiderman's office in a strong position to investigate the deals, according to the person familiar with the probe. The other 20 percent is governed by Delaware law, this person said.
Schneiderman's office may end up working with Biden on the inquiry into the trustees, this person said.
The inquiry into the role of the trustees is part of a larger investigation led by Schneiderman's office, which has sought information about securitization operations from seven banks and requested meetings with their representatives. It has also sent subpoenas to four mortgage-bond insurers.
Schneiderman's inquiry is separate from an investigation led by a group of attorneys general into allegations of shoddy foreclosure practices by banks and servicers.
That investigation resulted in settlement talks between bank regulators, a coalition of 50 state attorneys general, and federal agencies that included the Department of Justice and the Securities and Exchange Commission.
Schneiderman has been participating in those talks, but he publicly has voiced concern about any deal that would prevent additional investigations into mortgage practices at the banks.
http://www.reuters.com/article/2011/06/13/us-mortgage-probe-idUSTRE75C3ZT20110613
[Firm commentary: After reading the article below, the firm contacted the New York author Abigail Field to offer insight into the scope of assignment fraud in California. As a result of that conversation, the Firm has offered its resources to the author in writing a follow up article that will demonstrate the breadth of the fraud. Evidence offered by the firm demonstrates that the fraud extends to Chase, OneWest Bank, Aurora Loan Servicing, GMAC, Wells and Citibank.]
Fortune examined hundreds of foreclosure documents to determine the validity of mortgage securitizations after Bank of America debunked testimony about them last fall. The results raise more questions than they answer.
By Abigail Field, contributor
FORTUNE -- Are Countrywide mortgage-backed securities really mortgage-backed? Do banks even have the legal right to foreclose on certain homes?
These are just a few of the questions raised since the foreclosure crisis revealed shoddy mortgage servicing practices at many of the big banks - practices that have led to countless investigations and lawsuits. Court testimony by a former Countrywide employee added to the intrigue last fall, because she confessed that many loans there weren't properly handled, bringing into doubt the validity of Countrywide's securitization process. Bank of America, which owns Countrywide, quickly silenced the discussion with firm denials.
But Fortune has examined dozens of court records that corroborate the employee's testimony. And if Countrywide's mortgage securitizations systematically failed as it appears they did, Bank of America's potential liability dwarfs its shareholder equity, as the Congressional Oversight Panel points out.
Last November, a decision in a New Jersey bankruptcy case brought to light the testimony of Linda DeMartini, operational team leader for the litigation management department for Bank of America, which intended to prove the bank had the right to foreclose on a debtor's mortgage. Instead, her testimony was key to the judge's ruling that Bank of America (BAC) couldn't foreclose, and along the way DeMartini made two statements that called into question the securitization of Countrywide loans. She testified that Countrywide didn't deliver the notes to the securitization trustee, and that Countrywide notes weren't endorsed except on a case-by-case basis generally long after securitization ostensibly occurred. Both steps are required, in one form or another, under all securitization contracts.
Only the delivery issue was really scrutinized at the time, because without a doubt the failure to deliver the notes would invalidate the securitization. The other issue, failure to endorse the notes, sparked a debate: the American Securitization Forum argues the notes would still have been securitized without endorsement, while Adam Levitin, associate professor of law at Georgetown Law, convincingly argues that they would not have been.
If the securitization failed, a variety of securities fraud charges could follow. Indeed, one investor lawsuit based in part on DeMartini's testimony about endorsements and delivery has already been filed. And investors aren't the only possible pursuers of securities fraud -- New York Attorney General Eric Schneiderman is investigating mortgage securitizations by three banks, including Bank of America.
Bank of America vigorously denied DeMartini's testimony, insisting that as a member of Countrywide's mortgage servicing department, she didn't know what was happening during securitization. Besides, BofA insisted, its policy was and always has been to comply with the securitization contracts.
No endorsements
Although law enforcement should be able to answer the delivery question easily -- DeMartini indicated that Bank of America has FedEx tracking records for each note -- it's impossible for the public to check. But the endorsement of notes is easy to test. In every foreclosure, the bank must give the court the note or an accurate copy of it. And those notes are either properly endorsed or they're not.
To check DeMartini's testimony, Fortune examined the foreclosures filed in two New York counties (Westchester and the Bronx) between 2006 and 2010. There were 130 cases where the Bank of New York (BK) was foreclosing on behalf of a Countrywide mortgage-backed security. In 104 of those cases, the loan was originally made by Countrywide; the other 26 were made by other banks and sold to Countrywide for securitization.
None of the 104 Countrywide loans were endorsed by Countrywide - they included only the original borrower's signature. Two-thirds of the loans made by other banks also lacked bank endorsements. The other third were endorsed either directly on the note or on an allonge, or a rider, accompanying the note.
The lack of Countrywide endorsements, combined with the bank's representation to the court that these documents are accurate copies of the original notes, calls into question the securitization of these loans, as well as Bank of New York's right, as trustee, to foreclose on them. These notes ostensibly belong to over 100 different Countrywide securities and worse, they were originally made as long ago as 2002. If the lack of endorsement on these notes is typical -- and 104 out of 104 suggests it is -- the problem occurs across Countrywide securities and for loans that pre-date the peak-bubble mortgage frenzy.
The lack of Countrywide endorsements also corroborates DeMartini, who said that in her 10 years at Countrywide she had never seen a note with an endorsement, and that as foreclosures had been increasingly litigated, she had been handling the original notes, not just the copies scanned into the bank's database.
Bank of New York maintains that it had the right to foreclose on the notes. "The assignment language included in the pooling and servicing agreements that govern the trusts, along with the actual transfer of the mortgage note to the trustee and/or custodian, provide the trustee with the proper legal standing," Bank of New York spokesman Kevin Heine said in a statement. But even if true, the right to foreclose must be demonstrated in every case, and it doesn't seem to have been in any of these cases from New York.
As for the endorsements, foreclosure defense attorneys say a troubling phenomenon has been happening: "magically" appearing endorsements. That is, the note originally given the court has no endorsement, but after the defense points out the problem, an endorsed note is submitted. Here are several examples from Florida cases, all involving loans serviced by Countrywide, half of which were also made by Countrywide. Here is an example from a California bankruptcy case.
Todd Allen, the Florida attorney who shared the Florida examples, says the problem occurred with all the banks, not just Countrywide: "Magically appearing endorsements happen so often in Florida that I expect the banks' explanation to begin with: 'Once upon a time, in a land far, far away.' Unfortunately, the courts often turn a blind eye to the banks' shell game and homeowners are left with the empty shell."
Bank of America continues to deny that it failed to endorse mortgages as DeMartini claimed, even after seeing the cases Fortune uncovered from New York. It issued this statement in response: "Bank of America's policy is to conduct foreclosures in accordance with all applicable laws. After halting foreclosures last year, we reviewed our process with regulators and continue to do so as we incorporate improvements. Reviews have shown that foreclosed loans were seriously delinquent and that we could support our legal standing to foreclose. We believe the files referenced contain appropriate documentation. We offer home retention options and foreclosure avoidance programs to our distressed customers. Foreclosure is our last resort."
It will be left to the investigators - and possibly ultimately the courts - to decide whether the applicable laws were indeed followed. Meanwhile, Countrywide managers have given interviews to Moody's Investor Service, which led Moody's to reassure investors that notes were systematically endorsed, either in blank on the note or via allonge.
But if that's accurate, why don't the sampled court records reflect it?
http://finance.fortune.cnn.com/2011/06/03/at-bank-of-america-more-incomplete-mortgage-docs-and-more-questions/?section=magazines_fortune
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