Firm commentary:  The article below reports that Federal Reserve Chairman Ben Bernanke and Acting Comptroller of the Currency John Walsh are refusing to release details of their investigations into illegal foreclosure practices by the nation's largest banks.  This position by the Fed is taken despite published reports that banks are continuing to use robo-signers to facilitate the illusion of valid foreclosure.

Regulators balk at demands for foreclosure reports

July 21, 2011 12:28 PM ET

By DANIEL WAGNER

http://money.msn.com/business-news/article.aspx?feed=AP&date=20110721&id=13974656

WASHINGTON (AP) - Banking regulators refused to commit to releasing details of their investigations into illegal foreclosure practices by the nation's largest banks.

Appearing before a Senate panel Thursday, Federal Reserve Chairman Ben Bernanke and Acting Comptroller of the Currency John Walsh said they had not decided whether to release reports on illegal practices by individual banks

Sen. Robert Menendez, D-N.J, had pressed them to release the reports, banks' individual action plans and agreements with the consultants that investigated the banks. Menendez cited a report by the Associated Press this week that said banks are continuing to foreclose without doing the necessary paperwork, eight months after they had promised to stop.

"We will have to evaluate the individual documents and see if there is anything that would be of a confidential, supervisory nature," Walsh said, adding that his agency will release "some information."

Bernanke said the Fed plans to release a report that "will explain what the findings were and what the proposals were and what the reactions were." But he said he must consult with his legal team before releasing any information about individual banks.

Citing a legal opinion by his staff, Menendez said the regulators are permitted to release the information if doing so was in the public's best interest.

"It is not acceptable to violate the law, and it is not acceptable to do robo-signings," Menendez said.

County officials in at least three states say they have received thousands of mortgage documents with questionable signatures since last fall, suggesting that the practices, known collectively as "robo-signing," remain widespread in the industry, the AP reported Monday.

Last fall, the nation's largest banks and mortgage lenders, including JPMorgan Chase, Wells Fargo, Bank of America and an arm of Goldman Sachs, suspended foreclosures while they investigated how corners were cut to keep pace with the crush of foreclosure paperwork.

Since then, suspect paperwork has been filed not only with foreclosures, but also with new purchases and refinancings. Critics there is a systemic problem with the paperwork involved in home mortgages and titles. They say banks and mortgage processors haven't acted aggressively enough to put an end to widespread document fraud in the mortgage industry.

Bernanke and Walsh were testifying before a hearing to mark the one-year anniversary of a sweeping overhaul of the rules governing the financial system.

Copyright 2011 The Associated Press. All rights reserved.

Firm commentary:  The facts stated in the article below should come as no shock.  This type of business practice was the norm within the sub-prime mortgage culture.  $85 million is a drop in the bucket compared to the profits that were generated.  One wonders if the victimized consumers will ever see a dime of that money...doubtful.

Wells Fargo's big mortgage rip-off

By Colin Barr July 20, 2011: 5:41 PM ET

http://finance.fortune.cnn.com/2011/07/20/wells-fargos-big-mortgage-ripoff/

What do you have to do to get slapped with the Federal Reserve's biggest-ever consumer-protection fine?

You have to rip off mortgage borrowers by the thousand. The Fed alleges Wells Fargo (WFC) did just that during the housing boom, bilking "possibly more than 10,000" out of sums reaching as high as $20,000 by slapping them with high-cost loans when they would have qualified for cheaper ones.

The Fed fined Wells $85 million Wednesday for fraud, deceptive claims and unsafe banking practices for its mortgage lending practices between 2004 and 2008. It also told the bank to compensate wronged customers. Those sums could run into the millions of dollars, going by Fed figures.

What did Wells do? Commission-hungry salespeople at Wells Fargo Financial, a subprime loan shop the bank shut down last year after the mortgage market cratered, "altered or falsified income documents and inflated prospective borrowers' incomes to qualify those borrowers for loans that they would not otherwise have been qualified to receive," the Fed said. In a familiar tale, the bank also sold people who would have qualified for low-cost loans costlier ones.

Wells, of course, neither admitted nor denied anything - except for having a culture of fairness. Of some 300,000 loans it made over the relevant period, just 4% or so were abusive, the bank estimates. A spokesman says Wells doesn't have any estimates of the ultimate cost of making customers whole, because it must first identify those wronged in a Fed-supervised process.

"The alleged actions committed by a relatively small group of team members are not what we stand for at Wells Fargo," said CEO John Stumpf. Thank goodness for small favors.

Firm commentary:  Effective July 15, 2011....Jerry Brown signed a new law that prevents junior lien holders from pursuing deficiency judgments from homeowners if the lender agrees to a short sale.  This sounds good, but one has to wonder if this won't hurt short sale processing times.  If a property is sold at a foreclosure sale, borrowers are still liable for the junior liens.  Knowing this, junior lien holders may hold out for more money at closing or veto the deal so as to preserve the right to pursue the entire debt.  Since, all proceeds must come from the sale and not the borrower, this may drive prices up as junior lien holders insist on higher prices to satisfy their claims at closing.  Finally, this bill does not address the tax implications of cancelled debt from the short sale.  See IRS form 4681.  http://www.irs.gov/pub/irs-pdf/p4681.pdf.  Contact the firm for a detailed analysis of your situation.

BILL NUMBER: SB 458     CHAPTERED

                BILL TEXT

                CHAPTER  82

                FILED WITH SECRETARY OF STATE  JULY 15, 2011

                APPROVED BY GOVERNOR  JULY 11, 2011

                PASSED THE SENATE  MAY 23, 2011

                PASSED THE ASSEMBLY  JULY 1, 2011

                AMENDED IN SENATE  MAY 16, 2011

                AMENDED IN SENATE  APRIL 4, 2011

                AMENDED IN SENATE  MARCH 21, 2011

INTRODUCED BY   Senator Corbett

   (Principal coauthors: Senators Correa and Vargas)

   (Coauthors: Assembly Members Blumenfield and Skinner)

                        FEBRUARY 16, 2011

   An act to amend Section 580e of the Code of Civil Procedure,

relating to mortgages, and declaring the urgency thereof, to take

effect immediately.

                LEGISLATIVE COUNSEL'S DIGEST

   SB 458, Corbett. Mortgages: deficiency judgments.

   Existing law prohibits a deficiency judgment under a note secured

by a first deed of trust or first mortgage for a dwelling of not more

than 4 units in any case in which the trustor or mortgagor sells the

dwelling for less than the remaining amount of the indebtedness due

at the time of sale with the written consent of the holder of the

first deed of trust or first mortgage. Existing law provides that

written consent of the holder of the first deed of trust or first

mortgage to that sale shall obligate that holder to accept the sale

proceeds as full payment and to fully discharge the remaining amount

of the indebtedness on the first deed of trust or first mortgage.

Existing law specifies that those provisions would not limit the

ability of the holder of the first deed of trust or first mortgage to

seek damages and use existing rights and remedies against the

trustor or mortgagor or any 3rd party for fraud or waste if the

trustor or mortgagor commits either fraud with respect to the sale

of, or waste with respect to, the real property that secures that

deed of trust or mortgage. Existing law makes these provisions

inapplicable if the trustor or mortgagor is a corporation or

political subdivision of the state.

   This bill would expand those provisions to prohibit a deficiency

judgment upon a note secured solely by a deed of trust or mortgage

for a dwelling of not more than 4 units in any case in which the

trustor or mortgagor sells the dwelling for a sale price less than

the remaining amount of the indebtedness outstanding at the time of

sale, in accordance with the written consent of the holder of the

deed of trust or mortgage if the title has been voluntarily

transferred to a buyer by grant deed or by other document that has

been recorded and the proceeds of the sale are tendered as agreed.

The bill would also provide that, in other circumstances, when the

note is not secured solely by a deed of trust or mortgage for a

dwelling of not more than 4 units, no judgment shall be rendered for

any deficiency upon a note secured by a deed of trust or mortgage for

a dwelling of not more than 4 units, if the trustor or mortgagor

sells the dwelling for a sale price less than the remaining amount of

the indebtedness, in accordance with the written consent of the

holder of the deed of trust or mortgage. The bill would provide,

following the sale, in accordance with the written consent, the

voluntary transfer of title to a buyer, as specified, and the tender

of the sale proceeds, the rights, remedies, and obligations of any

holder, beneficiary, mortgagee, trustor, mortgagor, obligor, obligee,

or guarantor of the note, deed of trust, or mortgage, and with

respect to any other property that secures the note, shall be treated

and determined as if the dwelling had been sold through foreclosure

under a power of sale, as specified. The bill would prohibit the

holder of a note from requiring the trustor, mortgagor, or maker of

the note to pay any additional compensation, aside from the proceeds

of the sale, in exchange for the written consent to the sale. The

bill would provide that these provisions are inapplicable if the

trustor or mortgagor is a corporation, limited liability company,

limited partnership, or political subdivision of the state. The

provisions would also be inapplicable to any deed of trust, mortgage,

or other lien given to secure the payment of bonds or other evidence

of indebtedness authorized, or permitted to be issued, by the

Commissioner of Corporations, or that is made by a public utility

subject to the Public Utilities Act. The bill would provide that any

purported waiver of these provisions shall be void and against public

policy.

   This bill would declare that it is to take effect immediately as

an urgency statute.

THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

  SECTION 1.  Section 580e of the Code of Civil Procedure is amended

to read:

   580e.  (a) (1) No deficiency shall be owed or collected, and no

deficiency judgment shall be requested or rendered for any deficiency

upon a note secured solely by a deed of trust or mortgage for a

dwelling of not more than four units, in any case in which the

trustor or mortgagor sells the dwelling for a sale price less than

the remaining amount of the indebtedness outstanding at the time of

sale, in accordance with the written consent of the holder of the

deed of trust or mortgage, provided that both of the following have

occurred:

   (A) Title has been voluntarily transferred to a buyer by grant

deed or by other document of conveyance that has been recorded in the

county where all or part of the real property is located.

   (B) The proceeds of the sale have been tendered to the mortgagee,

beneficiary, or the agent of the mortgagee or beneficiary, in

accordance with the parties' agreement.

   (2) In circumstances not described in paragraph (1), when a note

is not secured solely by a deed of trust or mortgage for a dwelling

of not more than four units, no judgment shall be rendered for any

deficiency upon a note secured by a deed of trust or mortgage for a

dwelling of not more than four units, if the trustor or mortgagor

sells the dwelling for a sale price less than the remaining amount of

the indebtedness outstanding at the time of sale, in accordance with

the written consent of the holder of the deed of trust or mortgage.

Following the sale, in accordance with the holder's written consent,

the voluntary transfer of title to a buyer by grant deed or by other

document of conveyance recorded in the county where all or part of

the real property is located, and the tender to the mortgagee,

beneficiary, or the agent of the mortgagee or beneficiary of the sale

proceeds, as agreed, the rights, remedies, and obligations of any

holder, beneficiary, mortgagee, trustor, mortgagor, obligor, obligee,

or guarantor of the note, deed of trust, or mortgage, and with

respect to any other property that secures the note, shall be treated

and determined as if the dwelling had been sold through foreclosure

under a power of sale contained in the deed of trust or mortgage for

a price equal to the sale proceeds received by the holder, in the

manner contemplated by Section 580d.

   (b) A holder of a note shall not require the trustor, mortgagor,

or maker of the note to pay any additional compensation, aside from

the proceeds of the sale, in exchange for the written consent to the

sale.

   (c) If the trustor or mortgagor commits either fraud with respect

to the sale of, or waste with respect to, the real property that

secures the deed of trust or mortgage, this section shall not limit

the ability of the holder of the deed of trust or mortgage to seek

damages and use existing rights and remedies against the trustor or

mortgagor or any third party for fraud or waste.

   (d) (1) This section shall not apply if the trustor or mortgagor

is a corporation, limited liability company, limited partnership, or

political subdivision of the state.

   (2) This section shall not apply to any deed of trust, mortgage,

or other lien given to secure the payment of bonds or other evidence

of indebtedness authorized, or permitted to be issued, by the

Commissioner of Corporations, or that is made by a public utility

subject to the Public Utilities Act (Part 1 (commencing with Section

201) of Division 1 of the Public Utilities Code).

   (e) Any purported waiver of subdivision (a) or (b) shall be void

and against public policy.

  SEC. 2.  This act is an urgency statute necessary for the immediate

preservation of the public peace, health, or safety within the

meaning of Article IV of the Constitution and shall go into immediate

effect. The facts constituting the necessity are:

   In order to mitigate the impact of the ongoing foreclosure crisis

and to encourage the approval of short sales as an alternative to

foreclosure, it is necessary that this act take effect immediately.

Firm commentary:  The article below reports that the scope of the robo-signing practice exists beyond the execution of foreclosure documents.  Bank's can't explain why the practice continues because the banks have delegated due diligence responsibilities to third parties, like DOCX, who profit based on speed and volume rather than truth and accuracy.  It's an example of outsourcing gone wrong. 

This problem will not be solved until the economic incentives are re-aligned.  Until the market place places a premium on truth and accuracy, until the criminal and civil costs enough to outweigh the profits of the practice...nothing will change.

AP Exclusive: Mortgage 'robo-signing' goes on

http://money.msn.com/home-loans/news.aspx?feed=AP&date=20110718&id=13962627

July 18, 2011 6:26 PM ET

By MICHELLE CONLIN, PALLAVI GOGOI

AP) - Mortgage industry employees are still signing documents they haven't read and using fake signatures more than eight months after big banks and mortgage companies promised to stop the illegal practices that led to a nationwide halt of home foreclosures.

County officials in at least three states say they have received thousands of mortgage documents with questionable signatures since last fall, suggesting that the practices, known collectively as "robo-signing," remain widespread in the industry.

The documents have come from several companies that process mortgage paperwork, and have been filed on behalf of several major banks. One name, "Linda Green," was signed almost two dozen different ways.

Lenders say they are working with regulators to fix the problem but cannot explain why it has persisted.

Last fall, the nation's largest banks and mortgage lenders, including JPMorgan Chase, Wells Fargo, Bank of America and an arm of Goldman Sachs, suspended foreclosures while they investigated how corners were cut to keep pace with the crush of foreclosure paperwork.

Critics say the new findings point to a systemic problem with the paperwork involved in home mortgages and titles. And they say it shows that banks and mortgage processors haven't acted aggressively enough to put an end to widespread document fraud in the mortgage industry.

"Robo-signing is not even close to over," says Curtis Hertel, the recorder of deeds in Ingham County, Mich., which includes Lansing. "It's still an epidemic."

In Essex County, Mass., the office that handles property deeds has received almost 1,300 documents since October with the signature of "Linda Green," but in 22 different handwriting styles and with many different titles.

Linda Green worked for a company called DocX that processed mortgage paperwork and was shut down in the spring of 2010. County officials say they believe Green hasn't worked in the industry since. Why her signature remains in use is not clear.

"My office is a crime scene," says John O'Brien, the registrar of deeds in Essex County, which is north of Boston and includes the city of Salem.

In Guilford County, N.C., the office that records deeds says it received 456 documents with suspect signatures from Oct. 1, 2010, through June 30. The documents, mortgage assignments and certificates of satisfaction, transfer loans from one bank to another or certify a loan has been paid off.

Suspect signatures on the paperwork include 290 signed by Bryan Bly and 155 by Crystal Moore. In the mortgage investigations last fall, both admitted signing their names to mortgage documents without having read them. Neither was charged with a crime.

And in Michigan, a fraud investigator who works on behalf of homeowners says he has uncovered documents filed this year bearing the purported signature of Marshall Isaacs, an attorney with foreclosure law firm Orlans Associates. Isaacs' name did not come up in last year's investigations, but county officials across Michigan believe his name is being robo-signed.

O'Brien caused a stir in June at a national convention of county clerks by presenting his findings and encouraging his counterparts to investigate continued robo-signing.

The nation's foreclosure machine almost came to a standstill when the nation's largest banks suspended foreclosures last fall. Part of the problem, banks contended, was that foreclosures became so rampant in 2009 and 2010 that they were overwhelmed with paperwork.

The banks reviewed thousands of foreclosure filings, and where they found problems, they submitted new paperwork to courts handling the cases, with signatures they said were valid. The banks slowly started to resume foreclosures this winter and spring.

The 14 biggest U.S. banks reached a settlement with federal regulators in April in which they promised to clean up their mistakes and pay restitution to homeowners who had been wrongly foreclosed upon. The full amount of the settlement has not been determined. But it will not involve independent mortgage processing firms, the companies that some banks use to handle and file paperwork for mortgages.

So far, no individuals, lenders or paperwork processors have been charged with a crime over the robo-signed signatures found on documents last year. Critics such as April Charney, a Florida homeowner and defense lawyer, called the settlement a farce because no real punishment was meted out, making it easy for lenders and mortgage processors to continue the practice of robo-signing.

Robo-signing refers to a variety of practices. It can mean a qualified executive in the mortgage industry signs a mortgage affidavit document without verifying the information. It can mean someone forges an executive's signature, or a lower-level employee signs his or her own name with a fake title. It can mean failing to comply with notary procedures. In all of these cases, robo-signing involves people signing documents and swearing to their accuracy without verifying any of the information.

Most of the tainted mortgage documents in question last fall were related to homes in foreclosure. But much of the suspect paperwork that has been filed since then is for refinancing or for new purchases by people who are in good standing in the eyes of the bank. In addition, foreclosures are down 30 percent this year from last. Home sales have also fallen. So the new suspect documents come at a time when much less paperwork is streaming through the nation's mortgage machinery.

None of the almost 1,300 suspect Linda Green-signed documents from O'Brien's office, for example, involve foreclosures. And Jeff Thigpen, the register of deeds in North Carolina's Guilford County, says fewer than 40 of the 456 suspect documents filed to his office since October involved foreclosures.

Banks and their partner firms file mortgage documents with county deeds offices to prove that there are no liens on a property, that the bank owns a mortgage or that a bank filing for foreclosure has the authority to do so.

The signature of a qualified bank or mortgage official on these legal documents is supposed to guarantee that this information is accurate. The paper trail ensures a legal chain of title on a property and has been the backbone of U.S. property ownership for more than 300 years.

The county officials say the problem could be even worse than what they're reporting. That's because they are working off lists of known robo-signed names, such as Linda Green and Crystal Moore, that were identified during the investigation that began last fall. Officials suspect that other names on documents they have received since then are also robo-signed.

It is a federal crime to sign someone else's name to a legal document. It is also illegal to sign your name to an affidavit if you have not verified the information you're swearing to. Both are punishable by prison.

In Michigan, the attorney general took the rare step in June of filing criminal subpoenas to out-of-state mortgage processing companies after 23 county registers of deeds filed a criminal complaint with his office over robo-signed documents they say they have received. New York Attorney General Eric Schneiderman's office has said it is conducting a banking probe that could lead to criminal charges against financial executives. The attorneys general of Delaware, California and Illinois are conducting their own probes.

The legal issues are grave, deeds officials across the country say. At worst, legal experts say, the document debacle has opened the property system to legal liability well beyond the nation's foreclosure crisis. So someone buying a home and trying to obtain title insurance might be delayed or denied if robo-signed documents turn up in the property's history. That's because forged signatures call into question who owns mortgages and the properties they are attached to.

"The banks have completely screwed up property records," says L. Randall Wray, an economics professor and senior scholar at the University of Missouri-Kansas City.

In the Massachusetts case, The Associated Press tried to reach Linda Green, whose name was purportedly signed 1,300 times since October. The AP, using a phone number provided by lawyers who have been investigating the documents since last year, reached a person who said she was Linda Green, but not the Linda Green involved in the mortgage investigation.

In the Michigan case, a lawyer for the Orlans Associates law firm, where Isaacs works, denies that Isaacs or the firm has done anything wrong. "People have signatures that change," says Terry Cramer, general counsel for the firm. "We do not engage in 'robo-signing' at Orlans."

To combat the stream of suspect filings, O'Brien and Jeff Thigpen, the register of deeds in North Carolina's Guilford County, stopped accepting questionable paperwork June 7. They say they had no choice after complaining to federal and state authorities for months without getting anywhere.

Since then, O'Brien has received nine documents from Bank of America purportedly signed by Linda Burton, another name on authorities' list of known robo-signers. For years, his office has regularly received documents signed with Burton's name but written in such vastly different handwriting that two forensic investigators say it's highly unlikely it all came from the same person.

O'Brien returned the nine Burton documents to Bank of America in mid-June. He told the bank he would not file them unless the bank signed an affidavit certifying the signature and accepting responsibility if the title was called into question down the road. Instead, Bank of America sent new documents with new signatures and new notaries.

A Bank of America spokesman says Burton is an assistant vice president with a subsidiary, ReconTrust. That company handles mortgage paperwork processing for Bank of America.

"She signed the documents on behalf of the bank," spokesman Richard Simon says. The bank says providing the affidavit O'Brien asked for would have been costly and time-consuming. Instead, Simon says Bank of America sent a new set of documents "signed by an authorized associate who Mr. O'Brien wasn't challenging."

The bank didn't respond to questions about why Burton's name has been signed in different ways or why her signature appeared on documents that investigators in at least two states have deemed invalid.

Several attempts by the AP to reach Burton at ReconTrust were unsuccessful.

O'Brien says the bank's actions show "consciousness of guilt." Earlier this year, he hired Marie McDonnell, a mortgage fraud investigator and forensic document analyst, to verify his suspicions about Burton's and other names on suspect paperwork.

She compared valid copies of Burton's signature with the documents O'Brien had received in 2008, 2009 and 2010 and found that Burton's name was fraudulently signed on hundreds of documents.

Most of the documents reviewed by McDonnell were mortgage discharges, which are issued when a home changes hands or is refinanced by a new lender and are supposed to confirm that the previous mortgage has been paid off. Bank of America declined comment on McDonnell's findings.

In Michigan, recorder of deeds Hertel and his counterparts in 23 other counties found numerous suspect signatures on documents filed since the beginning of the year.

In June, their findings led the Michigan attorney general to issue criminal subpoenas to several firms that process mortgages for banks, including Lender Processing Services, the parent company of DocX, where Linda Green worked. On July 6, the CEO of that company, which is also under investigation by the Florida Attorney General's office, resigned, citing health reasons.

Firm commentary:  the article below reiterates what we have been repeating for 3 years:  Its all about cost-savings.  Loan servicers save money by avoiding costly searches for missing original documents or hiring additional staff to deal with the surge in foreclosures. Since most foreclosures are uncontested, lenders didn't keep proper documentation of mortgage transfers to mortgage backed security trusts. 

Rather than admit the truth and settle up with borrowers in the form of reasonable loan modifications....loan servicers chose to use Robo-signers to deceive courts and borrowers through the use of manufactured documents that create the illusion of valid transfers. 

The solution proposed in 2008 still exists:  Modify the bankruptcy laws and allow for cram down of residential mortgages.  In exchange for the modification, borrowers give up the right to sue over title issues.  The lending industry fought this proposal in 2008 and the bill was shot down by the Senate.  Loan servicers have profited from the crisis by racking up huge servicing fees that are collected after a property is liquidated.  Dragging out the foreclosure crisis hurts everyone EXCEPT the loan servicers.  We cannot reach a bottom in the housing crisis until this issue is resolved.

http://www.reuters.com/article/2011/07/19/foreclosures-banks-missing-idUSL3E7ID3T820110719

Behind foreclosure corner-cutting, troves of missing documents

By Scot J. Paltrow

NEW YORK, July 18 (Reuters) - Why have sketchy mortgage procedures been so difficult to root out? Some lawyers blame misguided efforts to cut costs. Most foreclosures are uncontested, they note. And so servicers save money by avoiding costly searches for missing original documents or hiring additional staff to deal with the surge in foreclosures.

There are signs, however, that servicers resort to doubtful documents because they have no choice if they are determined to foreclose: To a great extent, originals simply don't exist.

It's one of the overlooked legacies of the housing boom.

In the rush to make new home loans and sell them off as fast as possible to investors on Wall Street, the original lenders --big banks as well as now defunct makers of subprime loans --destroyed original documents, or never turned them over as required to the ownership pools that scooped them up. From 2004 through the end of the housing boom in 2006, more than half of all new mortgages were securitized and sold to such pools, known as mortgage-securitization trusts, according to the Securities Industry and Financial Markets Association.

So, banks and intermediaries in many cases never turned over the two essential documents underpinning a home loan -- promissory notes and mortgages -- that would convey ownership to the investor trusts. That means many pension funds, insurance companies and hedge funds that invested in the trusts never got formal title to mortgages they had paid for.

One example: Public records in foreclosure cases indicate that New Century Mortgage, the nation's second-largest subprime lender until it collapsed in 2007, almost never endorsed promissory notes or assigned mortgages to trusts that bought its mortgages.

A Reuters sampling of 50 foreclosure cases filed in Duval County, Florida, involving New Century mortgages found that none of the promissory notes filed in the cases had any endorsements at all on them. Records show that similar large-scale lapses occurred with other big lenders.

The result is that trusts may be out many billions of dollars, says Matthew Weidner, a lawyer who specializes in mortgage litigation. If proper procedures are followed now, foreclosures could slow to a trickle. And a cloud would hang over title to millions of homes, potentially further depressing the housing market.

Sheila Bair, who recently stepped down as Federal Deposit Insurance Corp. chairman, in Congressional testimony has called for a wide-ranging audit of the problem. But other regulators so far haven't backed the idea, possibly fearing the consequences if the extent of the problem became known. (Editing by Michael Williams)

Every dog has his day:  CitiMortgage tried to pass of an assignment purportedly executed by MERS as nominee for Seabreeze Financial, a California corporation that was dissolved 9 months prior to the transfer of the loan.  Citi's own loan mod denial letter listed Fannie Mae as the true owner of the loan.  New bankruptcy judge Marc S. Wallace denied the motion for relief of stay and opened the door for a state court law suit that will challenge the legality of the foreclosure.

Read the decision at

http://www.scribd.com/doc/60296945/Memo-Denying-Relief-of-Stay-Versus-CitiMortgage

Firm Commentary:  With tens of Billions of dollars at stake; with investors in mortgage backed security bonds already pressuring the bank with lawsuits, don't expect any confessions of wrongdoing on behalf of Bank of America as to how it conducts its foreclosure practice.  As we see daily, this bank and others retain outside vendors who manufacture evidence on demand so as to create the illusion of legitimate mortgage transfers so as to facilitate foreclosure,  Until the cost of this deceptive business practice exceeds the benefit of this deceptive business practice, don't expect change.

Subject: Fed: BofA 'Significantly Hindered' Foreclosure Probe

Daily Real Estate News, June 14, 2011

Fed: BofA 'Significantly Hindered' Foreclosure Probe:

Federal regulators are accusing Bank of America Corp. of being slow to provide documents and other information in an investigation into the banking giant's foreclosure practices, according to a court filing.

BofA "significantly hindered" the review, said departmental auditor William Nixon in a document that was filed in a lawsuit by the State of Arizona against the bank.

"When interviews were permitted, the presence or involvement of the bank's attorneys limited the effectiveness of those interviews," Nixon said in the court filing.

Federal regulators and state attorneys have been investigating banks' procedures for foreclosures after reports surfaced last year of banks using "robo-signers" to sign hundreds of unread foreclosure documents daily without proper reviews.

BofA spokesperson Dan Frahm disputes the claim that the bank has not cooperated with regulators.

"We provided on-site and follow-up access to more than 55,000 pages of material and we voluntarily coordinated interviews and assisted with arranging depositions with two dozen employees," Frahm told Reuters News.

Source: "Bank of America Hindered Foreclosure Review-Filing," Reuters News (June 13, 2011)

Firm commentary:

While many may find the allegations contained in the article below surprising, too many California Homeowners in financial distress have experienced this nightmare first hand.  The arrogance and disregard for property rights displayed by mega-banks will never change until there is a tangible cost...a punitive element that exceeds the savings the lenders enjoy from the current business practices.

It is simply about the bottom line:  the mega-bank's cost of due diligence, honesty and fair dealing is too high.  Until Courts begin imposing punitive damage awards based on the size of each lender, deceptive, misleading, fraudulent and bad faith business practices will continue.

If the scenario below has happened to you, call out office and set up a consultation.

Borrowers sue over apparent loan mod mishaps

July 5, 2011 3:40 AM ET

By JACOB ADELMAN

LOS ANGELES (AP) - It seemed Maria Campusano's financial problems were behind her when the mortgage on her Victorian home in a Massachusetts mill town was chopped by hundreds of dollars a month.

She soon learned that her troubles had just begun.

Weeks after making her first payment under the new rate, the school district staffer began receiving past-due notices, documents showing wildly inaccurate loan balances and letters threatening foreclosure. She now fears she'll lose her home.

"How can they take away what I have worked so hard for?" Campusano said.

Campusano is one of two named plaintiffs in a proposed class-action lawsuit alleging breach of contract by Bank of America NA and subsidiary BAC Home Loans Servicing LP.

The suit, which was filed in Los Angeles federal court because BAC is located in nearby Calabasas, is among a growing number of legal complaints accusing banks of disregarding what should be binding agreements to reduce the monthly mortgage payments of troubled borrowers.

The suits involve permanent modifications through the U.S. Treasury-administered Home Affordable Modification Program, which offers incentives to loan servicers who extend modifications, as well as so-called proprietary modifications, which banks offer independently of the government guidelines.

They represent a new wave of complaints against banks that have already weathered years of criticism for their reluctance to modify loans and for foreclosing on borrowers after offering them trial modifications.

Some have faced lawsuits alleging that the foreclosures amounted to a violation of the deal they struck with the government when they accepted funds from the $700 billion Wall Street rescue. And earlier this month, U.S. Treasury officials announced it was withholding incentives from Wells Fargo & Co., Bank of America Corp. and JPMorgan Chase & Co. for incorrectly determining that many borrowers were ineligible for HAMP modifications, a claim that the banks denied.

Recently, though, government officials and mortgage lenders have been touting statistics showing an increase in the number of modifications being extended.

The U.S. Treasury said in its April HAMP report, the most recent, that 70 percent of the trial modifications initiated since June 1, 2010 under the program's guidelines have been made permanent, up from 42 percent for trials started before that date.

Meanwhile, the Hope Now group -- an association of large banks, mortgage servicers and others -- reported that its members had modified 1.8 million loans in 2010, up from 1.2 million modifications in 2009.

But even as troubled borrowers increasingly manage to pry modification deals from reluctant banks, they're finding that problems persist long after the ink dries on their new loan contracts.

The Connecticut Fair Housing Center looked at 655 mortgage modifications granted in recent years to clients of partner organizations in 10 different states and found that nearly a quarter were having problems with inaccurate balance statements, erroneous default notices and other issues.

Campusano's lawsuit cites remarks from an unidentified former call center worker who said staff received bonuses for collecting more than was due under the modification deals. Attorney Shennan Kavanagh declined to make the worker available, but said the worker would testify or provide a declaration if needed during trial.

However Tracey Seslen, a real estate finance professor at the University of Southern California's Marshall School of Business, said the banks are probably just overwhelmed.

"There's not the kind of manpower for the quality control that's needed to make sure these things don't happen," he said.

Whether the problems are due to clerical errors, lack of oversight or something nefarious, the impact on homeowners is severe.

Julie Lewis, a 53-year-old mother of four, modified her contract with CitiMortgage Inc. for her Staten Island, N.Y. home after getting a divorce and suffering injuries in a car wreck that kept her from working.

In October 2010, after accepting her modified payments for more than a half year, CitiMortgage told her the modification had been denied, according to documents filed as part of a federal lawsuit in New York.

Bank agents now visit her street to take pictures of her home or hang fliers on her doorknob demanding that she call to discuss purportedly late payments.

"The banks act like bullies," said Lewis.

CitiMortgage spokesman Mark Rogers said legal restrictions kept him from discussing Lewis' situation.

Also in Staten Island, Merab Abdaladze and Tamar Bibishvili are having problems getting Chase to recognize a HAMP modification that it made permanent in September 2010.

After accepting the couple's first payment under the modified plan, the bank said the modification was invalid and stopped cashing their checks, according to a motion filed with New York state court. Chase lawyers have since assured the couple's attorney the modification was valid, but the bank still returns their checks uncashed.

Chase spokesman Gary Kishner said he could not comment on pending litigation.

And in the Seattle suburb of Issaquah, Nathaniel and Emily Perrone, both 29, saw a missed payment notice appear erroneously on their account statement soon after BAC approved their permanent modification in October 2010.

BAC customer service staffers have repeatedly assured Nathaniel Perrone that the charge was a mistake, but it remains on the account eight months later, along with late fees.

Bank of America spokeswoman Shirley Norton declined to comment on the cases involving the Perrones or Campusano, who are co-defendants in the proposed class-action lawsuit.

Campusano's problems began when she sought to modify a loan she refinanced years earlier to finish repairs to her Victorian-style home in Lawrence, Mass.

The 44-year-old single mother said she wanted to reduce her housing expenses because she was about to begin repaying a graduate school loan and had recently taken in a niece and nephew after the death of her sister.

Campusano made all of her payments under the modification she was granted in April 2010, but three months later received an account statement that misidentified her mortgage as being an interest-only loan. Over the following months, she was sent bills demanding late fees for payments she never owed.

In November, when she called the bank to ask about letters she received threatening foreclosure, she was told that she was actually ahead on her payments, according to the lawsuit. But the next month, she received four separate foreclosure notices, each giving a different figure as her monthly payment amount.

"I'm a very responsible woman and I don't think it's fair to be treated this way by the bank," she said. "If we signed an agreement, how can I be going through all this?"

July 5, 2011 3:40 AM ET

By JACOB ADELMAN