Tags: right of rescission
That sounds too good to be true! Guess who made this possible… The Supreme Court of the United States (SCOTUS)! There is a shockwave moving through the mortgage industry caused by a unanimous SCOTUS ruling in January. The court settled once and for all the exactly what a borrower’s Right of Rescission is, and what latitude the courts have when dealing with it. The content of that ruling is a major win for homeowners and real estate investors alike, but what exactly does it mean for you and your business?
First let’s begin with what the Right of Rescission is. It was established by the federal government in the Truth in Lending Act (TILA). It gives a borrower the right to rescind any residential mortgage transaction within three days of the lender providing all of the disclosures required by TILA. The traditional Right of Rescission happens within 3 days of the closing and allows the buyer to cancel the transaction and get all funds returned by the lender. The Right of Rescission we are interested in is much more expansive. Read More
Tags: right to foreclose
Picture this: a man purchases a house in 2007 with a loan from a major mortgage lender who then securitizes the loan. After 7 years of making payments, the homeowner loses his job and defaults on the loan. The lender sends a foreclosure notice to the homeowner, claiming the ability to foreclose on the loan. But does the lender actually have the right to foreclose? The answer is a bit complicated, and does not look good for the major banks. To understand why, let’s take a closer look at exactly what the banks did and what it means for homeowners and real estate investors.
When a loan was securitized it was lumped together with a massive pool of loans and then sold in parts to investors around the world. The investors were then paid from the principal and interest payments on the loans based on their percentage of ownership. It sounds simple enough. If it was that simple, why did mortgage lenders begin the process by selling each loan in the massive pool of loans through a sequence of sales? And why was the last sale almost invariably to a single-purpose entity, usually a trust with a major bank as the trustee? The point of this sequence of sales was to separate the pool of loans from the assets and liabilities of the originating lender. They did this in case the lender was to file for bankruptcy or go into receivership. If the loan had not been completely separated from the lender, the lender could then claim the loan by right of redemption, effectively leaving the investors with nothing.
If the homeowner continues to make their payments, this is the end of the process for them until they have paid off the loan. If the homeowner misses payments and the foreclosure process begins on their loan, that’s when things get hairy. Read More
It took a long time, but New York’s federal courts have finally ruled that forged documents don’t cut it when the banks are trying to foreclose on a homeowner! In a blistering, 30-page ruling, a federal bankruptcy judge from New York’s Southern District has slammed Wells Fargo for falsifying documents in order to foreclose on a home in Westchester County. Not only did the judge take Wells Fargo to task for trying to foreclose using falsified documents, he slammed the bank for its willingness to make up evidence after the fact in order to enforce its claims. This is a huge development for homeowners and real estate investors that could have a real impact on their ability to negotiate with banks.
It has been common knowledge that the banks were faking important documents ever since the robo-signing scandal started five years ago. For some reason, it took years before judges would stand up and forcefully reject the made up documents the ban. The New York case is a textbook example of the fraud I have been writing about for years. Wells Fargo forged signatures and dates on the endorsement and the assignment of the note in order to foreclose. The exceptional feature of this case as that it includes the testimony of a Wells Fargo employee who was a manager of the default documents department at the time of the foreclosure. This employee admitted to signing up to 150 original documents per day as well as creating assignments when necessary. This proved to the judge that Read More
Tags: loan modifications
Almost every real estate investor who buys short sales or pre-foreclosures has heard this story a hundred times. A homeowner requests a loan modification from the bank, the bank grants a “temporary” modification, payments were made and accepted, then bank changes its mind and forecloses on the homeowner for not making the full, original mortgage payment. It has been happening every day since the economic crisis began, leading millions of homeowners into foreclosure. This was business as usual for years, until a recent appellate court ruling that modification offers are in fact enforceable contracts that must be honored by the banks.
In this case, Wells Fargo offered a temporary modification to a homeowner. The offer was accepted, and the trial payments were all made and accepted. Wells Fargo then disavowed the modification settlement under the claim that it lacked consideration. Wells Fargo then went ahead with the foreclosure. The trial court ruled that Wells Fargo was correct by saying that there was no consideration. The appellate court reversed that ruling, declaring that there was more than enough consideration. This ruling has led to hundreds of cases in which trial and appellate courts have enforced the modification agreements ignored by banks.
This is a hugely exciting ruling for homeowners. The allegations of impropriety regarding loan modifications at the banks have been public for years and some are especially egregious. A former employee of a loan servicing company owned by Goldman Sachs alleged that Read More
The banks are turning on each other! Over the past few years, Americans have become aware of the financial fraud that was committed against the country by the major banks. The more the public hears about the Federal Reserve spending $60-70 billion dollars every month to buy garbage loans back from the banks that created them at 100 cents on the dollar, the more upset they get. Well it looks like the banks are starting to get upset with each other, too. Bank of New York Mellon (BONY) has sued JP Morgan Chase for misrepresenting the value of a pool of loans that was sold to BONY for nearly $1 billion. You would think that BONY would expect this sort of thing from Chase. After all, it has been common knowledge for years that the banks have been lying about the values of their loans and mortgage backed securities since the beginning of the housing boom. In fact, we now have the first person testimony of a person who tried to stop the fraud at Chase.
According to Chase whistleblower Alayne Fleischmann, Chase knowingly bundled up garbage loans with good ones, slapped a good rating on them, and sold them off to investors. These garbage loans were referred to as “scratch and dent” in the industry because they were a lot like dinged up cars – worth nowhere near the same amount as cars in good condition. This isn’t just an accusation though. Chase has admitted to selling hundreds of millions of dollars’ worth of these loans to investors by lying about their quality. Not only do they admit to doing this, they also admit that they were warned by people like Fleischmann that they were committing fraud by knowingly selling these mortgage backed securities.
So why aren’t these executives who knowingly committed fraud going to jail? Because they Read More
There have been over 20 million foreclosures in the United States since 2007 and more than 5.5 million homes have been repossessed. Meanwhile the major banks have been laughing as they cash in to the tune of $65-75 BILLION dollars every month from the Federal Reserve. According to the regulators in charge of protecting our currency we should rest assured that this was all an innocent mistake. Well we now have leaked documents that show that the major banks created their tangled web of risky financial transactions not by accident, but with the specific intent of bypassing local jurisdictions’ recording requirements and taxes.
By now most real estate investors have heard of MERS as it has taken on a kind of bogey man type of presence. They might not know what it’s all about, but they know it’s bad. The concept behind MERS was fairly simple. The banks were creating so many loans and transferring ownership so much that it became an expensive nightmare to file the right documents in the right jurisdictions and pay the resulting taxes from each transaction. Instead of doing the honest and ethical thing – paying the taxes and filing the paperwork properly – more than 25 of the largest financial institutions and insurance agencies in the nation teamed up to create MERS, Inc. When a loan was originated, MERS would appear as the owner. Meanwhile, in the back office system of MERS, actual ownership and administration of the loan would be bought and sold countless times without the local jurisdictions or borrowers ever being notified, thus allowing the bank to avoid the taxes and document filing that were legally required. Read More
Another day, another court ruling against the banksters who have fraudulently foreclosed on millions of homes! I have been writing about how the courts have been wising up to the games the banks have been playing to foreclose on properties that they have no claim to, and the latest ruling is one of the biggest. The Federal 6th Circuit Court in Ohio has cleared away a major hurdle that has stopped a lot of homeowners in their tracks.
In many homeowners’ cases, a major claim is that their note never made it into the trust that the foreclosing bank is acting as the servicer for. As soon as the homeowner makes their initial charge that the loan never made it into the trust, the bank would respond saying that, since the homeowner is not an owner or investor in the trust, they have no standing to challenge the validity of the transactions that purport to transfer the note into the trust. Since they have no standing to demand to see the chain of title on the note, their main claim is tossed out by the court, and their case is dismissed.
The 6th Circuit Court’s has ruled that the homeowner DOES in fact have the standing to challenge title and therefore the validity of the transactions that claim to show the note belonging to the trust. Not only that, but the court found that whether or not the homeowner had previously defaulted on his mortgage. The court was incredibly forceful in their ruling, almost recommending a RICO action against the banks.
This isn’t the only good news for homeowners and investors! Another example of things going our way is Read More
Tags: foreclosure crisis
It was almost eight years ago that the foreclosure crisis began. More than 5 million homes were lost to foreclosure during those eight years, many of them belonging to real estate investors who are no longer in business. But thing are looking up, right? According to CoreLogic the national foreclosure rate is at 1.7%, down from 2.5% last year. The rate of foreclosure starts is at 2006 levels, and the number of foreclosed homes being sold is back to 2008 levels. So why are many analysts now preparing for those numbers to shoot back up in the next year?
The answer is simple. The government created a bunch of temporary relief programs to try to stop the onslaught of foreclosures without actually fixing the problem. Instead of focusing on principal reduction, they focused on temporarily reducing payments. Over 300,000 homeowners’ HAMP payments will increase next year alone, with 2 million set to increase over the next few years. 40% of those 2 million homes are still underwater.
Another source of trouble is the fact that Home Equity Lines of Credit (HELOCs) that were taken out during the bubble years will began to have increased payments. According to the LA Times, this increase will hurt the areas whose economies are the most affected by the housing bust because that is where the most lending took place.
The foreclosures might already be starting to hit as the foreclosure rate did increase 2% from June to July, with activity increasing by 66% in Houston and 10% in Los Angeles. Foreclosure starts in Nevada, one of the hardest hit states during the housing bust, increased by 128% year over year.
The most appalling thing about this is the fact that a huge percentage of these loans Read More
Tags: fraudulent foreclosure
In July, fans of common sense and decency everywhere won a huge victory – in California of all places! The California Appellate Court ruled that Chase created and recorded false documentation in order to prove ownership of a property so they could foreclose on it. This is big news because it shows that the major courts in some of the biggest states in the country are catching onto the long con the banks have been playing this country for over a decade. Not only is this a good thing for the country in general, it is creating a huge opportunity for real estate investors to do some killer deals while helping homeowners in need.
In 1998, the Jan and Rosalind Kalicki secured a mortgage for their home in San Marcos California. A specialty mortgage banking company originated the loan, and Washington Mutual became the servicer. After WaMu went into receivership, Chase bought a large amount of WaMu’s interests, including the Kalicki’s loan. After being foreclosed on in 2008, the Kalicki’s filed a suit for wrongful foreclosure against Chase in 2009. The Kalicki’s claim was that Chase claimed ownership of the loan based on fraudulent documents.
In 2012, the court ruled not only that Chase had created and recorded fake documentation to show that ownership of the loan had been transferred to Chase, it was also exposed that Read More
Tags: mortgage fraud
Did you hear the news? Citigroup may have to pay a $7 billion settlement to resolve mortgage probes. Why? To get the government to stop looking into whether it defrauded investors on billions of dollars worth of mortgage securities. Most of the payment will be in cash, but it will also include a few billion dollars to help struggling homeowners. How magnanimous of them! Citi created hundreds of billions of dollars worth of fraudulent mortgages, and now that they’ve been caught after 7 years of foreclosing like crazy on their fraudulent mortgages, they’re finally going to cough up a few billion to help out some of the people they haven’t foreclosed on yet.
This news brings to mind a case I read about recently where a REGIONAL bank had the owner of a property falsify mortgage documents in order to originate a riskier loan. That’s right, the regional bank has the owner of two VACANT lots certify that there were houses on the two lots. Then the bank made a loan as if the nonexistent homes were actually on the two vacant lots. Why on Earth would the bank lie and increase their risk by loaning out so much more money than the land was worth? It was all part of a large scale scheme to rake in as much money as possible by defrauding the bank’s investors.
The only reason a bank would ever behave like this is that they were never loaning their own money in the first place. This was a securitized loan. The bank used investors’ money, and thus had no risk of losing anything if the loan was not repaid. The bank’s mission was simple: crank out as many loans for as much money as they could and then lump them together into massive bundles of junk mortgages.
So who paid the bank to do this? Broker dealers paid the banks to originate and buncles the loans together so that they could sell the resulting toxic mortgage bonds to investors who didn’t know any better. The broker dealer would then eliminate their own risk by dumping defaulted loans into empty, unfunded trust entities.
This whole process was designed to make it appear that there was a legitimate lender that was qualifying borrowers and writing good mortgages. In reality, the originator and aggregator of the loans Read More