Robo-Signers Substituted by Robo-Witnesses, but Florida Courts Start to Crack Down

“An ongoing criminal enterprise”: Why America’s housing disaster is back and wreaking terror”

You should read the entire article in Salon by David Dayen and linked above, but here are some interesting excerpts:

When servicers got caught robo-signing, they stopped. But they trained a new set of employees, best described as robo-witnesses. These low-level personnel work for the servicer’s litigation departments, and they fly around the country from courtroom to courtroom. Reading from a script, robo-witnesses claim to have personal knowledge of their employer’s practices, and that they can swear to the legitimacy of the foreclosures. “They’re trained to parrot a script, you could just bring a parrot in,” said Lisa Epstein, a foreclosure expert now working for a defense attorney.

But these robo-witnesses know pretty much nothing beyond the script; they have no insight into the individual cases in which they’re testifying. “They walk into court having read the documents of the case a moment before,” said Thomas Ice, a foreclosure defense attorney in Palm Beach, Florida. Ice argues that it’s no different than robo-signing, just moved into the courtroom. “They don’t give their signature now, they just perjure themselves in court.”

In one case last month, the 1st District Court of Appeals reversed a case featuring robo-witness Andrew Benefield. The court found that Benefield “had no personal information” about the authenticity of the documents he testified about in the case.  In another case, the appeals court ruled that the robo-witness swore to the correct loan balance based only on the review of computer printouts, “and she had no information about how and when those records had been prepared or where the data came from.” Other appeals courts in Florida have ruled similarly, effectively making robo-witnesses a failed tactic.

Defense lawyer Evan Rosen of Fort Lauderdale, Florida, decided to depose one of the signers of these verification statements: Lona Hunt, foreclosure specialist for Seterus, servicer for the mortgage giant Fannie Mae. In the deposition, Hunt admitted twice that she never read the complaint at all before she signed the document swearing that the facts were correct.

Hunt testified that she only scanned the foreclosure complaint, checking that the defendant’s name and date of default matched what was on a computer screen.  She misidentified key documents in the case, did not know the meaning of basic legal terms in the complaint, and basically showed little expertise about anything related to mortgages and foreclosures. You can read the deposition here.

So why is this important? If the verifiers cannot verify and the witnesses bear no witness to the facts, so what? Didn’t homeowners default on their loans? Why should they get a free pass? This is the familiar refrain of those who would minimize this misconduct. Some even blame the states for forcing the poor servicers to prove they own the homes they want to repossess.

Here’s the truth. False documents and mass perjury, both criminal violations, make a mockery of the judicial system. It means that the servicers have as much legal right to foreclose as I do. To say that the homeowner is guilty of not paying, so their lender can do whatever they want to force them out of the home, is like saying the murder suspect is obviously guilty, so the cops can plant false evidence. We have a system of law to defend the rights of everyone, and ensure equal treatment.

Moreover, as Jim Kowalski, executive director of Jacksonville Area Legal Aid and a longtime foreclosure attorney, told me, “when you have procedural defects in these cases, you will almost always have substantive defects.” Multiple reports and studies verify this. The inspector general for HUD, for example, took a sample of JPMorgan Chase loans andcould not find documented proof for the amount owed on 35 out of 36 loans. This gets worse when servicing transfers between several companies; the amount owed becomes subject to a game of telephone, with dollar amounts effectively made up.

New RICO-Fraud Class Action Against Ocwen for Abusive Fee Schemes Against Home Loans Serviced By Ocwen

fraud-fullWeiner v. Ocwen Fin. Corp. and Ocwen Loan Servicing, LLC, No 2:14-cv-02597 (E.D.Cal.), filed Nov. 5, 2014.

This new class action against Ocwen addresses the marked-up default services fees that Ocwen is charging homeowners, particularly distressed homeowners, as part of a scheme of self-dealing with companies such as Altisource, and with the involvement of William C. Erbey, Executive Chairman, who has a leadership role on the Board of Ocwen and Altisource:

Weiner v Ocwen Financial Corporation a Florida Corporation COMPLAINT.

52. Ocwen’s scheme works as follows: Ocwen directs Altisource to order and coordinate default-related services, and, in turn, Altisource places orders for such services with third-party vendors. The third-party vendors charge Altisource for the performance of the default-related services, Altisource then marks up the price of the vendors’ services, in numerous instances by 100% or more, before “charging” the services to Ocwen. In turn, Ocwen bills the marked-up fees to homeowners.

58.Thus, the mortgage contract discloses to homeowners that the servicer will pay for default-related services when reasonably necessary, and will be reimbursed or “paid back” by the homeowner for amounts “disbursed.” Nowhere is it disclosed to borrowers that the servicer may engage in self-dealing to mark up the actual cost of those services to make a profit. Nevertheless, that is exactly what Ocwen does.

….

[Ed.: Explanation of Modern Relationship Between Loan Servicers and Home Loan Borrowers]

America’s Lending Industry Has Divorced itself
from the Borrowers it Once Served
18. Ocwen’s unlawful loan servicing practices exemplify how America’s lending industry has run off the rails.
19. Traditionally, when people wanted to borrow money, they went to a bank or a “savings and loan.” Banks loaned money and homeowners promised to repay the bank, with interest, over a specific period of time. The originating bank kept the loan on its balance sheet, and serviced the loan — processing payments, and sending out applicable notices and other information — until the loan was repaid. The originating bank had a financial interest in ensuring that the borrower was able to repay the loan.
20. Today, however, the process has changed. Mortgages are now packaged, bundled, and sold to investors on Wall Street through what is referred to in the financial industry as mortgage backed securities or MBS. This process is called securitization. Securitization of mortgage loans provides financial institutions with the benefit of immediately being able to recover the amounts loaned. It also effectively eliminates the financial institution’s risk from potential default. But, by eliminating the risk of default, mortgage backed securities have disassociated the lending community from homeowners.
21. Numerous unexpected consequences have resulted from the divide between lenders and homeowners. Among other things, securitization has led to the development of an industry of companies which make money primarily through servicing mortgages for the hedge funds and investment houses who own the loans.
22. Loan servicers do not profit directly from interest payments made by homeowners. Instead, these companies are paid a set fee for their loan administration services. Servicing fees are usually earned as a percentage of the unpaid principal balance of the mortgages that are being serviced. A typical servicing fee is approximately 0.50% per year.
23. Additionally, under pooling and servicing agreements (“PSAs”) with investors and noteholders, loan servicers assess fees on borrowers’ accounts for default-related services. These fees include, inter alia, Broker’s Price Opinion (“BPO”) fees,appraisal fees, and title examination fees.
24. Under this arrangement, a loan servicer’s primary concern is not ensuring that homeowners stay current on their loans. Instead, they are focused on minimizing any costs that would reduce profit from the set servicing fee, and generating as much revenue as possible from fees assessed against the mortgage accounts they service. As such, their “business model . . . encourages them to cut costs wherever possible, even if [that] involves cutting corners on legal requirements, and to lard on junk fees and in-sourced expenses at inflated prices.”3

25. As one Member of the Board of Governors of the Federal Reserve System has explained:
While an investor’s financial interests are tied more or less directly to the performance of a loan, the interests of a third-party servicer are tied to it only indirectly, at best. The servicer makes money, to oversimplify it a bit, by maximizing fees earned and minimizing expenses while performing the actions spelled out in its contract with the investor. . . . The broad grant of delegated authority that servicers enjoy under pooling and servicing agreements (PSAs), combined with an effective lack of choice on the part of consumers, creates an environment ripe for abuse.4 (citing See Sarah Bloom Raskin, Member Board of Governors of the Federal Reserve System, Remarks at the National Consumer Law Center’s Consumer Rights Litigation Conference, Boston Massachusetts, Nov. 12, 2010, available at http://www.federalreserve.gov/newsevents/speech/raskin20101112a.htm (last visited Jan. 23, 2012).

Ocwen Sets Aside 100 Million for Foreclosure Settlement Loss

But this only includes settlement of the New York claims:

From the Wall Street Journal article, full piece here:

Mortgage servicer Ocwen Financial Corp. swung to a loss in the third quarter, after it set aside $100 million as it seeks to settle the latest in a series of charges of weak internal controls by New York’s financial regulator.

Ocwen recorded a loss of $75.3 million, or 58 cents a share, compared with net income of $60.6 million, or 39 cents a share, in the year-earlier quarter.

Revenue declined 3%, to $513.7 million.

The company said it is engaged in settlement talks with the New York Department of Financial Services over its practices in handling distressed mortgage borrowers, a sign the company is moving closer to resolving regulatory issues that have crimped its growth.

The stock, which has fallen 58% this year, climbed 11% on Thursday, rising $2.35, to $23.16, in 4 p.m. trading.

“The fact that they’re negotiating with the regulator is a positive for the market,” said Bose George, an analyst with Keefe, Bruyette & Woods. “It could mean that they’re putting this behind them.”

He noted, though, that the company said the $100 million was a preliminary estimate, and it covered only resolution of charges from New York state. It doesn’t include the possibility of additional penalties from federal or other state regulators over Ocwen’s practices.

Foreclosure Links

Evidence Suggests MERS Was Conceived in a “Fraud Friendly” Way

 

Bank of America’s Assignment and Blank Endorsement Were Insufficient to Transfer Ownership Interest

2014-10-16 – Nash – Final Judgment

Bank of America, N.A. Successor by Merger to BAC Home Loans Servicing, LP fka Countrywide Home Loans Servicing, LP v. Nash, Case No. 49-2011-CA-004389, In the Circuit Court of the 18th Judicial Circuit, Seminole County, Florida

The Court finds that:

The Court finds that:

a.) America’s Wholesale Lender, a New York Corporation, the “Lender”,

Specifically named in the mortgage, did not file this action, did not appear at

Trial, and did not Assign any of the interest in the mortgage. ·

b.) The Note and Mortgage are void because the alleged Lender, America’s

Wholesale Lender, stated to be a New York Corporation, was not in fact

incorporated in the year 2005 or subsequently, at any time, by either

Countrywide Home Loans, or Bank of America, or any of their related

corporate entities or agents.

c.) America’s Wholesale Lender, stated to be a corporation under the laws of

New York, the alleged Lender in this case, was not licensed as a mortgage

lender in Florida in the year 2005, or thereafter, and the alleged mortgage loan

is therefore, invalid and void.

d.) America’s Wholesale Lender, stated to be a New Y ork Corporation, did not
have authority to do business in Florida under Florida Statute 607.1506 and
the alleged mortgage loan is therefore invalid and void.
e.) Plaintiff and its predecessors in interest had no right to receive payment on the
mortgage loan because the loan was invalid and therefore void because the
corporate mortgagee named therein, was non-existent, and no valid mortgage
loan was ever held by Plaintiff or its predecessors in interest. ·
f.) The alleged Assignment of Mortgage which purported to transfer interest in
this mortgage to BAC Home Loans Servicing, LP, FKA Countrywide Home
Loans Servicing, LP, as assignee, was invalid because Mortgage Electronic
Registrations Systems, Inc. (MERS), as nominee for America’s Wholesale
Lender had no authority to assign the ovmership interest of said mortgage,
because MERS was not the owner of the subject mortgage and was only a
nominee for America’s Wholesale Lender, an alleged New York Corporation
which was a non-existent Corporation. Said purported assignment was
without authority, and therefore invalid.
g.) Plaintiffs witness had no knowledge of who or what entity might have
instructed MERS as nominee, to attempt to assign or transfer any interest in
said mortgage, which in any event would have been invalid because that entity
(MERS) had no ownership interest in the mortgage and was merely named as
a nominee for the non-existent corporate m0rtgagee.
10. Based upon the foregoing, the Plaintiff, Bank of America, NA, has no standing to
bring this action. The Plaintiff has no legal right to attempt to claim ownership of the subject
Note and Mortgage, or any right as servicer, for some other unknown entity, and is without any
legal basis to attempt to foreclose the subject Mo1tgage, or to collect on the Mortgage Note,
because America’s Wholesale Lender, a New York Corporation, did not exist in 2005, and was
never formed as a Corporation by Plaintiff or its predecessors in· interest. The collection of
mortgage payments by the Plaintiff and its predecessors in interest, was therefore illegal and they
were without any legal right to receive and use or disburse the funds therefrom on behalf of any.
owner of the Note and Mortgage, or any other party.
11. Defendant is therefore entitled to recover from Plaintiff, all funds reflected on
Plaintiffs Exhibit 4 which Plaintiffs witness testified reflected the payment history of monies
paid by Defendant to Plaintiff or its predecessors in interest, because the subject note and
mo1tgage were invalid because the alleged mortgage lender did not exist and did not have the
legal right to receive and retain or disburse said funds.
12. Defendant is also entitled to recover from Plaintiff, all costs and attorney’s fees
incurred . . .

CFPB’s Action Against Flagstar Bank Included a Benching Remedy

Reuters reports in the Fiscal Times regarding special features of the newest regulatory action taken against Flagstar related to servicing default loans, with the full article here:

CFPB has in the past sanctioned mortgage servicers for similar violations, with limited success. This time, in addition to fining the bank
$37.5 million (the bulk of which will go to victims of Flagstar’s bad servicing, who also must be offered new loan modifications), CFPB
banned the company from acquiring new mortgage servicing rights, particularly for defaulted loans, until it can demonstrate its ability to
comply with the law.

This is enormous. There’s a healthy trade in the right to service loans in default, because new capital rules make them less attractive to large
banks, and because CFPB’s regulations are costly to follow. Because servicers don’t originate a massive amount of loans themselves, and
because consumers constantly refinance, pay off, or lose a loan to foreclosure, servicers must constantly purchase new servicing rights to
refresh their supply and stay in business.
But CFPB ordered Flagstar to not purchase any more default loan servicing until it figures out how to do it properly. This “benching remedy,”
as Georgetown law professor Adam Levitin calls it, can change the calculations for financial institutions over whether to commit a fraud,
where the potential penalty is usually less than the profit they can make. In this case, Levitin writes, “compliance can be costly, and being
taken out of the market can really squeeze the firm’s market position and potentially even its cashflow.”

Imagine applying this model to other parts of the financial services industry. Firms guilty of securities fraud could be barred from issuing that
set of securities. Companies making high-risk corporate loans outside regulatory guidelines could be stopped from making corporate loans
entirely. Banks caught laundering money for sanctioned organizations could be barred from U.S. dollar clearing operations, or from taking
new deposits. The message would come through clearly: Violate the law and you no longer get to participate in the business until you prove
you can do it legally.
Unfortunately, federal financial fraud sanctions typically follow a different path. Take the Justice Department’s vaunted settlements with big
banks for mortgage-backed securities violations. This week, a monitor released the latest review of how JPMorgan Chase has complied with
the “consumer relief” section of the settlement.
At the time of the deal, prosecutors touted consumer relief as a way to deliver principal reductions for struggling homeowners. But of the
46,404 borrowers helped by the settlement as of June 30, only 2,633 got principal reductions. JPMorgan satisfied most of its punishment by
making 39,445 loans to low- and moderate-income borrowers, and borrowers in disaster areas. Of the $7.6 billion in gross “relief,” $7.1
billion came through lending.

CFPB Takes Action Against Flagstar Bank for Loan Modification Abuses

SEP 29 2014

Prepared Remarks of CFPB Director Richard Cordray on the Flagstar Enforcement Action Press Call

BY RICHARD CORDRAY

Today the Consumer Financial Protection Bureau is taking its first enforcement action under the Bureau’s new mortgage servicing rules. We are entering an order against Michigan-based Flagstar Bank for violating those rules by failing borrowers and illegally blocking them from trying to save their homes. Flagstar took excessive time to process borrowers’ applications, did not tell them when their applications were incomplete, denied loan modifications to qualified borrowers, and illegally delayed finalizing permanent loan modifications. These unlawful practices caused many consumers to lose the homes they had been trying to save. That is wrong and it is unacceptable.

Mortgage servicers play a central role in homeowners’ lives because they bear responsibility for managing the loans. They are the link between a mortgage borrower and a mortgage owner. They collect and apply payments, work out modifications to the loan terms, and handle the difficult process of foreclosure. Importantly, consumers cannot take their business elsewhere. Instead, they are stuck with their mortgage servicer, whether they are treated well or poorly.

In January 2014, the Consumer Bureau’s new mortgage servicing rules took effect. These new regulations establish specific rules of the road for handling loss mitigation applications. Since we first announced these rules almost two years ago, we have made clear that we expect full compliance to clean up the problems that had been pervasive in this industry and caused so many people to lose their homes. Consumers must not be hurt by illegal servicing any more. When mortgage servicers fail to treat people fairly, we will vigorously enforce the law.

Like many other servicers, Flagstar found that its volume of applications for loss mitigation rose sharply as a result of the foreclosure crisis. Our investigation found that Flagstar was simply not equipped to handle the influx. For a time, it took the staff up to nine months to review a single application. In 2011, Flagstar had 13,000 active loss mitigation applications but had only 25 full-time employees and a third-party vendor in India reviewing them. The Bureau found that in Flagstar’s loss mitigation call center, the average wait time was 25 minutes and the average call abandonment rate was almost 50 percent. Flagstar also had a heavy backlog of loss mitigation applications.

To make things worse, we found that Flagstar would clear its backlog of applications by closing those with expired documents – even though the documents had expired because Flagstar sat on them for so long. We also found that consumers would turn in loan modification applications but would not hear whether they were approved for many months. Flagstar was supposed to send “missing document” letters to consumers so they could provide any missing information, but it often delayed or did not send them at all.

We also concluded that when Flagstar did evaluate a completed application, it did a poor job. For example, we believe it routinely miscalculated the incomes of borrowers. Because loss mitigation programs are heavily dependent on the borrower’s income, this kind of miscalculation can have grave consequences for consumers. We determined that Flagstar’s failures led to wrongful denials of loan modifications.

Furthermore, when Flagstar denied an application, it did not give homeowners a specific reason why. Under the Consumer Bureau’s new rules, mortgage servicers must provide the specific reason why a complete application for a loan modification is rejected. This gives consumers a chance to fix the problem and either reapply or appeal the rejection. It also gives consumers more control over what is happening and provides them with critical information so they can make informed choices.

Another new mortgage servicing right for certain homeowners is the right to appeal the denial of a loan modification. But Flagstar has been wrongly telling borrowers that they only have the right to appeal if they live in certain states. That is not true. It does not matter what state the consumer lives in.

Finally, for those consumers lucky enough to get a trial loan modification, Flagstar kept them in a sort of “trial mod purgatory” for far too long. Indeed, Flagstar needlessly prolonged trial periods, causing some borrowers’ loan amount under the modified note to increase and, in some cases, jeopardizing the potential for a permanent loan modification.

Struggling homeowners paid a heavy price, including losing the opportunity to save their homes, as a result of Flagstar’s illegal actions. These problems were compounded because consumers have almost nowhere to turn. In the mortgage servicing market, they could not take their business elsewhere but were stuck with whatever treatment they received from Flagstar.

As we have seen for many years now – and I have seen it in local government, state government, and now the federal government – mortgage servicing failures hurt homeowners. In many cases, we believe Flagstar deprived people of the ability to make an informed choice about how to save or sell their home, causing borrowers to drop out of the process entirely and driving them into foreclosure. A former manager testified that when borrowers got to an advanced stage of delinquency, “You can feel that they’ve given up. There’s no hope left.” Another former manager recalled a borrower who told him, “You know what? My home can just go to foreclosure. I’m not faxing any documentation anymore.”

To remedy these wrongs, the Consumer Bureau is ordering Flagstar to halt any further violations of federal law. Flagstar must pay $27.5 million to consumers whose loans were being serviced by Flagstar and who were subject to its unlawful practices. At least $20 million of this amount will go to victims of foreclosure. Flagstar must also engage in outreach to affected borrowers who were not foreclosed on and offer them loss mitigation options. Flagstar must halt the foreclosure process, if one is happening, during this outreach and qualification process. Flagstar also is barred from acquiring servicing rights for default loan portfolios until it demonstrates that it is able to comply with the laws that protect consumers during the loss mitigation process. In addition, Flagstar will make a $10 million payment to the Bureau’s Civil Penalty Fund.

The Bureau has been clear that mortgage servicers must follow our new servicing rules and treat homeowners fairly. Today’s action signals a new era of enforcement to protect consumers against the cost of servicer runarounds. The financial crisis is still fresh in our minds and too many homeowners continue to feel its effects. We need all mortgage servicers to understand that they must step up and follow the law. We are working very hard to fulfill this objective. Thank you.