TARP Watchdog Report Calls Out Loan Servicers and Treasury for Massive HAMP Failures

The SIGTARP’s latest report to Congress issued July 29, 2015 chastises Treasury for its failure to question and punish loan servicers for their dismal HAMP numbers.  Servicers who participate in HAMP are paid incentives, and are “required to offer HAMP modifications to all eligible homeowners.” Servicers “must follow the HAMP rules” and “Treasury has an oversight responsibility to ensure that servicers follow Treasury’s HAMP Rules.”  But they do not.

A staggering 7 out of 10 homeowners have been rejected for HAMP modifications.  Mortgage servicers have denied four million homeowner applications for HAMP assistance.  “JP Morgan Chase and Bank of America, historically the two largest HAMP servicers, and Citi each turned down 80% or more of homeowners who applied for HAMP; Ocwen, the current largest HAMP servicer, turned down more than 70% of  homeowners who applied for HAMP.”  See SIGTARP Report, Section 3. And this is only after Treasury began requiring servicers to report some of their metrics post-2009.

“In Treasury’s first [second look] June 2011 servicer assessment, 5 of the top 10 servicers (Bank of America, Cit, JPMorgan Chase, Ocwen and OneWest Bank) ranked poorly in Treasury’s second look.” Id.

Treasury continues to find servicers wrongfully denying homeowners.  “In two quarters in 2014 Treasury found second look problems at Ocwen, Wells Fargo, and Citi.”  In addition, Treasury “found problems recently in the fourth quarter of 2014 at Select Portfolio Servicing, and at Nationstar Mortgage, LLC in the first quarter of 2015.” Treasury’s findings “make clear that even after more than five years of HAMP, top HAMP servicers are still mistreating homeowners by not following HAMP Rules designed to protect homeowners.” Id. (emphasis added)

Predictably, the self-reporting loan servicers lay the blame on homeowners but SIGTARP easily dispels the pretext.

The main three reasons self-reported to Treasury by the loan servicers are (1) failure to send documentation; (2) failure to accept trial payment plans or loan modifications; or (3) eligibility failure based on income.  But all three of these reasons can also be caused by servicer misconduct, as has been widely reported.

As noted by SIGTARP, the Consumer Financial Protection Bureau, and Treasury’s own limited investigations, as well as homeowner-filed complaints, “Persistent problems and errors in the application and income calculation process have hisorically plagued homeowners seeking HAMP assistance, and continue to do so.  As a result, eligible homeowners may have been, and may continue to be, denied a chance to get into HAMP through no fault of their own.”

As for the “failure of documentation,” SIGTARP reports that the “incomplete documentation” is often attritubutable to loan servicers losing paperwork and requiring resubmission, servicer delays, and servicers ignoring requests for clarification or assistance.  SIGTARP cites the “egregious examples” of the SunTrust Mortgage prosecution by the Department of Justice in July 2014 and of the CFPB findings that “Ocwen, the largest HAMP servicer, provided false and misleading information to homeowners about the status of their loss modification review, failed to respond to homeowner requests for loan modification information and assistance, and failed to honor modifications in process of loans obtained from other servicers.”

SIGTARP also questions the servicer claims of homeowner failures to accept modified loans, pointing out the role of significant servicer backlogs such as Citibank’s 14-month backlog, and Bank of America and Select Portfolio Services, LLC’s signficant application backlogs of 5 months each.

SIGTARP urges Treasury to see the HAMP denials through the “known history of servicer misconduct,” to look beyond the servicer reporting, and “hold servicers accountable for extensive delays, lost paperwork, and errors in calculating key eligibility factors such as income, rather than let those and other servicer problems seep into the servicers’ decisions on homeowners’ HAMP applications.”

Foreclosure Cases: MERS, Deutsche, and Other Usual Suspects

A new one from Massachusetts, a non-judicial foreclosure (like Arizona) case regarding paragraph 22 of the Deed of Trust contract, and the conditions precedent set forth therein:Pinti v Emigrant Mortg Co Inc Choice bits:

Insofar as the plaintiffs’ mortgage is concerned, paragraph 22 begins by requiring notice of default to be given prior to any acceleration of the sums secured by the mortgage; then specifically prescribes the contents of the notice of default; and then provides that, if the default is not cured before the date specified in the notice, the mortgagee may invoke the statutory power of sale (as well as pursue other remedies). As the paragraph is written, therefore, the sending of the prescribed notice of default is essentially a prerequisite to use of the mortgage’s power of sale, because the power of sale may be invoked only if the default is not cured within the time specified in the notice of default. In this regard, we agree with the plaintiffs that the “terms of the mortgage” with which strict compliance is required — both as a matter of common law under this court’s decisions and under § 2115 — include not only the provisions in paragraph 22 relating to the foreclosure sale itself, but also the provisions requiring and prescribing the preforeclosure notice of default. See Foster, Hall & Adams Co., 213 Mass. at 322-324.

Because the plaintiffs entered into their mortgage with Emigrant in Massachusetts, a nonjudicial foreclosure State, the default provision in paragraph 22 of their mortgage provided that Emigrant’s notice regarding the plaintiffs’ default and right to cure had to inform the plaintiffs of “the right to bring a court action to assert the non-existence of a default or any other defense of [the plaintiffs] to acceleration and sale” (emphasis added). See Beaton v. Land Court, 367 Mass. 385, 392- 393 (1975) (discussing mortgagor’s avenues of relief from foreclosure through court actions). The language that Emigrant used in the default notice that it actually sent to the plaintiffs — that the plaintiffs “have the right to assert in any lawsuit for foreclosure and sale the nonexistence of a default or any other defense [they] may have to acceleration and foreclosure and sale” (emphasis added) — presumably would comply with the requirements of paragraph 22 in a judicial foreclosure State, 17 but not in Massachusetts.

If, as the defendants argue, “substantial compliance” with paragraph 22 were sufficient, and if the erroneous information sent to the plaintiffs constituted substantial compliance, it is obvious that Massachusetts mortgagors, including the plaintiffs, could be misled into thinking that they had no need to initiate a preforeclosure action against the mortgagee but could wait to advance a challenge or defense to foreclosure as a response to a lawsuit initiated by the mortgagee — even though, as a practical matter, such a lawsuit would never be brought. 18,19

As previously discussed, in a nonjudicial foreclosure jurisdiction like Massachusetts, misstating this information in a way to suggest that a mortgagor with a defense does not need to initiate a lawsuit but may wait to respond to a foreclosure lawsuit filed by the mortgagee can have disastrous consequences for the mortgagor: if the mortgagor has a valid defense to the foreclosure sale going forward, but is not made aware that he or she must initiate an action in court against the mortgagee to raise that defense, the sale may well proceed and result in title passing to a bona fide purchaser without knowledge of the issue — at which point, and depending on the nature of the defense, the mortgagor’s right to redeem his or her home may well be lost. See Bevilacqua, 460 Mass. at 777- 778.24 Emigrant’s failure to provide the required and correct information on this point in the notice of default cannot fairly be described as a “mere irregularit[y] in executing a power of sale contained in a mortgage.” Rogers, supra. Contrast Chace, 189 Mass. at 562. The failure renders the subsequent foreclosure sale to Wilion void.

The position taken by the dissent is that strict compliance by Emigrant with the notice of default provisions in paragraph 22 was required, but that Emigrant’s failure to do so did not render the foreclosure sale void. See post at . In the dissent’s view, the result in this case is essentially controlled by our decision in Schumacher. See post at . The dissent reasons that § 35A, the subject of Schumacher, and the notice of default provisions in paragraph 22 are birds of a feather in terms of purpose and operation; that for the same reasons Schumacher concludes § 35A was not a statute relating to the foreclosure by sale, so paragraph 22 is not a term of the mortgage concerned with foreclosure by sale; and, consequently, as was the case in Schumacher, Emigrant’s defective notice of default rendered the foreclosure sale only voidable, not void. We disagree. The dissent fails to take into account the distinction –- reflected in our cases and in the language of § 21 — between the “terms of the mortgage” instrument relating to foreclosure by exercise of the power of sale, and “statutes” relating to foreclosure by the power of sale. But this distinction is a critical one. As discussed previously, that § 35A is not one of the statutes relating to foreclosure by the power of sale to which § 21 refers does not answer whether the provisions of paragraph 22 qualify as “terms of the mortgage” relating and integrally connected to the power of sale under§ 21. And as to that question, this court’s decisions about mortgage terms indicate that by structure and content, the notice of default required to be given under paragraph 22 is integrally connected, and operates as a prerequisite, to the proper exercise of the mortgage instrument’s power of sale. Emigrant’s strict compliance with the notice of default required by paragraph 22 was necessary in order for the foreclosure sale to be valid; Emigrant’s failure to strictly comply rendered the sale void.

And then tthere was this little gem against Deutsche Bank in the California Court of Appeals:

Miles v Deutsche Bank National Trust Company (00000002)

For this one, hat tip to my friend Ken McLeod:

This case involves allegations of a wrongful foreclosure and related causes of action. Plaintiff John Miles appeals from a judgment dismissing his breach of contract, fraud, and negligent misrepresentation causes of action pursuant to a sustained demurrer, and a summary judgment in favor of defendants on the wrongful foreclosure cause of action.

With respect to the demurred causes of action, we reverse. In the record before us, the court did not offer any explanation for its ruling. Based on our independent review of the complaint, we conclude plaintiff adequately stated his claims.

With respect to the wrongful foreclosure cause of action, we also reverse. The court granted summary judgment on the sole basis that plaintiff could not prove damages because he did not have any equity in the home when it was sold at a non-judicial foreclosure sale. Wrongful foreclosure is a tort, however, and thus plaintiff may recover any damages proximately caused by defendants’ wrongdoing.  Plaintiff offered evidence that he lost rental income and suffered emotional distress as a result of the foreclosure. This is disputed, of course, but it is sufficient to survive a summary judgment motion.

We begin by quickly dispensing with an argument that runs throughout respondents’ brief: “Plaintiff’s fraud, breach of contract and negligent misrepresentation causes of action were not sustained without leave to amend, they were sustained with 30 days leave to amend. Plaintiff chose to not file a timely amended complaint pursuant to the trial Court’s order and therefore voluntarily abandoned those causes of action. Plaintiff cannot appeal his decision not to pursue the other causes of action.” Defendants cite no authority for this remarkable proposition, and it would be an absurd rule indeed. If a plaintiff had already stated all available facts, but was given an opportunity to amend, how could forfeiture be avoided under defendants’ rule? By making up facts? That is not the law. Even if given an opportunity to amend, a plaintiff may stand on the sufficiency of the complaint. (County of Santa Clara v. Atlantic Richfield Co. (2006) 137 Cal.App.4th 292, 312 [“[w]hen a demurrer is sustained with leave to amend, and the plaintiff chooses not to amend but to stand on the complaint, an appeal from the ensuing dismissal order may challenge the validity of the intermediate ruling sustaining the demurrer”].) There was no forfeiture.

Next, defendants contend the demurrer to the breach of contract cause of action was properly sustained because the complaint “does not allege whether the contract was in writing, oral or implied.” (See Code Civ. Proc., § 430.10, subd. (g) [complaint demurrable if, “[i]n an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct”].) This is a purely technical argument, as defendants’ summary judgment motion demonstrates they knew which contract was at issue, were in possession of it, and thus knew it was in writing. The problem with this purely technical argument is that defendants did not comply with their own technicalities.…

Aside from these arguments, it appears that plaintiff alleged the basic elements of a breach of contract claim. “A cause of action for breach of contract requires proof of the following elements: (1) existence of the contract; (2) plaintiff’s performance or excuse for nonperformance; (3) defendant’s breach; and (4) damages to plaintiff as a result of the breach.” (CDF Firefighters v. Maldonado (2008) 158 Cal.App.4th 1226, 1239.) Plaintiff alleged an express contract to refinance his loan, including the loan balance, the interest rate, and the monthly payment. He alleged he performed by making payments under the agreement. He alleged defendants breached that contract by repudiating it and refusing to accept payments under it. And he alleged he was damaged by various fees he was charged and by being evicted from his home. Accordingly, we reverse the dismissal of plaintiff’s breach of contract claim.

Defendants offer two arguments in support of the dismissal of the fraud and negligent misrepresentation causes of action. First, they contend a misrepresentation cause of action does not lie where the misrepresentation pertains to future events: “The reason for this requirement is obvious: it is not possible to determine whether someone making a representation did so with knowledge, or reckless disregard, of the truth of the alleged representation if the representation was not made at a time in which it was known to be true or false. Therefore, the alleged promise to modify the Plaintiff’s loan cannot form the basis of a fraud or misrepresentation claim, because the Plaintiff cannot allege that the person making such a representation knew it to be true or false, as it concerned a future event.” Defendants later concede, however, “The only circumstances under which a future promise may form the basis of a fraud claim is where the plaintiff can allege facts that the promisor made a promise with no intent of performing.” Indeed, the nature of promissory fraud is that it is a promise of future performance with no present intent to actually perform. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638.) And this is precisely what plaintiff alleges: “42. Defendants induced Plaintiff into entering into making payments of more than $44,000.00 on the promise of providing Plaintiff with a reasonable modification of the loan on the Property. [¶] 43. At the time that Defendants made these representations, they knew them to be false as Defendants had no intention of honoring their promise to provide Plaintiff with a permanent loan modification but instead, intended to strip the Plaintiff of all of his liquid assets and then proceed with foreclosure on Plaintiff’s Property.” Accordingly, the misrepresentation causes of action are not demurrable on the ground they involved a future event.…

Finally, in an era of electronic signing, it is often unrealistic to expect plaintiffs to know the who-and-the-what authority when mortgage servicers themselves may not actually know the who-and-the-what authority. Accordingly, we do not consider that omission fatal. Thus we will reverse the dismissal of the misrepresentation causes of action.

The court granted summary judgment on the wrongful foreclosure cause of action on the sole ground that plaintiff could not prove damages. The court believed the only permissible damages in a wrongful foreclosure suit is the lost equity in the home, and where there is no equity, no cause of action will lie. We disagree.

We agree with this basic analysis of a tort of wrongful foreclosure. A tort of wrongful foreclosure satisfies the basic factors for finding a tort duty enunciated in Biakanja v. Irving (1958) 49 Cal.2d 647, 650-651. The transaction is intended to affect the plaintiff — it is intended to dispossess the plaintiff; it is easily foreseeable that doing so wrongfully will cause serious damage and disruption to the plaintiff’s life; the injuries are directly caused by the wrongful foreclosure; the moral blame of foreclosing on someone’s home without right supports finding a tort duty; and recognizing a duty will help prevent future harm by discouraging wrongful foreclosures. (See Ibid.) Such a tort bears some analogy to a wrongful eviction tort, which is well recognized and can exist in parallel with a breach of lease claim. (Nativi v. Deutsche Bank National Trust Co. (2014) 223 Cal.App.4th 261, 293 [“California recognizes the tort of wrongful eviction”];

Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1033, 1039 [permitting both a breach of lease and tortious wrongful eviction to proceed].)

The basic elements of a tort cause of action for wrongful foreclosure track the elements of an equitable cause of action to set aside a foreclosure sale. They are: “(1) the trustee or mortgagee caused an illegal, fraudulent, or willfully oppressive sale of real property pursuant to a power of sale in a mortgage or deed of trust; (2) the party attacking the sale (usually but not always the trustor or mortgagor) was prejudiced or harmed; and (3) in cases where the trustor or mortgagor challenges the sale, the trustor or mortgagor tendered the amount of the secured indebtedness or was excused from tendering.” (Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 104.) Federal District courts interpreting this cause of action have frequently cited the Nevada rule articulated in Collins v. Union Federal Sav. & Loan Ass’n (Nev. 1983) 662 P.2d 610, 623 that “[a]n action for the tort of wrongful foreclosure will lie if the trustor or mortgagor can establish that at the time the power of sale was exercised or the foreclosure occurred, no breach of condition or failure of performance existed on the mortgagor’s or trustor’s part which would have authorized the foreclosure or exercise of the power of sale.” (See, e.g., Das v. WMC Mortgage Corp. (N.D.Cal., Oct. 29, 2010, C10-0650 PVT) 2010 U.S.Dist. Lexis 122042; Roque v. Suntrust Mortgage, Inc. (N.D.Cal., Feb. 10, 2010, C-09-00040 RMW) 2010 U.S. Dist. Lexis 11546.) In other words, mere technical violations of the foreclosure process will not give rise to a tort claim; the foreclosure must have been entirely unauthorized on the facts of the case. This is a sound addition.

After describing the cause of action as a tort, the Munger court proceeded to describe the measure of damages as follows: “Civil Code section 3333 provides that the measure of damages for a wrong other than breach of contract will be an amount sufficient to compensate the plaintiff for all detriment, foreseeable or otherwise, proximately occasioned by the defendant’s wrong. In applying this measure it must be noted that the primary object of an award of damages in a civil action, and the fundamental theory or principle on which it is based[,] is just compensation or indemnity for the loss or injury sustained by the plaintiff and no more. [Citation.] Accordingly, where a mortgagee or trustee makes an unauthorized sale under a power of sale he and his principal are liable to the mortgagor for the value of the property at the time of the sale in excess of the mortgages and liens against said property.” (Munger, supra, 11 Cal.App.3d 1, 11.)

Both the trial court and defendants interpreted Munger narrowly, with defendants going so far as to say that “[t]he rule in Munger is an application of the benefit of the bargain rule.” It would be strange, however, to apply a contract measure of damages to a tort. We read Munger more broadly. It announced the rule that wrongful foreclosure is a tort (Munger, supra, 11 Cal.App.3d at p. 7), and the measure of damages is the familiar measure of tort damages: all proximately caused damages. In Munger, the only damages at issue were the lost equity in the property, and certainly that is a recoverable item of damages (id. at p. 11). It is not, however, the only recoverable item of damages. Wrongfully foreclosing on someone’s home is likely to cause other sorts of damages, such as moving expenses, lost rental income (which plaintiff claims here, and damage to credit. It may also result in emotional distress (which plaintiff also claims here). As is the case in a wrongful eviction cause of action, “‘The recovery includes all consequential damages occasioned by the wrongful eviction (personal injury, including infliction of emotional distress, and property damage) . . . and upon a proper showing . . . , punitive damages.’” (Spinks v. Equity Residential Briarwood Apartments (2009) 171 Cal.App.4th 1004, 1039.)

The rule applied by the trial court and urged by defendants would create a significant moral hazard in that lenders could foreclose on underwater homes with impunity, even if the debtor was current on all debt obligations and there was no legal justification for the foreclosure whatsoever. So long as there was no equity, there would be no remedy for wrongful foreclosure. And since lenders can avoid the court system entirely through nonjudicial foreclosures, there would be no court oversight whatsoever. Surely that cannot be the law. The consequences of wrongfully evicting someone from their home are too severe to be left unchecked. For the reasons expressed above, a tort action lies for wrongful foreclosure, and all proximately caused damages may be recovered. Accordingly, the summary judgment is reversed.

Scholarly Takes on Fabricated Mortgage Assignments, Unlawful Foreclosures, the UCC’s Role in Foreclosure, and Hypocritical Brandishing of Credit Score Scarlet As

Campbell, James P, The Nexus of Fabricated Mortgage Loan Assignments and Unlawful Home Foreclosures. (June 1, 2013). Available at SSRN: http://ssrn.com/abstract=2462778

Who has the legal right to foreclose on your home? More importantly, who doesn’t? Unlawful foreclosures are not just financial crimes against individuals and families. At the eviction stage, they are crimes perpetrated together with the threat of violence. Five years after the 2008 economic implosion, it is clear to anyone with a shred of sensibility that many financial regulators have become Wall Street commodities to be bought and sold. If that were not the case, by now there would have been hundreds, if not thousands of arrests, convictions and imprisonments; just as there were in the aftermath of the Savings and Loan debacle in the early 1990’s. Twenty years hence, our leaders are benign at best and complicit at worst. This is a legal issue that has haunted the foreclosure crisis since it began in 2008. During the 1990s, U.S banking interests launched an all-out campaign to repeal many of the federal banking regulations which were enacted by Congress in the aftermath of the stock market crash of 1929. Bit by bit, those regulations were stripped away until finally, in 1999, Congress repealed what was arguably the single most important financial regulation born out of that financial crisis: The Glass-Steagall Act. This deregulation allowed the rapid return to the same casino-like behavior that characterized the financial industry in the 1920s. Although many foreclosures are legitimate, a large percentage of them which were started since 2008 involved fake or forged documentation, the most egregious of which are recorded mortgage assignments involving private label securitized trusts created between 2004 and early 2007. In 2013, such unlawful foreclosures continue to occur daily, on a massive scale, in every State of the Union.

Renuart, Elizabeth, Uneasy Intersections: The Right to Foreclose and the U.C.C. (August 26, 2013). Wake Forest Law Review, Vol. 48, No. 5, 2013; Albany Law School Research Paper No. 10 for 2013-2014. Available at SSRN: http://ssrn.com/abstract=2316152

This is a great paper and has been out for awhile, but she did some updates in 2014.  I particularly like her willingness to pick on Arizona where its decisions lacked logic, or betrayed a strange hypocrisy.  Dale Whitman has also done this in some of his UCC articles, though his pieces seem to have more of a bank bias, in that the shrewd scholar skews naive when discussing sketchy note transfers.

Historically, the practice of real property and foreclosure law was routine and noncontroversial. This legal landscape significantly altered during the spectacular growth of securitization deals involving trillions of dollars of residential mortgage loans. The National Conference of Commissioners on Uniform State Laws (NCCUSL) was a driving force behind one of these changes. It adopted amendments to Article 9 of the Uniform Commercial Code in 1998, at least in part, to facilitate securitization. These modifications included extending coverage to the sale of (not merely to a security interest in) promissory notes, declaring that the sale of the note also constitutes a sale of the mortgage without the need for a written assignment of the mortgage, and providing for automatic perfection of interests in both the note and the accompanying mortgage without the need to file.

Meanwhile, the behavior of a number of mortgage lending and securitization participants or their agents generated additional legal complications. Examples include the mishandling of loan notes and mortgages, the forging of indorsements or the submitting of fraudulent affidavits to courts in support of their purported right to foreclose, and the pressing of foreclosures without the necessary documentation.

Confusion about the roles of and intersections among Articles 3 and 9 of the UCC and the right to foreclose under state real property law followed in the wake of these changes. These misunderstandings spawned volumes of judicial rulings, many of which appear to be at odds with each other. In an effort to reduce the ensuing legal confusion about the intersections between the right to foreclose and the UCC, this Article provides a roadmap of the relevant rules in Articles 3 and 9 and the right to foreclose in state real property law. Further, it explores the tension developing over the last decade among Articles 3, 9, and the right-to-foreclose concept in state real property law.

This Article advances the literature concerned with the right to foreclose by categorizing recent state appellate court decisions that address this right by the type of analysis applied by those courts. The rulings from Arizona, California, and Georgia fall into one category and are the subject of special scrutiny because they dismiss the role of the UCC outright. Moreover, these three states have experienced some of the worst foreclosure rates in the nation and permit foreclosures to proceed nonjudicially. Hence, these decisions will affect a broad swath of homeowners in danger of losing their homes. The Article then applies statutory construction principles to determine whether those courts ruled out the UCC unnecessarily, proffering that foreclosure laws in those states could be harmonized with the UCC.

Finally, the Article concludes that where inconsistencies arise between the UCC and state real property law, applying statutory construction principles likely will result in creating a more uniform legal landscape throughout the nation, in protecting homeowners from unjustified foreclosures, and in reducing litigation costs and judicial resources in a distraught foreclosure system.

This NCLC paper is fascinating regarding the undeserved power of the “credit score” and its failure to distinguish between truly bad borrowers who will not pay back, and borrowers who suffered “trembles” due to medical issues, job loss, or predatory loans, but who generally are good credit risks.

Shockingly, she exposes how loan modifications (esecially in the early days) resulted in an AC credit report black mark, which was unncessary, fundamentally dishonest (suggesting that the borrower wasn’t paying as agreed, or where the borrower wasn’t even in a modification, but had inquired about one, and had triggered this AC scarlet letter, that could send their credit score tumbling by 100 points or more (with lasting effects of 7 years or more)  Disgraceful.

Also, she questions the legitimacy of using a credit score to make moral judgments about people, in the realm of job interviews and other questionable contexts.

Solving the Credit Conndrum by Chi Chi Wu


Happy Fourth of July!



I think we can handle it today, right

Oh, and incidentally, I know you know this, but we now realize, recognize and interpret “all men” to mean “all people,” including women, and people of all colors, creeds, and religion.  That is the real face of America.  This cuts against how literally certain people want to interpret old documents that were intended to be living documents, e.g. Decl. of Ind., the Constitution, religious texts (ahem, J. Scalia), or at least when the literal interpretation suits them.

The Declaration of Independence: A Transcription

IN CONGRESS, July 4, 1776.

The unanimous Declaration of the thirteen united States of America,

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.–Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.
He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.
He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.
He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.
He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.
He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.
He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.
He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.
He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.
He has affected to render the Military independent of and superior to the Civil power.
He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:
For Quartering large bodies of armed troops among us:
For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:
For cutting off our Trade with all parts of the world:
For imposing Taxes on us without our Consent:
For depriving us in many cases, of the benefits of Trial by Jury:
For transporting us beyond Seas to be tried for pretended offences
For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:
For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:
For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.
He has abdicated Government here, by declaring us out of his Protection and waging War against us.
He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.
He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.
He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.
He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our Brittish brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.

Foreclosure News: OCC Will Escheat Funds Designated for Homeowners, OCC Restricts Chase, US Bank, Wells via Amended Consent Orders

The OCC issued a press release today that it plans to escheat uncashed payments from the Independent Foreclosure Review by the end of 2015.  Also, it has imposed restrictions on U.S. Bank, Chase, Wells, and others for not meeting Consent Order requirements, stating, in part:

The OCC terminated orders against Bank of America, N.A.; Citibank, N.A.; and PNC Bank, N.A., because it determined that these institutions have complied with the orders issued in April 2011 and amendments issued in February 2013.

The OCC also has determined that EverBank; HSBC Bank USA, N.A.; JPMorgan Chase Bank, N.A.; Santander Bank, National Association; U.S. Bank National Association; and Wells Fargo Bank, N.A., have not met all of the requirements of the consent orders. As a result, the amended orders issued today to these banks restrict certain business activities that they conduct. The restrictions include limitations on:

  • acquisition of residential mortgage servicing or residential mortgage servicing rights (does not apply to servicing associated with new originations or refinancings by the banks or contracts for new originations by the banks);
  • new contracts for the bank to perform residential mortgage servicing for other parties;
  • outsourcing or sub-servicing of new residential mortgage servicing activities to other parties;
  • off-shoring new residential mortgage servicing activities; and
  • new appointments of senior officers responsible for residential mortgage servicing or residential mortgage servicing risk management and compliance.

These restrictions vary based on the particular circumstance of each bank.

In all cases, OCC examiners will continue to oversee these institutions’ corrective actions and mortgage servicing activities as part of the agency’s ongoing supervision.

California Trial Court Rules That 331 Million Taken From National Mortgage Settlement Owed Back to Homeowner Fund

See Gretchen Morgenson’s article in the New York Times for more details.

A court ruled late Friday that California is obligated to return $331 million that it took from a fund designated to help troubled borrowers but instead used to plug holes in the state’s budget.

The ruling, by a state court judge in Sacramento, came in response to a lawsuit filed last year against Gov. Jerry Brown by three nonprofit groups offering counseling to homeowners. They contended that Mr. Brown improperly diverted some of the money California received in 2012 as part of a $25 billion nationwide settlement with the country’s largest banks over mortgage servicing improprieties.

The plaintiffs argued that $350 million of California’s share of the settlement was wrongly removed from a special fund dedicated to helping troubled homeowners avoid foreclosure through counseling and other educational services.

Nationstar Lawsuit to Watch

A new investor lawsuit filed against Nationstar was reported by Reuters, in an article called, “Securities lawsuit says Nationstar concealed illicit practices,” by Dena Aubin on June 5, 2015. The case is  City of St. Clair Shores Police and Fire Retirement System v. Nationstar Mortgage Holdings et al, U.S. District Court, Southern District of Florida, No. 15-cv-61170.St Clair v Nationstar Complaint

Of interest from the Complaint, the investors allege:

Until late 2013, Ocwen Financial Corporation (“Ocwen”) and entities affiliated with Ocwen had grown to become the nation’s largest non-bank subprime mortgage servicer by purchasing mortgage servicing rights (“MSRs”) from banking entities who no longer wanted to service their own portfolios due to increased regulatory attention. 4. However, by late 2013, federal regulators, followed in early 2014 by New York state regulators, commenced regulatory enforcement actions against Ocwen accusing it of illegally gouging customers and improperly profiting from doing so. By 2014, the Ocwen-related entities, mired in litigation and facing delisting proceedings, began retreating from the loan serving industry. 5. Nationstar grew its own portfolio exponentially by purchasing MSRs from Ocwen and from banks that Ocwen could no longer purchase from, promising that due to the Company’s own superior loan handling proficiencies and ability to comply with the law while profitably servicing loans, Nationstar could be profitable where Ocwen had not been. Beginning in early 2014, Nationstar began acquiring tens of millions of dollars of MSRs from Ocwen and other bank entities.

However, unbeknownst to investors, throughout the Class Period defendants knew or recklessly disregarded that: (a) Nationstar’s deficiencies in management control and supervision rendered it unable to comply with laws and regulations applicable to servicing MSRs; (b) Nationstar was gouging mortgagors – and illegally enhancing its profits through unsustainable means – via illicit practices, such as charging for repeated, unnecessary inspections, which resulted in additional late payment fees, and by pressuring mortgagors to carry out expensive modifications and refinancing of their mortgages;

. . .

(d) Heightened regulatory scrutiny into MSR transferring and servicing – including a probe into Nationstar’s own loan servicing practices launched by the New York State Department of Financial Services (“NY DFS”) in March 2014 – had significantly increased Nationstar’s costs of servicing MSRs and diminished the profitability and carrying value of the Company’s MSR portfolio; (e) In order to deflect regulatory scrutiny in the wake of the regulatory enforcement actions taken against Ocwen, Nationstar had abandoned certain of its own abusive loan servicing practices and adopted others required by regulators, which had made its loan servicing business less profitable and rendered Nationstar’s MSR portfolio less valuable to the Company;

This lawsuit by investors against Nationstar for padding its profit projections with loan servicing income based on illegal  practices and that had to be ceased (shutting down such a lucrative profit source for said investors) should be interesting to watch.  Funny how wealthy investors can throw enough money at lawyers and investigators to find out exactly what went down.  Meanwhile, the parties directly damaged by the bad acts of Nationstar and Ocwen, its source of loans and bad ideas,  parties such as the borrowers, consumers, homeowners were already poured out by the courts with nary a listen for their claims of damage from these harmful practices.  Poured out onto the street, no less.  Literally.

Sometimes it would seem that the nicer your shoes, the shinier your justice. At any rate, I am optimistic that the investors’ attorneys will uncover meaningful and interesting discovery regarding these shady practices.

Please don’t think I oppose the investors. I fully support their right to pursue justice too.  Perhaps I am just a wee bit antagonized by how borrowers/consumers are treated by the courts compared to other litigants.  And I might be the weensiest bit jealous of their war chest given the resources needed to bring down the Goliaths.

Speaking of war chests, it’s too bad that virtually none of the National Mortgage Settlement dollars actually made it into the hands of the homeowners affected, or into the coffers of law firms willing to represent homeowners at discounted fees, or pro bono, with the relief funds.  Are you listening, Arizona Legislature?  We remember that you swept half of the homeowners’ money by threatening then-Attorney General Horne’s entire budget.  And Attorney General Horne?  We aren’t so certain that you fought all that hard for that homeowner money, given your speech to one homeowner group about having to have panels to determine who “deserved” relief, given the moral hazards involved.  And you weren’t talking about the “moral hazards” presented by bailed out banks being allowed to dictate the terms of their own civil penalties while keeping their jobs and exorbitant bonuses.  But hey, somebody has to keep Bergdorf Goodman and the Upper East Side in business.

Also, Jan Brewer?  We remember that a lot of homeowner money was funneled to for-profit private prisons run by cronies.  Because what could be wrong or morally hazardous about profiteering off of locking up petty, non-violent criminals?

A lot of the money was never disbursed, and some of it was disbursed to “non-profits” with Board Members consisting of lawyers from the same firms representing the wrongdoer banks, such as Wells Fargo.

We aren’t bitter though.  We’ll keep fighting for the Arizona homeowner.