Banks Settle Modifications for Soldiers: Camo Washing

Wells Fargo settled a similar class action lawsuit on military foreclosures for $10 million and instituted a modification program. So did Saxon Mortgage, a division of Morgan Stanley. And Bank of America’s program for military personnel reduces principal to 100% of the current market rate. This is particularly notable, since just a day before instituting the program, Bank of America CEO Brian Moynihan rejectedprincipal reductions for the bank’s underwater borrowers, calling them “unworkable” and unfair. Moynihan stated, “There’s a core problem that if you start to help certain people and don’t help other people, it’s going to be very hard to explain the difference.”

Yet that’s what the entire mortgage industry is doing. And the reason for it is simple. The banks know that the military is one of the only widely respected institutions left in the country, and well-publicized instances of abuse of service members will cause a far bigger backlash than they have experienced to this point. What’s more, evidence of wrongful foreclosures on the military will lead to further scrutiny of their actions with other borrowers.

This is what you could call “camo-washing,” similar to the greenwashing that corporations employ to create an appearance of attentiveness to environmental issues. The banks bend over backwards for the benefit of members of the military they have wronged, to distract from the fact that they’re not doing the same for millions of others. It also works to enhance their public image, positioning them as sympathetic and responsible, willing to make good when they screw up.

But the logic is lacking. Banks are fighting any settlement to the foreclosure fraud scandal that forces them to pay penalties to their borrowers. But they’re showering service members with money and free homes. All the attention and care paid to military foreclosures simply underscores the fact that next to nothing is being done with all the wrongful foreclosures on everyone else. Almost three million families will get a foreclosure notice this year, just about the same number as last year and in 2009. But the banks are focusing on a small handful of military foreclosures.

Nobody denies that foreclosing on members of the military while they serve overseas is particularly egregious. But hardworking civilians duped into loans, ravaged by an economic meltdown and stonewalled in their effort to save their homes are not somehow less deserving than the men and women on the front lines.

Odds and Ends–New MERSCORP Chief is ex Citibank; Judges Say Servicers Aren’t Improving Despite Consent Orders

MERSCORP names Citigroup’s former chief as CEO.

Judges See Little Improvement in Foreclosure Procedures Wall Street Journal 4/29/11  Quote:

Some judges are skeptical of claims by lenders that they have substantially improved their foreclosure procedures since controversy over the practices exploded last fall.

F. Dana Winslow, a N.Y. State Supreme Court Justice in Long Island’s Nassau County, said there has been only “a marginal improvement in what is being submitted to the court.”

For example, financial institutions are “showing a better chain of title” about who owns the debt, he said. “But I’m not seeing any additional clarity on who has control over the actual mortgage note signed by the borrower and lender and where the note is.”

Seriously, Nancy McLain? Bizarre Rationalizations for Not Allowing SB 1259 to Be Voted Upon

Excuse me, but since when, in hundreds of years of real property law, did it become a “loophole” for foreclosing parties to be required to be legally entitled to foreclose?  So, let me get this straight, requiring banks to be accountable for the ownership they claim before they dispossess thousands of Arizonans of their homes, and passing laws that clarify existing laws regarding clean chains of title and certainty in real property transfers, is a “loophole?”  I suppose we should close the loophole and allow banks to steal with impunity.   Thank you so much Rep. McLain, for not letting us nurse “false hope” that the rule of law would be applied justly.

Let’s continue along this road where it is easier to steal a house then it is to steal a car.  After all, you need to show title to sell a car.  This has been great for the Arizona economy; let’s continue along this track.

This article is from the Mohave Daily News:

McLain defends decision to kill SB 1259

 By NEIL YOUNG/The Daily News

Published: Thursday, April 28, 2011 2:49 AM MDT
LAKE HAVASU CITY — At Wednesday’s Tri-City Council meeting, District 3 State Rep. Nancy McLain (R-Bullhead City) defended her decision not to hold hearings on SB 1259, proposed legislation dealing with foreclosures. Her decision killed the bill. McLain is chairman of the House Banking and Insurance Committee. She said the bill, which passed the senate, was seriously flawed.“To my way of thinking, it gave false hope to people who are honestly trying to save their homes from foreclosure and due to whatever circumstances, they weren’t able to make their mortgage payments,” McLain said.“And suddenly, you hold out this idea, well, if you make the bank show you the chain of title and they can’t do it, then they can’t foreclose. Well, they can. It’s the servicing agent that forecloses, not the actual bank that holds the title to it, so they can still be foreclosed upon.” She said the law would have provided a loophole for those who have no intention of paying their mortgage. “They’ve got a place to live for two, three, four years, however long it takes to get resolved and they’re getting a free ride. So I thought, for those reasons, it was a bad bill and that’s why I chose not to hear it.”McLain hotly contested charges she’s doing the bidding of the banking lobby. “I do listen to their point of view. I listen to the other side and then I make up my mind. And I have to say flat out, because this is the accusation that’s been made is that I’ve somehow been paid off by the banking industry. Flat out, no. I have not received a cent from them for this vote or any other.”


She added, “I probably had about eight or 10 other bills dealing with various attempts to prevent foreclosures which I did not hear as well. So this was not an exception. This was one of many. Now if that makes me an even worse person, well, so be it.”

Another MA Case to Watch:Bevilacqua v Rodriguez

In another Massachusetts case currently pending before its high court, US Bank, NA faces the consequences of another faulty foreclosure, where it attempted to sell an interest that it did not have.  Here’s the Credit Slips post on it, and the link to the amicus brief by Professor Adam Levitin, Professor Katie Porter and others.  Bob Lawless states:

A typical fact pattern might play out like this. Bank forecloses on Peter. At the foreclosure sale, Paul buys the property. Bank cannot prove it owned the mortgage and note at the time of the foreclosure sale, meaning it had as much right to foreclose as any other stranger to the property. That is to say, it had no right to foreclose.

At this point, Bank either owes Peter or Paul. It owes Peter for fraudulently obtaining a judgment of foreclosure against him and dispossessing him of his home. Or, if we overturn the foreclosure sale, it owes Paul for conveying an invalid title (more accurately, it would owe the sheriff who should have to return Paul’s money). If I had to choose between owing a homeowner for dispossessing the person of her home or owing a disappointed investor for conveying an invalid title at a foreclosure sale, I would rather owe the disappointed investor. It is going to be cheaper.

The issues I have outlined are in play in a Massachusetts case called Bevilacqua v. Rodriguez, currently pending before that state’s highest court. Previously, in a case called Ibanez, the court rejected claims that Wall Street’s nontransfer of mortgages and notes through the securitization process was sufficient to establish standing to conduct a foreclosure sale. Bevilacqua deals with the fallout from Ibanez as the purchaser at a foreclosure sale tries to bring a “try title” action to establish his prior claim to the property despite the fact that the foreclosure sale appears to be invalid under the reasoning of Ibanez. Credit Slips blogger Adam Levitin led an effort by other Credit Slips bloggers (Katie Porter, Chris Peterson, and John Pottow) to file an extraordinarily well-written amicus brief supporting the homeowner’s position. The Mortgage Bankers Association (MBA) has filed an amicus brief supporting the purchaser at the foreclosure sale.

LPS Law Suits Multiplying

It looks like foreclosure mill law firms in Arizona better start to beware.  Lawsuits against LPS have revealed what looks to be unlawful, undisclosed fee sharing (kickbacks) in bankruptcy court, and the unauthorized practice of law by LPS and foreclosure mill non-lawyer employees.

Interesting allegations regarding the LPS agreements arose in class action lawsuits in other jurisdictions, as reported by Yves Smith at Naked Capitalism here:

The smoking gun in both cases is that the plaintiffs have gotten hold of the agreements both between the network law firms and LPS, and LPS and the servicers. Some of the language in the agreements is damning on its face. For instance:

42. One of the standard definitions in the DSA [Default Services Agreement, a contract between LPSand the servicers] defines the term“Fidelity Network” (LPS Default is formerly known as Fidelity National Foreclosure & Bankruptcy Solutions).

43. That definition states that the servicer is required to select attorneys involved in the “Fidelity Network” at the servicer’s discretion, who are retained and managed by LPS Default to handle foreclosures “or otherwise provide services in accordance with the DSA”…..

46……“Fidelity has entered into an agreement (the “agreement”) with the servicer whereby Fidelity (LPS) has agreed to perform various legal services (emphasis supplied) for the servicer that include mortgage foreclosures, bankruptcies and other loan default services (the “services”).

This language is contrary to the way LPS has claimed the relationship between the servicers and the network firms work. It has asserted that the servicers pick the law firms and exercise control over them and LPS merely serves as an information hub. The language of the agreements and the other information presented in these filings present a starkly different picture, that of the servicers effectively delegating much of the work of overseeing the law firms to LPS and LPS in turn engaging in activities that look an awful like practicing law, with the law firms looking more like LPS’s arms and legs rather than independent parties.

This chipping away at the role of LPS is a hopeful sign. Many systematic abuses, such as the prevalent application of junk fee and fee pyramiding, appears to be hard coded in LPS’s software. The more lawyers and investigators keep pulling on this thread, the more abuses they are likely to expose.