We’ve been giving examples off and on about how servicers scam borrowers. Examples include impermissibly deducting fees before applying payments to interest and principal; force placed insurance, inflated prices on and excessive frequency of broker price opinions, and in altogether too many cases, treating payments that are on time as late. What many observers fail to appreciate is that these are tantamount to scamming investors. If a borrower goes into default, any bogus charges will be deducted from the sale of the house, and hence come out of investors’ hides.
Lisa Epstein of Foreclosure Hamlet is a mortgage document maven and has been looking extensively at investor reports and compared them to court documents and has found serious discrepancies. Her research shows that servicers are not only taking advantage of borrowers but are also scamming investors.
Lisa looked into a Countrywide trust (CWALT 2008-oc8) with Bank of America as the servicer, in part because it is the focus of an important case in Florida, Pino versus Bank of New York. She determined that despite the fact that the case had been satisfied in July 2011, it was still being included as of January 2012 in the monthly investor report. That means Bank of America is still charging servicing fees on it, and likely other fees (late fees, periodic broker price opinions, etc).
And she found that the Pino loan is not alone in having court records show that the property has been sold (ie, the trust is clearly no longer holding the mortgage), yet is still reported as an asset of the trust. From 4closureFraud (emphasis original):
Our research has uncovered other non-existent “assets” on the books of this trust. To put this in perspective, at the origination of this trust there were 6,734 loans of which 61 were originated in Palm Beach County. As of the Jan 2012 investor report, 29 of the original 61 Palm Beach County loans remain on the trusts’ books. Only ONE is performing as originally contracted at closing. Three others have been modified; one has a $39k forbearance, one has a $8k added to principal, one has $16k added to principal. The other 25 loans are non-performing. (As of Jan 2012 report, total left in the trust 2,921; of the 2,921 left 1,187 are non-performing (delinquent = 237, bankruptcy 188, foreclosure = 512, REO = 250) but we know this data isn’t correct, so….)
Some “non-existent” loan examples from the trust
Roman Pino loan #130133456 – $162,400 – (July 2011 satisfaction – still on the books in Jan 2012 trust report in “foreclosure” status) [3764 Mil Run Court, Greenacres, FL 33463] – BoA monthly servicing fee for non-existent mortgage $50.73
Samantha Woodruff loan #130521936 – $171,940 – (Sept 2011 deed from trust REO to new buyer – still on the books in Jan 2012 trust report in “REO” status) [1497 Lake Crystal Drive D, West Palm Beach, FL 33411] BoA monthly servicing fee for non-existent mortgage $33.70
Robert Rodriguez loan #130450231 – $176,542 – (Sept 2011 short sale deed & Nov 2011 satisfaction – still on the books in Jan 2012 trust report in “REO” status) [1139 Lake Terry Drive 60L, West Palm Beach, FL 33411] WOW – BoA monthly servicing fee for non-existent mortgage $181.69
Elsa Castillo Rivas loan #130445815 – $375,000 – (July 2011 short sale deed) – remained on books through Dec 2011 in “REO” status), finally reported as “liquidated” in Jan 2012 report [13918 Preacher Chapman Place, Centreville, VA]. WOW – BoA monthly servicing fee for non-existent mortgage $328.04
This is just a small example of what we are uncovering. If we learned anything from the robosigning scandal, if there are more than two “irregularities,” there are thousands.
More examples from other trusts to come.We feel comfortable saying that this is widespread…
Investors have told me they’ve seen signs of even more gross abuses, such as servicers treating fees as credit losses. But this sort of remark in a way shows investors suffer from the same agency problems as servicers, who have no reason to do a good job but instead are motivated to game a complex system of fees. Institutional investors are running other people’s money and therefore have no incentive to crack down on miscreant servicers (they feel it is not their job, plus if any one investor were to take this issue on, the rest of the industry would free ride on his work).
So no wonder we only have isolated and very dedicated individuals chipping away at this looting. Everyone else appears to be part of the problem.
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At the risk of sounding naïve, can’t people report these crimes to the police?
I think this is the part where I laugh maniacally.
Tens of thousands of homeowners, attorneys, activists, reporters, writers, philosophers, even a judge or two, have been reporting all these associated crimes for years now. We’ve all been told, “MOVE ALONG HERE, NOTHING TO SEE”. Most recently when the nation’s attorney generals (the police) sold americans out with an (almost) settlement/sellout agreement that let them walk for all their crimes…sorry, my friend you are a bit naive…..
Inasmuch as there is no solution to the mortgage problem, one is almost forced to admire the nefarious strategies adopted by participants involved in securitization. Borrowers pretended credit worthiness, originators fabricate appraisals, servicers treat defaulted loans as current and impose fraudulent fees on borrowers who remain current, trustees pretend to own loans never properly assigned, bondholders pretend to hold participations in current loans although everyone knows that all mortgages originated since 2003 are under water. The only thing missing in all this is an army of homeowners only pretending to pay their mortgages. It is the those homeowners who insist on actually continuing to pay who are making a hornet’s nest of the whole thing. If only they would stop paying we might have a chance of resolving the housing problem, although I have no idea how this might work except by writing down the entire US housing stock to 1999 price levels.
“Borrowers pretended credit worthines”
No, false, wrong
Well, some did. Particularly flippers who used supposed equity in one property (equity that was bubbled up often enough by bought/compromised appraisers) to qualify for financing on other properties. See Casey Serin for one notorious example:
http://iamfacingforeclosure.com/oldsite/33/will-i-go-to-jail-for-mortgage-fraud.html
They qualified for “financing” from other crooks. No Bankster was “fooled”, it didn’t matter. Does to the “cops”, of course.
Does any potential liability fall on the trustee here? Or just more buyer beware?
CWALT 06-OC8
I’m more concerned about the fraud perpetrated against investors than home owners here, and the reason is as follows. Many home owners knew or had to know, they were taking on loans they could not afford, so in effect they were in on the con, whereas mortage investors wound up underwriting loans that were not as advertised(e.g. the 80% LTV was really 105% LTV). That’s not to say, rule of law should not apply with regard to foreclosures, just that borrowers who made 20k a year had to know they could not afford a loan that used up all their income and more.
An honest banker doesn’t make ‘liars loans.’
The mortgage banks targeted financially unsophisticated borrowers, often people with little education or who barely spoke English, for the worst, riskiest subprime loans. These borrowers had no idea what LTV meant or how to cook the books to make the numbers come out right.
..the real ??? is what the banks WANTED “securitized mortgages” for?? Noone has really followed the $$$$ to the facts-Treasury Secretary Paulson himself-2003, went to SEC to deregulate “leverage”=collateral necessary to borrow…
using MBS as phoney “securities” to do so…then monopolize and collude to drive markets with most extreme sums ever…
derivatives 2001=$880 billion, but by 2007, $600 trillion..
say goodby to 10-20 years more of economic equilibrium..as downward depressionary spiral kills state tax revenues.
Paulson’s pedigree proved provident.
@Justicia – It wasn’t just unsophisticated buyers. Many borrowers got into homes by taking out ARMs with initial teaser rates that were extremely low. Other borrowers got interest-only loans, or other types of loans that had very low initial monthly payments. Most borrowers knew they were taking a risk, but mortgage loan officers told them, “Look, you can have a fixed rate mortgage now, with payments of $1,300 per month, or you can start with an ARM that has payments of $300 a month for twenty-four months. With an ARM, your payments will quadruple in two years, but your house will have appreciated dramatically in value by then. You’ll have enough equity to refinance into a good fixed rate loan, or else you can sell the house and move into a still bigger one. Don’t worry about income, or appraisals, or anything. Sign here, and you can literally move in today. The realtor is already waiting for you at the house with the door keys.”
Mortgage loan officers got more money by selling ARMs and subprime loans. Thus, even sophisticated borrowers became caught up in a nationwide Ponzi scheme mania sustained by Wall Street scams and the entire game derived from those scams. Anything to make loans, package the loans into securities, and sell the securities to sucker investors, and also sell them CDS derivatives to insure the securities.
The warning signs were everywhere, but anyone who noted them was ridiculed. Besides, average Americans trusted banks like they trust doctors. Bankers were not like snake oil salesmen of yore. Right? Bankers were “experts,” right? Bankers wouldn’t cause an international credit crisis. Right? Bankers would never intentionally scam the nation into ruin. Right?
Yeah. Right.
Bankers and their ilk are like drug pushers. Their narcotic is debt, and their mission is to create as many addicts as possible. When they succeed in this, we blame their victims. We blame the addicts. We blame the borrowers. And we let the pushers get off scott-free, because this is A’merka, dammit.
Remember that the banks didn’t make money from giving loans, but from packaging and trading loans. So it was in their best interest to give as many loans as possible, so they gave loans to people who had no business taking one.
1. Those liar loans should never have been written. It is the bank’s job to assess creditworthiness.
2. Investing entails a risk/reward trade off. It is the job of the investor to do his due diligence. It is not for the state to insure investors against their own failures to adequately understand the risk profile of their investments. Capitalism does not, and cannot, work that way.
I have to assume you believe investors deserve to be defrauded. Never forget that you Joel, are one of those investors. Even if you never purchased a CDO, your 401(k) plan likely does, or your pension does, and even if you have no investments, your Federal Reserve purchased tons of at risk CDOs to keep the Ponzi going. So quick, Joel, make with the diligence and let Ben know if he should continue buying scheiss. You, my dear friend, believe in a fairy tale. There is no such thing as a free market, Easter bunny, or Santa Claus. Invest accordingly.
As an investor my recourse at this time is to demand the guilty be punished and make reparations as they are able. My point was that putting the blame on the least responsible party , the borrower, is absurd.
A sensible and honest business would not have extended credit as haphazardly as the banks did. The borrowers may have thought they were the clever ones but in reality they were the suckers that made the whole scam float. Investors can’t point at the borrowers either, it’s their job to invest with care and to pursue recourse if defrauded.
There are degrees of guilt.
Unsophisticated homeowners, going one by one up against an entire industry of banks, mortgage brokers and political/media blitzes about the joys and ease of home ownership, come out on the shallow end of that scale. To come down heavy on the homeowner under those circumstances is simply bent out of shape.
As to investors, they had far more tools for due diligence at their disposal and more context for caution than did the average home owner. If anyone should have known better, outside of the lender-robbers, it would be them.
As someone who worked as a loan officer in a subprime mortgage brokerage chop-shop during the height of the boom, I can tell you that borrowers did NOT understand what they were getting into. Predatory lending is a real thing. Borrowers were basically browbeaten with high-pressure sales pitches into accepting extremely shady deals. How were they to understand the 40-plus-page loan documentation if it was our job description to keep it from them at all costs?
Citizens, er I mean consumers, are lobotomized mind controlled sheep. This is not their fault. They are victims.
So in essence you are blaming the mark, the victim. The ones that came up with the scam are the most culpable.
For instance, check out the an example of mind control I just noted–Apple dealing with complaints re environmental and labor issues associated with its products. I love how we are encouraged to get informed and sign petitions to Apple and otherwise gently disagree with Apple for acting evil so that we can run out there when Apple comes up with its new version of its gadget, this time “sweatshop free”, so they can make even more money. Any sort of push back against the fascists is heavily manipulated and controlled so that not only will it not bother them, but they will profit from it.
Our society is completely manipulated. It’s amazing there are still pockets of resistance and free thinking.
I’m more concerned about the fraud perpetrated against investors than home owners here, CoC
Quelle-surprise!
Investors usually are knowledgeable about where they place their money. In this case they were sloppy. They trusted history which said mortgages are almost as safe as T-Bills. It was the perfect con.
Possibly and No. Again as with the example of flipping discussed elsewhere some did it. However as the study by Paul Ting and others reported on this site indicated many if not most of the homeowners being hit by these frauds were not idiots buying second mansions they didn’t need but honest people who wither fell behind in payments due to that thing called the economy or individuals who are being actively scammed with false fees or fraudulent filings.
In general the elected officials have taken the view that you seem to share that investor faud matters more. I disagree. Both are fraud, both should be punished but losing investment income pales in comparison to losing your home.
I guess that’s why you’re a conservative. You assume the victims deserve their victimization, that institutions and elites are faultless, and you save your concern for the wealthy.
Cons. of a Cons., what if real estate broker/loan broker, telemarketed and connected with a person who 2 years ago bought his home for $500k and that ‘broker’ told him his house was now worth $900k and..”Mr. Jones, we’d like to refinance your home and cash you out $200K and still leave you with plenty of equity!”
Then, the ‘broker’ misrepresents the true parties to the refi “loan”, accepts secret fees, purposefully inflated the value of the property (That Mr. Jones was quite comfortable in maintaining prior), saddled Mr. Jones with a “Pay Option” or “teaser” loan that Mr. Jones did not fully understand or was counseled thereto and other mal and misfeasance occurred in that origination and subsequent “loan”.
These are the things that happened on a massive scale all in the want of “loan production” by the bank/trust/investors and underwriters. What if this happened on an epic scale? This is EXACTLY what the Government and Banks do not wish to expose…because if they did…Kaboom!
I don’t know what Mr. Ting’s motivations are or were in that report, but it may wind up being one of the most important acts to date in this awful and horrid chapter of public trust and commerce in this country.
I will grant that there were plenty of citizens that were complicit and took advantage of the edict and seige of Wall Street upon property. There were. There were (and are) far more that were defrauded, used, abused and treated as so much chattel. These were people’s HOMES! for God’s sake!
By the way, read any of the major suits wending their way through the courts by Investors (Allstate, US Bank, MBIA, et al.) and you will find exactly the same allegations being made by those investors against the trusts/originators.
It ain’t over yet.
“Many home owners knew or had to know, they were taking on loans they could not afford, so in effect they were in on the con”
Generalization, red herring, largely false.
Yves,
Just curious if mortgages are no longer performing why would they want them to appear to be? Wouldn’t they then have to pay out monthly interest/principle payments to the trust?
There has to be something more going on here.. This is just too obvious..
Yves may be busy – allow me to give it a shot. First, the banks hold some of the bonds from securitizations. Thus, when they pay the coupon on a bond, they are paying themselves. Second, they get the fees. Third, when an nonperforming loan finally results in foreclosure, they pay themselves first. That’s right, the servicer stands in front of the trust, not behind it. So they recover all those costs in the foreclosure (assuming adequate principal). And, let us not forget that if they had to, right now, mark all those assets to market, the big banks would be broke. Of course they want to keep the banks alive at any costs as that cow has plenty of teats and the big boys are sucking it down.
” if they had to, right now, mark all those assets to market, the big banks would be broke”
If I ran the country, I’d force the banks to do just that, then FDIC the bastards and break them up into smaller chunks. The government owns a lot of those bad assets and could easily put them on the market. If they viewed predatory lenders as a problem, that is.
By leaving the loan in the trust even after the home has been sold, the servicer can continue to collect servicing fees on the loan and, potentially, recover any additional advances of principal, interest and expenses from the proceeds of the liquidated property. Since the loan is still being treated as a part of the trust, presumably the proceeds of the liquidation haven’t yet been distributed to the bond holders. Whatever money the servicer got for selling the home belongs to the bond holders, after deducting advances and principal. But the bond holders rely on the servicer to account for the proceeds, which gives the servicer a lot of room for games, if they are so inclined.
If the servicer is charging bogus expenses at marked up prices, then this is a way for them to extract servicing “revenue” from liquidation proceeds.
It’s exactly that simple, in fact, though the wrinkles are myriad.
That’s the problem with fraud – let a little fraud go without prosecution and you will get more fraud. Once this goes on for a while, trust is destroyed – and once trust is destroyed, bye-bye market. The coming market implosion would be deafening, if folks could only hear.
Oh come on, that fraud was in the distant past. Look forward, not backward!
There is no market with so much lawlessness, and hence there will be no market collapse. In fact, the collapse happened in 2008. Not coincidentally that was the same year the big big lie started (the big lie started some years earlier, and the lie itself started in 1913 with the Federal Reserve Act). They figured that if they turned up the heat slowly enough the frogs wouldn’t notice, and so far they have been proven correct in their assumptions.
I’m confused, though – wouldn’t the interest payments to the trust be greater than the fees retained by the servicers? If the loans are still listed in the filing, don’t the servicers have to remit interest payments for them? Surely, the servicers don’t believe they can hang on to the property sales proceeds indefinitely. Can they?
Through the filing of these fradulent fees, the absence of any real law enforcement in this country (at least real to them), and the lack of a coordinated response by bilked investors, yes they can.
They also recover the interest advances when the house is sold. And since interest rates are close to zero, it does not cost them much to keep advancing.
A nice summary of the mortgage/foreclosure fraud and settlement from Mike Whitney with an account of studies done in SF that show 84% of foreclosures were illegal.
http://www.counterpunch.org/2012/02/21/why-hasnt-anyone-gone-to-jail/
Thanks for the scoop. I’m guessing you don’t read here regularly. We already had this several days ago…
http://www.nakedcapitalism.com/2012/02/quelle-surprise-san-francisco-assessor-finds-pervasive-fraud-in-foreclosure-exam-and-paul-jackson-defends-his-meal-tickets-yet-again.html
OCWEN is one of the worst servicers for doing this, and there is nothing that a homeowner can do because they control everything via their so-called “Research” department.
Thanks Yves.
“Institutional investors are running other people’s money and therefore have no incentive to crack down on miscreant servicers (they feel it is not their job, plus if any one investor were to take this issue on, the rest of the industry would free ride on his work).”
I’d mentioned the other peoples money problem before. That’s the biggest reason the banks are getting away with defrauding “investors.”
The institutional investor doesn’t care what happens as long as all his investor buddies were equally screwed so he performs acceptably relative to his benchmarks and peers. They are ironically just collecting a paycheck not capital gains (or losses) or dividends that they are paid to perform on.
Well, well.
I think we knew this one was coming. The incentive to cheat both the borrower and lender is to great for the servicer to resist.
And this is the problem with the soon to be fifty state agreement – each day a new aspect of the scam leaks out while the present administration is running out of fingers with which to plug what’s left of the dike.
What to expect –
A continued happy talk offensive to hold off the inevitable till after the election. We’ll see better unemployment numbers, better manufacturing job numbers, and better foreclosure numbers. Each of these are generally manipulated by both parties at election time.
And of course it is becoming pretty clear that each jurisdiction, each local records clerk, and so on have a stake in this. Pretty hard to corral all these folks and get them headed in the same direction. And there is a good chance we will see another bank or other large financial institution fail in 2013.
Hold on to your hats folks.!!!