Massive new fraud coverup: How banks are pillaging homes — while the government watches


When financial crimes go unpunished, the root problem of fraud never gets fixed — and these are the consequences


Eric Holder (Credit: AP/J. Scott Applewhite)


Joseph and Mary Romero of Chimayo, N.M., found that their mortgage note was assigned to the Bank of New York three months after the same bank filed a foreclosure complaint against them; in other words, Bank of New York didn’t own the loan when they tried to foreclose on it.

Glenn and Ann Holden of Akron, Ohio, faced foreclosure from Deutsche Bank, but the company filed two different versions of the note at court, each bearing a stamp affirming it as the “true and accurate copy.”

Mary McCulley of Bozeman, Mont., had her loan changed by U.S. Bank without her knowledge, from a $300,000 30-year loan to a $200,000 loan due in 18 months, and in documents submitted to the court, U.S. Bank included four separate loan applications with different terms.

All of these examples, from actual court cases resolved over the last two months, rendered rare judgments in favor of homeowners over banks and mortgage lenders. But despite the fact that the nation’s courtrooms remain active crime scenes, with backdated, forged and fabricated documents still sloshing around them, state and federal regulators have not filed new charges of misconduct against Bank of New York, Deutsche Bank, U.S. Bank or any other mortgage industry participant, since the round of national settlements over foreclosure fraud effectively closed the issue.

Many focus on how the failure to prosecute financial crimes, by Attorney General Eric Holder and colleagues, create a lack of deterrent for the perpetrators, who will surely sin again. But there’s something else that happens when these crimes go unpunished; the root problem, the legacy of fraud, never gets fixed. In this instance, the underlying ownership on potentially millions of loans has been permanently confused, and the resulting disarray will cause chaos for decades into the future, harming homeowners, investors and the broader economy. Holder’s corrupt bargain, to let Wall Street walk, comes at the cost of permanent damage to the largest market in the world, the U.S. residential housing market.

By now we know the details: During the run-up to the housing bubble, banks bought up millions of mortgages, packaged them into securities and sold them around the world. Amid the frenzy, lenders failed to follow basic property laws, which ensure legitimate transfers of mortgages from one legal owner to another. When mass foreclosures resulted from the bubble’s collapse, banks who could not demonstrate they owned the loans got caught trying to cover up the irregularities with false documents. Federal authorities made the offenders pay fines, much of which banks paid with other people’s money. But the settlements put a Band-Aid over the misconduct. Nobody went in, loan by loan, to try to equitably confirm who owns what.

Now, the lid banks and the government tried to place on the situation has begun to boil over. For example, Bank of America really wants to exit the mortgage servicing business, because it now finds it unprofitable. The bank entered into a deal to sell off all the servicing for loans backed by the Government National Mortgage Association (often known as Ginnie Mae). But Ginnie Mae refused the sale, because the loans Bank of America serviced are missing critical documents, including the recorded mortgages themselves.

If you’re a mortgage servicer, and you don’t possess the recorded mortgage, you probably aren’t able to foreclose on that loan without fabricating the document. And Ginnie Mae made it clear that the problem could go beyond Bank of America. “I don’t mean to sound like we’re picking on BofA,” Ginnie Mae president Ted Tozer told trade publication National Mortgage News. “I can’t say if it’s just BofA or not.” Incredibly, this would represent the first time a government agency has actually examined loan files under its control to search for missing documents, seven years after the collapse of the housing bubble and four years after the recognition of mass document fabrication.

Any effort to fix the system would start by reforming MERS, the electronic database banks use to track mortgage trades (and avoid fees they would incur from county clerks with every transfer). MERS was part of a broad settlement in 2011 with federal regulators, and they promised to improve the quality control over their database to avoid errors and fraudulent assignments. Three years later, the fixes haven’t happened, and four senior officers brought in to comply with the settlement have left. MERS then tried to hire a consultant to manage the settlement terms whom U.S. regulators found unqualified for the job.

The database still tracks roughly half of all U.S. home loans, and banks fear that without changes, they might have to – horrors – actually go back to recording mortgages individually with the county clerks! You know, the property law system that the nation somehow survived under for more than 200 years.

Link to full article here


Ormond Beach fighting a plague of zombie homes

Saul Saenz
March 30, 2014

This is one of the zombie house residents in Ormond Beach are trying to fight.

Florida leads the nation in zombie foreclosures.





There’s a group of Ormond Beach homeowners battling a zombie home problem — homes that are standing dead and sucking the life out of entire neighborhoods.

The group is targeting homes that are abandoned and decaying, with so much overgrowth they are hard to look at.

“It is an eyesore and it is exactly a zombie home because we don’t even know at this point who owns the homes,” said Rita Press, president of Citizens for Ormond Beach.

“I think it’s gonna lower the property values if they see a rundown house,” said neighbor Joe Puccino.

The group has identified at least 300 foreclosed homes throughout the city, and numerous abandoned homes with no paper trail that homeowners simply walked away from. One house Press told us about is in the city’s exclusive, historic riverfront district.

The group contacts homeowners in foreclosure to help them through the process before a homes turns into a zombie home. They also want the city to prevent houses from turning into lifeless shells.

But the ultimate goal, Press said, is to get all those homes on the market so that new homeowners can breathe life back into a lifeless Zombie home.


Five of Florida’s housing markets are in the top 10 zombie foreclosures, according to RealtyTrac.

The foreclosure tracking group said there are more than 140,000 homes in Florida that are in zombie mode, or are bank-owned. And zombie homes in Florida are in foreclosure for about 1,095 days.


CFPB Takes Aim at ‘Zombie’ Foreclosures (aka Zombie Titles)

By Kate Berry, MAR 12, 2014

The Consumer Financial Protection Bureau plans to address the growing problem of

vacant and abandoned properties that banks and mortgage servicers have walked away from

to avoid maintaining the homes.


Some borrowers are being harmed when a mortgage servicer starts a foreclosure but then fails to complete it, leaving borrowers on the hook for the mortgage debt, taxes and maintenance even though they may have already moved out, said Laurie Maggiano, the CFPB’s servicing and secondary markets program manager.

“The CFPB is beginning to look very closely at abandoned properties and zombie foreclosures,” Maggiano said Tuesday at a conference sponsored by the Federal Reserve Bank of Cleveland. “There is direct borrower harm if a borrower believes a foreclosure on their property has been conducted and they are no longer responsible, and months or years later find out that they are, that there was never a foreclosure and they have large financial responsibilities that they never knew about.”

Consumer advocates have repeatedly asked the CFPB to address the issue, saying servicers are not complying with certain disclosure requirements to borrowers and anti-blight provisions that require banks to release the lien on a property or complete a foreclosure sale, rather than leaving a property in limbo.

The CFPB is participating in several industry-led task forces to try to identify the hundreds of thousands of homes that have been dubbed “zombie foreclosures.”

Bank “walkaways” typically occur on low-value properties. Often a bank or mortgage servicer will determine that the cost to repair a home is more than the property is worth, and may choose not to complete a foreclosure. But that means the borrower has to continue paying the debt, taxes and upkeep.

Servicers typically flood defaulted homeowners with as many 250 letters and phone calls telling them their home is going into foreclosure, says Peter Skillern, the executive director of Reinvestment Partners, a Raleigh, N.C., nonprofit. But they usually fail to notify the borrower when the foreclosure is stalled.

“They are pushing the borrower out of the home, which results in abandonment,” Skillern says. “Servicers need to make sure they are accurately communicating the status of the foreclosure process to the borrower.”

Nationwide there are roughly 152,000 vacant or abandoned homes for which the servicer has not taken title to the home, says Daren Blomquist, a senior vice president at RealtyTrac, the Irvine, Calif., data firm. These properties make up roughly 22% of the 676,000 bank-owned homes that are held by banks and not listed for sale.

These zombie properties are not included in the bucket of roughly 740,000 properties currently in the process of foreclosure. Chicago, Dayton, Ohio and Philadelphia are among the cities with large numbers of so-called zombie properties.

The CFPB found “it was extremely common” for servicers to charge off low-balance loans and not notify borrowers or municipalities if they did not complete the foreclosure and take title to the property, Maggiano said. As a result, borrowers often were not notified that they were still responsible for repaying the mortgage debt, taxes and code violations.

“Most of the time [the servicers] didn’t notify anybody, they just took [the home] off their books. They stopped servicing it,” she said.

Though banks and servicers are not technically required to communicate with borrowers about lien releases or charge-offs, an obscure provision of the Truth-in-Lending Act requires that servicers send periodic statements every month to borrowers who have liability for delinquent mortgage debt.

That provision now is “pushing servicers to release the borrower from liability for the debt,” Maggiano said. “So, it’s not a technical requirement in our regulations…but we consider that to be a responsible communication to borrowers.”

“Servicers are changing their behavior and communicating with borrowers about lien releases,” she added.

Click here for full article

Helpful Links_Fall 2013

Florida Today: Zombie Titles

Zombie Properties: the ones that Banks do not want

Zombie Law: Federal Court Case Compendium

Kickstarter dot com: Zombie Law in the Federal Courts 

Zombie Law dot wordpress dot com: FL Zombie Foreclosures

SFF: Remic Internal Revenue Code revealed

SFF: Royal Park Investments vs Deutsche Bank et al 

SFF: The double dipping docket_paying out on defaulted mortgages

SFF: Phoenix Light et al vs JPMorgan Chase et al 

Servicer Compliance Audits for Homeowners?

As the mortgage market increases the use of upfront automated audits to comply and prepare in advance for up-and-coming regulatory requirements, homeowners are being offered the opportunity to review whether lenders and servicers are up to the task.

Federal Home Retention Services is offering a new set of automated tools that enable real estate professionals and property owners to investigate whether residential and commercial real estate transactions comply with certain multistate requirements.

The FHRS platform ensures that loans are clear of violations. It enables users to conduct specific mortgage loan compliance audits that help streamline mortgage loan modification inquiries and loss mitigation reviews.

Yet it does not serve only lenders and servicers that need to take action so they save time and avoid cost associated with failure to comply or litigation.

Until now the firm only conducted business-to-business dealings with lending institutions, federal banking associations, law firms, wholesale lenders & loss mitigation companies. Now consumers can benefit from mortgage compliance reports and audits of securitized mortgage loans.

Mortgage compliance failures may help homeowners to avoid foreclosure action in both nonjudicial and judicial foreclosure states giving them “a better position to negotiate” new loan terms or a loan settlement, said Phillip Michaels, CEO of FHRS and acting VP of compliance, “regardless of financial hardship and payment history.” Hence, he added, violations found in investigative compliance reports can provide crucial assistance to the borrower, as well as to legal advisors who want to specializes in loan modifications.