Part I of this series, Part II, Part III, Part IV, Part V, Part VI, Part VII, Part VIII.
Now that the foreclosure fraud scandal has deepened, I wanted to show how it connected to the problems with HAMP, using some reader stories as an illustration. While I’ve put this project into the background in recent weeks, I still receive personal stories about struggles with the servicers almost every day, and the problems they’re having are consistent whether you’re talking about modifying a loan or preventing foreclosures. They still feature document flim-flammery, double-talk and a clear violations of established rules, whether in the legal foreclosure process or the rules set up by Treasury for HAMP.
Tina Kimmel is an epidemiologist in California who saw her salary cut by Arnold Schwarzenegger to balance the budget, and this reduction in income put her in trouble with her mortgage. She tried to get into the HAMP program in June 2009, when it began, through her lender, Citi Mortgage. I’ll reprint the follies from there from her email:
Meanwhile I heard about the HAMP program, which was to begin June 2009. I asked Citi to consider me for it. They asked me for dozens of documents, which I submitted. They then said I qualified for HAMP, and put me on the trial program for October – December 2009. My payments were only $1350, which was a great relief. In January, they told me me to keep paying that lower amount while they finished processing my paperwork, which I did.
Then suddenly in April, they said I was in default, and that I owed them $13,000. They said that I was no longer in HAMP, so I owed the difference between what they had asked me for and I had paid ($1350), and what they were saying I actually owed them ($2800), for those 7 months, plus interest and late fees.
Citi’s explanations for why I didn’t qualify for HAMP were first, that I hadn’t submitted the right documents (but they couldn’t find any that were missing), then, they claimed that *I* had turned *THEM* down (but had no evidence of that), then, they said my credit was bad (but my credit was perfect when I applied, plus there is no credit requirement for HAMP). So in other words, I totally qualify for the program.
In May, I received an odd statement from Citi, where buried among the $13k “past due amount” and various fees, was an indication that my mortgage amount was now $2100, NOT $2800 as it had been. I found one lone person at Citi who said that inexplicably, my mortgage had been permanently modified. The only thing I can figure is that NACA got to someone there, which was great. But it didn’t stop the foreclosure train.
BTW I made, and continued to make, these mortgage payments, despite Citi saying they would have no place to put my money if I sent it in, since I was in the foreclosure process. (Huh??) But they did cash the checks anyway.
I contacted my congressperson, who put me in contact with the federal HAMP office. They told me to request Citi to give me a traditional modification (in-house) while they figured out what was going on. Citi spent all of July and August supposedly working on this new modification, which they said would “catch me up”, as well as lower my payment to around the $1350 HAMP payment.
But instead of hearing back from Citi, I was notified that on September 2, Citi had sold my account to a subprime lender, Carrington Mortgage Services (which seems to be associated with something called Quality Loan Service Corp).
I called Carrington, who told me that they had received no paperwork with my mortgage, that they were only told that I had over $16k “past due” at that point and that I was in foreclosure. I told them I had never missed a payment and had no plans to leave my house.
They then asked ME for copies of my HAMP agreement, all my qualifying docs, CitiMortgage statements, and bank statements showing all my mortgage payments, which I supplied. I asked to be considered for any in-house modification and/or forbearance and/or deferral of the “past due amount”, and they agreed to look into it. I got Carrington to accept September’s payment from me.
BUT on Sept 21, someone from the County taped an auction notice to my door: Carrington/ Quality Loan had set an auction date for my house, October 12.
That’s today. Kimmel eventually borrowed the $13,000 from friends needed to stave off the subprime lender, and saved her home.
Now, let’s count the violations in this all-too-typical account:
1) Trial modifications are supposed to be 90 days only, according to HAMP policy. This stretched more than twice that long.
2) Per HAMP, the lenders are not supposed to include late fees and interest onto the amount owed if the borrower doesn’t qualify for a permanent modification. This is part of an epidemic of extra fees tacked onto the mortgage that don’t follow the specific instructions of the note. Too many homeowners accept what the banks tell them is the total amount owed to stop a foreclosure, and the terms of the note would provide that information very clearly.
3) The bank falsely accused the borrower of having bad credit when the credit would only have been damaged by the trial modification program, which is seen as a partial default on credit reports.
4) Citi improperly informed the borrower that she was denied a permanent modification when she actually succesfully received one. This is basically document fraud, designed to extract a higher payment out of the borrower.
5) Per California law, Citi must make a reasonable effort to modify the loan to prevent a foreclosure, and that does not include selling the loan to a subprime lender. In addition, Citi sold the loan without giving the new lender the paperwork, which is at the hub of the foreclosure fraud scandal.
6) Instead of getting back in touch with the borrower to notify her of the outcome of the effort to modify the mortgage, Quality Loan Service/Carrington just had the county tape a foreclosure notice to the door. I believe this also violates California law under the Foreclosure Prevention Act.
All of these casual violations of accepted standards, state and federal law, and the terms of the HAMP program, mirror exactly the violations of the the legal process governing foreclosures. The servicers would rather foreclose at this point, after a period of extending the borrower and squeezing out some more payments, because they extract fees on a successful foreclosure and have every incentive not to help modify the loan. Add to this that no federal regulator has oversight specifically over the servicers (though they do over the parent companies) and what you have is a Wild West Show, where the servicers can put borrowers through hell, trap them using HAMP, and foreclose with impunity.
In both cases, the lender could ask for their note and determine what they actually owe, and whether they would quality for a short sale, have more equity in the home than they think, etc. Homeowners are being taken advantage of by being in the dark, and allowing the servicer to have all the balance of power in the transaction. This is true in foreclosure fraud and it’s true in HAMP.
This is why we need to stop the evictions for now.
For years, mortgage loan servicing companies have engaged in shoddy business practices, ranging from misapplied payments to evicting homeowners who have never missed a payment. Now employees of these companies have admitted to falsifying thousands upon thousands of affidavits used to toss families out of their homes.
The fraudulent documents indicate a problem well beyond the “technical glitches” that the industry describes. If servicers had accurate records, there would be no need to invent paperwork. The entire system is rife with unfairness, and the mistakes and omissions have serious consequences in terms of unnecessary or even mistaken foreclosures.
Document fraud. False statements. Misplaced notes. Value to the servicer over the borrower. This distinguishes both HAMP and foreclosure fraud.





12 Comments


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I would be curious to see what the top people in the Obama administration have to say directly about this case. Obama, Warren, Geithner.
What is going on? How can they allow this to happen without expressing outrage? This is exactly the reason that Democratic voters are so disappointed in Obama. He’s just NOT doing his job.
The Administration is doing it’s job if that job consists of covering Wall Street and the Banksters toxic assets. I’ve beat this drum for a while but think that what I’m finding here in Baltimore ties into all of this. 2 more examples: First in June a home with an original debt of $146,715 that defaults/foreclosed on and sold at auction “to the highest bidder” for $167,500. That high bidder happens to be you and me through HUD. HUD (us) then resells our new asset to a non-profit for the low, low price of $36,000 (an 80% loss). In July another row home with original debt of $180,000 is sold on the courthouse steps “to the highest bidder” for $194,000. We are that high bidder again through FHAMortgage, we then sell our newer asset for a 42% loss, $113,471.
It’s HAMP, it’s derivitives, it’s CDO’s, it’s bad titles, it’s fraud to the core and a big shit pile that is a creation of a corrupt bipartisan corporate controlled politic. A lot of people should go to jail. Sadly though I fear some distinguished politician from the World’s Most Deliberative Body will quietly stick a rider on the bill naming Topeka’s town center for Mother Theresa and Wall Street will come out fine.
These stories are legion. It truly is this century’s Grapes of Wrath and we are all potential Joad families.
Where is the assistance for homeowners caught in Kafkaesque vises like the one you illustrated? Most don’t have friends who can loan 13K, which seems like illgotten gains, more like extortion, for the servicer.
No federal oversight for loan servicers, although there is oversight for the parent companies? That’s actually hard to believe. Aren’t they servicing in many cases federally guaranteed loans? We are all just at their mercy?
There is a gigantic moral abyss in the American business world. Fraud is an accepted business model. Only a very few of our “leaders” have the will to pursue justice on behalf of the beleaguered and swindled. We all have to hope that an Alan Grayson or Elizabeth Warren will come riding in on a white horse from stage right and save us and shame others into doing the right thing.
Perhaps foreign courts will take a look at how they were conned with these fake securities and bring some suits in their own countries since these products were sold internationally.
Per California law, Citi must make a reasonable effort to modify the loan to prevent a foreclosure, and that does not include selling the loan to a subprime lender. In addition, Citi sold the loan without giving the new lender the paperwork, which is at the hub of the foreclosure fraud scandal
Unfortunately, Citi has no duty to modify or make such a reasonable effort.
Say you qualify, but they mistakenly or intentionally say you don’t after making 10 forebearance payments on time and sent in all docs. YOU HAVE NO REMEDY UNDER HAMP EVEN IF THEY SCREWED UP.You have no right to a modification under CC 2923.5, 2923.6. No contract, no promissory estoppel, nothing. Per Sen. Durbin attempting to get “cramdown” re modifying mtgs. in bankruptcy and getting 47 votes, “The banks own the place.” They own Sacramento too. And Sen. Feingold is behind in his race. I fear for the future of this country.
Exactly. Forget progressive champion – at this point all I want is someone in charge with a basic sense of decency and fairness, and the integrity to act on it. The nightmares that dday is cataloging don’t have to happen – they’re being allowed to happen.
In response to 1der @ 2 (and dday)
I think you’ve nailed the reason for the speeded-up foreclosures, and unwillingness of the administration to support a nationwide foreclosure moratorium:
We already know that HAMP is a ruse to squeeze more payments out of people before foreclosing anyway. Treasury admitted this. David documents this ad despaireum.
It is my belief that Fannie and Freddie have been ordered to help bail out the banks by the scheme you describe. I’ve also read several times about cases in which homes have been foreclosed on by banks, and it is later shown that Fannie owned the mortgages on those homes. We also read in a Mother Jones article in July that Fannie uses the same foreclosure mill(s) as the banks (David J. Stern), and that Fannie is also encouraging its foreclosure a speed up of foreclosures on its loans.
I wouldn’t be at all surprised to learn that Fannie and Freddie have bought MBSs that have never had any mortgages properly conveyed into them: per Karl Denninger’s assertions about incomplete conveyances A->B->C->D.
1der: I saw this comment of yours on a prior post, where it disappeared. I hope you will consider fleshing it out into a Seminal diary, tagged ‘Foreclosure Fraud’. We need this kind of data point to add to whatever other whistleblowers and people in positions to recognize these frauds have been observing in the courts or elsewhere.
What this poor person doesn’t realize is that Carrington Mortgage Services is a hedge fund out of Greenwich Ct. run by a guy named Bruce Rose. He has been in the foreclosure business since the 80′s with the company that started a mortgage company that started a similar problem then. They we’re called Salomon Brothers. They went bust and eventually were acquired by Citibank. And they got Bruce Rose with it. They eventually asked him to leave and I am amazed that they are dumping there crap to him. I’ve read elsewere that they are trading these loans again and Carrington Capital is buying them up.
But in any event this person is screwed. You’re loan is now in the hands of a servicer that very much like to foreclose on you. Has something to do with juniour bond holders blah blah blah
Any links you have would be appreciated.
This article is stellar, David, especially as it provides a clear example of motive for who’s-got-the-note shenanigans that goes beyond a supposed desire on the part of the originators and servicers to do things on the cheap.
Something just occurred to me. Once the housing downturn occurred, predators began coming out of the woods with all kinds of “save your home from foreclosure” scams, equity stripping, etc. Many states came out with specific laws about these schemes which were nothing more than designs to separate desperate homeowners from their money while charging large fees for services never performed OR actually taking title and equity stripping.
I’m starting to think that the national mortgage servicers should be charged under these same state crime statutes for essentially doing exactly the same things: Pretending to re-negotiate mortgages while simultaneoulsy selling them is prima facie bad faith, while running up excessive fees which are nothing less than equity stripping.
I think Tim Geithner himself should be charged under these laws for running the fake HAMP program which hurt more than it helped.
From this article, it looks like less a failure of HAMP than the fact that Citi is simply breaking the law.
Maybe this is not Geithner’s failure so much as the Justice Department’s.
Just out of curiosity, will someone please tell me how a bank can modify a loan it doesn’t own any more than it can foreclose on a loan it doesn’t own?
I have a very similar story to the one mentioned in this article. I applied for a loan modification after my husband’s sudden death. I kept in touch every two weeks and was always assured that a loan mod was in process. After EIGHTEEN MONTHS, and several complaints, I asked to speak to a supervisor. She said I’d have to start over because I had never been “coded” for a loan mod. I was to receive another loan mod package in “two weeks.” It didn’t arrive, so I called and the retention rep said I would have to appeal because the record showed that I had DECLINED the loan mod. I had BEGGED for the loan mod for EIGHTEEN MONTHS, and jumped through every hoop they asked, over and over. Lost documents, phone system outage, waiting over an hour to be transferred to another department then the call dropped to a dial tone, and countless other frustrations. I was paying an agreed forbearance payment, and paying EARLY every month to help ensure a favorable result on the loan mod. During the delay, $20,000 in lates and fees accrued. WHY would I have declined what I was trying so hard to get? The retention department said I would go into foreclosure anyway, despite my cooperation; so I quit paying two months ago. I just got my letter of debt verification from an attorney’s office last week, so I guess foreclosure sale is close.
I hate the thought of having to leave the home I shared with my beloved husband, but because of the delay, I’m now underwater. Paying for something worth less than what I owe doesn’t make sense. My husband and I had credit scores over 800 when we bought our home and our loan was with full documentation and proof of income. We had bought and sold several houses, and NEVER had paid a late mortgage payment. I’m not a deadbeat wanting a free ride; I just need to save money for moving expenses.
Yes, the banks are getting as much money out of us as they can and dragging out the loan mod decisions as long as they want to to get it. What do the banks have to lose by delaying? NOTHING. What do we have to lose? Our sanity, our health, our credit, and our home.