I am definitely looking forward to tonight’s 60 Minutes special on foreclosure fraud. In it, the head of the FDIC, Sheila Bair, will call for a cleanup Superfund to cleanse the country of toxic mortgages.
Banks so poorly handled documentation on millions of mortgages that many today cannot prove that they own the homes they want to foreclose on. The resulting rash of lawsuits from people seeking to save their homes has one of the government’s top banking regulators worried that the torrent of litigation will delay the real estate market’s recovery.
Federal Deposit Insurance Corporation Chair Sheila Bair tells Scott Pelley banks should be forced to contribute billions to a clean-up fund that will help stressed homeowners stay in their homes and stave off lawsuits – there are 30,000 already – that threaten the economic rebound [...]
Like last year, banks are expected to foreclose on a million mortgages this year, a scenario that could generate more lawsuits over mismanaged paperwork. “I think that this litigation could easily get out of control,” says Bair. “…We’re already feeling like we’re falling behind it,” She thinks a large clean-up pool funded by the banks that would pay homeowners to accept a bank’s ownership claim without a lawsuit is necessary. “I would assume it would be billions [that the fund would need],” Bair tells Pelley.
It sounds like 60 Minutes actually got this and reported it correctly. Lynn Szymoniak, one of the leading experts in foreclosure document fraud, is profiled in the piece. You will see forged paperwork, misidentified dates, and fabricated documents.
Now, regardless of what you think of the proposed mortgage settlement, and the banksters’ counteroffer, it’s important to note that what Bair’s talking about would have to exist separate from that. Attorneys General or even federal banking regulators do not have the authority to waive claims in state courts on behalf of homeowners. So this Superfund would be a separate event.
And the more banks resist it, the more liable they will become. In an important case this week, a judge in Alabama dismissed a foreclosure because the bank failed to comply with the pooling and servicing agreement for transferring mortgages to the trust. This would be a stunning ruling if applied broadly, though whether or not it will stand as precedent across other states remains to be seen; it’s far too early in the process to determine that. But we know that banks simply did not convey mortgages to trusts properly as a general rule. Foreclosure fraud can be seen as a coverup for that original sin. And if state courts are starting to make rulings based on that sin, banks will be stuck and unable to pursue foreclosures on tens of millions of loans.
The ruling in favor of the borrower endorses an argument we have made since last year on this blog, that the pooling and servicing agreement stipulated a specific set of transfers be undertaken to convey the borrower note (the IOU) to the securitization trust within a specified time frame. New York trust law was chosen to govern the trusts precisely because it is unforgiving; any act not specifically stipulated by the governing documents is deemed to be a “void act” and has no legal force. So if a the parties to a securitization failed to convey a note to the trust within the stipulated timetable, retroactive fixes don’t work. In this case, the note had been endorsed by the originator, Encore, but not by the later parties in the securitization chain as required in the pooling and servicing agreement.
There’s evidence to suggest that, particularly in hard-hit foreclosure states, judges have simply had enough and are dismissing cases left and right because of shoddy paperwork. So while the banks give off a public posture of calm, in reality the continued awareness of fraud is hampering their ability to process foreclosures and locking up the system. Exposés by the press have had an impact as well: after a story by Pro Publica about a trustee blocking a mortgage modification for a borrower in Georgia, the servicer postponed the foreclosure for two months to give an opportunity for the trustee to give up and allow the modification.
The point is that it’s not the captured political figures who will eventually give urgency to the banks to find a resolution – it’s the judicial process. And while that may take a while, it’s a potentially much more favorable scenario for borrowers than some settlement which threatens to strip away their due process rights. Bair’s Superfund idea only works if it is commensurate with the level of title problems, and only if it’s completely separate from punishment for fraud already committed in state courts.
Related: Katherine Porter on Fannie and Freddie’s responsibility for servicer abuse.




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Unless 60 Minutes starts the discussion with the demand that bankers, mortgage brokers, traders, investment bankers, and ratings agencies be prosecuted and held criminally and civilly liable, then we should expect another corporate whore propaganda segment. See 60 Minutes’ Leslie Stahl, Corporate Whore. http://my.firedoglake.com/binquick/2011/03/27/leslie-stahl-corporate-whore/
Why is it that nobody talks about how these banks have next to nothing into these mortgages. Everybody thinks the banks will lose money if they have to settle a mortgage that they can’t prove but the fact is that in many cases they bought the mortgage in a bank buyout for pennies on the dollar. For instance, it’s my understanding that if you have a WAMU mortgage for $300,000 that Chase paid about $3,000 for your mortgage. And they don’t want to lower your principle? They should be held to usary laws based on what they paid for the mortgage. BOFA is even worse. They got $1.4 TRILLION in mortgages for $4 MILLION. Yet they want to bleed the homeowners that were victims of fraud by Countrywide for every dime possible. Do we not hear about this because they own the information?
Bair talking about paying customers to accept bank’s claims?! it’d be cheaper for the banks?
outrageous
You are on the right track, but these mortgages were not purchased for “pennies on the dollar.” Yes, they do make money on foreclosures and short sales, which is why they do everything they can to avoid modifications. It is primarily through FDIC loss guarantees that the banks/lenders are assured of making a profit. Here is a short (4:26) video clip illustrating exactly how this works. Once again the taxpayers are screwed over while the banks reaps record profit. Like George Carlin said, “the game is rigged.”
http://www.youtube.com/watch?v=ssl5yb7FewA
This whole tragic and criminal reality is so obscene; we have every right to be very cynical about the outcome, but if there is any justice, the system needs to pay big time damages to all the present owners and somehow all those who were thrown out from the beginning. The stock holders and institutional/corporate leaders of all these systems should be sent to jail for a long time.
Dare we hope for justice?
Thanks David for alerting us to his program
Blessings,
Georgia is not the only state cracking down. Florida judges are fed up with attorneys representing banks who simply follow the dictates of their clients. One attorney was even held in contempt of court recently. The good news is that many homeowners end up owning their homes free and clear.
http://www.squattable.com/news/040311/foreclosure-crisis-fed-judges-dismissing-cases-giving-homes-back-homeowners-and-boldly-a
Scott Pelley gets a bit more candid on the ‘Overtime’ site.
http://www.cbsnews.com/8301-504803_162-20049744-10391709.html?tag=contentBody;listingLeadStories
Surprised he laid it out – banks used forged documents to do business, as we all well know.
What I would have also wanted to see – Pelley asking any congressman, or Obama himself – why it’s okay for banks to do this. The report makes the claim against the banks, but doesn’t ask them to be held accountable for fraud and forgery.
We’ll have to see if people on both sides (investors and homeowners) use this report to get some handcuffs put on some white collar criminals.
There it is: DOCS -mortgage fraud. In which case, the fraudsters should be denied all legal claim, liquidated to cover loss, and imprisoned. Or let them keep on, and piss and moan about the way things are.
Excellent video clip. Well done and easy to understand. Good to see its got three million views.
You can take that to the bank.
60 minutes of Lying Media Whores will not suggest in any way that bankers and mortgage brokers have committed crimes worthy of criminal prosecution. They won’t touch it with a ten foot pole.
They will point out the fraud, but they won’t dare use the word. Not once.
Banks, Goldman Sachs, The FDIC, The Treasury are a Revolving Door Money Machine for the richest one percent whom the most powerful politicians R & D favor.
Pay to play. Legalized Corruption at the highest levels on down.
“They will point out the fraud, but they won’t dare use the word.”
Bingo!!
I abhor the term “toxic assets.” It is a misnomer. Most of these mortgage assets are fraudulent assets.
After a 35+ year career in residential mortgage lending, I called it quits in 2007. The fraud became so blatant I could no longer make a honest living.
Really, when we had the savings and loans crisis, scores of bankers were prosecuted and sent to jail. What exactly puts these turkeys above this exactly? Why is there no criminal prosecutions? Someone steals some music off the internet, the FBI breaks down the door. Commit massive fraud on the nation and everyone sits around chewing bubblegum.
Our courts and prisons should be clogged with people who have committed fraud. “Poorly handled documentation” my ass.
I keep hoping investors will have more clout than the homeowners. But so far there is NO JUSTICE whatsoever in the wake of the crime of the century. The criminals are not prosecuted. They are subsidized.
Here’s the print version.
Mortgage paperwork mess: the next housing shock?
Scott Pelley reports how problems with mortgage documents are prompting lawsuits and could slow down the weak housing market
LINK.
It just started in callie please give the short view when you can?
There was a time when 60min would have broken this story. Like, you know, before everyone with the interest and access to a computer had been discussing it for over a year.
Just watched it, and although at least they said that the banks refused to be interviewed, it sure sounded like Scott Pelley got their spin exactly right for the bottom line of the story: “It wasn’t us, it wasn’t even our subcontractor, it was our sub-contractor’s-sub-contractor–the now defunct DocX–that defrauded us all! Oh well! Too bad! But NOT OUR FAULT!” …and to me Bair said nothing more than “not surprised that the banks won’t talk to you, and I won’t say boo about them, it’s gonna be really bad!”
…thus the story title.
Nothing to see here folks. All ovah. Move along!
This segment was so short and so superficial as to be insulting. The banks got bailed out, are still shafting borrowers, ignoring regulators, state and federal laws and laughing at everyone as they reward themselves with bigger and bigger paydays. All the talk about fining them and re-regulating them as punishment is disgusting because it so laughable. They have all perfected the art of passing the buck. Nothing will change until those at the top get very long prison sentences. What they did makes Worldcom, Tyco and Enron look like childs play.
We quit in ’95. It was criminal then.
Whilst on the subject of bankster’s criminal activities this Guardian piece reveals much more:
Hear, hear! I couldn’t agree more; Eric Holder and Sheila Bair should be impeached over this mess.
Friends were noting the different ways usury is being built in to many aspects of daily finances for the average person.
Was anyone able to get a transcript of the 60 Minutes broadcast, view the video and do a fact check?
I thought the program was good. Informative for someone who has not been following this story and not knowing they were played/preyed on and are full of ‘shame’ (I am sick to death of the morale game TPTB play with us)
I got a call right after the airing, someone that I had been sharing my outrage with, he got it. Those of us that spent years in the business when it was honest are the ones that understand the true scope of what has happened here. Mers is the reason this all happened and I understand why 60 minutes didn’t go there because this is such a complex subject. I am further surprised they even got to air this subject on National T.V.
I was involved in both the processing and many closing of the thousands of loans I worked on during my career. I understand clearing title. Mers decided to do ‘paperless’ mortgage loans. What is so outragous is that the people that brought us Mers were the mortgage bankers, brokers, and title companies, they thought they would get away with it and they have for so many years.
My regret is that after leaving the business I quit paying attention. Never in my wildest imagination could I have thought this would happen. I don’t know how they will fix this, imho, it can’t be fixed. Every loan has to be started over and yes, show us the Note or pay us to sign a new Note.
(I wonder how many of the robosigned docs were Satisfactions on loans owed by the zillionaires and politicians, I imagine a whole lot of them got their homes for free)
A shout out to every honest judge out there that is finally saying No. Every loan in the Mers system is fraudulent.
Like you, I have been involved in the industry just enough to be utterly appalled at MERS because it’s basically so illegal!!! I keep wanting to say, “Doesn’t the term ‘Constructive Notice’ mean anything anymore?” You can’t just take the public notice out of the public notice and be completely ignored. But I remember seeing lots and lots of publicly recorded docs with MERS all over them. Wonder how they recorded some, but not all?
Thanks to gigi3 and oblizk for providing the links. (The Overtime link has over 300 comments..I will be reading for awhile.) And of course, thank you David.
I first started to notice Mers when I started to see so many foreclosures in my local paper in 2004. I wondered who this entity was because I had never heard of them. Red flags as well when I was seeing relatives that I knew could not buy houses, getting loans. I wrote a LTE warning people at that time about ARM’s and losing their homes when the rates adjusted never in my mind thinking this was “The Plan”.
Back then I knew about ‘creative financing’ but had no clue how ‘creative’ the financing had become. I think back now on all the signs, talking to a ‘loan officer’ who couldn’t talk to me in ‘mortgage’ language. Talking to a ‘title officer’ while researching the chain of title on a friends house and him kicking me out of his office and his boss telling my friend I was never allowed back. This from a title company that had courted my company for years and it was his job to explain how he put together the mess he sent to her attorney. (My friend spent thousands on an attorney who based his work on my work and should have never had to be involved if the title company had done their job. A good old boy judge in my town later gave away some of her property..adverse possession..to a developer.) A different title company giving fraudulent info to the same developer to get the ball rolling and actually was the one who forced her to pursue legal action and started the whole mess.
I remember thinking..who are these people, working for companies and obviously not knowing a thing about their jobs. Hearing from friends still in the business about how shoddy the paperwork had become. Getting a loan and having a loan officer laughing and asking me how ‘old’ did I want to be on the loan ap..giggle, giggle. I was getting the signs but I was ignoring them for the most part.
In retrospect I guess no one would have ever believed me if I had knew then what I know now and was talking about it. So few people are aware now and when they tell me they are in foreclosure they hang their heads in shame. I feel so bad for them but how do you explain to someone not in the business how fraudulent this is. I just say, don’t move.
As far as Mers, I can’t even understand the language on some of the recorded docs I have read..like wtf does that mean…garbage, it’s all garbage.