Consumer Law & Policy Blog

WSJ blames evil consumer lawyers

By Alan White

Although the Wall Street Journal has provided some excellent coverage of the foreclosure crisis, this story by Robbie Whelan (via Naked Capitalism rebuttal) is pure drivel.  The ludicrous premise is that a coterie of clever consumer lawyers have contrived to keep deadbeat homeowners out of foreclosure by raising silly technicalities.  Never mind that the case used as an illustration involved a homeowner whose timely payments were improperly refused by GMAC Mortgage, and is still in litigation. 

While I try, not always successfully, to provide dispassionate commentary about the foreclosure crisis, these attacks on the legal services lawyers and private practitioners who I know well make my blood boil.  These lawyers are the heroes of this crisis.  They are devoting countless hours not only to finding fraudulent affidavits, but also and more importantly to decoding servicer payment histories, endlessly resubmitting modification paperwork, trying to enforce bankruptcy plans, and getting servicers to acknowledge their own shockingly frequent errors.  Most of these consumer lawyers earn far less than their counterparts in the foreclosure mills and white shoe firms who are obsequiously protesting that banks can do no wrong. 

I know of not a single consumer lawyer who has any interest in representing a homeowner who is unwilling or unable to make payments.  Many homeowners are in foreclosure due entirely to servicer errors, such as double charging for insurance or misapplying payments.  Hundreds of thousands of homeowners in foreclosure not only want to pay but are paying in temporary HAMP and other plans right now.  They just want someone at their mortgage company to listen, and to accept their payments and get them out of foreclosure.  Modifications, contrary to popular belief, almost never involve ANY forgiveness of debt.  At best, modifications are giving them a temporary reduction in interest rates.  Our debtors are not even asking to be forgiven, they are simply asking to be heard before their homes are taken.  Now that the Attorneys General, and even the Cabinet and the media, are listening, the WSJ wants to shoot the messengers.   

The foreclosure crisis is a result of banks and Wall Street making and buying loans that were poorly underwritten.  It is being made worse month after month due to massive servicer (i.e. Big Bank) inability either to work out salvageable loans or to transfer and foreclose mortgages properly.  Hats off to the consumer lawyers who comfort the afflicted while the Journal comforts the comfortable.

Ray Brescia on New York's Response to the Latest Foreclosure Crisis

Here.

Foreclosure Fraud Crisis - Good Explanation

Mike Konczal has posted a clear and basic explanation of the foreclosure fraud crisis, its causes and its potential impact, complete with diagrams and links to the best reporting.

Would the Foreclosure Fraud Have Occurred if the CFPB Were Already Here?

An interesting article here.

Robosigner Scandal Making for Strange Bedfellows

By Alan White

From the AP we learn today that banks hired foreclosure specialists with no knowledge of mortgages or foreclosures to file foreclosure papers.  Meanwhile, Treasury Secretary Geithner, HUD Secretary Donovan, and even Presidential spokesperson David Axelrod, piously intone the banking and real estate industries' line, attempting to trivialize the widespread fraud on the grounds that more delays in foreclosure will prevent economic recovery.  As if.

The Obama administration and its provisional allies on the Wall Street Journal editorial page want to scapegoat the robosigner scandal for delaying a housing recovery.  The real culprit is the foreclosure crisis itself, i.e. the fact that we have more than 5 million mortgages in default or foreclosure, that were being resolved at a snail's pace before the robosigner scandal and moratoria came along.  If every bank and servicer called off its moratorium today, and if all the state Attorneys General went away, we would simply go back to the agonizing process of dumping another 100,000 or so foreclosed properties on the market every month, while homeowners who want to make payments wait for months to get their workouts processed.  Before the foreclosure fraud scandal hit we were already facing  another five years  of depressed and uncertain home prices, even assuming more homeowners now making payments don't start falling behind.

Whether or not forcing banks to foreclose properly will delay economic recovery, the economic argument is hardly a reason to condone the systematic abuse of courts and the property recording system.  The banks we bailed out continue to cut corners, refusing to hire adequate staff to properly administer modification, short sale and other programs, or to do foreclosure paperwork correctly. 

Given the unpopularity of banks, it is a mystery why the Administration refuses to call out the banks, who are handing out record pay and bonuses, and demand that they do their jobs.  The way to stabilize home prices is to modify every loan that can be modified, bite the bullet on every reasonable short sale, and foreclose what is left, with adequate personnel to handle all these tasks quickly AND accurately.  Making excuses for banks who take shortcuts and lie to courts and deed recorders is not an economic recovery program.

More questionable foreclosure affidavits - of service

4ClosureFraud has compiled a lengthy list of affidavits of lost summons filed in Florida foreclosure cases.  The GMAC and Wells Fargo robosinger affidavits were usually attesting to the ownership of the mortgage loan being foreclosed and whether and by how much the homeowner was behind in payments.  Affidavits of lost summons are used as a substitute for proof that the defendant homeowner has received proper notice of a foreclosure, a basic requirement for due process in judicial foreclosure states.  

Chase joins GMAC/Ally in Robo-signer Scandal

The Wall Street Journal reports today that JP Morgan Chase is suspending 56,000 pending foreclosures in order to review court documents signed improperly, in other words by robo-signers.  See also the Huffpo story here.  The growing scandal is getting wide play in the media, the blogosphere, and even in Congress.  Also today, Fitch Ratings issued a release saying they are asking all mortgage servicers whether they have a robo-signer problem. 

HAMP report: Banks not doing the Job

The taxpayer is being ill-served by the banks we bailed out, the same banks that signed contracts with Treasury to modify eligible mortgages and prevent foreclosures.  The August report on the HAMP program confirms that a homeowner’s chances of negotiating an alternative to foreclosure depend mightily on which company services their mortgage.  On a number of performance measures, Bank of America is falling woefully short of even the poor performance of servicers as a whole.

 For example, roughly half a million homeowners had temporary HAMP modifications canceled, for missing payments, or more likely, due to lost paperwork.  Of those unfortunate families, about 45% overall have been offered an alternative modification option outside of HAMP.  Bank of America, however, offered alternative modifications to fewer than 25% of this group.   Chase, in contrast, offered alternate mods to 60% of the HAMP cancellation victims.

 Similarly, another 600,000 homeowners were rejected for even a temporary HAMP modification.   Of that group, 31% overall were offered alternative modifications, but BofA made such offers to fewer than 12%. 

 BofA has also mastered the art of false hopes.   It has converted only 26% of trial modifications to permanent ones, while servicers as a whole have achieved a rate of over 50% (still terrible, but it’s all relative.)   Over half of BofA’s trial modifications are more than six months old, despite the fact that they are supposed to convert to permanent or be canceled after three months. 

 Bank of America services the former Countrywide portfolio, plagued by predatory loan originations and servicing errors.  If anything, BofA should be working harder than other servicers to prevent foreclosures.  While HAMP certainly has design flaws that hamper its ability to turn around the foreclosure crisis, servicer performance is a serious issue, and some banks are either unwilling or unable to honor their program contracts.

 

 

GMAC Mortgage Halts Tainted Foreclosures

Bloomberg has a report today that GMAC Mortgage is halting foreclosures in 23 states due to unspecified defects.  Apparently this action results from depositions of an employee who admits to signing tens of thousands of summary judgment affidavits and lost note affidavits with no knowledge of whether any of the facts being affirmed are true.  This is another illustration of the need for stronger enforcement of laws and rules governing mortgage servicer conduct, at a point when the stress of foreclosure volumes inevitably leads to shortcuts and worse by mortgage collectors.

Update:  Ally Financial, parent company of GMAC Mortgage, has issued a statement clarifying that it has only stopped some sales of foreclosed homes and evictions, not all foreclosures.  The release is otherwise uninformative.

Mortgage servicers failing borrowers and Treasury

by Alan White

Mortgage servicers, including the big four banks, continue to perform poorly on their contracts with the US Treasury to modify loans and prevent foreclosure losses, much of the latter falling ultimately on taxpayers.  A new survey by ProPublica provides further empirical evidence of the systematic breach of servicer participation agreements.  For example respondents have been waiting an average of 14 months for a modification decision.  Documents had to be submitted an average of six times before a servicer would acknowledge receiving them.  It's time for Treasury to act.