FedUpUSA

Hoh hoh hoh… read this one carefully folks.

SAN DIEGO (CN) – A La Jolla man can keep his home for now, after a federal judge granted his motion for a temporary restraining order blocking Washington Mutual and JP Morgan from foreclosing on his house because the banks misled him into defaulting on his mortgage.

Kaveh Khast claimed the banks instructed him to stop making his mortgage payments so he could qualify for a loan modification.

Yep.

HAMP was a scam and a fraud.  It was designed to induce people to default on their loans on purpose in order to get a modification.

But the modification was “optional” (helped along in many cases by intentionally losing documents sent through certified mail!) and as such the banks did exactly that.

Now we have judges – finally – pushing back and recognizing the inherent fraud in that scam.

A scam hatched by The Federal Government and Treasury in collusion with the banks.

I think there’s a law against this somewhere….. will it be enforced? 

Very interesting hearing.  But the most-interesting part of it is right here….

The largest and most complex harm that may exist with the loans in default or foreclosure today is that the paperwork for the loans was not transferred correctly. I emphasize that what constitutes a correct transfer is a gray area; we need more direction from courts and legislatures on this subject. But there are plausible legal claims that the transfers of the notes and mortgages were not effective to give the trust full enforcement rights.

Uh, yep.  That’s the short version of where the problem lies…..

And it only gets better….

The implications of problems with transfer are serious. If the trust does not have the loan, homeowners may have been making payments to the wrong party. If the trust does not have the note or mortgage, it may not have standing to foreclose or legal authority to negotiate a loan modification. To the extent that these transfers are being completed retroactively, it raises issues about honesty in creating and dating the assignments/transfers and about what parties can do, if anything, if an entity in the securitization chain, such as Lehman Brothers or New Century, is no longer in existence. Moreover, retroactive transfers may violate the terms of the trust, which often prohibit the addition of new assets, or may cause the trust to lose its REMIC status, a favorable treatment under the Internal Revenue Code. Chain of title problems have the potential to expose the banks to investor lawsuits and to hinder their legal authority to foreclose or even to do loss mitigation.

And you thought that was it?  Oh no….

Another type of lawsuit risk is that consumers are able to sue the current holder of their note for violations that occurred at origination. Normally, these complaints fail because the holder of the note is thought to be a “holder in due course,” a person that receives protection from most of the claims that someone could bring against the originator of the note. However, if the notes do not meet the requirements of negotiable instruments, there cannot be a holder in due course. The person with the note merely is the possessor “bearer paper,” and can be sued for all wrongs associated with that note contract.

Now do you understand why nobody wants to come forward with the paper?  Well gee, what if the Trusts or worse servicers wind up with successor liability for the wrongs committed by the LENDERS?  (The trustees tend not to have much money – the servicers, on the other hand, are all the big banks…. oi!)

Finally, I want to share with the Panel that the lawyers that I have met over years of my research on mortgage servicing—both creditor lawyers and debtor lawyers—have nearly universally expressed that they believe a very large number (perhaps virtually all) securitized loans made in the boom period in the mid-2000s contain serious paperwork flaws, did not meet underwriting or other requirements of the trust, and have not been serviced properly as to default and foreclosure.

Oh, it’s not “just some paperwork” eh?  Yeah.

The second type of lawsuit that seems certain to follow the exposure of the flawed foreclosure procedure is a claim by investors that problems at loan origination, including a lack of paperwork to support a valid foreclosure, or mortgage servicing mishaps have increased their losses. These suits most obviously will seek to force the banks to “buy back” or “repurchase” loans that were improperly placed into a particular trust for securitization or were improperly originated. Investors could also argue for money damages for lost revenue stream or breach of fiduciary duty by the trust or the servicer to exercise good judgment in favor of in investors’ interests. These suits could be incredibly expensive for banks, requiring the payments of large claims to make investors whole and to satisfy the plaintiffs’ attorneys who will bring such cases.

Yep.  And those suits are just getting started.

But America does not have to continue in a “crisis.” We do not have to tolerate abuse of the legal system, systematic errors, bloated fees, and chaos in the housing and financial sector.

THANK YOU.

Now, let’s see the law come in and do the right thing.

We’re well beyond the point where this should have occurred, but all good movements start with one step.

And here’s the money quote:

If you don’t have time for three hours of testimony and questioning, you only need to listen to the this short little clip to “get it.”

Still think this is a

eh?

Ok.

Bestaluck on that.

Well, ok, maybe not quite that explicit, but….

Feb. 25 (Bloomberg) – The Obama administration may expand efforts to ease the housing crisis by banning all foreclosures on home loans unless they have been screened and rejected by the government’s Home Affordable Modification Program.

The proposal, reviewed by lenders last week on a White House conference call, “prohibits referral to foreclosure until borrower is evaluated and found ineligible for HAMP or reasonable contact efforts have failed,” according to a Treasury Department document outlining the plan.

Contract rights don’t matter, law doesn’t matter, we’ll just ignore all of that pesky stuff when we don’t like it.

Should this come to pass the obvious thing for everyone in this country who is underwater to do is to default.  On purpose.  The resulting flood of defaults will bury the banks with the HAMP “review” requirement for literal years, allowing you to stay in a free house for that amount of time.

During that time you can save a lot of money (your entire mortgage payment) or live high on the hog on the money you would otherwise send to the bank.

Of course you should consult with counsel before doing this, but this sort of change, if Obama actually does it, should be expected to provoke exactly that response.

If I was underwater on my house and had a non-recourse loan, the day this went into effect I’d burn the payment book and send a picture of it on fire to the bank along with a photograph of my ass bearing a hand-scrawled “kiss it!”

(Page 2 of 2)From its inception, the Obama plan has drawn criticism for failing to compel banks to write down the size of outstanding mortgage balances, which would restore equity for underwater borrowers, giving them greater incentive to make payments. A vast majority of modifications merely decrease monthly payments by lowering the interest rate. 

 “We want to overwhelm this problem,” he said. “If we do go back into recession, it will be very difficult to get out.”

 Under the current program, the government provides cash incentives to mortgage companies that lower monthly payments for borrowers facing hardships. The Treasury Department set a goal of three to four million permanent loan modifications by 2012.

 “That’s overly optimistic at this stage,” said Richard H. Neiman, the superintendent of banks for New York State and an appointee to the Congressional Oversight Panel, a body created to keep tabs on taxpayer bailout funds. “There’s a great deal of frustration and disappointment.”

 As of mid-December, some 759,000 homeowners had received loan modifications on a trial basis typically lasting three to five months. But only about 31,000 had received permanent modifications — a step that requires borrowers to make timely trial payments and submit paperwork verifying their financial situation.

 The government has pressured mortgage companies to move faster. Still, it argues that trial modifications are themselves a considerable help.

 “Almost three-quarters of a million Americans now are benefiting from modification programs that reduce their monthly payments dramatically, on average $550 a month,” Treasury Secretary Timothy F. Geithner said last month at a hearing before the Congressional Oversight Panel. “That is a meaningful amount of support.”

 But mortgage experts and lawyers who represent borrowers facing foreclosure argue that recipients of trial loan modifications often wind up worse off.

 In Lakeland, Fla., Jaimie S. Smith, 29, called her mortgage company, then Washington Mutual, in October 2008, when she realized she would get a smaller bonus from her employer, a furniture company, threatening her ability to continue the $1,250 monthly mortgage payments on her three-bedroom house.

 In April, Chase, which had taken over Washington Mutual, lowered her payment to $1,033.62 in a trial that was supposed to last three months.

 Ms. Smith made all three payments on time and submitted required documents, Chase confirms. She called the bank almost weekly to inquire about a permanent loan modification. Each time, she says, Chase told her to continue making trial payments and await word on a permanent modification.

 Then, in October, a startling legal notice arrived in the mail: Chase had foreclosed on her house and sold it at auction for $100. (The purchaser? Chase.)

 “I cried,” she said. “I was hysterical. I bawled my eyes out.”

 Later that week came another letter from Chase: “Congratulations on qualifying for a Making Home Affordable loan modification!”

 When Ms. Smith frantically called the bank to try to overturn the sale, she was told that the house was no longer hers. Chase would not tell her how long she could remain there, she says. She feared the sheriff would show up at her door with eviction papers, or that she would return home to find her belongings piled on the curb. So Ms. Smith anxiously set about looking for a new place to live.

 She had been planning to continue an online graduate school program in supply chain management, and she had about $4,000 in borrowed funds to pay tuition. She scrapped her studies and used the money to pay the security deposit and first month’s rent on an apartment.

 Later, she hired a lawyer, who is seeking compensation from Chase. A judge later vacated the sale. Chase is still offering to make her loan modification permanent, but Ms. Smith has already moved out and is conflicted about what to do.

 “I could have just walked away,” said Ms. Smith. “If they had said, ‘We can’t work with you,’ I’d have said: ‘What are my options? Short sale?’ None of this would have happened. God knows, I never would have wanted to go through this. I’d still be in grad school. I would not have paid all that money to them. I could have saved that money.”

 A Chase spokeswoman, Christine Holevas, confirmed that the bank mistakenly foreclosed on Ms. Smith’s house and sold it at the same time it was extending the loan modification offer.

 “There was a systems glitch,” Ms. Holevas said. “We are sorry that an error happened. We’re trying very hard to do what we can to keep folks in their homes. We are dealing with many, many individuals.”

 Many borrowers complain they were told by mortgage companies their credit would not be damaged by accepting a loan modification, only to discover otherwise.

 In a telephone conference with reporters, Jack Schakett, Bank of America’s credit loss mitigation executive, confirmed that even borrowers who were current before agreeing to loan modifications and who then made timely payments were reported to credit rating agencies as making only partial payments.

 The biggest source of concern remains the growing numbers of underwater borrowers — now about one-third of all American homeowners with mortgages, according to Economy.com. The Obama administration clearly grasped the threat as it created its program, yet opted not to focus on writing down loan balances.

 “This is a conscious choice we made, not to start with principal reduction,” Mr. Geithner told the Congressional Oversight Panel. “We thought it would be dramatically more expensive for the American taxpayer, harder to justify, create much greater risk of unfairness.”

Mr. Geithner’s explanation did not satisfy the panel’s chairwoman, Elizabeth Warren. 

“Are we creating a program in which we’re talking about potentially spending $75 billion to try to modify people into mortgages that will reduce the number of foreclosures in the short term, but just kick the can down the road?” she asked, raising the prospect “that we’ll be looking at an economy with elevated mortgage foreclosures not just for a year or two, but for many years. How do you deal with that problem, Mr. Secretary?”A good question, Mr. Geithner conceded.