Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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14 Foreclosure Cases Dismissed


Published: November 15, 2007

A federal judge in Ohio has ruled against a longstanding foreclosure practice, potentially creating an obstacle for lenders trying to reclaim properties from troubled borrowers and raising questions about the legal standing of investors in mortgage securities pools.

Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.

The pooling of home loans into securities has been practiced for decades and helped propel real estate prices in recent years as investors sought the higher yields that such mortgage trusts could provide. Some $6.5 trillion of securitized mortgage debt was outstanding at the end of 2006.

But as foreclosures have surged, the complex structure and disparate ownership of mortgage securities have made it harder for borrowers to work out troubled loans, in part because they cannot identify who holds the mortgage notes, consumer advocates say.

Now, the Ohio ruling indicates that the intricacies of the mortgage pools are starting to create problems for lenders as well. Lawyers for troubled homeowners are expected to seize upon the district judge’s opinion as a way to impede foreclosures across the country or force investors to settle with homeowners. And it may encourage judges in other courts to demand more documentation of ownership from lenders trying to foreclose.

The ruling was issued Oct. 31 by Judge Boyko, and relates to 14 foreclosure cases brought by Deutsche Bank National Trust Company. The bank is trustee for securitization pools, issued as recently as June 2006, claiming to hold mortgages underlying the foreclosed properties.

On Oct. 10, Judge Boyko, 53, ordered the lenders’ representative to file copies of loan assignments showing that the lender was indeed the owner of the note and mortgage on each property when the foreclosure was filed. But lawyers for Deutsche Bank supplied documents showing only an intent to convey the rights in the mortgages rather than proof of ownership as of the foreclosure date.

Saying that Deutsche Bank’s arguments of legal standing fell woefully short, the judge wrote: “The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the court to stop them at the gate.”

A spokesman for Deutsche Bank declined to comment on the ruling. But the inability of Deutsche Bank, as trustee for the pools, to produce proof of ownership at the time of the foreclosures will fuel borrowers’ concerns that they are being forced out of their homes by entities that may not even hold the underlying loans.

“This is the miracle of not having securities mapped to the underlying loans,” said Josh Rosner, a specialist in mortgage securities at Graham-Fisher, an independent research firm in New York. “There is no industry repository for mortgage loans. I have heard of instances where the same loan is in two or three pools.”

The process of putting together a mortgage pool begins when a home loan is originated by a bank or mortgage lender. That loan is typically sold to a Wall Street firm that pools it with thousands of others. Once a pool is packaged, it is sold to investors in different slices, based on risk. A trustee bank oversees the pool’s operations, ensuring that payments made by borrowers go to the appropriate investors.

Lawyers who represent troubled borrowers complain that trustees overseeing home loan pools often do not produce proof, usually in the form of a mortgage note, that their investors own a foreclosed property. And a recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership. Such proof gives a creditor standing to foreclose against a borrower and is required by law.

“The big issue in all these cases, whether we are dealing with a bankruptcy court, a state court or a federal court, is who really owns the mortgage note, and that is allegedly what they securitized,” said O. Max Gardner III, a lawyer who represents borrowers in foreclosure in Shelby, N.C. “A collateral question is, has that mortgage note really been transferred and assigned to the securitization trust? If not, then they really don’t have standing. It’s Law School 101.”

When a loan goes into a securitization, the mortgage note is not sent to the trust. Instead it shows up as a data transfer with the physical note being kept at a separate document repository company. Such practices keep the process fast and cheap.

Because most foreclosures proceed without challenges from borrowers, few judges have forced trustees like Deutsche Bank and Bank of New York to prove ownership by producing a mortgage note in each case.

Borrower advocates cheered Judge Boyko’s ruling.

The plaintiff’s argument that “‘Judge, you just don’t understand how things work,’” the judge wrote, “reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.” The cases could be filed again in state court, however.

April Charney, a consumer lawyer at Jacksonville Area Legal Aid in Florida, who has been practicing foreclosure law since the late 1980s, said she rarely sees proof of ownership in cases involving securitization trusts. Her group has 30 to 50 such cases and not one of the lenders’ representatives has produced proof of ownership predating the foreclosure action.

“We see a trend toward judges having enough of this trampling of the rules and procedure and care and reverence with which lawyers and litigants and participants in the judicial process should comply,” Ms. Charney said. “Hopefully this will convince everybody that the time to work out these home loans is now.”

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George Burns

Our courts and legal system have failed us. These cases were in 2007 there were others earlier covering the same and other related issues, yet here we  are at the end of 2010 arguing as if this is all so new and hard to believe.

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I put it there so we can compare what happened and then

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November 24th, 2010 · No Comments · Foreclosure

It’s not just the opinion of foreclosure defense attorneys and advocates…

WASHINGTON – An Obama administration official says a preliminary investigation into the foreclosure process has found inexcusable breakdowns in the basic controls mortgage lenders should have been using.

Assistant Treasury Secretary Michael Barr said Tuesday that a foreclosure task force composed of 11 federal agencies had found serious problems in the way home foreclosures were being handled.

Barr told a new financial stability council headed by Treasury Secretary Timothy Geithner that the task force hoped to have a set of recommended improvements ready by late January.

Barr said the goal of the task force was to hold banks accountable for fixing the problems that have been found and making sure that individuals who have been harmed are given a way to seek redress.

Bar said the investigation had found “widespread and, in our judgment, inexcusable breakdowns in basic controls. The problems must be fixed.”

Barr was delivered his comments before the Financial Stability Oversight Council. The group of top federal officials including Geithner and Federal Reserve Chairman Ben Bernanke was holding its second meeting.

The panel was created by the Dodd-Frank legislation passed by Congress last summer in an effort to fix flaws in current government regulation that were exposed by the financial crisis that struck with force two years ago.

Barr said that the 11 federal agencies were coordinating their investigation with state regulators across the country. He said the federal task force hoped to report back to the stability council at its January meeting.

Major financial institutions are being reviewed for problems across a wide range of issues in foreclosure processing,” Barr said.

Members of the stability council heard Barr’s presentation but made no comments during the portion of the group’s meeting that was open to the public.

The foreclosure crisis followed a housing boom that had been fueled by borrowers being allowed to take out risky loans with variable interest rates that they could not afford.

Several major lenders temporarily suspended their foreclosures to review thousands of cases for improper handling. Attorney generals in all 50 states have also launched a joint investigation into the issue.

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The Equitable One
What a bind.

I want our elected and appointed representatives, regulators, etc., to become involved. But their involvement is also rather frightening.

Weren't most of them on the job as all of this was developing? Weren't there already statutes and regulations in place that prohibited a lot of what occurred? Isn't there law on the books that mandates actions completely antithetical to a bailout (see So if they missed it the first time what evidence is there to suggest they will catch any of it this time? If they already disregard laws that prohibit passing out money like lollipops is there any reason to believe they will act in our interests this time?

The language Barr uses: "...the problems must be fixed" doesn't fill me with confidence. I'd prefer to hear something more like "We will do a thorough and extensive investigation and if we find any violations of statute or regulation we will file charges and prosecute."

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NEW YORK, Sept. 12, 2009

N.Y. Judge Takes on Foreclosures

Arthur Schack Looks beyond the Routine Process for a Chance to Help the Little Guy

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  • Play CBS Video Video Fighting Foreclosure

    Continuous housing foreclosures have made this the deepest housing crisis since the great depression. As Seth Doane reports, one judge has become determined to keep families in their houses.

    • Judge Arthur Schack, who has rejected more than 40 of the 100-plus foreclosure filings that have crossed his desk in the last two years.

      Judge Arthur Schack, who has rejected more than 40 of the 100-plus foreclosure filings that have crossed his desk in the last two years.  (CBS)

    (CBS)  After struggling to pay a home equity loan, Pat Antrobus was facing foreclosure, and thought she'd be forced from her Brooklyn, N.Y. neighborhood and the only home she's known, reports CBS News correspondent Seth Doane.

    "I could of taken out stock in Hershey's, Nestlé's and Haagen-Dazs," Antrobus said. "I was so stressed."

    Though she tried to negotiate with her bank several times, relief came from a rather unlikely knight in shining armor: Judge Arthur Schack of the Kings County Supreme Court.

    "My role is to try to do justice, so, if the little guy can stay in his house, that's great," Schack said.

    Lenders need judicial approval to foreclose on homeowners in New York. It's usually a routine process, though not in these chambers.

    As foreclosure filings have mounted, so have mistakes. It reminds Judge Schack of his days as a social studies teacher.

    "It's like students would ask me if spelling counts on a test," Schack said.

    He's rejected more than 40 of the 100-plus foreclosure filings that have crossed his desk in the last two years because of what some call "small" errors in the bank's paperwork, from incorrect dates and signatures to unclear proof of ownership.

    "About half of the cases in the last two years you've thrown out for what some would describe as a procedural - small issue, " Doane said.

    "I don't think it's a small issue when somebody lives in a house and you're going to disrupt their lives and take away their home," Schack said.

    Antrobus agrees.

    "I felt that, you know, OK - here's somebody who is actually doing something because he knows it is right - and who cares about little people - who he doesn't even know," Antrobus said.

    "Do you see yourself on a personal mission to protect the little guy?" Doane asked.

    "No, I see myself on a personal mission to do justice, which means if the little guy wins he wins," Schack said. "If he loses he loses but at least he gets a fair shot."

    And he does it with flair, sometimes quoting Shakespeare, or in a decision he likens a lender to Mr. Potter, the heartless banker in "It's a Wonderful Life."

    Schack said the his writing is so descriptive and flowery is to gain attention.

    It certainly got Antrobus' attention.

    "I think of judges as mean guys in black robes - or mean ladies in black robes with gavels dispensing justice," she said. "But I never thought the justice was going to be for me."

    The judge's decision helped Antrobus keep both her faith in the system - and her childhood home.
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    Progress is being made. Next step:

    A recent case (November 19, 2010) out of the Court of Appeals of Indiana, Florence R. Lacy-McKinney v. Taylor, Bean & Whitaker Mortgage Corp.

    Available at:

    Here is an editable copy of the opinion: 
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    All the rules have changed in the last couple of months. Lending banks are now being held accountable for the trap they set, borrowing money they didn't themselves have, while using loose and illegal practices in the process. The massive lawsuit against Wells Fargo / Wachovia, Indymac / OneWest bank, Citibank, Bank of America, JP Morgan Chase, GMAC..............can actually, not only put a stop to your foreclosure, but also pause your house payments with no loss to you............

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    What should I do if, after sending a QWR to the servicer, they reply only a small
    percentage of the QWR?      Or lets say that they evade most of the questions
    with legal jargon?

    What is the next step in this case?

    Also, is this true that there is a new law where the service must repond to a QWR
    (to acknowlegdge 5 days?   and (to repond 30 days?

    Your feedback will be greatly appreciated.           

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