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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Mortgage Application Volume Surges
as Rates Fall
16Jan08
Mortgage application volume was up 28.4 percent on a seasonally adjusted
basis for the week ending January 11, the Mortgage Bankers Association
reported today.

The MBA’s seasonally adjusted index of mortgage applications struck
906.4, up from 706.0 a week earlier, its highest point since April 2, 2004.
 
On an unadjusted basis, application volume was up 64.8 percent from the
prior week, one shortened by the New Year’s holiday, and up 39 percent
from the same week a year ago.
 
The refinance share of mortgage activity climbed to 62.7 percent of total
applications, up from 57.7 percent the previous week, while the adjustable-
rate mortgage (ARM) share of activity fell minimally to 9.2 from 9.3
percent of total applications from the previous week.
 
Interest rates continue to fall across the board, with the traditional 30-year
fixed mortgage dipping to 5.62 percent from 5.73 a week earlier.
 
That’s the lowest point since the week ended July 1, 2005, when rates stood
at 5.58 percent, and significantly lower than the 6.19 percent average rate a
year-ago.
 
The 15-year fell to 5.07 percent, down from 5.21 percent, and the one-year
ARM decreased to 5.77 percent from 6.04 percent.
 
“When consumers see an opportunity, no matter how pessimistic they might
be, they take it,” said Doug Duncan, the MBA’s chief economist. “It will
improve the underlying state of the industry and the longer rates stay down,
the more people will take advantage of the opportunity, so that is a good thing.”
 
The MBA’s weekly survey, compiled every week since 1990, covers about
half of all U.S. retail residential mortgage applications.
 
Despite the generally positive numbers, it should be noted that the index only
covers retail originations, which surely have increased as a result of wholesale’s
demise.
 

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Does anyone know if certain mortgage servicers can be stipulated as
"unsatisfactory" on a new mortgage contract?
 
Thanks,
Ed Cage  /  ecagetx@tx.rr.com  /  972-596-4363



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It is very unlikely that a borrower could stipulate that a certain servicer was unsatisfactory. There is no way of knowing how the pooling of loans will go at the time of origination. Generally, originators have little or no control over choosing a servicer.  Once polled, the PSA rules.  

 

Many lenders, including Indy Mac for example, keep most of their good loans and retain the servicing.  Other may do the same.  Countrywide services almost 100% of their loans.   Truth is, the system is not, and will never be, set up to allow a borrower to either select their servicer or request who there servicer(s) will not be.

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Way To Go wrote:

It is very unlikely that a borrower could stipulate that a certain servicer was unsatisfactory. There is no way of knowing how the pooling of loans will go at the time of origination. Generally, originators have little or no control over choosing a servicer.  Once polled, the PSA rules.  

 

Many lenders, including Indy Mac for example, keep most of their good loans and retain the servicing.  Other may do the same.  Countrywide services almost 100% of their loans.   Truth is, the system is not, and will never be, set up to allow a borrower to either select their servicer or request who there servicer(s) will not be.


Which is why the power of the consumer marketplace had to be deliberately thwarted to allow unmitigated freedom for servicers to keep churning bad loans through the system.



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. what do you mean by, "freedom for servicers to keep
churning bad loans through the system?"
Ed

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Joe B
Ed-

     Let me preface my answer with the fact that I do NOT know of anyone that HAS done this successfully. However, as a practical matter, the terms of a loan contract are inherently negotiable. Now, most folks take what they are presented, and generally sign without objection.

     However, I think that given the current landscape, that providing a servicer, or a couple of servicers that are prohibited from servicing your loan would seem like a reasonable request. Now, I would expect the loan company to reject this on its face. However, if the consumer is able, I cannot imagine that they couldn't simply "shop" the loan around until they find the party who would.

     Again, I reiterate that i know of no one who has done this. However, I would think that if done well in advance of closing, with openness between broker/bank and home buyer that it is entirely possible. I also would not make it particularly onerous on the bank/broker, but simply provide the list of non-acceptable servicers, and what should happen if it ends up with them. I think that some acceptable terms and conditions could be reached with some moderate negotiation.

     And, I might add, it is precisely what I intend to do on MY next home purchase!! I will not go through this again! Let's face it, how many of us here, knowing what we do about our servicer NOW, would willingly be "serviced" by them again?

     Again Ed, no promises, but it seems inherently possible, but likely never/rarely done in practice; in my opinion.

JB
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Just a thought, JB. Instead of presenting a "list" of unacceptable servicers I wonder if it might not seem more of a plausible request from a borrower to specifically stipulate that their loan simply not be sold after origination.

We, as MSF victims, know that the vast majority of problems start after a loan is securitized. Instead of trying to dictate which trust your loan can be placed into, why not simply negotiate a blanket "no sale" statement into a loan, thereby potentially narrowing the odds of having to deal with that "list" of unacceptable servicers?

There, of course, will never be any guarantees in this business but from everything I've been told and read the small community banks and credit unions have had a better overall track record of dealing fairly with borrowers than the large "commercial" brokers. I think the biggest challenge, and also the biggest advantage, that we as homeowners/borrowers potentially have is in keeping our loans out of the mainstream of "global finance and investment." Finding someone who already does business that way or someone willing to do business that way would quite possibly make the entire exercise a lot less bumpy.

Any change for my $.02?
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Wowsers.. 4 top notch blue chip responses!
Thanx you guys!
MR ;^D
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Joe B
Mike-

     Yours is probably a more effective solution. I think your option is actually self-selecting. By that I mean that there are a wide number of banks/brokers that sell ALL or nearly all of their loans; they would simply walk away.

     However, as you point out, the smaller, some regional, or other "old-school" banks keep most of theirs in house. Therefore, I think that as a practical matter, a no-sale will simply narrow your source of funding to only those types of sources.

     For those of you unfamiliar, there is a disclosure requirement as to the percentage of loans kept vs. resold. Therefore, it is simply a matter of asking the question until you find the one that says all loans are kept in house. There is a small amount of risk that they could later be bought, and your loan sold subsequent to that sale,  but with Mike's "no sale" provision, that should protect this option. My point is that it is likely not enough to find a bank that says 100% are kept in house; you should also add in the no sale clause!

     Again, I think this is a more reasonable solution. So, Mike, I submit $.01 change to your $.02.

JB

    
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Dang it, now you got me thinking JB. For those serious enough about keeping their loan in one place it may be worth the couple hundred in hourly fees to have an addendum drawn up that can be submitted for negotiation with any lender. That way, everything is in writing (that pesky paper trail), everyone's A is C'd from the get go, and everyone knows the specific terms of the additional request - including any penalties that may be incurred should an "unauthorized" sale take place.

Heck, for that matter, if you want to seem even more "reasonable" instead of completely negating the sale of the loan, try simply asking for a right of refusal prior to any potential sale of the note. It may not fly. Heck, none of this may. But you never know until/unless you ask and at this point, I've seen some rather interesting things fly over the years. To me, it's worth some piece of mind to at least ask the question. If the answer is "No" you either move on or take the next appropriate step to protect yourself as a consumer. But if the answer is "Yes" or at least some variation of "Yes" then you're at least playing on a slightly more level field.
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From a LEGAL standpoint, I AGREE that a borrower and a lender could enter into a binding contractual agreement which CONSTRAINS the sale of servicing.  This would need to be written into BOTH the promissory note and the mortgage, deed of trust or other mortgage security instrument.  Typically any NON-STANDARD language is added to a standard instrument by a RIDER.

HOWEVER, NO MORTGAGE ORIGINATOR WILL EVER AGREE TO SUCH A RIDER FOR THE FOLLOWING REASON:

Mortgage Investors SPECIFY within their Loan Sellers Agreement (FNMA/FHLMC Sellers and Servicers' Agreement, etc.) to originate mortgage loans ONLY using standardized pre-approved instruments.  You can find these instruments at the Fannie Mae and Freddie Mac web sites.  A loan written on a NON-STANDARD instrument is ONLY going to be eligible for sale in the secondary market as a part of a BULK LOAN SALE of other similar non-standard paper and then ONLY with a written legal opinion as to the effect and validity of the non-standard instrument.  A law firm will probably charge $50,000 to $100,000 for such a written opinion for a pool of loans.  This implcitly creates and additional TRANSACTIONAL COST to EVERY SUBSEQUENT SALE of the loan and makes using NON-STANDARD instruments UNECONOMIC.

FNMA and FHLMC make one EXCEPTION to the policy regarding NON-STANDARD instruments.  This involves adding a provision which is segregated within a DETACHABLE RIDER where the provision is BINDING against the borrower, but which is NON-BINDING against the Lender and any subsequent holder, which rider may be then simply IGNORED at the election of the mortgage investor.  FOR EXAMPLE, if a Lender adds a rider containing a PREPAYMENT PENALTY, to which the borrower AGREES, the mortgage investor could elect NOT to enforce the prepayment penalty and a borrower could hardly object.

IF ONE WAS SEEKING TO ADD A RIDER RESTRICTING THE SALE OF SERVICING IT IS CRITICAL THAT THE ORIGINAL UNDERLYING NOTE AND MORTGAGE EXPRESSLY INDICATE THIS ON THE FACE OF THE INSTRUMENT AND THAT EVERY PAGE BE INITIALLED.  OTHERWISE, THE RIDER WILL SIMPLY BE STRIPPED AND DISCARDED LEAVING YOU WITH A PROOF PROBLEM.  ALSO, MOST PROMISSORY NOTES ARE SIGNED ONLY BY THE BORROWER AND MOST MORTGAGES SIGNED ONLY BY THE GRANTOR.  I WOULD RECOMMEND GETTING THE MORTGAGE LENDER TO SIGN ANY SUCH AGREEMENT, AS THIS IS AN AGREEMENT BEING MADE BY THE LENDER.

IN THE END, I CANNOT CONCEIVE THAT ANY LENDER WOULD EVER CONSENT TO THIS ARRANGEMENT, NOT BECAUSE IT IS INHERENTLY UNREASONABLE OR BECAUSE THERE IS ANY REASON FOUNDED IN LAW NOT TO AGREE, BUT RATHER AS A PRACTICAL MATTER BECAUSE AGREEMEN WILL RENDER THE LOAN UNMARKETABLE OR ONLY MARKETABLE AT A DISCOUNT SO STEEP THAT THE MORTGAGE ORIGINATOR CANNOT MAKE ANY MONEY FROM THE SALE!

I ALSO WANT TO EMPHASIZE THAT THIS IS A GOOD IDEA, ED!!  BUT IT IS JUST AN IDEA THAT WILL NEVER FLY IN THE FACE OF SECURITIZATION AND MORTGAGE MARKET REALITIES.  


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