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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Nye Lavalle
All parties in Ellington Credit Fund’s case versus servicer Select Portfolio Servicing (formerly Fairbanks Capital) will meet in New York for their first conference with the District Judge Richard J. Sullivan on 9 May, according to court documents and an attorney involved.
The case, originally filed in Texas in 2007, is related to Ellington’s purchase of residuals from 21 ContiFinancial deals in 2004, with the intent of turning a profit in the clean-up call. Ellington alleges that Select Portfolio misrepresented the value of the residuals.
The case was ordered transferred to New York’s southern district on 21 February. It is an early example of a securities investor filing suit against a servicer based on claims related to the handling, reporting and valuing of subprime loans. Conti is a skeleton of the previous subprime credit crisis in 2000, when several lenders crumbled in the illiquid aftermath of Long Term Capital Management.
As is happening now, fast-moving, sophisticated hedge funds swooped in after the last subprime crisis to pick up what seemed like bargains for bond-hunters. But as the Ellington case suggests, even sophisticated investors – due to apparently unforeseen circumstances – may not have always accurately predicted how their investments would perform. And today the hazards may be far greater, one fixed-income manager noted, because “the current mess has attracted tons of investors and tens of billions of dollars being managed by people with far less experience [than Ellington] in the arcane world of mortgage securitization.”
The residuals were from deals originated by ContiFinancial Corp. and its affiliates and purchased from Conti’s bankruptcy estate, according to the complaint.
But Ellington suffered financial damage in connection with the residuals, based on what it alleged in the complaint was intentionally false information provided by Select Portfolio, which was the servicer. As holder of the residuals – class R certificates – Ellington had the right to exercise a clean-up call under specific circumstances, the complaint said.
Ellington executed three clean-up calls for three of the deals, it said in the complaint. It acted in part based on information Select Portfolio provided about “deficiency balances” that would be collectible from the securitizations, the complaint said. Deficiency balances represent the difference between what a borrower owes a lender and the sale price of a foreclosed property. Select Portfolio “misrepresented to owners [of the class R certificates] the amounts which could be recovered on the deficiency balances upon the exercise of clean-up calls,” the complaint said. “In fact, Fairbanks/SPS knew that the amounts it represented were not attainable.”
The reason the deficiency balances were not collectible, Ellington alleged in the complaint, was that Select Portfolio, in its former incarnation as Fairbanks, had settled legal claims relating to charges of predatory servicing, including charges of collecting improper fees from borrowers. In connection with those settlements, the complaint said, Select Portfolio had “released, failed to preserve, or otherwise bargained away those balances to avoid further predatory servicing litigation.”
Furthermore, Ellington alleged in its complaint, Select Portfolio had inflated the amount of “trapped” servicing advances – or servicing advances that had not been recovered through the sale of foreclosed homes – that the servicer was owed. Ellington “relied on the misrepresentations of Fairbanks/SPS regarding the amounts of the trapped advances. Plaintiffs paid Fairbanks/SPS the amount it represented was the proper trapped advance total” which was over USD 37m, the complaint said. Alleging that Select Portfolio had collected servicing advances that were not legitimate, Ellington noted that “Fairbanks/SPS was only entitled to recoup legitimate advances to true third-party vendors. Instead of doing so, Fairbanks/SPS engaged in illicit self-dealing in order to boost its profits at the expense of the securitizations.” The self-dealing, Ellington alleged, involved Select Portfolio paying servicing advances essentially to itself through what appeared to be several front companies.
In its answer to Ellington’s original complaint, filed in Austin, Texas, Select Portfolio (and its subsidiaries, also named in the suit), responded that Ellington lacked standing to bring the suit. Further, Ellington had not provided enough specific facts to bring the types of claims it was making, the response said. And finally, the venue – in Texas – was improper, given the locations of Ellington and the defendants named, the complaint said. Select Portfolio argued the case should either be dismissed or moved to New York.
Attorney Stephen Lemmon of Brown McCarroll in Austin, representing Ellington, said that “Ellington looks forward to having the case develop through discovery and finding out what explanation the defendants have for the charges through the [alleged] dummy companies and [for their alleged] failure to protect the rights of the investors.”
Citing ongoing litigation, attorney Thomas Yoxhall of Locke Liddell & Sapp in Dallas, representing Select Portfolio and affiliates, declined to comment, other than to say the firm is “vigorously defending” its clients.

by Danielle Reed, New York
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Well that's a name I haven't heard in a while...Boy GOD only knows with the CONTI MORTGAGE Files. This doesn't surprise me at all. When I initially had my former employment with the collection agency they tried to give me some CONTI FILES to collect on.
 
They were a MESS...Good Luck! Why do they even fight and waste more of our money? Wonder if some of the LAWSUITS are from any of the FILES NARS had sitting in their offices when I started. Bet there are many with LOST FILES sitting in NARS.
 
Horrible for the MORTGAGORS they are! Busted pretty much for the same thing as Wells Fargo...U have to LAUGH at them they dont LEARN!
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Anyone know who the NY attorney's are Suing Select Portfolio Servicing in the Ellington case?  Can't find anything online since it was thrown out of the TX Courts to the Southern District of NY!  Read the NY Judge denied the plaintiff's request to stop SPS from destroying doc's. In Jan 2010, met with TX Atty Patty Tomasco.  She was the Atty of record in the Ellington case.  She seemed interested in our case, but once the case went to NY she would not call us back. No assignment of mortgage/dded of trust on our house. Atty for SPS insurer wrote us letter admitting there is NO Legal mortgagee on county records. No one owns our note!  SPS is collecting payments and fees from us illegally!  
Ellington Case # 1:2008CV02437

Did notice that the NY Judge on the SPS case was also the Judge in the Madoff case.  Judge Sullivan in the Southern Dist. of NY.  HOPE!  Hope SPS and it's entire criminal enterprise ends up in jail next to Madoff!  He is in jail, but they aren't!  FTC found fraud on them and let them go Scot free!  FTC refuses to go back after them for violating the FTC agreement in the Curry case!  SPS affected more people than Madoff!  Guess, the rich get special perks, but the avg Joe blow doesn't! All who you know politically isn't it! SAD!
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PS. We are also on Facebook fighting SPS and other pretender lenders at:
Homeowners Against Mortgage Servicing Fraud
Chat with us there too.
Donna
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