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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arkygirl

This is getting interesting.  A judge in U.S. District Court, Southern District of California, has issued an order that may just answer a few prayers of many homeowners.  Here’s what happened…

A San Diego homeowner, by the name of Ademar Marques, was applying for a loan modification, and, although it might be hard for many readers to believe, his servicer, Wells Fargo, dba, America’s Servicing Company, wasn’t being very nice about it, or even cooperating at all.  It seems that Wells Fargo wanted to just skip all of those messy and time-consuming formalities required when considering someone for a loan modification, and just jump straight into foreclosure.

Mr. Marques filed a lawsuit against Wells Fargo’s America’s Servicing Company because he read about the Home Affordable Modification Program (“HAMP”) and the program’s guidelines said that his servicer was “REQUIRED” to screen him for a hardship, and consider him for a loan modification.  He also alleged that he qualified for the loan modification program based on all of the published guidelines, and that his servicer, a participating servicer in HAMP never said that his loan could not be modified, they just refused to modify it, and instituted foreclosure proceedings.

Well, I never!  The gall of some servicers.  Have you ever heard of such a thing?  Actually, I have.  But not more than 30-40 times a day for the last two years.

According to the court order

“On or about April 13, 2009 Defendant entered into the Commitment to Purchase Financial Instrument and Servicer Participation Agreement for the Home Affordable Modification Program under the Emergency Economic Stabilization Act of 2008 with Federal National Mortgage Association (“Fannie Mae”) and agreed to perform certain loan modification and foreclosure prevention services for eligible loans.”

“Plaintiff filed a complaint in San Diego County Superior Court alleging breach of the Agreement on the theory that he is a third-party beneficiary under California Civil Code Section 1559, that his loan was eligible for modification, Defendant refused to offer to modify it under the Agreement, but instead commenced foreclosure proceedings.”

Based on breach of contract, Mr. Marques also alleged that Wells Fargo’s Servicer violated the Unfair Competition Law (Cal. Bus. & Prof Code § 17200 et seq. (“UCL”) and he sought damages and declaratory judgment that Wells does not have the right to foreclose on the Property.

So, the first thing Wells Fargo did was to argue that the venue was improper.  Wells Fargo said that the complaint should either be dismissed, or transferred to the District of Colombia… and I’m pretty sure that’s the D.C. in Washington D.C.  Now, I don’t know about you, but I found that nothing short of hysterical.  Mr. Marques should travel back and forth to Washington D.C. in order to sue Wells Fargo?  Where’s that damn stagecoach from anyway… D.C.?

It’s called a “forum selection clause,” and the judge wasn’t buying any of it, explaining in his order:

“Plaintiff argues that enforcing the clause would be unreasonable because it would effectively deprive him of his day in court. The court agrees. That Plaintiff is financially distressed is obvious from the nature of this action and Defendant does not dispute it. Where a party’s financial circumstance would effectively preclude him from a day in court, enforcing the forum selection clause would be unreasonable.  Defendant’s motion to dismiss or transfer for improper venue is therefore DENIED.”


So… a swing and a miss!  Nice try Wells Fargo, but at the bottom of the first inning, it’s one up and one down.

Next Wells Fargo tried to argue that the complaint should be dismissed pursuant to something called Rule 12(b)(6), because:

“… it failed to state a claim pursuant to motion tests the sufficiency of the complaint.  Dismissal is warranted under where the complaint lacks a cognizable legal theory.”

Apparently, Rule 12(b)(6) authorizes a court to “dismiss a claim on the basis of a dispositive issue of law”.  Or, the same rule also states that the court may dismiss a complaint if it presents a cognizable legal theory but fails to “plead essential facts under that theory”.

(It’s strike two, no runners on base as we head into the third inning, even though, as you’ll see at the end of this article, Mr. Marques, who was not represented by counsel, must amend his complaint in order to return to his day in court.)

Here’s where it gets really good…

Marques claimed that he could sue Wells Fargo for breach of contract, referring to the contract between the federal government and the HAMP participating servicers, because he argued that he… and in fact all eligible homeowners in this country, are “intended third party beneficiaries” to that contract.

Wells Fargo’s lawyers said a bunch of stuff, but to paraphrase they basically said, “Noooooooooooooooo!”

The judge, M. James Lorenz, had quite a bit to say, starting with establishing that Federal law controls the interpretation of a contract entered into pursuant to federal law and to which the United States is a party, which took me by surprise as it makes total sense.

“The Agreement was entered into between Defendant and Fannie Mae in its capacity as a financial agent of the United States.  Furthermore, the Agreement provides that it “shall be governed by and construed under Federal law and not the law of any state or locality, without reference to or application of the conflicts of law principles. Whether Plaintiff is a third-party beneficiary is therefore determined by federal law.”

And then he added the following key sentence:

“Under federal common law only an intended beneficiary may enforce a contract as a third-party beneficiary:”

Are you digging this?  Best I can make out, if you’re the intended third party beneficiary to a federal contract you can sue for breach of contract.  So, if it says in the contract that the servicer “MUST” do something, and that servicer doesn’t do it… you the borrower may be able to sue the servicer for breaching that contract.

More here:

http://mandelman.ml-implode.com/2010/08/federal-court-borrower-is-intended-3rd-party-beneficiary-of-hamp-contract-%E2%80%93-homeowners-can-sue-for-breach/
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Will someone please provide a link to the Judge's opinion in Marques?


More comments:

Remember that there is already a Due Process right to participate in HAMP, under Huxtable v. Geithner (see the judge's opinion online).

So Marques just buttresses that right. But what ARE the dimensions of the right? That is what this comment explores.

The important thing now is to establish what the right IS: the right is to in FACT minimize the risk of housing loss.

And what in FACT is the minimization of the risk of housing loss? According to HAMP, that is 31% of gross income. But that is the bald assertion of the Government. That is not in FACT the minimization of the risk of housing loss, and you have the Fifth Amendment Due Process right to litigate the FACT.

The government itself determined, many decades ago, the minimization of risk of housing loss. That is 5% of takehome pay.

Then the government starting playing around with the figures, and now the minimization of the risk of housing loss, in the government's opinion, is 31%.

That is absolute rubbish, and now that you have the Fifth Amendment Due Process right to participate in HAMP, you have the right to what in FACT is the minimization of the risk of housing loss.

In short, tell your stupid lawyer to litigate what is in FACT the minimization of the risk of housing loss.

Then your modification will NEVER fail.

Remember also what is going on. Since you have the Fifth Amendment Due Process to what is in FACT the minimization of the risk of housing loss (by the way, renters are also third party beneficiaries to HAMP mortgages where the homeowner rents), Lindsey v. Normet (which said that housing enjoyed only "minimum" scrutiny), is overruled. This is the Constitutional revolution, make no mistake about it. This has opened the door to getting rid of the health and welfare regime we have been saddled with ever since West Coast Hotel v. Parrish. We now have a new Constitutional regime, which stands for the proposition, not that policy is rationally related to a legitimate government purpose (that's "minimum" scrutiny), but rather, that policy maintains important facts. HAMP is the policy that housing is an important fact (it is an unchanging fact of human experience, a la West Virginia v. Barnette).

It's over. We now live in the "absolute rights" regime, rather than in a "health and welfare" regime. It's the Federal Government which has stumbled into this new regime. It never would have allowed it if it could have avoided it. But it couldn't avoid it. HAMP shows this.

Now take advantage of the new regime. Push it to the max.

Putting things in the lingo of the old "scrutiny" regime, housing now enjoys strict scrutiny. That is, the policy of the Government is now narrowly tailored to minimize the risk of housing loss. Enforce that policy and you will never lose your housing again. Again, what in FACT is minimization? That is what you are to litigate.

Remember, you now have an individually enforceable right to housing, whether you are a homeowner or a renter. The policy is to minimize the risk of housing loss, not to minimize the risk of housing loss by HOMEOWNERS. It is to minimize the risk of housing loss, PERIOD.

Nice eh?

And also, since the policy is now to minimize the risk of housing loss--and not just with respect to participation in HAMP--the IRS can't tax or withhold in any way which increases the risk of housing loss.  Litigate that, too.

We shall overcome.
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arkygirl

Remember the San Diego homeowner, Ademar Marques, who was applying for a loan modification with his servicer (Wells Fargo, dba, America’s Servicing Company, which for the purposes of this article, we will refer to as “the Hampster”) who wasn’t cooperating at all.  Wells Fargo wanted to just skip all of those messy and time-consuming formalities required when considering someone for a loan modification, and just jump straight to foreclosure.

So, Mr. Marques filed a lawsuit against Wells Fargo’s Hampster because he had read about the Home Affordable Modification Program (“HAMP”) and the program’s guidelines said that his servicer was “REQUIRED” to screen him for a hardship, and consider him for a loan modification.  He also alleged that he qualified for the loan modification program based on all of the published guidelines, and that his servicer, a participating servicer in HAMP never said that his loan could not be modified, they just refused to modify it, and instituted foreclosure proceedings.

Marques won, then he lost, but now he has won again. Case should proceed to trial.....

An update on this case:

http://www.scribd.com/doc/56199785/Marques-vs-Wells-Fargo-LIVES

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