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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Looks like there was a failsafe mechanism built in after all....I think there will soon be a stampede for servicers and others to admit that they did indeed have "errors" in the accounts and their "professional *gag* services".

No mismanagement or fraud here, just mistakes. *SIGH*

August 20, 2007

US legal battles over mortgage crisis could cost London insurers

London insurers face the prospect of claims worth hundreds of millions of pounds arising from the sub-prime mortgages debacle in the United States, as class-action lawsuits begin to pour into American courts.

At least ten claims have been lodged against mortgage providers in the US, claiming that the banks hid from shareholders the true risks posed by the home loans that they had sold to people with bad credit histories. Ratings agencies and investment banks face litigation from investors who bought asset-backed securities based on the bad loans, and lawyers and accountants who advised on the creation and purchase of the securities are in the firing line as well.

The companies being hit by multimillion-dollar legal actions are expected to claim on their errors and omissions (E&O) and directors’ and officers’ (D&O) insurance to cover the cost of their defence.

An underwriter for a leading insurer said: “There’s D&O and E&O exposure all over the place. Wherever someone had their fingers in the pie, someone’s going to get sued.”

Jonathan Davies, a partner at Reynolds Porter Chamberlain, the law firm, said: “While much of the legal action that will result in insurance claims is likely to be launched in the US, it’s likely to be the London insurance market that has to pick up the lion’s share of the bill.”

Marsh, the world’s biggest insurance broker, said that already it had received notifications of claims from its clients, some of whom had bought cover in London. Siobhan O’Brien, a senior vice-president at Marsh’s financial institutions practice, said that insurers would not know the full extent of their losses until American financial regulators had finished their investigations and stock market fluctuations had calmed.

“When it starts levelling out, that’s when we’ll really see the [law] suits coming in,” Ms O’Brien said. “The tentacles of this are very far-reaching.”

E&O covers companies against claims arising from errors in their professional services. The insurance could be used by funds that bought securitised sub-prime mortgages or by lawyers who advised clients to buy the securities. D&O covers executives against claims that they have mismanaged a company. The cover could be used by the managers of retail banks that sold sub-prime mortgages to bad debtors. E&O and D&O insurance covers legal costs and damages payments but not penalties levied by regulators.

Countrywide Financial, America’s biggest mortgage lender, was hit by a securities class-action lawsuit in California on August 15. It alleges that the bank and “certain of its officers and directors violated federal securities laws by making false and misleading statements regarding the changing quality of the company’s mortgage loan portfolio”. On Friday Countrywide was forced to borrow $11.5 billion (£5.8 billion) from other banks to ensure that it could continue in business.

An underwriter said that London insurers were more likely to receive E&O claims. “D&O will stay mainly in the US,” he said.

Ms O’Brien said that the cost of cover had fallen by 10 per cent to 15 per cent in the first half, but gave warning that companies renewing their policies should expect close scrutiny of their involvement in the sub-prime sector.
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AG, you didn't really think that the $55M that Fairbanks/SPS voluntarily put up for USA/Curry actually came out of their pocket did you? There's D&P and E&P coverage on every trust out there if I'm not mistaken. It's part of the SEC disclosures. I believe Fairbanks/SPS usually opts for $38M/$10M policies...

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Yes, of course they will try to get insurance to pay.

That is why you find the phrase no admission of guilt.

You can not be insured for a criminal act.

Here's hoping their carriers deny coverage.  Let them pay for their own defense and the pay the damages as they should be.

If they go out of business and have to go to prison, yippee.

A class action lawsuit does not benefit the borrowers and likely won't
benefit the investors for that matter either.

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Of course I never thought that Fairbanks or Basmajian gave up ANYTHING willingly. These settlements are not designed to harm the fat cats. The system is rigged to protect them. If it weren't Fairbanks would never have been allowed to morph into SPS and continue its reign of terror. Speaking of Basmajian, anyone here know what that clown is up to lately?

Just thought some folks would find it interesting how they have spread the risk. And it might be amusing to watch them paint themselves into a corner and start having to admit "ERRORS" in order to collect the insurance.

Once (if) they start admitting "errors" it will add a whole new tier of entertainment value to various lawsuits present and future. I cannot see how they can win either way. They can continue to stubbornly insist that they are always right (after all, most judges believe it already) and forfeit the insurance. And go under due to dried up revenue streams because their chum feeders are dying off. (All Ponzis need constant infusions of new

Or they can admit "errors" which will open up a huge can of worms for them and collect. Then the plaintiffs will collect from their insurance proceeds if there is any justice left at all in America. And they will go under.

My popcorn popper has died from all the activity lately. I anxiously await the deaths of the servicing companies. They will have to jump off the fence soon, right or left. As near as I can see, doom awaits them either way. I fully acknowledge that the architects of the scams will probably walk away and retire in the Cayman Islands to booze it up and party their lives away, but they will be going in disgrace. I mean, how many ambassadorships can be granted before they are all filled?

But, I am certainly open to corrections to my opinions expressed here. Perhaps I have oversimplified the situation. I cannot see how they can survive this. Their positions are being eliminated. Sound lenders do not need servicers.

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Some do get jail time but not enough of them get caught......
Would be interested in knowing who were their servicers......
It all makes me really wonder if purported hedge fund losses are just that or being conveniently shipped offshore with some set aside for rainy day defense funds, if not transformed into fancy cars, yachts and homes in the Hamptons along the way? 
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Hello again!, several months ago I addressed these issues of E&O and D&O Claims, relating to insurance claims. 
1) D&O excludes defense or coverage for "Fraud".  This will be the number one reason for the Lloyd's group to "Deny" coverage to Officers and Directors.   Most likely they will first get a "Reservation of rights" letter from the insurance company, then later after a bit of "Discover" deny coverage due to "Fraud".
2) E&O Claims again, are not covered by "Fraud" the same as the above will most likely occur.
The major cost will be supplying a defense until these determinations are made by the Insurance Companies, and most likely be done in conjunction with several companies at a time.
The real time losers here, are going to be companies like MGIC RADIAN, etc.  They do not have enough reserves to cover all the liablities as they exist today! Yet alone 3-5 years out.  The normal "Tail" for insurance claims is figured in 7 year cycles, or at least it used to have been, Depending on the type of coverage the E&O and D&O policies are, I don't think there are any more "Occurrence" form E&O policies being sold in that market, I believe only "Claims Made Forms" currently exist.  This gives Lloyd's and other insurance companies left facing only "limited" exposure, unless a "notice of circumstance" or "Incident" report was made to the insurance company during the policy period, or specified time frame after coverage lapsed. 
When I told Larry Litton that I was going to bring class action suits against his company the likes no one had ever seen before I met it.  God I hope Larry and his lawyers still have that tape!  I do so want to get that quote exactly right I made to him.  But I must confess, when I made it, I really did not know the size, scope, and magnitude of the investigation and where it was going to take me today.  In reality, the litigation is just beginning here, there are players like me, and hundreds and thousands of "bit" players that were defrauded, that are fighting in courts for ourselves first, now investor groups are beginning to fight from the top level down, as they also were defrauded, so the E&O suits, or Malpractice litigation, lawyers that acted on behalf of companies of Litton Loan, will face their own exposure, for either fraud, or mal-practice,  in the past four years we have seen the litigation grow at quantum leaps, the costs, the true costs of litigation defense for these companies is unknown, and out of control, and the Officers and Directors know it.  In the end, they (Officers & Directors) like in Enron, and the Savings and Loan Crisis, can and will be held "Personally" responsible, This is why many have formed "Trusts" and put them in their wife's name, or other names, in insure the preservation of their personal wealth.  I can name many, whom I have already named here on this site that have developed trusts in their wife's or children's name to protect themselves from these vary claims later.
All I would like to find, is the "Names" for the forced placed insurance policies Litton Loan, purchased from SOUTH WEST BUSINESS CORPORATON and where did the premium money go they received,  and that they never paid any "SURPLUS LINES TAX'S" on go to! And why the policy did not name the "home owner" as a named insured on the policy after charging them excessive premiums to keep them in a "Default" status, in order for them to foreclose on.  Naming only Litton Loan and CBASS as named insureds under the policy! 
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I'd sure like to see somebody write to the Litton's and or any of the other
servicers demanding to know their errors and omissions carrier as well as their D&O carriers and when they decline or just don't answer the letter?

File suit and get discovery going for real.

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