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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LaSalle Bank, N.A. v Shearon
2008 NY Slip Op 28032
Decided on January 28, 2008
Supreme Court, Richmond County
Maltese, J.
Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431.
This opinion is uncorrected and subject to revision before publication in the printed Official Reports.

This court has denied the plaintiff bank's summary judgment motion in a mortgage foreclosure action because it has found that the original lender has violated the "predatory lending" statutes found in New York Banking Law §6L. As a result of the findings of violations of the predatory lending sections of the New York Banking Law this court grants the defendant home owner summary judgment wherein he may be entitled to damages to include the voiding of the mortgage and loan, along with the return of all mortgage payments, the expenses of obtaining the loans and attorney fees.

Read the Case Here:

http://www.nycourts.gov/reporter/3dseries/2008/2008_28032.htm

This is a great case against Predatory Lending. It can be used to help show Predatory Lending aspects of some Mortgage Servicing Fraud cases. Many cases have aspects of both and since many states have strong anti Predatory Lending laws currently in place, these laws can be used for relief until new mortgage servicing fraud laws are enacted and enforced.

I'll bet since they were steered into a subprime loan, there were mortgage servicing issues. But they were able to get the loan rescinded without addressing these issues, they did not need them for this case. If the result is as it is in this case, which is victory for the consumer (pending any further appeals) why not use the anti Predatory Lending laws if they apply to an MSF case. The process of  predatory lending then mortgage servicing fraud are related in my opinion, check out the attachments to the press release below.

New Briefing Paper by Private Property Advocates Draws Link between Predatory Lending and Mortgage Servicing Abuse in America

http://www.prweb.com/releases/2005/5/prweb243928.php



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Stephen

Thanks for posting that.  Hopefully many more to come as judges wake up to the fact that the lending industry is the devil.

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Ohio
Any TILA violation, no matter how miniscule, is a violation that gives the buyer the right to rescind the loan. There are NO defenses available to the lender for a TILA violation...NONE. TILA violations are an affirmative defense to foreclosure.

Proving you have the right to rescind does not mean you have to rescind.

In my opinion this is probably one of the best bargaining tools to hit them with...they want the foreclosure period! They do NOT want to walk away with nothing. This threat and the proof to back it up stops them dead in their tracks. They have no other choice but to take you serious about what you DO want and be a bit less arrogant negotiating a decent settlement.

They use the threat of foreclosure to extort extra fees and they use it like a hammer with no mercy.

Find those TILA violations..they are there! 


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H. Gosh
Ohio, you posted: 

Any TILA violation, no matter how miniscule, is a violation that gives the buyer the right to rescind the loan. There are NO defenses available to the lender for a TILA violation...NONE. TILA violations are an affirmative defense to foreclosure

In Pennsylvania, we had a huge case wherein over 100 people were the victims of fraudulent appraisals and TILA violations.  The DA actually produced HUD-1 statements that were altered.  Guess what?  Pennsylvania ruled that there is no law that requires that the HUD-1 statements actually set forth the actual closing numbers.

The perpetrators walked, the victims suffered, and the developer is starting a new development to target new victims.

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Ohio
Most often RESPA violations are evident from the HUD-1 ....

What was the complaint about?
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John

In Pennsylvania there is a way to get around the problems of the TILA, which can apply all over the United States. Instead of charging them with TILA violations. Charge Them with CONTRACT FRAUD, because the violations of the TILA are acts of FRAUD. And if you have HORNBOOK LAW violations it makes it better. Hornbook LAW states that no contract can be signed under DURESS and that all terms of the contract have to agreed upon by both parties along with if the contract contains Fraud the signing of the contract is not a deffence.

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William A. Roper, Jr.
John:

Usually fraud, like TILA violations, is subject to a statutory limitations period, which varies from state to state.  This limitations period can sometimes be tolled by the so-called discovery rule, but the discovery rule tends to toll limitations only until the fraud is discovered or should have been discovered through due diligence.  Invariably, the mortgage originators and mortgage investors argue that the borrower defendant sat on his or her hands and failed to make reasonable and diligent inquiry.

A second problem which very often arises is the mortgage investors will very frequently launder the loan contracts through a modification the sole purpose of which is to obtain an express borrower waiver of any origination or servicing fraud.  Basically, they dangle this modification in front of the borrower, get the borrower to sign up and waive all their rights and then foreclose anyway.  The modification was merely part of the bait and switch to speed foreclosure and immunize the mortgage investor against any fraud defenses.

Finally, bear in mind that when a promissory note is properly negotiated -- indorsed and delivered -- to a subsequent holder that holder is usually entitled to so called holder in due course protection.  Pro se defendants often confuse the concepts of holder and holder in due course.

When the plaintiff is a valid holder in due course, it is immunized against certain of the counterclaims which could otherwise be asserted against the originator.  The fraud claims usually need to be brought in a separate action against the originator and many of the originators were thinly capitalized and collapsed in the subprime meltdown.

One chink in this holder in due course immunity arises when the plaintiff forges an assignment after default and proximate to foreclosure creating evidence that the mortgage investor acquired its interest AFTER DEFAULT.  When a holder obtains its interest AFTER the instrument is already in default, it is NOT entitled to holder in due course protection.

Similarly, when the mortgage investor has bungled the indorsement and delivery documentation and argues that it is entitled to enforce the instrument as a transferee, there is also NO HOLDER IN DUE COURSE IMMUNITY.  Holder in due course immunity is only available to a holder through negotiation.  It is NOT available to a transferee.

Where the plaintiff in a judicial foreclosure is using a forged assignment or has pled an unindorsed promissory note, the defendant borrower should take special care in examining other possible counterclaims, including TILA violations and fraud, since the holder in due course immunity is probably not available to the plaintiff.

The borrower who makes out a strong fraud case under these circumstances vastly adds to the complexity and possible cost of the mortgage investor litigation the foreclosure.
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John
Mr Roper, I agree with your findings However, the case I'm doing contains not only TILA violations, It also includes Hornbook Law Violations and Document certification violations. For example First the Contract Documents where certified for a 30 year conventional only, which where altered to read for a Balloon, which was ADMITTED by the Defendant. This was used to distract from the amounts on the documents, The Settlement State has one amount that was inflated when extra fees where claimed ( NOT PAID) and the amount of the pay-off of former mortgages was inflated by thousands.
Then the TILA Statement shows a different amount which was inflated by thousands over the amount listed on the Settlement Statement, Which was not disclosed. Then the Mortgage Note holds yet another inflated amount by thousands over the other documents ( Also Undisclosed), Therefore there was no true borrowed amount listed on any document. Now this contract was signed under duress, since it was signed because the lender stated that the pay-off check was sent out prior to the settlement and that if it was not signed, then they would file fraud charges. Now all this was supported with documents. Therefore, the contract was designed to defraud.  
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William A. Roper, Jr.
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John said:
Now this contract was signed under duress, since it was signed because the lender stated that the pay-off check was sent out prior to the settlement and that if it was not signed, then they would file fraud charges.


John:

Best of luck with your allegations, but it seems to me that you are facing an inherent proof problem separate and distinct from the holder in due course immunity.  Moreover, the argument that threats at the closing constituted a basis for duress seems pretty flimsy to me.

In most instances, the borrower has a three day right of rescission.  Faced with these threats, the court is going to tend to view the problem through the prism that you ought to have REFUSED TO SIGN and sought legal representation; that you OUGHT TO HAVE HAD AN ATTORNEY AT THE CLOSING and/or that you voluntarily entered into the agreement with full knowledge of the nature of the frauds.

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John said:
For example First the Contract Documents where certified for a 30 year conventional only, which where altered to read for a Balloon, which was ADMITTED by the Defendant.


Material alteration of an instrument after signing usually VOIDS the instrument.
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floridagal
Mr. Roper

Wouldn't that be a form of tort, the modification agreement, if they were advised (in writing) of the fraud in the origination?

And would it then void the modification agreement as well.

What if the servicer, whom made the modification as holder/servicer, did not in fact hold the note, due to it not being transferred/or negotiated from the originating alleged lender and only was made to extend collecting payments fraudulently??
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William A. Roper, Jr.
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floridagal said:
Wouldn't that be a form of tort, the modification agreement, if they were advised (in writing) of the fraud in the origination?


What tort do you think this would be??

Suppose that you bought what was purpoted to be a Steinway piano and financed the purchase.  The seller then sells the promissory note you gave in payment.  The purchaser doesn't know that the Steinway piano you bought was actually NOT a Steinway, but was a less valuable and prestigious piano which had been painted with indicia to include forged Steinway trademarks.

You stop paying the note.  The holder of the note sues.  The holder offers to modify the loan and you agree.

What has the holder, who knew nothing of the original fraud, done wrong?  Your assertion of the fraud came AFTER the purchase of the note.

Read the UCC carefully.  Particularly the holder in due course protections.  These are NOT particularly oppressive or unreasonable provisions.

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floridagal said:
And would it then void the modification agreement as well.


WHy would the origination fraud void the modification agreement you freely entered into with a third party holder?

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floridagal said:
What if the servicer, whom made the modification as holder/servicer, did not in fact hold the note, due to it not being transferred/or negotiated from the originating alleged lender and only was made to extend collecting payments fraudulently??


The servicer is NOT typically the note holder.  Usually the holder is an institutional custodian working as agent for the mortgage investor.  The servicer is also an agent of the mortgage investor which is the owner of the note.  Pursuant to an agency agreement, often the Pooling and Servicing Agreement or the Fannie Mae or Freddie Mac Selling and Servicing Agreement, the servicer acts on behalf of the mortgage investor.

But the servicer as agent of the note owner acts on the note owners behalf pursuant to such agreements.

IF the servicer is acting under a valid power of attorney or PSA AND if the mortgage investor actually OWNS the note, then the servicer probably has the actual authority to enter into the modification agreement.  The fact that neither the mortgage investor or the servicer had physical possession of the note (which was in the custody of the institutional custodian) is usually irrelevant.

But note that the modification agreements are mostly SCAMS to get you to sign away YOUR RIGHTS.  The borrower NEVER THINKS to demand that the servicer show PROOF of its agency or PROOF that the mortgage investor actually OWNS the note. 

Moreover, the servicer rarely actually SIGNS and returns a copy of the modification agreement.  To teh contrary, more often the servicer get the BORROWER to sign the agreement and then puts it into the file UNSIGNED by the servicer or investor so that it might be enforced against the borrower, but NEVER against the mortgage investor.

Is this bait and switch an actionable tort?   Probably NOT.  The ignorant borrower just signs his or her rights away never getting anythign meaningful in return.  The typical modification agreement is intended to SPEED foreclosure by getting borrowers to waive their valid rights rather than to avoid foreclosure!

The ONLY modification agreements that EVER actually get signed by the mortgage servicer are the ones negotiated by attorneys who aren't generally stupid enough to fall for these stunts.  These modification agreements are often then RECORDED.
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f
What if the servicer does actually sign. Then records it.

What if the PSA was for Trust that closed in 2007 and the sale/transfer was made 2 years after the closing date of the pool. How can that be effective if it was not under the alleged PSA?
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floridagal
Forgot to mention, that prior to the mod, they were advised over and over about the bait and switch of originator and in writing.

It was modified due to those issue's, and not for failure to pay.

And the modification did not disclose the actual parties the modification was made by and between, just ***as servicer and ***servicer is holder ...
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William A. Roper, Jr.
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f said:
What if the PSA was for Trust that closed in 2007 and the sale/transfer was made 2 years after the closing date of the pool. How can that be effective if it was not under the alleged PSA?


I have been through this issue repeatedly.  Those who think that the sale/transfer was made after the closing of the mortgage trust are simply deluding themselves.
You are confusing the forgery of an assignment for a transfer.  Essentially ALL of the assignments are forgeries.

LET THIS WORK FOR YOU RATHER THAN CLINGING TO THE DELUSION THAT THE ASSIGNMENT IS REAL AND THAT THE TRANSFER WAS BELATED.
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William A. Roper, Jr.
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floridagal said:
Forgot to mention, that prior to the mod, they were advised over and over about the bait and switch of originator and in writing.

It was modified due to those issue's, and not for failure to pay.

 
So, I repeat, WHAT TORT do you perceive from these facts?
 
You made allegations about fraud in the origination and then voluntarily entered into a modification agreement.
 
How would this implicate some culpability on the part of the servicer?
 
*
 
Look, I KNOW that the servicers and foreclosure mills are CROOKS.  But you have a PROOF PROBLEM.  And if you voluntarily entered into a modification agreement and signed away your rights, SHAME ON YOU! 


I have posted elsewhere a discussion about agency.  If the servicer was the agent then it probably had some authority to bind the principal to the modification.  Even if the servicer did NOT have such authority, the principal could probably ratify the agreement.

And if you now want to REPUDIATE the agreement are you prepared to renounce and return all of the benefits you have received under the agreement?

Most borrowers are already in a BAD enough position even without signing away their rights in a modification agreement.  The modification agreements are mostly designed to speed foreclosure and assure that the servicer can steal any remaining equity.

Enter into these at your peril.  CONSULT A LAWYER FIRST!  DO NOT SIGN AN AGREEMENT WITHOUT FULLY UNDERSTANDING AND APPRECIATING ITS TERMS.  DO NOT EXPECT THAT A COURT WILL ALLOW YOU TO LIGHTLY SET ASIDE AN AGREEMENT THAT YOU FREELY ELECTED TO EXECUTE.
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Angelo
Bill

You said: "Moreover, the servicer rarely actually SIGNS and returns a copy of the modification agreement.  To teh contrary, more often the servicer get the BORROWER to sign the agreement and then puts it into the file UNSIGNED by the servicer or investor so that it might be enforced against the borrower, but NEVER against the mortgage investor."

If this is the case: 1) is the modification void for lack of signing by the second party 2) whats the time frame that the servicer/investor has to sign the contract/mod. agreement?

Futhermore, if the mod. is void, isn't it the servicers duty to return all proceeds that they received under a voided contract?
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floridagal
Wouldn't the servicer have to show the right, legal right to cause such a modification, when asked? Even after? Such as perfecting the chain of title since there is no proof of who legally/equitably owns the note/mortgage since the assignment was fraudulently created to expedite a foreclosure. And the Note has authenticity problems. Shouldn't the defendant have the right to have all parties submit proof of their rights who make claims. They could have been made through scheme and trickery because the servicer knew of certain things that was not made available to the defendant??

Where you say it is stupid, why can't you look at it as being under duress, due to games these servicers play for their own benefit? They are a scam within the scam in my opinion. All working in concert with each other because they have nothing to loose.

If they knowingly offer terms whereby it would benefit them (servicers) to continue to collect under the fraud, knowing of the fraud in the inducement in the origination of the loan contract. Couldn't the modification be rescinded and/or servicers be held accountable as well for contributing thereafter for fraud in the inducement and aid to cover up the fraud from the origination just to run the statute of limitations?

And what if this buyer of the loan, couldn't shove the sh** back to the seller, cause the seller went bankrupt and the loan never made it or was kicked out of the securitized pool it so claimed to be in? The parties cannot collect twice of defaults....
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John
Mr. Roper,
Under normal conditions I would agree about your statement pertaining to duress. However, my claim is supported with documents and witness from the settlement company. Oh and for the document alteration, they reported to the credit reporting services that it was a 30 year conventional, but later claimed it was a balloon.
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floridagal
Finally: If the sale/transfer really took place, then why is an assignment made 2 years later directly from the defunct/bankrupt originator to the Trust, made by the servicer as mers VP??? Whom appointed herself within the assignment the authority to do so? Which the trust closed 2 years prior?

And attempts to assign the note also in the assignment which is objected to.
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John
Mr. Roper,
Here is someting to think about. Now as I stated prior 2 of the counts filed was 1. Filing Fradulent Foreclosure and 2. Contract Fraud. Now the following was claimed as a defence 1. Res Judicata 2. Estoppel 3. Rooker- Feldman.
Now the District Court kicked out Res Judicata But claimed Rooker- Feldman and Estoppel, Based solely as the district Court stated, was based solely on it's personal feelings that it applied. Keeping in mind no mention of the document violations or Hornbook Violations. Now the Appeal Court then Agrees with my findings that Rooker- Feldman and Estoppel DID NOT Apply.
So then the Appeal Court elected to split count 1. Fraud Forclosure in to two parts Title and Content, which time they claimed the content was barred by Rooker- Feldman, because it contained counts 1 through 6 in the content.
Now this action has already been ruled on as a decemptive act by the 2nd Cir.Federal Court. The they altered the title of count 2 Contract Fraud to a TILA VIOLATION to claim the statutes of limitations, disregarding the documents and Hornbook because they have no statute of limitations.
Also keep in mind this federal court district has no record of ever ruling against a predatory lender and has never grant TOLLING to a privat person.
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William A. Roper, Jr.
Quote:
Angelo said:
If this is the case: 1) is the modification void for lack of signing by the second party 2) whats the time frame that the servicer/investor has to sign the contract/mod. agreement?


Angelo:

If the contract expressly calls for the signature of both parties within its provisions, then failure of one of the parties to sign would probably indicate that no contract had been actually agreed to.

But if the contract was otherwise silent as to any express requirement that both sign, then a contract might have come into being if the parties both clearly manifested their assent, as through implied ratification where one or both are acting as if the modification agreement had become a contract.

Usually, when the first party signs, the document is treated as an OFFER to contract.  The signature of the second party would then typically be the acceptance.  Where a contract is signed by only one party,it would then be usually treated as an OFFER to contract rather than a contract.

UNLESS the contract has some express provision limiting the period during which it could be accepted and concluded, the offer would tend to remain open indefinitely and the non-signing party could accept at any time up until the expiration of some express deadline provision within the instrument OR the revocation or withdrawal of the offer by the offerror.

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Futhermore, if the mod. is void, isn't it the servicers duty to return all proceeds that they received under a voided contract?


If there was an original promissory note and mortgage, which was the subject of a modifcation agreement which wasn't roperly completed, then the original terms of the note and mortgage would remain.

Only if the modification called for payments in excess of that reuqired by teh original instrument would there be any necessity of restitution.  More often, modification agreements call for reduced payments and a reversion to the original terms would imply the need for additional borrower payments.  As with the HAMP modification scams, by holding out a modification and then pulling the rug out from the borrower, the lender precipitates a contractual default and succeeds in driving the distressed borrower into default, foreclosing and stealing the borrower's equity.

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