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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I have a question.  Maybe a dumb one, but asking anyhow.

My loan is FHA.  FHA has a few options available for loan modification.  However, my servicer's pooling and service agreement states they will not modify a loan if the new mortgage amount would exceed the original amount of the loan.  So, if I originally borrowed $100,000, but I need a new $115,000 modification loan, the servicer won't approve the mod in any amount above $100,000.  If I didn't have THIS servicer who is subject to rules under some separate agreement, I could modify my loan.

My question.  What/how/why is the borrower subject to the provisions of this pooling and servicing agreement?  When/where did I agree to such?  My closing docs doesn't refer to it in any way.  And in fact, the PSA trumps the provisions of HUD/FHA.

If A and B sign a contract, B cannot then have a separate contract with C and obligate A to that contract which overrides the provisions of the contract between A and B which A knew nothing about.  This would cause chaos in contracts.

What am I missing?
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   I would first look at the HUD addendum to the loan application. The true lender is in Box 15, the
initial servicer is in box 16.
   I would next compare the name of the lender on the Note & mortgage, with the name of the lender in box 15 and see if they are the same. Very often they are different.
   Next look at the closing statement, whoever got the YSP (yield spread premium) was the true
lender.(For example: the true lender loans $100k and then immediately sells it for $102K, the YSP
would be 2K)
   If the lender shown on the Note & mortgage is not the same as the lender shown on the HUD
addendum and the one that got the YSP, then the lien was never perfected in the name of the
true lender and foreclosure should be impossible.
   Very often, the loan was "table funded", which means a licensed entity was the originator (true
lender) but it immediately sold it to an unlicensed lender at a "premium" over face value. If it
was done correctly, the licensed entity should have endorsed the Note over to the unlicensed
entity.
    Many times they would by-pass this formality and just put the Note & Mortgage directly in the
name of the unlicensed entity. Since FHA loans are insured, this appears to be a way of defrauding FHA by allowing unlicensed entities to get FHA mortgage insurance. (That is my opinion only, there could
be another reason why they do it.)
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Totally confused Mike H as to how your answer relates.

The answer is more likely to come from the law of contracts.

As I mentioned, nothing in the closing docs makes any reference to a PSA or that my loan would also be governed by this unknown and unrevealed PSA.  And I believe this would be the case with most people's loans.

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Texas
Danger, Will Robinson, Danger, Mike is off target.
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  It relates as follows: you need to know who the true lender was before doing anything else. Very
often the lender named on the Note and mortgage was not the true lender. This means the lien
was never perfected in the name of the true lender so no foreclosure is possible. That is your defense.
    You are trying to get a modification. They have no reason to modify your loan, unless you can
show that you never borrowed anything from the entity listed on the Note.
    It is true you borrowed from someone, but if that "someone" is not listed on the loan documents,
then there is no mortgage, it is an unsecured obligation to some third party and it could be wiped out
in Ch 7 Bk. This is strong leverage to get it 'crammed down", which is what you want, Right?
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Mike H, you have mistakenly assumed there is some issue with who my lender is.  As this could be true with many loans, it's not an issue at all in my case. 

Again, my question is about the PSA and what makes the borrower obligated to it.
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Cabinetmaniac
 
Friend wrote:

My question.  What/how/why is the borrower subject to the provisions of this pooling and servicing agreement?  When/where did I agree to such?  My closing docs doesn't refer to it in any way.  And in fact, the PSA trumps the provisions of HUD/FHA.


You are not party to it and you are not subject to it. The servicer is subject to it.

Quote:

If A and B sign a contract, B cannot then have a separate contract with C and obligate A to that contract which overrides the provisions of the contract between A and B which A knew nothing about.  This would cause chaos in contracts.

What am I missing?


While your ABC scenario is true it is a fallacious premise for your argument.

How are you obligated beyond your contract? You are dissatisfied with requirements which your servicer must apply to modification of the contract not to the original contract itself.

In seeking a modification you are asking to change the contract. The lender/servicer can certainly choose their own lending practices, under the law, such as limiting the amount they are willing to lend.

Perhaps it would be better for you to consider refinancing if you qualify.

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Dear Friend,
   What you might be missing is that all FHA loans are insured with regard to the principal amount.
You would not only be modifying the mortgage Note amount by increasing the principal, you would
also be modifying the credit default insurance principal amount.
    Most people want a "cram down" of principal or a reduction in the interest rate. I have never heard
of a "jack up" of principal. Is that something new? Normally if you are in arrears, they put the missed
principal at the end of the loan, but the total remains the same. It is the interest which can be varied
to meet the problem.
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Cabinetmaniac wrote:
 
Friend wrote:

My question.  What/how/why is the borrower subject to the provisions of this pooling and servicing agreement?  When/where did I agree to such?  My closing docs doesn't refer to it in any way.  And in fact, the PSA trumps the provisions of HUD/FHA.


You are not party to it and you are not subject to it. The servicer is subject to it.

Quote:

If A and B sign a contract, B cannot then have a separate contract with C and obligate A to that contract which overrides the provisions of the contract between A and B which A knew nothing about.  This would cause chaos in contracts.

What am I missing?


While your ABC scenario is true it is a fallacious premise for your argument.

How are you obligated beyond your contract? You are dissatisfied with requirements which your servicer must apply to modification of the contract not to the original contract itself.

In seeking a modification you are asking to change the contract. The lender/servicer can certainly choose their own lending practices, under the law, such as limiting the amount they are willing to lend.

Perhaps it would be better for you to consider refinancing if you qualify.





Well Cabinetmaker, I'm sure anyone who can qualify to refi would choose that option versus messing around with a loan mod.

I follow your logic for the most part, but I think there's room for a new, interesting argument by smart defense counsel.  And that's especially so when servicers pick and choose which parts of the PSA they want to apply and which parts they want to ignore.

Thanks for commenting.
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Texas
What baffles me in this thread is how "Mike H" became "mike H", little things like this baffles most, not all.

Danger Will Robinson
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TheEquitableOne
The case Bank of America, NA v Bassman, 2012 IL App (2d) 110729 would be an informative read on this question.  

"We are cognizant that we have already concluded that defendants are not entitled to rely on the PSA's choice-of-law provision; however, we do not view the application of New York law under these circumstances as an invocation by defendants. Quite simply, plaintiff was a party to a transaction that took place under and contained a choice-of-law provision expressly contemplating the application of New York law."

 

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